Essential Utilities, Inc. — Call Transcript 2025

Thank you for standing by. My name is Elena, who will be your conference operator today. At this time, I would like to welcome everyone to the Essential Utilities Full Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers prepare remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star one again. Thank you. I'd now like to turn the call over to Dan Schuller. You may now begin. Good morning, everyone, and thank you for joining us for Essential Utilities Q4 and Full Year 2024 Earnings Call. This is Dan Schuller, Chief Financial Officer at Essential. I'm stepping in for Brian Dingerdissen, who welcomed twins this past weekend. If you did not receive a copy of the press release, you can find it by visiting the investor relations section of our website at essential.co. The slides we'll be referencing and the webcast of this event can also be found on our website. I did want to take a moment to introduce our new IR director, as you may have seen his photo in the deck that is posted. Ed Vallejo, with whom most of you are familiar from his time in the industry, joined our team just last week. Ed hit the ground running, and we fully engaged in our IR activities right away. Welcome, Ed. Let's move to the forward-looking statement. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10Q, 10K, and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the investor relations section of the company's website. We begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company, and then I'll provide an overview of our financial results before Chris closes the call with our guidance. And with that, I'll turn the call over to Chris Franklin. Chris. Hey, thanks, Dan. Ed, welcome aboard. Nice to have you with us, and good morning, everyone. Thanks for joining us. Hey, listen, as I reflect on 2024, I have to tell you I'm really proud of the performance of the company, the team that leads it, and all of those that did the work to make the year so successful. Financially, 2024 is another year in a string of years that we have reported earnings per share in line with our 5%-7% guidance. In fact, on a GAAP basis, we delivered $2.17 per share. The GAAP earnings, of course, include the gain on sale from the Pittsburgh Energy projects. When you think about repeatable earnings, I'm talking non-GAAP now, we would think about finishing the year at about $1.97 earnings per share. Dan's going to provide more detail on this in just a few moments. Now, these outcomes would not be possible without the discipline of our operating teams. They held operating expenses this year to only 2% growth year-over-year and completed our $1.3 billion capital plan right on target. Our operating expense control is key to keeping rates affordable, and our timely capital investments improve water quality, gas safety, and service reliability, all while building rate base and, of course, earnings for shareholders. Over the course of the year, we responded to investors who wanted to get to know our operating team leaders a little bit better in both water and natural gas. And so Colleen Arnold, the head of our water business, and Mike Huwar, the head of our gas business, spent time on the road with us in investor meetings throughout 2024. And that'll continue into the future, as I know you enjoy the interaction with both Mike and Colleen. Now, when we think about our accomplishments and our consistency, consider that the board raised the dividend by 6% in 2024, and that's consistent with our 30-plus year track record of growing the dividend at a healthy rate. In fact, it's sort of amazing to consider that we've grown the dividend approximately 40% in just five short years, and we've paid a dividend now for 80 straight years. Probably the accomplishments that we're most proud of in 2024 are the successful water and natural gas rate cases in Pennsylvania, the state that contains 75% of our operations. Both cases were Black Box settlements, but most of you could easily estimate the approximate equity layer and ROE that were granted in those cases. We believe these strong regulatory outcomes, combined with the recent changes at the Office of Consumer Advocate, are reminders that Pennsylvania continues to be a constructive regulatory state. We also believe that our strong regulatory reputation of doing the right thing should continue to facilitate positive regulatory outcomes that are both good for customers and shareholders. In fact, since the recent change in leadership at the OCA, the agency has withdrawn its protest of the Peoples Rate Case, a really good sign that a more moderate approach to regulatory relations may be coming to that agency. One of the key accomplishments in the Peoples Rate Case was the establishment of weather normalization. This regulatory solution has already proven to be beneficial to both shareholders and customers. In January of 2025, just last month, because of abnormally cold weather, the company will give back about $8.2 million to customers, but shareholders will also reap some benefit from this cold stretch. Bottom line is that in that short time since October, when the weather normalization was first put in place, the smoothing of weather volatility and the associated revenue is working exactly as designed. Now, while we're talking about regulatory accomplishments, I want to mention that in 2024, there was some reform of the fair market value statute that was passed by the PA Public Utility Commission. As I think you already know, we were actively engaged in that solution with the PUC. We believe that this reform will bring greater certainty to the process and should also help keep rates at affordable levels. Already, we're seeing increased activity from municipals that are interested in selling their utilities. All right. Now, when we think about 2024, I have to mention the progress that we've made in PFAS mitigation. We spent about $27 million in capital and completed the mitigation work in 13 plants. This is toward our four-year goal to mitigate approximately 300 plants at an overall estimated capital spend of $450 million. The solution we're applying to most of our plants is a patent-pending approach that we are also marketing to other utilities as a solution to their PFAS issues. Now, it's too early to predict whether our solution will be additive to earnings or not, but I'm proud of the team for engineering the solution and for the pace of our installations. One of our top priorities in the natural gas business will always be risk reduction. In fact, in 2024, we focused on several key risks. First, we installed 30,000 Intelis meters. These are the meters made by Itron. We believe that these meters are literally a game changer for safety. The meters are lighter weight, slightly smaller, and more accurate, but most importantly, they prevent overpressurization. When you consider the catastrophic incidents that have occurred within the gas industry just over the past decade, if these meters had been installed, they hadn't been invented when those incidents happened, but had they been installed, many of these fires could have been prevented. Now, we'll install at least 60,000 more of these meters in 2025 as we ramp up this new potentially life-saving technology. When we think about risk in the gas business, particularly, we also think about underground storage wells. That's why we reconditioned some of our older wells and abandoned some others. Overall, the work we did on underground storage wells in 2024 reduced our risk scores by 50%, a significant accomplishment. As part of our capital plan in 2024, we replaced more than 370 miles of water and natural gas mains, which is key to the continued reduction in our carbon footprint. Our expectation remains that we will spend nearly $7.8 billion in capital over the next five years. In preparation for that work, we continue to deepen our bench of talent by creating development opportunities for members of the team so we can continue the long-term consistency of results that has been our reputation. Now, we had our challenges in 2024 as well. In Pennsylvania alone, we were named receiver for 10 water and wastewater systems. These are systems that the former owners neglected, and they were undercapitalized. We responded quickly when the Pennsylvania Public Utility Commission asked us to operate these systems. We invested capital and made improvements. But I got to tell you that receiverships are not the best solution. We will be in all of our states with the environmental agencies to push the improved enforcement. This deferral of investment and ultimate dilapidation did not occur overnight, and we'll use this example to encourage environmental agencies to enforce earlier, which could provide us an opportunity to rescue these systems before they reach a critical stage. The other macro challenge that we face in the water industry is stock performance. Now, we're no exception, and I'll say that we were pleased to be the strongest performing water stock in 2024, but still disappointed in not seeing our successes reflected in our overall current valuation. Now, moving to 2025, I already mentioned the successful Pennsylvania Rate Case. It did receive final approval on February 6th by a unanimous vote of the Public Utility Commissioners in Pennsylvania. We look forward. Our theme this year is "Leading Today, Shaping Tomorrow," which captures our dual focus: solving today's issues with urgency while building a foundation for tomorrow through a focus on sustainable business practices. Now, to facilitate this work, a key theme in 2025 will be a focus on lean practices across our footprint and throughout our corporate functions. Operational excellence has always been a cornerstone of our company, and we're going to lean into that even further beginning this year. Some of the best-performing utilities across the country have adopted lean practices, and we believe that Essential will benefit from this approach in the coming years. The last issue I'll mention is probably the hottest topic in the utility industry right now: load growth generated by data centers. This creates a challenge and an opportunity. See, some investors see greater growth in the electric utility industry compared to the stability and more measured growth of water and natural gas. However, our company and investors are uniquely positioned to benefit from both growth and stability. Our investors have the stability and growth of the second-largest investor-owned water utility in the United States, while also benefiting from the potential low growth from data center construction within our natural gas service territory. This is important. As of today, we are in discussions with data center developers that represent up to 5GW of needed power generation in the Pittsburgh region if the data centers are built. While all of that may not be built and the exact financial implications for us aren't known, it is exciting to see the state of Pennsylvania is engaged in these opportunities. And we would welcome both the increased throughput and any capital improvements that would be associated with that growth because of the potential benefit to customers and to shareholders. So listen, we were really pleased to reinitiate long-term growth guidance in November with expected annual EPS growth of between 5% and 7% through 2027 off of the $1.97 non-GAAP base we earned in 2024. This does not include any potential earnings associated with the pending acquisition of DELCORA. Additionally, we'll spend between $1.4 and $1.5 billion in capital in 2025, and we'll invest nearly $8 billion in infrastructure improvements over the next five years. That will lead to 8-plus% annual rate base growth before accounting for any acquisitions. All right. With that, let me pass it to Dan to get into the financials for 2024. Thanks, Chris, and good morning again, everyone. This first slide, let's talk high level on full year 2024, and then we'll get into the details on the waterfalls. During the year, we had exceptional execution on two large rate cases, Pennsylvania Gas and Pennsylvania Water, which actually just concluded earlier this month, and we reached a great outcome with the sale of our non-core Pittsburgh area energy projects, which allowed us to reduce our financing needs in 2024. We continue to see the merits of our long-term strategy of providing outstanding service to our customers, investing in needed capital improvements, managing our day-to-day O&M expenses, and maintaining our disciplined regulatory practices to deliver long-term shareholder value. Operating revenues were up due to rates and surcharges and increased water volume. This was offset by the decline in natural gas commodity prices year-over-year, which positively impacted our customers' bills, and due to weather, which was warmer than normal for the gas business as compared to the prior year. Importantly, as a reminder, we now have the weather normalization mechanism that provides customers better certainty and alleviates the volatility associated with extreme weather. While we continue our focus on managing O&M expenses, the full year O&M shows only a slight increase, reflecting our long-term focus on operating efficiently and the sale of our West Virginia and energy project assets. As Chris mentioned, on a GAAP basis, we achieved EPS of $2.17 for the year, which is up from $1.86 in 2023. These results include the gain on sale, plus the impact of warmer than normal weather in the first half of 2024 for the gas business, and drier than normal weather in the Mid-Atlantic and Ohio for the second half. If you adjust for these factors, you'd be squarely in the 2024 guidance range of $1.96-$2. Next, let's walk through the full year waterfalls. At slide 11, we have the revenue waterfall for the year. Moving left to right, we have rate increases and surcharges of nearly $83 million, with about $51 million of that coming from water and $32 million from gas. Increases in water volume of $11.6 million, and then other, which is mainly the weather normalization adjustment and the gas customer assistance program rider, offset by the loss of revenue from both the West Virginia utility assets and the energy projects of $8.4 million, plus acquisitions and organic growth in the water business of $8.2 million, offset by lower gas consumption, as well as the impact of the lower purchased gas costs of approximately $75 million. As a reminder, we experienced dry warm weather over the summer and into the fall in Pennsylvania, New Jersey, and Ohio, which led to increased water usage. Let's talk about the natural gas business for a moment. Through June, each of the months of 2024 was warmer than normal, and this had a significant impact on our financial results. This is exactly why we asked for the weather normalization adjustment in our People's rate case. Now, we've already seen the benefit of weather norm both for the company in the fourth quarter and for customers in early 2025. Next, let's look at the O&M on slide 12. O&M increased just 2%, or under $12 million year over year in 2024. The increase included additional costs from the gas segment universal services rider, which is recoverable through a revenue surcharge, as well as employee-related expenses, increased water production costs, so mainly purchased wastewater, power, and purchased water, offset by lower chemicals, and expenses related to serving acquired water and wastewater systems. Those increases were offset by lower bad debt costs and lower expenses due mainly to the sale of the West Virginia utility assets and the energy projects, so overall, a good story on O&M consistent with our long-term efforts. Next, let's look at the EPS waterfall on slide 13. Starting on the left side of the waterfall, with GAAP earnings per share of $1.86 from last year, the next thing we see is the nearly $0.22 increase from regulatory recoveries, $0.05 from other, which includes the approximately $0.25 gain on sale of assets and related transaction activities, plus weather normalization adjustment revenue offset by increased depreciation, interest, and taxes other than income, as well as lower income tax benefits. Then we see the $0.03 gain from water volume and nearly $0.50 gained from water growth, which were then offset slightly by higher expenses and lower gas volumes. That gets us to the $2.17 of GAAP EPS for 2024. We thought it was important to clarify that the $2.17 includes $0.25 of gain on sale of assets, which includes the energy project and a true-up for post-acquisition activities on the previously closed West Virginia gas utility assets. And then, if we normalize the weather impact of $0.05 of EPS for the year, we get to $1.97 of adjusted earnings per share, which is a non-GAAP measure. And that $1.97 is our weather normalized results without the asset sale impact. That $1.97 is nicely in the original $1.96-$2 guidance range for the year and above the current full year 2024 consensus of $1.95. Notably, the $0.05 weather impact incorporates both the positive impact of the dry summer and fall on our water segment sales and the larger unfavorable weather impact you may recall from the first half on our gas segment. As you may be aware, we're currently experiencing drought conditions in the Mid-Atlantic that we've not seen in about 20 years. Given our water supplies and the resiliency of our systems, this is not having much of an effect on us now, but we'll keep you posted as the year progresses. Next, let's move to the slide on rate activity. This slide highlights our regulatory activity during the past year and into 2025. We continue to manage our regulatory activity to maintain safe and reliable service, earn a fair return on capital that we invest, and minimize regulatory lag while always considering affordability for our customers. As you can see on the slide, 2024 was a significant year for regulatory activity. We completed rate cases or surcharges in many of the water states to raise annualized revenue by nearly $54 million. This included the late 2024 settlement in Illinois. As we've previously discussed, in September, we completed the first rate case since the merger at Peoples Gas, which included a $93 million revenue increase and the weather normalization adjustment we mentioned earlier. In total, we had annualized rate or surcharge increases of about $148 million in 2024, which I believe is the most significant year on record. Earlier this month, the PAPUC voted 5-0 to approve the settlement previously announced for the Aqua Pennsylvania rate case, increasing revenues by $73 million on an annualized basis. In total, so far in 2025, we've received rate cases or surcharges to increase annualized revenues by $86.5 million in the water business. Additionally, we have pending rate cases or surcharges totaling approximately $16 million across the company today, with the majority of that being an ongoing rate case in our Kentucky gas business. And later in 2025, we expect to file rate cases in Texas, North Carolina, Ohio, and Virginia. And as a reminder, we expect to file a People's rate case early next year. And with that, I'll