Strategic Performance and Integration Progress
Secured the first major regulatory milestone for the American Water merger with approval from the Kentucky Public Service Commission.
Attributed Q1 earnings pressure to extreme winter weather in January and February, which increased operational costs for leaks, snow removal, and overtime.
Maintained a disciplined capital investment pace of $269 million this quarter, targeting $1.7 billion for the full year to address PFAS and lead regulations.
Reported that integration planning is ‘full steam ahead’ with joint teams from both companies focused on melding best practices for a 2027 close.
Affirmed that operational excellence remains a priority during the transition, with the majority of water and gas performance metrics currently meeting ‘green’ status targets.
Closed the Greenville Water acquisition in March, continuing the strategy of consolidating municipal water and wastewater systems in core markets.
Guidance Framework and Strategic Outlook
Reaffirmed long-term annual EPS growth target of 5% to 7% through 2027, using the adjusted 2024 baseline of $1.97.
The company remains optimistic about settling its pending merger and regulatory cases in Pennsylvania, expecting to hit a long-term goal of 5% to 7% EPS growth through 2027.
Expects to complete 106 PFAS-related infrastructure projects by the end of 2026 to meet evolving federal and state environmental regulations.
Maintains a dividend payout ratio target of 60% to 65% while prioritizing a strong balance sheet and improved cash position.
Assumes a normalized O&M expense trajectory for the remainder of the year following the nonrecurring weather and merger-related impacts in Q1.
Non-Recurring Impacts and Risk Factors
Incurred $16.3 million in merger-related expenses during Q1, impacting GAAP earnings by approximately $0.04 per share.
Faced a difficult year-over-year comparison due to a $22.6 million favorable tax reserve adjustment in Q1 2025 that did not recur.
Noted that the DELCORA transaction remains stalled due to a federal bankruptcy court stay related to the City of Chester.
Identified extreme cold as a driver for lower capitalization in Q1 due to a slower start on physical infrastructure projects.
Q&A Session Highlights
Impact of Pennsylvania governor’s affordability letter on pending rate cases
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Management is aligned with the governor on affordability and is in active dialogue with his team to understand how these initiatives will materialize at the Commission level.
Confirmed that the current Peoples gas rate case is proceeding as filed, with no immediate changes to the strategy for the upcoming water case filing.
