SAN DIMAS, Calif. - American States Water Company (NYSE:AWR) announced a significant investment in California's water infrastructure through its subsidiary Golden State Water Company (GSWC). The investment, part of a settlement agreement with the Public Advocates Office at the California Public Utilities Commission (CPUC), proposes approximately $573.1 million to be spent over a three-year period starting in 2025.
The settlement, if approved by the CPUC, will resolve most issues from GSWC's general rate case application filed in August 2023. This includes the authorization for the company to invest in capital projects to ensure the continued provision of safe and reliable water services. The investment also covers $58.2 million for capital projects already underway since 2023.
As per the agreement, Golden State Water Company's operating revenues, excluding water supply costs, are projected to increase by about $23 million in 2025 compared to the previous year. Moreover, potential revenue hikes of roughly $20 million annually for 2026 and 2027 are anticipated, contingent on inflation factors and earnings tests.
However, the settlement leaves two key 2025 revenue requirement issues unresolved: the sales forecast and supply mix. Four regulatory mechanism requests, including adjustments related to sales, revenue, supply mix, and tracking of capital investments for compliance with new PFAS regulations, are yet to be litigated.
American States Water Company and its subsidiaries, including GSWC, maintain strong credit ratings, with AWR holding an A Stable rating from S&P Global Ratings and GSWC an A+ Stable from S&P and an A2 Stable from Moody's (NYSE:MCO) Investors Service. These ratings, affirmed in 2024, rank among the highest in the U.S. investor-owned water utility industry.
The company, which has been paying dividends to shareholders since 1931 and increasing them for 69 consecutive years, aims for a compound annual growth rate in dividends of over 7% over the long term.
The information in this article is based on a press release statement from American States Water Company. The CPUC is expected to make a decision on the water general rate case by the end of 2024, with the new rates proposed to take effect on January 1, 2025.
In other recent news, American States Water Company reported mixed results for Q1 2024. The company recorded a decrease in diluted earnings per share compared to Q1 2023, but an increase in adjusted earnings per share. The company's subsidiary, Golden State Water, saw an authorized return on equity and rate base increase at the start of 2024.
The company also highlighted its regulatory proceedings, investments in regulated utilities, and expansion of operations at new military bases. Compliance with new PFAS drinking water regulations is expected to result in significant capital expenditures over the next five years.
In addition, ASUS, another subsidiary, transitioned water and wastewater systems at a military base and secured a $4.1 million task order. These developments mark recent strides in the company's operations and regulatory compliance.
InvestingPro Insights
Amidst American States Water Company's (NYSE:AWR) strategic investment plans in California's water infrastructure, data from InvestingPro offers a glimpse into the company's financial health and market performance. AWR's commitment to capital projects and dividend growth is reflected in its market valuation, with an adjusted market capitalization of $3.01 billion USD. The company's price-to-earnings (P/E) ratio stands at 25.92, suggesting a premium market valuation relative to current earnings.
InvestingPro Tips highlight that AWR has a legacy of consistent dividend growth, having raised its dividend for 31 consecutive years. Moreover, the company's solid financial position is underscored by a gross profit margin of 59.81% over the last twelve months as of Q1 2024. Investors should note that the stock's recent performance has been robust, with a one-month price total return of 14.8% and a three-month price total return of 19.59% as of the latest available data.
For those interested in a deeper dive into AWR's financials and market prospects, InvestingPro offers an array of additional tips. The platform currently lists 9 InvestingPro Tips, which can be accessed at: https://www.investing.com/pro/AWR. Readers looking to leverage these insights can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
With the CPUC's decision pending and the proposed rate adjustments on the horizon, these metrics and insights provide valuable context for investors monitoring AWR's future performance and its role in the water utility sector.
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