turn it back to Chris. All right. Thanks, Dan. Let's touch briefly on our acquisition program. I want to point out the recently closed Greenville wastewater acquisition in Pennsylvania. This is the first municipal acquisition we've closed since the PAPUC's motion was published. It's a pretty important milestone for us. As of this call, we have six signed asset purchase agreements in three states in which we already have existing operations. These acquisitions will add over 210,000 customer equivalents and total approximately $344 million in purchase price. I should note that nearly $70 million of that rate base are deals other than DELCORA. Now, we continue to see a strong and healthy pipeline of opportunities for additional growth, and we currently have activities and engaged discussions with municipalities that have over 400,000 potential water and wastewater customers. At our board meeting just this past week, we spoke about several potential transactions where we have submitted bids, and while we don't know that we'll get all those deals, we are seeing increased levels of activity. Lastly, and in closing, we were pleased to share our new multi-year financial guidance and growth guidance back in November. This guidance provides a clear line of sight to the opportunities in front of the company. In 2025, we expect earnings per share to be between $2.07 and $2.11. Importantly, now that we have a weather normalization mechanism in place, the volatility of earnings associated with unusual weather should be dramatically reduced, and for the three-year period through 2027, we're guiding to a compounded annual growth of EPS at a rate of 5%-7%. And this does not include DELCORA and is based off of the $1.97 non-GAAP 2024 EPS that Dan referenced. As we look to the next five years through 2029, we plan to make regulated infrastructure investments of about $7.8 billion. And notably, it does not include unsigned acquisitions or associated follow-on capital from those acquisitions. We expect our 2025 capital expenditures on infrastructure to be approximately $1.4-$1.5 billion. And through 2029, we anticipate that the regulated water segment rate base will grow at a compounded annual growth rate of approximately 6%. This projection only includes the acquisitions listed on the previous slide, which are scheduled to close in 2025 and in 2026, and again, excludes DELCORA. This projection does include the crucial work that we are doing to remediate PFAS across the systems we currently own and operate. Now, for our regulated natural gas segment, we expect the rate-based growth at compounded annual growth rate of approximately 11% through 2029. We plan to continue replacing aging natural gas pipes well past the next decade. On a combined basis, water and gas, we project rate-based growth at a compounded annual growth rate of over 8% through 2029. This growth will be driven by our ongoing investments in infrastructure and our commitment to operational excellence. I'd expect that when we look back on these five years, we will have done even more given the acquisition pipeline that is not factored into our rate-based growth projections. We believe that the rate base and earnings growth we've described could be accomplished while we keep customer rates at affordable levels. We anticipate that our water customer base will grow at an average annual growth rate of between 2% and 3% over the long term, largely because of the continued consolidation opportunity in water and wastewater and the strong organic customer growth, especially in Texas and North Carolina. To support our growth and meet our credit metrics, we plan to raise equity via our multi-year ATM program through 2027. Specifically, in 2025, we expect to issue approximately $315 million in equity through the ATM, and that's after raising about $36 million previously that we guided to in 2024. We believe that $315 million will satisfy our capital needs, fund our growth initiatives, and maintain a strong balance sheet for our credit profile. Now, that concludes our formal remarks for the day, and we look forward to answering any of your questions. Operator, if you'll please open the line for any questions. Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star, followed by one on your telephone keypad. Your first question comes from Julien Dumoulin-Smith from Jefferies. Your line is now open. Hey, Julian. Morning, team. This is Paul on for Julian. First off, congrats on closing your first fair market value acquisition in Pennsylvania. With M&A activity picking up, how do you think about the cadence of your $1 billion long-term equity plan? Is it still closely tied to wrapping up DELCORA, or there are some new factors now driving it? Yeah, it's a good question, Paul. I mean, what we indicated on this call is very consistent with what we said on the last call, which the last call we had said $350 million between 2024 and 2025. We raised about $36 million in 2024. So that leaves us with that $315 million that Chris mentioned. So that obviously is for 2024, so 2025, I should say. So at this point, DELCORA is not expected to close this year. And as we've told you, we've taken it out of our five-year plan. We certainly are committed to it, and we believe it will close. But when we think about the program that we have, we had said that the billion-dollar program would likely last us something like three years. But if we have an accelerated acquisition program and DELCORA comes into that, then we could exhaust that billion-dollar program inside of that three years that we mentioned. It wasn't set in stone when we said it initially. So there's some flexibility there depending on how the acquisition program develops. And as you know, if the acquisition program accelerates, that'll be a good problem to have. Got it. Appreciate the call, there. I will jump back to the queue. All right. Thanks, Paul. Take care. Thanks. Your next question comes from Ryan Connors from Northcoast Research. Your line is now open. Hey, good morning. And good morning. Yeah, thanks. And welcome back to the water space there. Good to see that. Wanted to ask for an update, Chris. You kind of gave a little bit of color on the OCA consumer advocate situation in Pennsylvania. I wonder if you can expand on that just in terms of what kind of timeline are we looking at to a permanent nomination. I know we've got sort of an acting or an interim person there. Do they have the same powers legally that the permanent person does, or are there things that they can and cannot do in terms of on East Whiteland, for example. I know that's kind of a pending matter out there. So just kind of looking for some color on when we get a permanent nomination in your view and what happens in the meantime that we're kind of in limbo here. Yeah, good question, Ryan. And really important question for the utility space in Pennsylvania. Tanya McCloskey, who was a terrific consumer advocate, was never confirmed by the Senate. She sat in that seat for many, many years not being confirmed. So yeah, the power of the consumer advocate, even on an acting basis, is still very, very strong. And I think largely the same power as a fully approved. So listen, the acting consumer advocate, Darryl, terrific guy. Been there 25 years. We've worked with him for many, many years. So we enjoy a relationship, much like we did with Tanya and Tanya's predecessor before that, Sunny McCloskey. The timeline is sort of undetermined. I think the attorney general has a lot of things to set up in the space of attorney general. And then to look at this sort of niche regulatory aspect of his role, I think he's going to take his time, and that's what he's indicated, and make up his mind. I know he's doing interviews over the next couple of weeks. And we'll see what he comes up with in terms of his ultimate pick for a consumer advocate. But obviously, we're watching very, very closely. Yep. And then as a follow-on to that, I mean, you talked about this sort of potential re-acceleration of fair market value transactions in Pennsylvania now that the settlement's complete and the consumer advocate change, at least to the interim, has been made. I mean, is that something where if you're a buyer or even a seller, are people still going to kind of wait around and see who that permanent person is, or do you think that could kind of open up right away? Well, listen, I hate to read signals. So I think probably if you're a seller, you may say, "Okay, let's see what the first one through is." Now, Greenville's through already. And so that was very positive. And I felt like that was handled well. So listen, I think these transactions have greater certainty since the Senate motion was passed. And I think they've even notched up in certainty with the change at the OCA. Listen, there's plenty of opportunity between utilities and the various advocates to argue over issues. But I think what we need to guard against is an overly litigious atmosphere. And I think that's what we had. I think we're moving away from that, fortunately, into something where compromise is more part of the solution. And I think that's where the consumers are best served. Yep. Yep, and then one more, if I could just sneak in. The data center comments you made, very exciting there, but I wonder if you could just explain kind of the fundamental nature of those deals. We've done a little bit of reading on that, and my understanding was it was more, I guess, with these so-called behind-the-meter deals, which are with more upstream from an LDC, so can you just kind of give us some general characterization of what those look like for a company like People's? Yeah. And Ryan, I think you probably would think about this like we wouldn't. These could take many shapes and forms. And so it's hard to know. But listen, I think if we just got the throughput, increased use of natural gas, that's a help to our customers, right? It keeps rates down. And so that's great. If there was an opportunity for us to do something where we would build some extension of lines, a capital project that could facilitate, obviously, that builds rate base. And then finally, if we were to look at opportunities like we did at the airport and some hospitals out there to build some kind of on-site generation, that would be largely in the non-regulated or unregulated space. So it could be a lot of different forms. I think what we look at here, and I think about generally in the electric industry, is these developers, if you will, are talking to multiple cities at the same time. It's hard to know if there's a lot of double counting going out there. We think, just given the volume of the interest in Pennsylvania, Western Pennsylvania, where we are, that it's a really interesting opportunity potentially for us and just sort of undefined at this point. Great. Well, hey, thanks for your time. You bet. Your next question comes from Durgesh Chopra from Evercore ISI. Your line is now open. Hey, Durgesh. Good morning, Durgesh. Hey. Hey, good morning, Chris and Dan. Congrats to Brian. And then also congrats on getting Ed on board to the team. Double congratulations. Okay. Just one. Absolutely. Just one question from me. On this PFAS stuff, actually, two-part question. First, are you seeing any, with all the noise coming from DC, any change in your strategy, any kind of change in your capital plans on this investment? I believe you said you wanted $50 million is in the plan. Just wondering if any of that is at risk. So that's part one of the question. Part two, Chris, I think you mentioned some of the patented technology that might be earnings accretive. Maybe just a little bit more color on that. What are you thinking there? Thank you. Sure. Yeah. What's the moment to start this off, Chris? Well, let me hit PFAS first. Okay. Go ahead. Because I just came back from Washington, spoke on a panel as did Colleen Arnold, our segment president for water, on this issue of PFAS. And I think what regulators, this was largely PUC commissioners from all over the country, and what they really wanted to know is how we were seeing what we were hearing from the federal government on PFAS. And so listen, the way we think about it today is it's a health MCL, right? And so at four parts per trillion, we don't see a rollback. We're not hearing about a rollback in that MCL. Might there be some easing of the time to comply? Maybe. We haven't actually even seen that yet. So I think I've mentioned on the call before, but just let me remind you that we met with the chief environmental regulator and the chief economic regulator, the PUC, in each state where we're putting these units in. And what they've told us is full speed ahead. And so number one, we don't anticipate any slowdown in our installation. Number two, we don't expect any challenges in the recovery of or on those investments. But I'll remind you, we continue to focus on the lawsuits. We still think we're going to get about a little over $100 million to offset some of our capital costs. And we're very aggressive. As a matter of fact, we received a number of compliments from public utility commissioners in Washington this week for our aggressive nature on getting state and federal funds to offset the cost of the PFAS mitigation. Really proud of the patent-pending solution we're putting out there. What Colleen's team continues to do is drive down the per-unit cost of these. So while we're still guiding to about $450 million spend, the hope is between the proceeds from the lawsuits, the proceeds from any loan funds or grants, and the driving down of the overall cost that we can come in less than that. But at this point, we're comfortable with those estimations. You want to take? Yeah. And I guess I'd just add that this patent-pending approach we have, it's really a modular approach that we can implement in small systems. These are cost-effective both to install and then to maintain as you think about changing the media in the future. So initially, what we're doing here is we're rolling these out across all of our small systems. So basically, it accounts for all of those systems that we have in North Carolina. They're kind of in the right size. Some of our systems in Virginia and Pennsylvania as well. And then, as Chris noted on the call, we're talking to other utilities about these. If it's something they're interested in, we certainly would like to have those discussions. We do think these systems could be helpful in a lot of applications. And so that could become a revenue generator for us. But happy to have conversations about the technology that we've developed that Colleen and her team have really spent a lot of time perfecting. Awesome. Okay. That's all I had. Thank you. Yep. Thank you. Again, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from Travis Miller from Morningstar. Your line is now open. Hello, everyone. Thank you. Hey there. Yeah. Good morning, Travis. You nearly answered my PFAS question, so I'll ask this and see just clarification-wise. That $450 million, does that include, so would you deduct then in terms of your cash outlay, the $100 million lawsuits and any grants, or is it $450 plus the $100 million of lawsuits and other grants in terms of total cost? Does that make sense? Yeah. No, that does make sense. So we've thought of the $450 as being net of the proceeds that we receive from the lawsuits and low-income loans and grants that we're getting. And really, I should say grants because if it's a loan, we obviously still get the rate base. It's just that a portion is supported by lower-cost debt. So think of that as the net investment that we'll make. And of course, we're doing everything we can to help moderate the impact for our customers. So if we can get more in terms of lower-cost financing or grants, we'll do that in order to help our customer affordability. I would think about this too. As we continue to test our systems, we find new wells that need to be treated. And so it's a little bit of a moving target over a period of years, right? We're trying to drive costs down and get loans and grants. At the same time, the number of systems tends to trend up. And so that's why we're pretty confident in guiding to that $450. Okay. So that's a true kind of rate base, incremental rate base type of number. That's how we think about it. We'll continue to guide each year as we adjust. Yeah. That's our projection of that at this time, Travis. Okay. Yep. That makes sense. And then I think in the past, you've talked about maybe some more creative ways rather than just traditional base rate cases to get that number into rates, get the return on, return of. Any updates there in terms of riders or something else that might be more creative than just simply general rate case for that treatment, PFAS specific? Yeah. I mean, we have looked. We are having conversations with our regulators around deferred accounting related to these types of systems. I'll give you an example. In North Carolina, where we have a three-year forward-looking rate case, in this first one, we've had discussions around deferred accounting. When we file this next rate case this spring for the next three years, we'll have our PFAS investments in each of those three years. So really trying to cover as much of this in rates on an ongoing basis as we can. Okay. Great. Thanks. And then one other - since you brought up the data center topic, I appreciate the other details you gave there. Just another clarification or follow-on from that. So would you potentially anticipate doing an on-site type - I hate to say co-located, but it's the great word of the year - but something along those lines, like a water and gas type facility that would ultimately serve power? Is that the way I'm interpreting your earlier comments? Listen, I would just point you to, we've got a little history of building CHPs. And so we obviously partner with entities that do that work. So I would say the possibilities are open. And at this point, we need to see what those developers are specifically looking for. And then, as you know from covering across the country, they're looking for lowest rates. So I think the solution would be, how can we get them the lowest-cost power? Certainly, in a region like that we serve in Western Pennsylvania, where we've got access to gas from the Marcellus and the Utica, that natural gas does tend to be priced lower than what you see on NYMEX. I call it $1 a dekatherm on an ongoing basis. Yeah. It would just be like going to the electric utility, right? They want to come to one place for the solution. That's how we would think about it, as we did with CHPs. We would come up with a solution that works for them. Okay. Sure. That makes sense. That's all I had. Appreciate it. You got it. Thanks, Travis. Take care. We have reached the end of our Q&A session. I'd now like to hand back over to Chris Franklin for final remarks. Thanks for joining us today, folks. We, as always, are available for questions afterwards. Please feel free to reach out to Brian, Ed, and the rest of the team. Thanks so much. Thank you for attending today's call. You may now disconnect. Goodbye.

