SJW's Q4 2024 Earnings Call: Navigating Contradictions in NRW Strategy, PFAS Costs, and Rate Case Timing

These are the key contradictions discussed in SJW's latest 2024Q4 earnings call, specifically including: Non-Revenue Water (NRW) Improvement Strategy and Timeline, Connecticut PFAS Investment Cost Increase, Connecticut Rate Case Cycle and Timing, and PFAS Investment Costs:



Strong Financial Performance:
- SJW Group reported revenues of $748.4 million for 2024, a 12% increase over the $670.4 million reported in 2023.
- GAAP net income increased 11% to $94 million from 2023, and adjusted net income was $96.8 million, a 15% increase.
- This growth was driven by rate increases in California and Connecticut, higher customer usage, and strategic investments in infrastructure.

Increased Capital Expenditures:
- The company's 5-year capital plan has increased by 25% to approximately $2 billion.
- The increased CapEx forecast will support strategic infrastructure investments, PFAS treatment, and system resiliency.
- This decision is driven by the need to address aging infrastructure, regulatory requirements, and extreme weather conditions, particularly in Texas.

Leadership Transition:
- Eric Thornburg, currently serving as Chair, President, and CEO, announced his retirement effective June 30.
- Andrew Walters was named as his successor, and Bruce Hauk will take on the role of President, Regulated Utilities.
- This transition is aimed at maintaining operational continuity and ensuring a smooth leadership handover.

PFAS Treatment Cost Projections:
- The estimated cost for PFAS treatment has risen from $120 million to $190 million in Connecticut.
- The increase in cost is attributed to refined treatment process estimations and holding polluters accountable through legal actions.
- The company is leveraging regulatory mechanisms to offset some of these costs and mitigate rate shocks to customers.