Speaker 7: Thank you for standing by. My name is Elena, who will be your conference operator today. At this time, I would like to welcome everyone to the Essential Utilities Full Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers prepare remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star one again. Thank you. I'd now like to turn the call over to Dan Schuller. You may now begin. Thank you for standing by. thank you for standing by My name is Elena, who will be your conference operator today. my name is elena who will be your conference operator today At this time, I would like to welcome everyone to the Essential Utilities Full Year 2024 Earnings Call. at this time i would like to welcome everyone to the essential utilities full year 2024 earnings call All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speakers prepare remarks, there will be a question-and-answer session. after the speakers prepare remarks there will be a question-and-answer session If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. if you'd like to ask a question during that time please press star followed by one on your telephone keypad If you'd like to withdraw your question, please press star one again. if you'd like to withdraw your question please press star one again Thank you. thank you I'd now like to turn the call over to Dan Schuller. i'd now like to turn the call over to dan schuller You may now begin. you may now begin

Speaker 4: Good morning, everyone, and thank you for joining us for Essential Utilities Q4 and Full Year 2024 Earnings Call. This is Dan Schuller, Chief Financial Officer at Essential. I'm stepping in for Brian Dingerdissen, who welcomed twins this past weekend. If you did not receive a copy of the press release, you can find it by visiting the investor relations section of our website at essential.co. The slides we'll be referencing and the webcast of this event can also be found on our website. I did want to take a moment to introduce our new IR director, as you may have seen his photo in the deck that is posted. Ed Vallejo, with whom most of you are familiar from his time in the industry, joined our team just last week. Ed hit the ground running, and we fully engaged in our IR activities right away. Welcome, Ed. Good morning, everyone, and thank you for joining us for Essential Utilities Q4 and Full Year 2024 Earnings Call. good morning everyone and thank you for joining us for essential utilities q4 and full year 2024 earnings call This is Dan Schuller, Chief Financial Officer at Essential. this is dan schuller chief financial officer at essential I'm stepping in for Brian Dingerdissen, who welcomed twins this past weekend. i'm stepping in for brian dingerdissen who welcomed twins this past weekend If you did not receive a copy of the press release, you can find it by visiting the investor relations section of our website at essential.co. if you did not receive a copy of the press release you can find it by visiting the investor relations section of our website at essential.co The slides we'll be referencing and the webcast of this event can also be found on our website. the slides we'll be referencing and the webcast of this event can also be found on our website I did want to take a moment to introduce our new IR director, as you may have seen his photo in the deck that is posted. i did want to take a moment to introduce our new ir director as you may have seen his photo in the deck that is posted Ed Vallejo, with whom most of you are familiar from his time in the industry, joined our team just last week. ed vallejo with whom most of you are familiar from his time in the industry joined our team just last week Ed hit the ground running, and we fully engaged in our IR activities right away. ed hit the ground running and we fully engaged in our ir activities right away Welcome, Ed. welcome ed Let's move to the forward-looking statement. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10Q, 10K, and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the investor relations section of the company's website. We begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company, and then I'll provide an overview of our financial results before Chris closes the call with our guidance. Let's move to the forward-looking statement. let's move to the forward-looking statement As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. as a reminder some of the matters discussed during this call may include forward-looking statements that involve risk uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements Please refer to our most recent 10Q, 10K, and other SEC filings for a description of such risks and uncertainties. please refer to our most recent 10q 10k and other sec filings for a description of such risks and uncertainties During the course of this call, reference may be made to certain non-GAAP financial measures. during the course of this call reference may be made to certain non-gaap financial measures A reconciliation of any non-GAAP to GAAP financial measures is posted in the investor relations section of the company's website. a reconciliation of any non-gaap to gaap financial measures is posted in the investor relations section of the company's website We begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company, and then I'll provide an overview of our financial results before Chris closes the call with our guidance. we begin the call today with chris franklin our chairman and ceo who will provide an update on the company and then i'll provide an overview of our financial results before chris closes the call with our guidance And with that, I'll turn the call over to Chris Franklin. Chris. And with that, I'll turn the call over to Chris Franklin. and with that i'll turn the call over to chris franklin Chris. chris

Speaker 6: Hey, thanks, Dan. Ed, welcome aboard. Nice to have you with us, and good morning, everyone. Thanks for joining us. Hey, listen, as I reflect on 2024, I have to tell you I'm really proud of the performance of the company, the team that leads it, and all of those that did the work to make the year so successful. Financially, 2024 is another year in a string of years that we have reported earnings per share in line with our 5%-7% guidance. In fact, on a GAAP basis, we delivered $2.17 per share. The GAAP earnings, of course, include the gain on sale from the Pittsburgh Energy projects. When you think about repeatable earnings, I'm talking non-GAAP now, we would think about finishing the year at about $1.97 earnings per share. Dan's going to provide more detail on this in just a few moments. Hey, thanks, Dan. hey thanks dan Ed, welcome aboard. ed welcome aboard Nice to have you with us, and good morning, everyone. nice to have you with us and good morning everyone Thanks for joining us. thanks for joining us Hey, listen, as I reflect on 2024, I have to tell you I'm really proud of the performance of the company, the team that leads it, and all of those that did the work to make the year so successful. hey listen as i reflect on 2024 i have to tell you i'm really proud of the performance of the company the team that leads it and all of those that did the work to make the year so successful Financially, 2024 is another year in a string of years that we have reported earnings per share in line with our 5%-7% guidance. financially 2024 is another year in a string of years that we have reported earnings per share in line with our 5%-7% guidance In fact, on a GAAP basis, we delivered $2.17 per share. in fact on a gaap basis we delivered $2.17 per share The GAAP earnings, of course, include the gain on sale from the Pittsburgh Energy projects. the gaap earnings of course include the gain on sale from the pittsburgh energy projects When you think about repeatable earnings, I'm talking non-GAAP now, we would think about finishing the year at about $1.97 earnings per share. when you think about repeatable earnings i'm talking non-gaap now we would think about finishing the year at about $1.97 earnings per share Dan's going to provide more detail on this in just a few moments. dan's going to provide more detail on this in just a few moments Now, these outcomes would not be possible without the discipline of our operating teams. They held operating expenses this year to only 2% growth year-over-year and completed our $1.3 billion capital plan right on target. Our operating expense control is key to keeping rates affordable, and our timely capital investments improve water quality, gas safety, and service reliability, all while building rate base and, of course, earnings for shareholders. Over the course of the year, we responded to investors who wanted to get to know our operating team leaders a little bit better in both water and natural gas. And so Colleen Arnold, the head of our water business, and Mike Huwar, the head of our gas business, spent time on the road with us in investor meetings throughout 2024. And that'll continue into the future, as I know you enjoy the interaction with both Mike and Colleen. Now, these outcomes would not be possible without the discipline of our operating teams. now these outcomes would not be possible without the discipline of our operating teams They held operating expenses this year to only 2% growth year-o ver- year and completed our $1.3 billion capital plan right on target. they held operating expenses this year to only 2% growth year-o ver- year and completed our $1.3 billion capital plan right on target Our operating expense control is key to keeping rates affordable, and our timely capital investments improve water quality, gas safety, and service reliability, all while building rate base and, of course, earnings for shareholders. our operating expense control is key to keeping rates affordable and our timely capital investments improve water quality gas safety and service reliability all while building rate base and of course earnings for shareholders Over the course of the year, we responded to investors who wanted to get to know our operating team leaders a little bit better in both water and natural gas. over the course of the year we responded to investors who wanted to get to know our operating team leaders a little bit better in both water and natural gas And so Colleen Arnold, the head of our water business, and Mike Huwar, the head of our gas business, spent time on the road with us in investor meetings throughout 2024. and so colleen arnold the head of our water business and mike huwar the head of our gas business spent time on the road with us in investor meetings throughout 2024 And that'll continue into the future, as I know you enjoy the interaction with both Mike and Colleen. and that'll continue into the future as i know you enjoy the interaction with both mike and colleen Now, when we think about our accomplishments and our consistency, consider that the board raised the dividend by 6% in 2024, and that's consistent with our 30-plus year track record of growing the dividend at a healthy rate. In fact, it's sort of amazing to consider that we've grown the dividend approximately 40% in just five short years, and we've paid a dividend now for 80 straight years. Probably the accomplishments that we're most proud of in 2024 are the successful water and natural gas rate cases in Pennsylvania, the state that contains 75% of our operations. Both cases were Black Box settlements, but most of you could easily estimate the approximate equity layer and ROE that were granted in those cases. Now, when we think about our accomplishments and our consistency, consider that the board raised the dividend by 6% in 2024, and that's consistent with our 30-plus year track record of growing the dividend at a healthy rate. now when we think about our accomplishments and our consistency consider that the board raised the dividend by 6% in 2024 and that's consistent with our 30-plus year track record of growing the dividend at a healthy rate In fact, it's sort of amazing to consider that we've grown the dividend approximately 40% in just five short years, and we've paid a dividend now for 80 straight years. in fact it's sort of amazing to consider that we've grown the dividend approximately 40% in just five short years and we've paid a dividend now for 80 straight years Probably the accomplishments that we're most proud of in 2024 are the successful water and natural gas rate cases in Pennsylvania, the state that contains 75% of our operations. probably the accomplishments that we're most proud of in 2024 are the successful water and natural gas rate cases in pennsylvania the state that contains 75% of our operations Both cases were Black Box settlements, but most of you could easily estimate the approximate equity layer and ROE that were granted in those cases. both cases were black box settlements but most of you could easily estimate the approximate equity layer and roe that were granted in those cases We believe these strong regulatory outcomes, combined with the recent changes at the Office of Consumer Advocate, are reminders that Pennsylvania continues to be a constructive regulatory state. We also believe that our strong regulatory reputation of doing the right thing should continue to facilitate positive regulatory outcomes that are both good for customers and shareholders. In fact, since the recent change in leadership at the OCA, the agency has withdrawn its protest of the Peoples Rate Case, a really good sign that a more moderate approach to regulatory relations may be coming to that agency. One of the key accomplishments in the Peoples Rate Case was the establishment of weather normalization. This regulatory solution has already proven to be beneficial to both shareholders and customers. We believe these strong regulatory outcomes, combined with the recent changes at the Office of Consumer Advocate, are reminders that Pennsylvania continues to be a constructive regulatory state. we believe these strong regulatory outcomes combined with the recent changes at the office of consumer advocate are reminders that pennsylvania continues to be a constructive regulatory state We also believe that our strong regulatory reputation of doing the right thing should continue to facilitate positive regulatory outcomes that are both good for customers and shareholders. we also believe that our strong regulatory reputation of doing the right thing should continue to facilitate positive regulatory outcomes that are both good for customers and shareholders In fact, since the recent change in leadership at the OCA, the agency has withdrawn its protest of the Peoples Rate Case, a really good sign that a more moderate approach to regulatory relations may be coming to that agency. in fact since the recent change in leadership at the oca the agency has withdrawn its protest of the peoples rate case a really good sign that a more moderate approach to regulatory relations may be coming to that agency One of the key accomplishments in the Peoples Rate Case was the establishment of weather normalization. one of the key accomplishments in the peoples rate case was the establishment of weather normalization This regulatory solution has already proven to be beneficial to both shareholders and customers. this regulatory solution has already proven to be beneficial to both shareholders and customers In January of 2025, just last month, because of abnormally cold weather, the company will give back about $8.2 million to customers, but shareholders will also reap some benefit from this cold stretch. Bottom line is that in that short time since October, when the weather normalization was first put in place, the smoothing of weather volatility and the associated revenue is working exactly as designed. Now, while we're talking about regulatory accomplishments, I want to mention that in 2024, there was some reform of the fair market value statute that was passed by the PA Public Utility Commission. As I think you already know, we were actively engaged in that solution with the PUC. We believe that this reform will bring greater certainty to the process and should also help keep rates at affordable levels. Already, we're seeing increased activity from municipals that are interested in selling their utilities. In January of 2025, just last month, because of abnormally cold weather, the company will give back about $8.2 million to customers, but shareholders will also reap some benefit from this cold stretch. in january of 2025 just last month because of abnormally cold weather the company will give back about $8.2 million to customers but shareholders will also reap some benefit from this cold stretch Bottom line is that in that short time since October, when the weather normalization was first put in place, the smoothing of weather volatility and the associated revenue is working exactly as designed. bottom line is that in that short time since october when the weather normalization was first put in place the smoothing of weather volatility and the associated revenue is working exactly as designed Now, while we're talking about regulatory accomplishments, I want to mention that in 2024, there was some reform of the fair market value statute that was passed by the PA Public Utility Commission. now while we're talking about regulatory accomplishments i want to mention that in 2024 there was some reform of the fair market value statute that was passed by the pa public utility commission As I think you already know, we were actively engaged in that solution with the PUC. as i think you already know we were actively engaged in that solution with the puc We believe that this reform will bring greater certainty to the process and should also help keep rates at affordable levels. we believe that this reform will bring greater certainty to the process and should also help keep rates at affordable levels Already, we're seeing increased activity from municipals that are interested in selling their utilities. already we're seeing increased activity from municipals that are interested in selling their utilities All right. Now, when we think about 2024, I have to mention the progress that we've made in PFAS mitigation. We spent about $27 million in capital and completed the mitigation work in 13 plants. This is toward our four-year goal to mitigate approximately 300 plants at an overall estimated capital spend of $450 million. The solution we're applying to most of our plants is a patent-pending approach that we are also marketing to other utilities as a solution to their PFAS issues. Now, it's too early to predict whether our solution will be additive to earnings or not, but I'm proud of the team for engineering the solution and for the pace of our installations. One of our top priorities in the natural gas business will always be risk reduction. In fact, in 2024, we focused on several key risks. First, we installed 30,000 Intelis meters. All right. all right Now, when we think about 2024, I have to mention the progress that we've made in PFAS mitigation. now when we think about 2024 i have to mention the progress that we've made in pfas mitigation We spent about $27 million in capital and completed the mitigation work in 13 plants. we spent about $27 million in capital and completed the mitigation work in 13 plants This is toward our four-year goal to mitigate approximately 300 plants at an overall estimated capital spend of $450 million. this is toward our four-year goal to mitigate approximately 300 plants at an overall estimated capital spend of $450 million The solution we're applying to most of our plants is a patent-pending approach that we are also marketing to other utilities as a solution to their PFAS issues. the solution we're applying to most of our plants is a patent-pending approach that we are also marketing to other utilities as a solution to their pfas issues Now, it's too early to predict whether our solution will be additive to earnings or not, but I'm proud of the team for engineering the solution and for the pace of our installations. now it's too early to predict whether our solution will be additive to earnings or not but i'm proud of the team for engineering the solution and for the pace of our installations One of our top priorities in the natural gas business will always be risk reduction. one of our top priorities in the natural gas business will always be risk reduction In fact, in 2024, we focused on several key risks. in fact in 2024 we focused on several key risks First, we installed 30,000 Intelis meters. first we installed 30,000 intelis meters These are the meters made by Itron. We believe that these meters are literally a game changer for safety. The meters are lighter weight, slightly smaller, and more accurate, but most importantly, they prevent overpressurization. When you consider the catastrophic incidents that have occurred within the gas industry just over the past decade, if these meters had been installed, they hadn't been invented when those incidents happened, but had they been installed, many of these fires could have been prevented. Now, we'll install at least 60,000 more of these meters in 2025 as we ramp up this new potentially life-saving technology. When we think about risk in the gas business, particularly, we also think about underground storage wells. That's why we reconditioned some of our older wells and abandoned some others. These are the meters made by Itron. these are the meters made by itron We believe that these meters are literally a game changer for safety. we believe that these meters are literally a game changer for safety The meters are lighter weight, slightly smaller, and more accurate, but most importantly, they prevent overpressurization. the meters are lighter weight slightly smaller and more accurate but most importantly they prevent overpressurization When you consider the catastrophic incidents that have occurred within the gas industry just over the past decade, if these meters had been installed, they hadn't been invented when those incidents happened, but had they been installed, many of these fires could have been prevented. when you consider the catastrophic incidents that have occurred within the gas industry just over the past decade if these meters had been installed they hadn't been invented when those incidents happened but had they been installed many of these fires could have been prevented Now, we'll install at least 60,000 more of these meters in 2025 as we ramp up this new potentially life-saving technology. now we'll install at least 60,000 more of these meters in 2025 as we ramp up this new potentially life-saving technology When we think about risk in the gas business, particularly, we also think about underground storage wells. when we think about risk in the gas business particularly we also think about underground storage wells That's why we reconditioned some of our older wells and abandoned some others. that's why we reconditioned some of our older wells and abandoned some others Overall, the work we did on underground storage wells in 2024 reduced our risk scores by 50%, a significant accomplishment. As part of our capital plan in 2024, we replaced more than 370 miles of water and natural gas mains, which is key to the continued reduction in our carbon footprint. Our expectation remains that we will spend nearly $7.8 billion in capital over the next five years. In preparation for that work, we continue to deepen our bench of talent by creating development opportunities for members of the team so we can continue the long-term consistency of results that has been our reputation. Now, we had our challenges in 2024 as well. In Pennsylvania alone, we were named receiver for 10 water and wastewater systems. These are systems that the former owners neglected, and they were undercapitalized. Overall, the work we did on underground storage wells in 2024 reduced our risk scores by 50%, a significant accomplishment. overall the work we did on underground storage wells in 2024 reduced our risk scores by 50% a significant accomplishment As part of our capital plan in 2024, we replaced more than 370 miles of water and natural gas mains, which is key to the continued reduction in our carbon footprint. as part of our capital plan in 2024 we replaced more than 370 miles of water and natural gas mains which is key to the continued reduction in our carbon footprint Our expectation remains that we will spend nearly $7.8 billion in capital over the next five years. our expectation remains that we will spend nearly $7.8 billion in capital over the next five years In preparation for that work, we continue to deepen our bench of talent by creating development opportunities for members of the team so we can continue the long-term consistency of results that has been our reputation. in preparation for that work we continue to deepen our bench of talent by creating development opportunities for members of the team so we can continue the long-term consistency of results that has been our reputation Now, we had our challenges in 2024 as well. now we had our challenges in 2024 as well In Pennsylvania alone, we were named receiver for 10 water and wastewater systems. in pennsylvania alone we were named receiver for 10 water and wastewater systems These are systems that the former owners neglected, and they were undercapitalized. these are systems that the former owners neglected and they were undercapitalized We responded quickly when the Pennsylvania Public Utility Commission asked us to operate these systems. We invested capital and made improvements. But I got to tell you that receiverships are not the best solution. We will be in all of our states with the environmental agencies to push the improved enforcement. This deferral of investment and ultimate dilapidation did not occur overnight, and we'll use this example to encourage environmental agencies to enforce earlier, which could provide us an opportunity to rescue these systems before they reach a critical stage. The other macro challenge that we face in the water industry is stock performance. Now, we're no exception, and I'll say that we were pleased to be the strongest performing water stock in 2024, but still disappointed in not seeing our successes reflected in our overall current valuation. Now, moving to 2025, I already mentioned the successful Pennsylvania Rate Case. We responded quickly when the Pennsylvania Public Utility Commission asked us to operate these systems. we responded quickly when the pennsylvania public utility commission asked us to operate these systems We invested capital and made improvements. we invested capital and made improvements But I got to tell you that receiverships are not the best solution. but i got to tell you that receiverships are not the best solution We will be in all of our states with the environmental agencies to push the improved enforcement. we will be in all of our states with the environmental agencies to push the improved enforcement This deferral of investment and ultimate dilapidation did not occur overnight, and we'll use this example to encourage environmental agencies to enforce earlier, which could provide us an opportunity to rescue these systems before they reach a critical stage. this deferral of investment and ultimate dilapidation did not occur overnight and we'll use this example to encourage environmental agencies to enforce earlier which could provide us an opportunity to rescue these systems before they reach a critical stage The other macro challenge that we face in the water industry is stock performance. the other macro challenge that we face in the water industry is stock performance Now, we're no exception, and I'll say that we were pleased to be the strongest performing water stock in 2024, but still disappointed in not seeing our successes reflected in our overall current valuation. now we're no exception and i'll say that we were pleased to be the strongest performing water stock in 2024 but still disappointed in not seeing our successes reflected in our overall current valuation Now, moving to 2025, I already mentioned the successful Pennsylvania Rate Case. now moving to 2025 i already mentioned the successful pennsylvania rate case It did receive final approval on February 6th by a unanimous vote of the Public Utility Commissioners in Pennsylvania. We look forward. Our theme this year is "Leading Today, Shaping Tomorrow," which captures our dual focus: solving today's issues with urgency while building a foundation for tomorrow through a focus on sustainable business practices. Now, to facilitate this work, a key theme in 2025 will be a focus on lean practices across our footprint and throughout our corporate functions. Operational excellence has always been a cornerstone of our company, and we're going to lean into that even further beginning this year. Some of the best-performing utilities across the country have adopted lean practices, and we believe that Essential will benefit from this approach in the coming years. The last issue I'll mention is probably the hottest topic in the utility industry right now: load growth generated by data centers. It did receive final approval on February 6th by a unanimous vote of the Public Utility Commissioners in Pennsylvania. it did receive final approval on february 6th by a unanimous vote of the public utility commissioners in pennsylvania We look forward. we look forward Our theme this year is "Leading Today, Shaping Tomorrow," which captures our dual focus: solving today's issues with urgency while building a foundation for tomorrow through a focus on sustainable business practices. our theme this year is "leading today shaping tomorrow," which captures our dual focus solving today's issues with urgency while building a foundation for tomorrow through a focus on sustainable business practices Now, to facilitate this work, a key theme in 2025 will be a focus on lean practices across our footprint and throughout our corporate functions. now to facilitate this work a key theme in 2025 will be a focus on lean practices across our footprint and throughout our corporate functions Operational excellence has always been a cornerstone of our company, and we're going to lean into that even further beginning this year. operational excellence has always been a cornerstone of our company and we're going to lean into that even further beginning this year Some of the best-performing utilities across the country have adopted lean practices, and we believe that Essential will benefit from this approach in the coming years. some of the best-performing utilities across the country have adopted lean practices and we believe that essential will benefit from this approach in the coming years The last issue I'll mention is probably the hottest topic in the utility industry right now: load growth generated by data centers. the last issue i'll mention is probably the hottest topic in the utility industry right now load growth generated by data centers This creates a challenge and an opportunity. See, some investors see greater growth in the electric utility industry compared to the stability and more measured growth of water and natural gas. However, our company and investors are uniquely positioned to benefit from both growth and stability. Our investors have the stability and growth of the second-largest investor-owned water utility in the United States, while also benefiting from the potential low growth from data center construction within our natural gas service territory. This is important. As of today, we are in discussions with data center developers that represent up to 5GW of needed power generation in the Pittsburgh region if the data centers are built. While all of that may not be built and the exact financial implications for us aren't known, it is exciting to see the state of Pennsylvania is engaged in these opportunities. This creates a challenge and an opportunity. this creates a challenge and an opportunity See, some investors see greater growth in the electric utility industry compared to the stability and more measured growth of water and natural gas. see some investors see greater growth in the electric utility industry compared to the stability and more measured growth of water and natural gas However, our company and investors are uniquely positioned to benefit from both growth and stability. however our company and investors are uniquely positioned to benefit from both growth and stability Our investors have the stability and growth of the second-largest investor-owned water utility in the United States, while also benefiting from the potential low growth from data center construction within our natural gas service territory. our investors have the stability and growth of the second-largest investor-owned water utility in the united states while also benefiting from the potential low growth from data center construction within our natural gas service territory This is important. this is important As of today, we are in discussions with data center developers that represent up to 5GW of needed power generation in the Pittsburgh region if the data centers are built. as of today we are in discussions with data center developers that represent up to 5gw of needed power generation in the pittsburgh region if the data centers are built While all of that may not be built and the exact financial implications for us aren't known, it is exciting to see the state of Pennsylvania is engaged in these opportunities. while all of that may not be built and the exact financial implications for us aren't known it is exciting to see the state of pennsylvania is engaged in these opportunities And we would welcome both the increased throughput and any capital improvements that would be associated with that growth because of the potential benefit to customers and to shareholders. So listen, we were really pleased to reinitiate long-term growth guidance in November with expected annual EPS growth of between 5% and 7% through 2027 off of the $1.97 non-GAAP base we earned in 2024. This does not include any potential earnings associated with the pending acquisition of DELCORA. Additionally, we'll spend between $1.4 and $1.5 billion in capital in 2025, and we'll invest nearly $8 billion in infrastructure improvements over the next five years. That will lead to 8-plus% annual rate base growth before accounting for any acquisitions. All right. With that, let me pass it to Dan to get into the financials for 2024. And we would welcome both the increased throughput and any capital improvements that would be associated with that growth because of the potential benefit to customers and to shareholders. and we would welcome both the increased throughput and any capital improvements that would be associated with that growth because of the potential benefit to customers and to shareholders So listen, we were really pleased to reinitiate long-term growth guidance in November with expected annual EPS growth of between 5% and 7% through 2027 off of the $1.97 non-GAAP base we earned in 2024. so listen we were really pleased to reinitiate long-term growth guidance in november with expected annual eps growth of between 5% and 7% through 2027 off of the $1.97 non-gaap base we earned in 2024 This does not include any potential earnings associated with the pending acquisition of DELCORA. this does not include any potential earnings associated with the pending acquisition of delcora Additionally, we'll spend between $1.4 and $1.5 billion in capital in 2025, and we'll invest nearly $8 billion in infrastructure improvements over the next five years. additionally we'll spend between $1.4 and $1.5 billion in capital in 2025 and we'll invest nearly $8 billion in infrastructure improvements over the next five years That will lead to 8-plus% annual rate base growth before accounting for any acquisitions. that will lead to 8-plus% annual rate base growth before accounting for any acquisitions All right. all right With that, let me pass it to Dan to get into the financials for 2024. with that let me pass it to dan to get into the financials for 2024

Speaker 4: Thanks, Chris, and good morning again, everyone. This first slide, let's talk high level on full year 2024, and then we'll get into the details on the waterfalls. During the year, we had exceptional execution on two large rate cases, Pennsylvania Gas and Pennsylvania Water, which actually just concluded earlier this month, and we reached a great outcome with the sale of our non-core Pittsburgh area energy projects, which allowed us to reduce our financing needs in 2024. We continue to see the merits of our long-term strategy of providing outstanding service to our customers, investing in needed capital improvements, managing our day-to-day O&M expenses, and maintaining our disciplined regulatory practices to deliver long-term shareholder value. Operating revenues were up due to rates and surcharges and increased water volume. Thanks, Chris, and good morning again, everyone. thanks chris and good morning again everyone This first slide, let's talk high level on full year 2024, and then we'll get into the details on the waterfalls. this first slide let's talk high level on full year 2024 and then we'll get into the details on the waterfalls During the year, we had exceptional execution on two large rate cases, Pennsylvania Gas and Pennsylvania Water, which actually just concluded earlier this month, and we reached a great outcome with the sale of our non-core Pittsburgh area energy projects, which allowed us to reduce our financing needs in 2024. during the year we had exceptional execution on two large rate cases pennsylvania gas and pennsylvania water which actually just concluded earlier this month and we reached a great outcome with the sale of our non-core pittsburgh area energy projects which allowed us to reduce our financing needs in 2024 We continue to see the merits of our long-term strategy of providing outstanding service to our customers, investing in needed capital improvements, managing our day-to-day O&M expenses, and maintaining our disciplined regulatory practices to deliver long-term shareholder value. we continue to see the merits of our long-term strategy of providing outstanding service to our customers investing in needed capital improvements managing our day-to-day o&m expenses and maintaining our disciplined regulatory practices to deliver long-term shareholder value Operating revenues were up due to rates and surcharges and increased water volume. operating revenues were up due to rates and surcharges and increased water volume This was offset by the decline in natural gas commodity prices year-over-year, which positively impacted our customers' bills, and due to weather, which was warmer than normal for the gas business as compared to the prior year. Importantly, as a reminder, we now have the weather normalization mechanism that provides customers better certainty and alleviates the volatility associated with extreme weather. While we continue our focus on managing O&M expenses, the full year O&M shows only a slight increase, reflecting our long-term focus on operating efficiently and the sale of our West Virginia and energy project assets. As Chris mentioned, on a GAAP basis, we achieved EPS of $2.17 for the year, which is up from $1.86 in 2023. This was offset by the decline in natural gas commodity prices year- over- year, which positively impacted our customers' bills, and due to weather, which was warmer than normal for the gas business as compared to the prior year. this was offset by the decline in natural gas commodity prices year- over- year which positively impacted our customers' bills and due to weather which was warmer than normal for the gas business as compared to the prior year Importantly, as a reminder, we now have the weather normalization mechanism that provides customers better certainty and alleviates the volatility associated with extreme weather. importantly as a reminder we now have the weather normalization mechanism that provides customers better certainty and alleviates the volatility associated with extreme weather While we continue our focus on managing O&M expenses, the full year O&M shows only a slight increase, reflecting our long-term focus on operating efficiently and the sale of our West Virginia and energy project assets. while we continue our focus on managing o&m expenses the full year o&m shows only a slight increase reflecting our long-term focus on operating efficiently and the sale of our west virginia and energy project assets As Chris mentioned, on a GAAP basis, we achieved EPS of $2.17 for the year, which is up from $1.86 in 2023. as chris mentioned on a gaap basis we achieved eps of $2.17 for the year which is up from $1.86 in 2023 These results include the gain on sale, plus the impact of warmer than normal weather in the first half of 2024 for the gas business, and drier than normal weather in the Mid-Atlantic and Ohio for the second half. If you adjust for these factors, you'd be squarely in the 2024 guidance range of $1.96-$2. Next, let's walk through the full year waterfalls. At slide 11, we have the revenue waterfall for the year. Moving left to right, we have rate increases and surcharges of nearly $83 million, with about $51 million of that coming from water and $32 million from gas. These results include the gain on sale, plus the impact of warmer than normal weather in the first half of 2024 for the gas business, and drier than normal weather in the Mid-Atlantic and Ohio for the second half. these results include the gain on sale plus the impact of warmer than normal weather in the first half of 2024 for the gas business and drier than normal weather in the mid-atlantic and ohio for the second half If you adjust for these factors, you'd be squarely in the 2024 guidance range of $1.96-$2. if you adjust for these factors you'd be squarely in the 2024 guidance range of $1.96-$2 Next, let's walk through the full year waterfalls. next let's walk through the full year waterfalls At slide 11, we have the revenue waterfall for the year. at slide 11 we have the revenue waterfall for the year Moving left to right, we have rate increases and surcharges of nearly $83 million, with about $51 million of that coming from water and $32 million from gas. moving left to right we have rate increases and surcharges of nearly $83 million with about $51 million of that coming from water and $32 million from gas Increases in water volume of $11.6 million, and then other, which is mainly the weather normalization adjustment and the gas customer assistance program rider, offset by the loss of revenue from both the West Virginia utility assets and the energy projects of $8.4 million, plus acquisitions and organic growth in the water business of $8.2 million, offset by lower gas consumption, as well as the impact of the lower purchased gas costs of approximately $75 million. As a reminder, we experienced dry warm weather over the summer and into the fall in Pennsylvania, New Jersey, and Ohio, which led to increased water usage. Let's talk about the natural gas business for a moment. Through June, each of the months of 2024 was warmer than normal, and this had a significant impact on our financial results. Increases in water volume of $11.6 million, and then other, which is mainly the weather normalization adjustment and the gas customer assistance program rider, offset by the loss of revenue from both the West Virginia utility assets and the energy projects of $8.4 million, plus acquisitions and organic growth in the water business of $8.2 million, offset by lower gas consumption, as well as the impact of the lower purchased gas costs of approximately $75 million. increases in water volume of $11.6 million and then other which is mainly the weather normalization adjustment and the gas customer assistance program rider offset by the loss of revenue from both the west virginia utility assets and the energy projects of $8.4 million plus acquisitions and organic growth in the water business of $8.2 million offset by lower gas consumption as well as the impact of the lower purchased gas costs of approximately $75 million As a reminder, we experienced dry warm weather over the summer and into the fall in Pennsylvania, New Jersey, and Ohio, which led to increased water usage. as a reminder we experienced dry warm weather over the summer and into the fall in pennsylvania new jersey and ohio which led to increased water usage Let's talk about the natural gas business for a moment. let's talk about the natural gas business for a moment Through June, each of the months of 2024 was warmer than normal, and this had a significant impact on our financial results. through june each of the months of 2024 was warmer than normal and this had a significant impact on our financial results This is exactly why we asked for the weather normalization adjustment in our People's rate case. Now, we've already seen the benefit of weather norm both for the company in the fourth quarter and for customers in early 2025. Next, let's look at the O&M on slide 12. O&M increased just 2%, or under $12 million year over year in 2024. The increase included additional costs from the gas segment universal services rider, which is recoverable through a revenue surcharge, as well as employee-related expenses, increased water production costs, so mainly purchased wastewater, power, and purchased water, offset by lower chemicals, and expenses related to serving acquired water and wastewater systems. Those increases were offset by lower bad debt costs and lower expenses due mainly to the sale of the West Virginia utility assets and the energy projects, so overall, a good story on O&M consistent with our long-term efforts. This is exactly why we asked for the weather normalization adjustment in our People's rate case. this is exactly why we asked for the weather normalization adjustment in our people's rate case Now, we've already seen the benefit of weather norm both for the company in the fourth quarter and for customers in early 2025. now we've already seen the benefit of weather norm both for the company in the fourth quarter and for customers in early 2025 Next, let's look at the O&M on slide 12. next let's look at the o&m on slide 12 O&M increased just 2%, or under $12 million year over year in 2024. o&m increased just 2% or under $12 million year over year in 2024 The increase included additional costs from the gas segment universal services rider, which is recoverable through a revenue surcharge, as well as employee-related expenses, increased water production costs, so mainly purchased wastewater, power, and purchased water, offset by lower chemicals, and expenses related to serving acquired water and wastewater systems. the increase included additional costs from the gas segment universal services rider which is recoverable through a revenue surcharge as well as employee-related expenses increased water production costs so mainly purchased wastewater power and purchased water offset by lower chemicals and expenses related to serving acquired water and wastewater systems Those increases were offset by lower bad debt costs and lower expenses due mainly to the sale of the West Virginia utility assets and the energy projects, so overall, a good story on O&M consistent with our long-term efforts. those increases were offset by lower bad debt costs and lower expenses due mainly to the sale of the west virginia utility assets and the energy projects so overall a good story on o&m consistent with our long-term efforts Next, let's look at the EPS waterfall on slide 13. Starting on the left side of the waterfall, with GAAP earnings per share of $1.86 from last year, the next thing we see is the nearly $0.22 increase from regulatory recoveries, $0.05 from other, which includes the approximately $0.25 gain on sale of assets and related transaction activities, plus weather normalization adjustment revenue offset by increased depreciation, interest, and taxes other than income, as well as lower income tax benefits. Then we see the $0.03 gain from water volume and nearly $0.50 gained from water growth, which were then offset slightly by higher expenses and lower gas volumes. That gets us to the $2.17 of GAAP EPS for 2024. Next, let's look at the EPS waterfall on slide 13. next let's look at the eps waterfall on slide 13 Starting on the left side of the waterfall, with GAAP earnings per share of $1.86 from last year, the next thing we see is the nearly $0.22 increase from regulatory recoveries, $0.05 from other, which includes the approximately $0.25 gain on sale of assets and related transaction activities, plus weather normalization adjustment revenue offset by increased depreciation, interest, and taxes other than income, as well as lower income tax benefits. starting on the left side of the waterfall with gaap earnings per share of $1.86 from last year the next thing we see is the nearly $0.22 increase from regulatory recoveries $0.05 from other which includes the approximately $0.25 gain on sale of assets and related transaction activities plus weather normalization adjustment revenue offset by increased depreciation interest and taxes other than income as well as lower income tax benefits Then we see the $0.03 gain from water volume and nearly $0.50 gained from water growth, which were then offset slightly by higher expenses and lower gas volumes. then we see the $0.03 gain from water volume and nearly $0.50 gained from water growth which were then offset slightly by higher expenses and lower gas volumes That gets us to the $2.17 of GAAP EPS for 2024. that gets us to the $2.17 of gaap eps for 2024 We thought it was important to clarify that the $2.17 includes $0.25 of gain on sale of assets, which includes the energy project and a true-up for post-acquisition activities on the previously closed West Virginia gas utility assets. And then, if we normalize the weather impact of $0.05 of EPS for the year, we get to $1.97 of adjusted earnings per share, which is a non-GAAP measure. And that $1.97 is our weather normalized results without the asset sale impact. That $1.97 is nicely in the original $1.96-$2 guidance range for the year and above the current full year 2024 consensus of $1.95. Notably, the $0.05 weather impact incorporates both the positive impact of the dry summer and fall on our water segment sales and the larger unfavorable weather impact you may recall from the first half on our gas segment. We thought it was important to clarify that the $2.17 includes $0.25 of gain on sale of assets, which includes the energy project and a true-up for post-acquisition activities on the previously closed West Virginia gas utility assets. we thought it was important to clarify that the $2.17 includes $0.25 of gain on sale of assets which includes the energy project and a true-up for post-acquisition activities on the previously closed west virginia gas utility assets And then, if we normalize the weather impact of $0.05 of EPS for the year, we get to $1.97 of adjusted earnings per share, which is a non-GAAP measure. and then if we normalize the weather impact of $0.05 of eps for the year we get to $1.97 of adjusted earnings per share which is a non-gaap measure And that $1.97 is our weather normalized results without the asset sale impact. and that $1.97 is our weather normalized results without the asset sale impact That $1.97 is nicely in the original $1.96-$2 guidance range for the year and above the current full year 2024 consensus of $1.95. that $1.97 is nicely in the original $1.96-$2 guidance range for the year and above the current full year 2024 consensus of $1.95 Notably, the $0.05 weather impact incorporates both the positive impact of the dry summer and fall on our water segment sales and the larger unfavorable weather impact you may recall from the first half on our gas segment. notably the $0.05 weather impact incorporates both the positive impact of the dry summer and fall on our water segment sales and the larger unfavorable weather impact you may recall from the first half on our gas segment As you may be aware, we're currently experiencing drought conditions in the Mid-Atlantic that we've not seen in about 20 years. Given our water supplies and the resiliency of our systems, this is not having much of an effect on us now, but we'll keep you posted as the year progresses. Next, let's move to the slide on rate activity. This slide highlights our regulatory activity during the past year and into 2025. We continue to manage our regulatory activity to maintain safe and reliable service, earn a fair return on capital that we invest, and minimize regulatory lag while always considering affordability for our customers. As you can see on the slide, 2024 was a significant year for regulatory activity. We completed rate cases or surcharges in many of the water states to raise annualized revenue by nearly $54 million. This included the late 2024 settlement in Illinois. As you may be aware, we're currently experiencing drought conditions in the Mid-Atlantic that we've not seen in about 20 years. as you may be aware we're currently experiencing drought conditions in the mid-atlantic that we've not seen in about 20 years Given our water supplies and the resiliency of our systems, this is not having much of an effect on us now, but we'll keep you posted as the year progresses. given our water supplies and the resiliency of our systems this is not having much of an effect on us now but we'll keep you posted as the year progresses Next, let's move to the slide on rate activity. next let's move to the slide on rate activity This slide highlights our regulatory activity during the past year and into 2025. this slide highlights our regulatory activity during the past year and into 2025 We continue to manage our regulatory activity to maintain safe and reliable service, earn a fair return on capital that we invest, and minimize regulatory lag while always considering affordability for our customers. we continue to manage our regulatory activity to maintain safe and reliable service earn a fair return on capital that we invest and minimize regulatory lag while always considering affordability for our customers As you can see on the slide, 2024 was a significant year for regulatory activity. as you can see on the slide 2024 was a significant year for regulatory activity We completed rate cases or surcharges in many of the water states to raise annualized revenue by nearly $54 million. we completed rate cases or surcharges in many of the water states to raise annualized revenue by nearly $54 million This included the late 2024 settlement in Illinois. this included the late 2024 settlement in illinois As we've previously discussed, in September, we completed the first rate case since the merger at Peoples Gas, which included a $93 million revenue increase and the weather normalization adjustment we mentioned earlier. In total, we had annualized rate or surcharge increases of about $148 million in 2024, which I believe is the most significant year on record. Earlier this month, the PAPUC voted 5-0 to approve the settlement previously announced for the Aqua Pennsylvania rate case, increasing revenues by $73 million on an annualized basis. In total, so far in 2025, we've received rate cases or surcharges to increase annualized revenues by $86.5 million in the water business. Additionally, we have pending rate cases or surcharges totaling approximately $16 million across the company today, with the majority of that being an ongoing rate case in our Kentucky gas business. As we've previously discussed, in September, we completed the first rate case since the merger at Peoples Gas, which included a $93 million revenue increase and the weather normalization adjustment we mentioned earlier. as we've previously discussed in september we completed the first rate case since the merger at peoples gas which included a $93 million revenue increase and the weather normalization adjustment we mentioned earlier In total, we had annualized rate or surcharge increases of about $148 million in 2024, which I believe is the most significant year on record. in total we had annualized rate or surcharge increases of about $148 million in 2024 which i believe is the most significant year on record Earlier this month, the PAPUC voted 5-0 to approve the settlement previously announced for the Aqua Pennsylvania rate case, increasing revenues by $73 million on an annualized basis. earlier this month the papuc voted 5-0 to approve the settlement previously announced for the aqua pennsylvania rate case increasing revenues by $73 million on an annualized basis In total, so far in 2025, we've received rate cases or surcharges to increase annualized revenues by $86.5 million in the water business. in total so far in 2025 we've received rate cases or surcharges to increase annualized revenues by $86.5 million in the water business Additionally, we have pending rate cases or surcharges totaling approximately $16 million across the company today, with the majority of that being an ongoing rate case in our Kentucky gas business. additionally we have pending rate cases or surcharges totaling approximately $16 million across the company today with the majority of that being an ongoing rate case in our kentucky gas business And later in 2025, we expect to file rate cases in Texas, North Carolina, Ohio, and Virginia. And as a reminder, we expect to file a People's rate case early next year. And with that, I'll turn it back to Chris. And later in 2025, we expect to file rate cases in Texas, North Carolina, Ohio, and Virginia. and later in 2025 we expect to file rate cases in texas north carolina ohio and virginia And as a reminder, we expect to file a People's rate case early next year. and as a reminder we expect to file a people's rate case early next year And with that, I'll turn it back to Chris. and with that i'll turn it back to chris

Speaker 6: All right. Thanks, Dan. Let's touch briefly on our acquisition program. I want to point out the recently closed Greenville wastewater acquisition in Pennsylvania. This is the first municipal acquisition we've closed since the PAPUC's motion was published. It's a pretty important milestone for us. As of this call, we have six signed asset purchase agreements in three states in which we already have existing operations. These acquisitions will add over 210,000 customer equivalents and total approximately $344 million in purchase price. I should note that nearly $70 million of that rate base are deals other than DELCORA. Now, we continue to see a strong and healthy pipeline of opportunities for additional growth, and we currently have activities and engaged discussions with municipalities that have over 400,000 potential water and wastewater customers. All right. all right Thanks, Dan. thanks dan Let's touch briefly on our acquisition program. let's touch briefly on our acquisition program I want to point out the recently closed Greenville wastewater acquisition in Pennsylvania. i want to point out the recently closed greenville wastewater acquisition in pennsylvania This is the first municipal acquisition we've closed since the PAPUC's motion was published. this is the first municipal acquisition we've closed since the papuc's motion was published It's a pretty important milestone for us. it's a pretty important milestone for us As of this call, we have six signed asset purchase agreements in three states in which we already have existing operations. as of this call we have six signed asset purchase agreements in three states in which we already have existing operations These acquisitions will add over 210,000 customer equivalents and total approximately $344 million in purchase price. these acquisitions will add over 210,000 customer equivalents and total approximately $344 million in purchase price I should note that nearly $70 million of that rate base are deals other than DELCORA. i should note that nearly $70 million of that rate base are deals other than delcora Now, we continue to see a strong and healthy pipeline of opportunities for additional growth, and we currently have activities and engaged discussions with municipalities that have over 400,000 potential water and wastewater customers. now we continue to see a strong and healthy pipeline of opportunities for additional growth and we currently have activities and engaged discussions with municipalities that have over 400,000 potential water and wastewater customers At our board meeting just this past week, we spoke about several potential transactions where we have submitted bids, and while we don't know that we'll get all those deals, we are seeing increased levels of activity. Lastly, and in closing, we were pleased to share our new multi-year financial guidance and growth guidance back in November. This guidance provides a clear line of sight to the opportunities in front of the company. In 2025, we expect earnings per share to be between $2.07 and $2.11. Importantly, now that we have a weather normalization mechanism in place, the volatility of earnings associated with unusual weather should be dramatically reduced, and for the three-year period through 2027, we're guiding to a compounded annual growth of EPS at a rate of 5%-7%. At our board meeting just this past week, we spoke about several potential transactions where we have submitted bids, and while we don't know that we'll get all those deals, we are seeing increased levels of activity. at our board meeting just this past week we spoke about several potential transactions where we have submitted bids and while we don't know that we'll get all those deals we are seeing increased levels of activity Lastly, and in closing, we were pleased to share our new multi-year financial guidance and growth guidance back in November. lastly and in closing we were pleased to share our new multi-year financial guidance and growth guidance back in november This guidance provides a clear line of sight to the opportunities in front of the company. this guidance provides a clear line of sight to the opportunities in front of the company In 2025, we expect earnings per share to be between $2.07 and $2.11. in 2025 we expect earnings per share to be between $2.07 and $2.11 Importantly, now that we have a weather normalization mechanism in place, the volatility of earnings associated with unusual weather should be dramatically reduced, and for the three-year period through 2027, we're guiding to a compounded annual growth of EPS at a rate of 5%-7%. importantly now that we have a weather normalization mechanism in place the volatility of earnings associated with unusual weather should be dramatically reduced and for the three-year period through 2027 we're guiding to a compounded annual growth of eps at a rate of 5%-7% And this does not include DELCORA and is based off of the $1.97 non-GAAP 2024 EPS that Dan referenced. As we look to the next five years through 2029, we plan to make regulated infrastructure investments of about $7.8 billion. And notably, it does not include unsigned acquisitions or associated follow-on capital from those acquisitions. We expect our 2025 capital expenditures on infrastructure to be approximately $1.4-$1.5 billion. And through 2029, we anticipate that the regulated water segment rate base will grow at a compounded annual growth rate of approximately 6%. This projection only includes the acquisitions listed on the previous slide, which are scheduled to close in 2025 and in 2026, and again, excludes DELCORA. This projection does include the crucial work that we are doing to remediate PFAS across the systems we currently own and operate. And this does not include DELCORA and is based off of the $1.97 non-GAAP 2024 EPS that Dan referenced. and this does not include delcora and is based off of the $1.97 non-gaap 2024 eps that dan referenced As we look to the next five years through 2029, we plan to make regulated infrastructure investments of about $7.8 billion. as we look to the next five years through 2029 we plan to make regulated infrastructure investments of about $7.8 billion And notably, it does not include unsigned acquisitions or associated follow-on capital from those acquisitions. and notably it does not include unsigned acquisitions or associated follow-on capital from those acquisitions We expect our 2025 capital expenditures on infrastructure to be approximately $1.4-$1.5 billion. we expect our 2025 capital expenditures on infrastructure to be approximately $1.4-$1.5 billion And through 2029, we anticipate that the regulated water segment rate base will grow at a compounded annual growth rate of approximately 6%. and through 2029 we anticipate that the regulated water segment rate base will grow at a compounded annual growth rate of approximately 6% This projection only includes the acquisitions listed on the previous slide, which are scheduled to close in 2025 and in 2026, and again, excludes DELCORA. this projection only includes the acquisitions listed on the previous slide which are scheduled to close in 2025 and in 2026 and again excludes delcora This projection does include the crucial work that we are doing to remediate PFAS across the systems we currently own and operate. this projection does include the crucial work that we are doing to remediate pfas across the systems we currently own and operate Now, for our regulated natural gas segment, we expect the rate-based growth at compounded annual growth rate of approximately 11% through 2029. We plan to continue replacing aging natural gas pipes well past the next decade. On a combined basis, water and gas, we project rate-based growth at a compounded annual growth rate of over 8% through 2029. This growth will be driven by our ongoing investments in infrastructure and our commitment to operational excellence. I'd expect that when we look back on these five years, we will have done even more given the acquisition pipeline that is not factored into our rate-based growth projections. We believe that the rate base and earnings growth we've described could be accomplished while we keep customer rates at affordable levels. Now, for our regulated natural gas segment, we expect the rate-based growth at compounded annual growth rate of approximately 11% through 2029. now for our regulated natural gas segment we expect the rate-based growth at compounded annual growth rate of approximately 11% through 2029 We plan to continue replacing aging natural gas pipes well past the next decade. we plan to continue replacing aging natural gas pipes well past the next decade On a combined basis, water and gas, we project rate-based growth at a compounded annual growth rate of over 8% through 2029. on a combined basis water and gas we project rate-based growth at a compounded annual growth rate of over 8% through 2029 This growth will be driven by our ongoing investments in infrastructure and our commitment to operational excellence. this growth will be driven by our ongoing investments in infrastructure and our commitment to operational excellence I'd expect that when we look back on these five years, we will have done even more given the acquisition pipeline that is not factored into our rate-based growth projections. i'd expect that when we look back on these five years we will have done even more given the acquisition pipeline that is not factored into our rate-based growth projections We believe that the rate base and earnings growth we've described could be accomplished while we keep customer rates at affordable levels. we believe that the rate base and earnings growth we've described could be accomplished while we keep customer rates at affordable levels We anticipate that our water customer base will grow at an average annual growth rate of between 2% and 3% over the long term, largely because of the continued consolidation opportunity in water and wastewater and the strong organic customer growth, especially in Texas and North Carolina. To support our growth and meet our credit metrics, we plan to raise equity via our multi-year ATM program through 2027. Specifically, in 2025, we expect to issue approximately $315 million in equity through the ATM, and that's after raising about $36 million previously that we guided to in 2024. We believe that $315 million will satisfy our capital needs, fund our growth initiatives, and maintain a strong balance sheet for our credit profile. Now, that concludes our formal remarks for the day, and we look forward to answering any of your questions. Operator, if you'll please open the line for any questions. We anticipate that our water customer base will grow at an average annual growth rate of between 2% and 3% over the long term, largely because of the continued consolidation opportunity in water and wastewater and the strong organic customer growth, especially in Texas and North Carolina. we anticipate that our water customer base will grow at an average annual growth rate of between 2% and 3% over the long term largely because of the continued consolidation opportunity in water and wastewater and the strong organic customer growth especially in texas and north carolina To support our growth and meet our credit metrics, we plan to raise equity via our multi-year ATM program through 2027. to support our growth and meet our credit metrics we plan to raise equity via our multi-year atm program through 2027 Specifically, in 2025, we expect to issue approximately $315 million in equity through the ATM, and that's after raising about $36 million previously that we guided to in 2024. specifically in 2025 we expect to issue approximately $315 million in equity through the atm and that's after raising about $36 million previously that we guided to in 2024 We believe that $315 million will satisfy our capital needs, fund our growth initiatives, and maintain a strong balance sheet for our credit profile. we believe that $315 million will satisfy our capital needs fund our growth initiatives and maintain a strong balance sheet for our credit profile Now, that concludes our formal remarks for the day, and we look forward to answering any of your questions. now that concludes our formal remarks for the day and we look forward to answering any of your questions Operator, if you'll please open the line for any questions. operator if you'll please open the line for any questions

Speaker 7: Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star, followed by one on your telephone keypad. Your first question comes from Julien Dumoulin-Smith from Jefferies. Your line is now open. Thank you. thank you We are now opening the floor for question and answer session. we are now opening the floor for question and answer session If you'd like to ask a question, please press star, followed by one on your telephone keypad. if you'd like to ask a question please press star followed by one on your telephone keypad Your first question comes from Julien Dumoulin-Smith from Jefferies. your first question comes from julien dumoulin-smith from jefferies Your line is now open. your line is now open

Speaker 6: Hey, Julian. Hey, Julian. hey julian Morning, team. This is Paul on for Julian. First off, congrats on closing your first fair market value acquisition in Pennsylvania. With M&A activity picking up, how do you think about the cadence of your $1 billion long-term equity plan? Is it still closely tied to wrapping up DELCORA, or there are some new factors now driving it? Morning, team. morning team This is Paul on for Julian. this is paul on for julian First off, congrats on closing your first fair market value acquisition in Pennsylvania. first off congrats on closing your first fair market value acquisition in pennsylvania With M&A activity picking up, how do you think about the cadence of your $1 billion long-term equity plan? with m&a activity picking up how do you think about the cadence of your $1 billion long-term equity plan Is it still closely tied to wrapping up DELCORA, or there are some new factors now driving it? is it still closely tied to wrapping up delcora or there are some new factors now driving it

Speaker 4: Yeah, it's a good question, Paul. I mean, what we indicated on this call is very consistent with what we said on the last call, which the last call we had said $350 million between 2024 and 2025. We raised about $36 million in 2024. So that leaves us with that $315 million that Chris mentioned. So that obviously is for 2024, so 2025, I should say. So at this point, DELCORA is not expected to close this year. And as we've told you, we've taken it out of our five-year plan. We certainly are committed to it, and we believe it will close. But when we think about the program that we have, we had said that the billion-dollar program would likely last us something like three years. Yeah, it's a good question, Paul. yeah it's a good question paul I mean, what we indicated on this call is very consistent with what we said on the last call, which the last call we had said $350 million between 2024 and 2025. i mean what we indicated on this call is very consistent with what we said on the last call which the last call we had said $350 million between 2024 and 2025 We raised about $36 million in 2024. we raised about $36 million in 2024 So that leaves us with that $315 million that Chris mentioned. so that leaves us with that $315 million that chris mentioned So that obviously is for 2024, so 2025, I should say. so that obviously is for 2024 so 2025 i should say So at this point, DELCORA is not expected to close this year. so at this point delcora is not expected to close this year And as we've told you, we've taken it out of our five-year plan. and as we've told you we've taken it out of our five-year plan We certainly are committed to it, and we believe it will close. we certainly are committed to it and we believe it will close But when we think about the program that we have, we had said that the billion-dollar program would likely last us something like three years. but when we think about the program that we have we had said that the billion-dollar program would likely last us something like three years But if we have an accelerated acquisition program and DELCORA comes into that, then we could exhaust that billion-dollar program inside of that three years that we mentioned. It wasn't set in stone when we said it initially. So there's some flexibility there depending on how the acquisition program develops. And as you know, if the acquisition program accelerates, that'll be a good problem to have. But if we have an accelerated acquisition program and DELCORA comes into that, then we could exhaust that billion-dollar program inside of that three years that we mentioned. but if we have an accelerated acquisition program and delcora comes into that then we could exhaust that billion-dollar program inside of that three years that we mentioned It wasn't set in stone when we said it initially. it wasn't set in stone when we said it initially So there's some flexibility there depending on how the acquisition program develops. so there's some flexibility there depending on how the acquisition program develops And as you know, if the acquisition program accelerates, that'll be a good problem to have. and as you know if the acquisition program accelerates that'll be a good problem to have Got it. Appreciate the call, there. I will jump back to the queue. Got it. got it Appreciate the call, there. appreciate the call there I will jump back to the queue. i will jump back to the queue All right. Thanks, Paul. Take care. All right. all right Thanks, Paul. thanks paul Take care. take care Thanks. Thanks. thanks

Speaker 7: Your next question comes from Ryan Connors from Northcoast Research. Your line is now open. Your next question comes from Ryan Connors from Northc oast Research. your next question comes from ryan connors from northc oast research Your line is now open. your line is now open

Speaker 1: Hey, good morning. And good morning. Yeah, thanks. And welcome back to the water space there. Good to see that. Wanted to ask for an update, Chris. You kind of gave a little bit of color on the OCA consumer advocate situation in Pennsylvania. I wonder if you can expand on that just in terms of what kind of timeline are we looking at to a permanent nomination. I know we've got sort of an acting or an interim person there. Do they have the same powers legally that the permanent person does, or are there things that they can and cannot do in terms of on East Whiteland, for example. Hey, good morning. hey good morning And good morning. and good morning Yeah, thanks. yeah thanks And welcome back to the water space there. and welcome back to the water space there Good to see that. good to see that Wanted to ask for an update, Chris. wanted to ask for an update chris You kind of gave a little bit of color on the OCA consumer advocate situation in Pennsylvania. you kind of gave a little bit of color on the oca consumer advocate situation in pennsylvania I wonder if you can expand on that just in terms of what kind of timeline are we looking at to a permanent nomination. i wonder if you can expand on that just in terms of what kind of timeline are we looking at to a permanent nomination I know we've got sort of an acting or an interim person there. i know we've got sort of an acting or an interim person there Do they have the same powers legally that the permanent person does, or are there things that they can and cannot do in terms of on East Whiteland, for example. do they have the same powers legally that the permanent person does or are there things that they can and cannot do in terms of on east whiteland for example I know that's kind of a pending matter out there. So just kind of looking for some color on when we get a permanent nomination in your view and what happens in the meantime that we're kind of in limbo here. I know that's kind of a pending matter out there. i know that's kind of a pending matter out there So just kind of looking for some color on when we get a permanent nomination in your view and what happens in the meantime that we're kind of in limbo here. so just kind of looking for some color on when we get a permanent nomination in your view and what happens in the meantime that we're kind of in limbo here

Speaker 6: Yeah, good question, Ryan. And really important question for the utility space in Pennsylvania. Tanya McCloskey, who was a terrific consumer advocate, was never confirmed by the Senate. She sat in that seat for many, many years not being confirmed. So yeah, the power of the consumer advocate, even on an acting basis, is still very, very strong. And I think largely the same power as a fully approved. So listen, the acting consumer advocate, Darryl, terrific guy. Been there 25 years. We've worked with him for many, many years. So we enjoy a relationship, much like we did with Tanya and Tanya's predecessor before that, Sunny McCloskey. The timeline is sort of undetermined. I think the attorney general has a lot of things to set up in the space of attorney general. Yeah, good question, Ryan. yeah good question ryan And really important question for the utility space in Pennsylvania. and really important question for the utility space in pennsylvania Tanya McCloskey, who was a terrific consumer advocate, was never confirmed by the Senate. tanya mccloskey who was a terrific consumer advocate was never confirmed by the senate She sat in that seat for many, many years not being confirmed. she sat in that seat for many many years not being confirmed So yeah, the power of the consumer advocate, even on an acting basis, is still very, very strong. so yeah the power of the consumer advocate even on an acting basis is still very very strong and And I think largely the same power as a fully approved. and i think largely the same power as a fully approved So listen, the acting consumer advocate, Darryl, terrific guy. so listen the acting consumer advocate darryl terrific guy Been there 25 years. been there 25 years We've worked with him for many, many years. we've worked with him for many many years So we enjoy a relationship, much like we did with Tanya and Tanya's predecessor before that, Sunny McCloskey. so we enjoy a relationship much like we did with tanya and tanya's predecessor before that sunny mccloskey The timeline is sort of undetermined. the timeline is sort of undetermined I think the attorney general has a lot of things to set up in the space of attorney general. i think the attorney general has a lot of things to set up in the space of attorney general And then to look at this sort of niche regulatory aspect of his role, I think he's going to take his time, and that's what he's indicated, and make up his mind. I know he's doing interviews over the next couple of weeks. And we'll see what he comes up with in terms of his ultimate pick for a consumer advocate. But obviously, we're watching very, very closely. And then to look at this sort of niche regulatory aspect of his role, I think he's going to take his time, and that's what he's indicated, and make up his mind. and then to look at this sort of niche regulatory aspect of his role i think he's going to take his time and that's what he's indicated and make up his mind I know he's doing interviews over the next couple of weeks. i know he's doing interviews over the next couple of weeks And we'll see what he comes up with in terms of his ultimate pick for a consumer advocate. and we'll see what he comes up with in terms of his ultimate pick for a consumer advocate But obviously, we're watching very, very closely. but obviously we're watching very very closely

Speaker 1: Yep. And then as a follow-on to that, I mean, you talked about this sort of potential re-acceleration of fair market value transactions in Pennsylvania now that the settlement's complete and the consumer advocate change, at least to the interim, has been made. I mean, is that something where if you're a buyer or even a seller, are people still going to kind of wait around and see who that permanent person is, or do you think that could kind of open up right away? Yep. yep And then as a follow-on to that, I mean, you talked about this sort of potential re-acceleration of fair market value transactions in Pennsylvania now that the settlement's complete and the consumer advocate change, at least to the interim, has been made. and then as a follow-on to that i mean you talked about this sort of potential re-acceleration of fair market value transactions in pennsylvania now that the settlement's complete and the consumer advocate change at least to the interim has been made I mean, is that something where if you're a buyer or even a seller, are people still going to kind of wait around and see who that permanent person is, or do you think that could kind of open up right away? i mean is that something where if you're a buyer or even a seller are people still going to kind of wait around and see who that permanent person is or do you think that could kind of open up right away

Speaker 6: Well, listen, I hate to read signals. So I think probably if you're a seller, you may say, "Okay, let's see what the first one through is." Now, Greenville's through already. And so that was very positive. And I felt like that was handled well. So listen, I think these transactions have greater certainty since the Senate motion was passed. And I think they've even notched up in certainty with the change at the OCA. Listen, there's plenty of opportunity between utilities and the various advocates to argue over issues. But I think what we need to guard against is an overly litigious atmosphere. And I think that's what we had. I think we're moving away from that, fortunately, into something where compromise is more part of the solution. And I think that's where the consumers are best served. Well, listen, I hate to read signals. well listen i hate to read signals So I think probably if you're a seller, you may say, "Okay, let's see what the first one through is." Now, Greenville's through already. so i think probably if you're a seller you may say "okay let's see what the first one through is." now greenville's through already And so that was very positive. and so that was very positive And I felt like that was handled well. and i felt like that was handled well So listen, I think these transactions have greater certainty since the Senate motion was passed. so listen i think these transactions have greater certainty since the senate motion was passed And I think they've even notched up in certainty with the change at the OCA. and i think they've even notched up in certainty with the change at the oca Listen, there's plenty of opportunity between utilities and the various advocates to argue over issues. listen there's plenty of opportunity between utilities and the various advocates to argue over issues But I think what we need to guard against is an overly litigious atmosphere. but i think what we need to guard against is an overly litigious atmosphere And I think that's what we had. and i think that's what we had I think we're moving away from that, fortunately, into something where compromise is more part of the solution. i think we're moving away from that fortunately into something where compromise is more part of the solution And I think that's where the consumers are best served. and i think that's where the consumers are best served

Speaker 1: Yep. Yep, and then one more, if I could just sneak in. The data center comments you made, very exciting there, but I wonder if you could just explain kind of the fundamental nature of those deals. We've done a little bit of reading on that, and my understanding was it was more, I guess, with these so-called behind-the-meter deals, which are with more upstream from an LDC, so can you just kind of give us some general characterization of what those look like for a company like People's? Yep. yep Yep, and then one more, if I could just sneak in. yep and then one more if i could just sneak in The data center comments you made, very exciting there, but I wonder if you could just explain kind of the fundamental nature of those deals. the data center comments you made very exciting there but i wonder if you could just explain kind of the fundamental nature of those deals We've done a little bit of reading on that, and my understanding was it was more, I guess, with these so-called behind-the-meter deals, which are with more upstream from an LDC, so can you just kind of give us some general characterization of what those look like for a company like People's? we've done a little bit of reading on that and my understanding was it was more i guess with these so-called behind-the-meter deals which are with more upstream from an ldc so can you just kind of give us some general characterization of what those look like for a company like people's

Speaker 6: Yeah. And Ryan, I think you probably would think about this like we wouldn't. These could take many shapes and forms. And so it's hard to know. But listen, I think if we just got the throughput, increased use of natural gas, that's a help to our customers, right? It keeps rates down. And so that's great. If there was an opportunity for us to do something where we would build some extension of lines, a capital project that could facilitate, obviously, that builds rate base. And then finally, if we were to look at opportunities like we did at the airport and some hospitals out there to build some kind of on-site generation, that would be largely in the non-regulated or unregulated space. So it could be a lot of different forms. Yeah. yeah And Ryan, I think you probably would think about this like we wouldn't. and ryan i think you probably would think about this like we wouldn't These could take many shapes and forms. these could take many shapes and forms And so it's hard to know. and so it's hard to know But listen, I think if we just got the throughput, increased use of natural gas, that's a help to our customers, right? but listen i think if we just got the throughput increased use of natural gas that's a help to our customers right It keeps rates down. it keeps rates down And so that's great. and so that's great If there was an opportunity for us to do something where we would build some extension of lines, a capital project that could facilitate, obviously, that builds rate base. if there was an opportunity for us to do something where we would build some extension of lines a capital project that could facilitate obviously that builds rate base And then finally, if we were to look at opportunities like we did at the airport and some hospitals out there to build some kind of on-site generation, that would be largely in the non-regulated or unregulated space. and then finally if we were to look at opportunities like we did at the airport and some hospitals out there to build some kind of on-site generation that would be largely in the non-regulated or unregulated space So it could be a lot of different forms. so it could be a lot of different forms I think what we look at here, and I think about generally in the electric industry, is these developers, if you will, are talking to multiple cities at the same time. It's hard to know if there's a lot of double counting going out there. We think, just given the volume of the interest in Pennsylvania, Western Pennsylvania, where we are, that it's a really interesting opportunity potentially for us and just sort of undefined at this point. I think what we look at here, and I think about generally in the electric industry, is these developers, if you will, are talking to multiple cities at the same time. i think what we look at here and i think about generally in the electric industry is these developers if you will are talking to multiple cities at the same time It's hard to know if there's a lot of double counting going out there. it's hard to know if there's a lot of double counting going out there We think, just given the volume of the interest in Pennsylvania, Western Pennsylvania, where we are, that it's a really interesting opportunity potentially for us and just sort of undefined at this point. we think just given the volume of the interest in pennsylvania western pennsylvania where we are that it's a really interesting opportunity potentially for us and just sort of undefined at this point

Speaker 1: Great. Well, hey, thanks for your time. Great. great Well, hey, thanks for your time. well hey thanks for your time

Speaker 6: You bet. You bet. you bet

Speaker 7: Your next question comes from Durgesh Chopra from Evercore ISI. Your line is now open. Your next question comes from Durgesh Chopra from Evercore ISI. your next question comes from durgesh chopra from evercore isi Your line is now open. your line is now open

Speaker 4: Hey, Durgesh. Good morning, Durgesh. Hey, Durgesh. hey durgesh Good morning, Durgesh. good morning durgesh

Speaker 5: Hey. Hey, good morning, Chris and Dan. Congrats to Brian. And then also congrats on getting Ed on board to the team. Double congratulations. Okay. Just one. Absolutely. Just one question from me. On this PFAS stuff, actually, two-part question. First, are you seeing any, with all the noise coming from DC, any change in your strategy, any kind of change in your capital plans on this investment? I believe you said you wanted $50 million is in the plan. Just wondering if any of that is at risk. So that's part one of the question. Part two, Chris, I think you mentioned some of the patented technology that might be earnings accretive. Maybe just a little bit more color on that. What are you thinking there? Thank you. Hey. hey Hey, good morning, Chris and Dan. hey good morning chris and dan Congrats to Brian. congrats to brian And then also congrats on getting Ed on board to the team. and then also congrats on getting ed on board to the team Double congratulations. double congratulations Okay. okay Just one. just one Absolutely. absolutely Just one question from me. just one question from me On this PFAS stuff, actually, two-part question. on this pfas stuff actually two-part question First, are you seeing any, with all the noise coming from DC, any change in your strategy, any kind of change in your capital plans on this investment? first are you seeing any with all the noise coming from dc any change in your strategy any kind of change in your capital plans on this investment I believe you said you wanted $50 million is in the plan. i believe you said you wanted $50 million is in the plan Just wondering if any of that is at risk. just wondering if any of that is at risk So that's part one of the question. so that's part one of the question Part two, Chris, I think you mentioned some of the patented technology that might be earnings accretive. part two chris i think you mentioned some of the patented technology that might be earnings accretive Maybe just a little bit more color on that. maybe just a little bit more color on that What are you thinking there? what are you thinking there Thank you. thank you

Speaker 4: Sure. Yeah. What's the moment to start this off, Chris? Sure. sure Yeah. yeah What's the moment to start this off, Chris? what's the moment to start this off chris

Speaker 6: Well, let me hit PFAS first. Well, let me hit PFAS first. well let me hit pfas first

Speaker 4: Okay. Go ahead. Okay. okay Go ahead. go ahead

Speaker 6: Because I just came back from Washington, spoke on a panel as did Colleen Arnold, our segment president for water, on this issue of PFAS. And I think what regulators, this was largely PUC commissioners from all over the country, and what they really wanted to know is how we were seeing what we were hearing from the federal government on PFAS. And so listen, the way we think about it today is it's a health MCL, right? And so at four parts per trillion, we don't see a rollback. We're not hearing about a rollback in that MCL. Might there be some easing of the time to comply? Maybe. We haven't actually even seen that yet. Because I just came back from Washington, spoke on a panel as did Colleen Arnold, our segment president for water, on this issue of PFAS. because i just came back from washington spoke on a panel as did colleen arnold our segment president for water on this issue of pfas And I think what regulators, this was largely PUC commissioners from all over the country, and what they really wanted to know is how we were seeing what we were hearing from the federal government on PFAS. and i think what regulators this was largely puc commissioners from all over the country and what they really wanted to know is how we were seeing what we were hearing from the federal government on pfas And so listen, the way we think about it today is it's a health MCL, right? and so listen the way we think about it today is it's a health mcl right And so at four parts per trillion, we don't see a rollback. and so at four parts per trillion we don't see a rollback We're not hearing about a rollback in that MCL. we're not hearing about a rollback in that mcl Might there be some easing of the time to comply? might there be some easing of the time to comply Maybe. maybe We haven't actually even seen that yet. we haven't actually even seen that yet So I think I've mentioned on the call before, but just let me remind you that we met with the chief environmental regulator and the chief economic regulator, the PUC, in each state where we're putting these units in. And what they've told us is full speed ahead. And so number one, we don't anticipate any slowdown in our installation. Number two, we don't expect any challenges in the recovery of or on those investments. But I'll remind you, we continue to focus on the lawsuits. We still think we're going to get about a little over $100 million to offset some of our capital costs. And we're very aggressive. As a matter of fact, we received a number of compliments from public utility commissioners in Washington this week for our aggressive nature on getting state and federal funds to offset the cost of the PFAS mitigation. So I think I've mentioned on the call before, but just let me remind you that we met with the chief environmental regulator and the chief economic regulator, the PUC, in each state where we're putting these units in. so i think i've mentioned on the call before but just let me remind you that we met with the chief environmental regulator and the chief economic regulator the puc in each state where we're putting these units in And what they've told us is full speed ahead. and what they've told us is full speed ahead And so number one, we don't anticipate any slowdown in our installation. and so number one we don't anticipate any slowdown in our installation Number two, we don't expect any challenges in the recovery of or on those investments. number two we don't expect any challenges in the recovery of or on those investments But I'll remind you, we continue to focus on the lawsuits. but i'll remind you we continue to focus on the lawsuits We still think we're going to get about a little over $100 million to offset some of our capital costs. we still think we're going to get about a little over $100 million to offset some of our capital costs And we're very aggressive. and we're very aggressive As a matter of fact, we received a number of compliments from public utility commissioners in Washington this week for our aggressive nature on getting state and federal funds to offset the cost of the PFAS mitigation. as a matter of fact we received a number of compliments from public utility commissioners in washington this week for our aggressive nature on getting state and federal funds to offset the cost of the pfas mitigation Really proud of the patent-pending solution we're putting out there. What Colleen's team continues to do is drive down the per-unit cost of these. So while we're still guiding to about $450 million spend, the hope is between the proceeds from the lawsuits, the proceeds from any loan funds or grants, and the driving down of the overall cost that we can come in less than that. But at this point, we're comfortable with those estimations. You want to take? Really proud of the patent-pending solution we're putting out there. really proud of the patent-pending solution we're putting out there What Colleen's team continues to do is drive down the per-unit cost of these. what colleen's team continues to do is drive down the per-unit cost of these So while we're still guiding to about $450 million spend, the hope is between the proceeds from the lawsuits, the proceeds from any loan funds or grants, and the driving down of the overall cost that we can come in less than that. so while we're still guiding to about $450 million spend the hope is between the proceeds from the lawsuits the proceeds from any loan funds or grants and the driving down of the overall cost that we can come in less than that But at this point, we're comfortable with those estimations. but at this point we're comfortable with those estimations You want to take? you want to take

Speaker 4: Yeah. And I guess I'd just add that this patent-pending approach we have, it's really a modular approach that we can implement in small systems. These are cost-effective both to install and then to maintain as you think about changing the media in the future. So initially, what we're doing here is we're rolling these out across all of our small systems. So basically, it accounts for all of those systems that we have in North Carolina. They're kind of in the right size. Some of our systems in Virginia and Pennsylvania as well. And then, as Chris noted on the call, we're talking to other utilities about these. If it's something they're interested in, we certainly would like to have those discussions. We do think these systems could be helpful in a lot of applications. And so that could become a revenue generator for us. Yeah. yeah And I guess I'd just add that this patent-pending approach we have, it's really a modular approach that we can implement in small systems. and i guess i'd just add that this patent-pending approach we have it's really a modular approach that we can implement in small systems These are cost-effective both to install and then to maintain as you think about changing the media in the future. these are cost-effective both to install and then to maintain as you think about changing the media in the future So initially, what we're doing here is we're rolling these out across all of our small systems. so initially what we're doing here is we're rolling these out across all of our small systems So basically, it accounts for all of those systems that we have in North Carolina. so basically it accounts for all of those systems that we have in north carolina They're kind of in the right size. they're kind of in the right size Some of our systems in Virginia and Pennsylvania as well. some of our systems in virginia and pennsylvania as well And then, as Chris noted on the call, we're talking to other utilities about these. and then as chris noted on the call we're talking to other utilities about these If it's something they're interested in, we certainly would like to have those discussions. if it's something they're interested in we certainly would like to have those discussions We do think these systems could be helpful in a lot of applications. we do think these systems could be helpful in a lot of applications And so that could become a revenue generator for us. and so that could become a revenue generator for us But happy to have conversations about the technology that we've developed that Colleen and her team have really spent a lot of time perfecting. But happy to have conversations about the technology that we've developed that Colleen and her team have really spent a lot of time perfecting. but happy to have conversations about the technology that we've developed that colleen and her team have really spent a lot of time perfecting

Speaker 5: Awesome. Okay. That's all I had. Thank you. Awesome. awesome Okay. okay That's all I had. that's all i had Thank you. thank you

Speaker 4: Yep. Thank you. Yep. yep Thank you. thank you

Speaker 7: Again, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from Travis Miller from Morningstar. Your line is now open. Again, if you'd like to ask a question, please press star followed by one on your telephone keypad. again if you'd like to ask a question please press star followed by one on your telephone keypad That's star followed by one on your telephone keypad. that's star followed by one on your telephone keypad Your next question comes from Travis Miller from Morningstar. your next question comes from travis miller from morningstar Your line is now open. your line is now open

Speaker 3: Hello, everyone. Thank you. Hello, everyone. hello everyone Thank you. thank you

Speaker 6: Hey there. Hey there. hey there

Speaker 4: Yeah. Good morning, Travis. Yeah. yeah Good morning, Travis. good morning travis

Speaker 3: You nearly answered my PFAS question, so I'll ask this and see just clarification-wise. That $450 million, does that include, so would you deduct then in terms of your cash outlay, the $100 million lawsuits and any grants, or is it $450 plus the $100 million of lawsuits and other grants in terms of total cost? Does that make sense? You nearly answered my PFAS question, so I'll ask this and see just clarification-wise. you nearly answered my pfas question so i'll ask this and see just clarification-wise That $450 million, does that include, so would you deduct then in terms of your cash outlay, the $100 million lawsuits and any grants, or is it $450 plus the $100 million of lawsuits and other grants in terms of total cost? that $450 million does that include so would you deduct then in terms of your cash outlay the $100 million lawsuits and any grants or is it $450 plus the $100 million of lawsuits and other grants in terms of total cost Does that make sense? does that make sense

Speaker 4: Yeah. No, that does make sense. So we've thought of the $450 as being net of the proceeds that we receive from the lawsuits and low-income loans and grants that we're getting. And really, I should say grants because if it's a loan, we obviously still get the rate base. It's just that a portion is supported by lower-cost debt. So think of that as the net investment that we'll make. And of course, we're doing everything we can to help moderate the impact for our customers. So if we can get more in terms of lower-cost financing or grants, we'll do that in order to help our customer affordability. Yeah. yeah No, that does make sense. no that does make sense So we've thought of the $450 as being net of the proceeds that we receive from the lawsuits and low-income loans and grants that we're getting. so we've thought of the $450 as being net of the proceeds that we receive from the lawsuits and low-income loans and grants that we're getting And really, I should say grants because if it's a loan, we obviously still get the rate base. and really i should say grants because if it's a loan we obviously still get the rate base It's just that a portion is supported by lower-cost debt. it's just that a portion is supported by lower-cost debt So think of that as the net investment that we'll make. so think of that as the net investment that we'll make And of course, we're doing everything we can to help moderate the impact for our customers. and of course we're doing everything we can to help moderate the impact for our customers So if we can get more in terms of lower-cost financing or grants, we'll do that in order to help our customer affordability. so if we can get more in terms of lower-cost financing or grants we'll do that in order to help our customer affordability

Speaker 6: I would think about this too. As we continue to test our systems, we find new wells that need to be treated. And so it's a little bit of a moving target over a period of years, right? We're trying to drive costs down and get loans and grants. At the same time, the number of systems tends to trend up. And so that's why we're pretty confident in guiding to that $450. I would think about this too. i would think about this too As we continue to test our systems, we find new wells that need to be treated. as we continue to test our systems we find new wells that need to be treated And so it's a little bit of a moving target over a period of years, right? and so it's a little bit of a moving target over a period of years right We're trying to drive costs down and get loans and grants. we're trying to drive costs down and get loans and grants At the same time, the number of systems tends to trend up. at the same time the number of systems tends to trend up And so that's why we're pretty confident in guiding to that $450. and so that's why we're pretty confident in guiding to that $450 Okay. So that's a true kind of rate base, incremental rate base type of number. That's how we think about it. We'll continue to guide each year as we adjust. Okay. okay So that's a true kind of rate base, incremental rate base type of number. so that's a true kind of rate base incremental rate base type of number That's how we think about it. that's how we think about it We'll continue to guide each year as we adjust. we'll continue to guide each year as we adjust

Speaker 4: Yeah. That's our projection of that at this time, Travis. Yeah. yeah That's our projection of that at this time, Travis. that's our projection of that at this time travis

Speaker 3: Okay. Yep. That makes sense. And then I think in the past, you've talked about maybe some more creative ways rather than just traditional base rate cases to get that number into rates, get the return on, return of. Any updates there in terms of riders or something else that might be more creative than just simply general rate case for that treatment, PFAS specific? Okay. okay Yep. yep That makes sense. that makes sense And then I think in the past, you've talked about maybe some more creative ways rather than just traditional base rate cases to get that number into rates, get the return on, return of. and then i think in the past you've talked about maybe some more creative ways rather than just traditional base rate cases to get that number into rates get the return on return of Any updates there in terms of riders or something else that might be more creative than just simply general rate case for that treatment, PFAS specific? any updates there in terms of riders or something else that might be more creative than just simply general rate case for that treatment pfas specific

Speaker 4: Yeah. I mean, we have looked. We are having conversations with our regulators around deferred accounting related to these types of systems. I'll give you an example. In North Carolina, where we have a three-year forward-looking rate case, in this first one, we've had discussions around deferred accounting. When we file this next rate case this spring for the next three years, we'll have our PFAS investments in each of those three years. So really trying to cover as much of this in rates on an ongoing basis as we can. Yeah. yeah I mean, we have looked. i mean we have looked We are having conversations with our regulators around deferred accounting related to these types of systems. we are having conversations with our regulators around deferred accounting related to these types of systems I'll give you an example. i'll give you an example In North Carolina, where we have a three-year forward-looking rate case, in this first one, we've had discussions around deferred accounting. in north carolina where we have a three-year forward-looking rate case in this first one we've had discussions around deferred accounting When we file this next rate case this spring for the next three years, we'll have our PFAS investments in each of those three years. when we file this next rate case this spring for the next three years we'll have our pfas investments in each of those three years So really trying to cover as much of this in rates on an ongoing basis as we can. so really trying to cover as much of this in rates on an ongoing basis as we can

Speaker 6: Okay. Great. Okay. okay Great. great

Speaker 3: Thanks. And then one other - since you brought up the data center topic, I appreciate the other details you gave there. Just another clarification or follow-on from that. So would you potentially anticipate doing an on-site type - I hate to say co-located, but it's the great word of the year - but something along those lines, like a water and gas type facility that would ultimately serve power? Is that the way I'm interpreting your earlier comments? Thanks . thanks And then one other - since you brought up the data center topic, I appreciate the other details you gave there. and then one other - since you brought up the data center topic i appreciate the other details you gave there Just another clarification or follow-on from that. just another clarification or follow-on from that So would you potentially anticipate doing an on-site type - I hate to say co-located, but it's the great word of the year - but something along those lines, like a water and gas type facility that would ultimately serve power? so would you potentially anticipate doing an on-site type - i hate to say co-located but it's the great word of the year - but something along those lines like a water and gas type facility that would ultimately serve power Is that the way I'm interpreting your earlier comments? is that the way i'm interpreting your earlier comments

Speaker 6: Listen, I would just point you to, we've got a little history of building CHPs. And so we obviously partner with entities that do that work. So I would say the possibilities are open. And at this point, we need to see what those developers are specifically looking for. And then, as you know from covering across the country, they're looking for lowest rates. So I think the solution would be, how can we get them the lowest-cost power? Listen, I would just point you to, we've got a little history of building CHPs. listen i would just point you to we've got a little history of building chps And so we obviously partner with entities that do that work. and so we obviously partner with entities that do that work So I would say the possibilities are open. so i would say the possibilities are open And at this point, we need to see what those developers are specifically looking for. and at this point we need to see what those developers are specifically looking for And then, as you know from covering across the country, they're looking for lowest rates. and then as you know from covering across the country they're looking for lowest rates So I think the solution would be, how can we get them the lowest-cost power? so i think the solution would be how can we get them the lowest-cost power

Speaker 4: Certainly, in a region like that we serve in Western Pennsylvania, where we've got access to gas from the Marcellus and the Utica, that natural gas does tend to be priced lower than what you see on NYMEX. I call it $1 a dekatherm on an ongoing basis. Certainly, in a region like that we serve in Western Pennsylvania, where we've got access to gas from the Marcellus and the Utica, that natural gas does tend to be priced lower than what you see on NYMEX. certainly in a region like that we serve in western pennsylvania where we've got access to gas from the marcellus and the utica that natural gas does tend to be priced lower than what you see on nymex I call it $1 a dekatherm on an ongoing basis. i call it $1 a dekatherm on an ongoing basis

Speaker 6: Yeah. It would just be like going to the electric utility, right? They want to come to one place for the solution. That's how we would think about it, as we did with CHPs. We would come up with a solution that works for them. Yeah. yeah It would just be like going to the electric utility, right? it would just be like going to the electric utility right They want to come to one place for the solution. they want to come to one place for the solution That's how we would think about it, as we did with CHPs. that's how we would think about it as we did with chps We would come up with a solution that works for them. we would come up with a solution that works for them

Speaker 3: Okay. Sure. That makes sense. That's all I had. Appreciate it. Okay. okay Sure. sure That makes sense. that makes sense That's all I had. that's all i had Appreciate it. appreciate it

Speaker 6: You got it. You got it. you got it

Speaker 4: Thanks, Travis. Take care. Thanks, Travis. thanks travis Take care. take care

Speaker 7: We have reached the end of our Q&A session. I'd now like to hand back over to Chris Franklin for final remarks. We have reached the end of our Q&A session. we have reached the end of our q&a session I'd now like to hand back over to Chris Franklin for final remarks. i'd now like to hand back over to chris franklin for final remarks

Speaker 6: Thanks for joining us today, folks. We, as always, are available for questions afterwards. Please feel free to reach out to Brian, Ed, and the rest of the team. Thanks so much. Thanks for joining us today, folks. thanks for joining us today folks We, as always, are available for questions afterwards. we as always are available for questions afterwards Please feel free to reach out to Brian, Ed, and the rest of the team. please feel free to reach out to brian ed and the rest of the team Thanks so much. thanks so much

Speaker 7: Thank you for attending today's call. You may now disconnect. Goodbye. Thank you for attending today's call. thank you for attending today's call You may now disconnect. you may now disconnect Goodbye. goodbye