BRYN MAWR, PA — Essential Utilities Inc. (NYSE: WTRG) has reported its financial results for the second quarter ending June 30, 2024. The company posted a net income of $75.4 million, or $0.28 per share, for the quarter.
“We continue to deliver long-term value to our customers, communities, shareholders, and employees, and we are pleased with the execution of our infrastructure investment plan and with the progress made in our strategic regulatory priorities in the first half of 2024,” said Essential Utilities Chairman and Chief Executive Officer Christopher Franklin.
Operating Results
Essential saw a net income of $75.4 million and earnings per share of $0.28 in Q2 2024, compared to $91.3 million and $0.34 per share in the same period in 2023. Increased revenues from regulatory recoveries and customer growth in the regulated water segment were offset by lower volumes in the natural gas and water segments and increased expenses.
Revenues for Q2 2024 were $434.4 million, slightly down from $436.7 million in Q2 2023, a 0.5% decrease. The primary reasons for the revenue dip were lower purchased gas costs and decreased volumes in the natural gas and water segments. However, these were offset by regulatory recoveries and customer growth in the water segment. Operations and maintenance expenses rose to $142.5 million, up from $133.5 million in the same period last year.
The company’s regulated water segment reported a 3.0% increase in revenues, reaching $302.5 million, compared to $293.7 million in Q2 2023. Rates, surcharges, and customer growth fueled this increase. Operations and maintenance expenses in the water segment grew by 2.5% to $95.6 million.
The regulated natural gas segment reported revenues of $128.2 million, down from $139.0 million in Q2 2023. Lower volume and commodity prices were the main factors, along with a 44% warmer-than-normal second quarter. Purchased gas costs fell to $32.7 million from $39.7 million. Operations and maintenance expenses in this segment rose to $49.7 million, compared to $41.1 million last year.
Year-to-Date Performance
As of June 30, 2024, Essential reported a year-to-date net income of $341.2 million, or $1.25 per share, compared to $282.7 million, or $1.07 per share, for the same period in 2023. The company’s revenues for the first half of 2024 were $1,046.5 million, down 10.0% from $1,163.2 million in the first half of 2023. Operations and maintenance expenses for the first six months of 2024 were $279.4 million, up from $271.5 million in the same period last year.
Dividend Announcement
On July 31, 2024, Essential declared a quarterly cash dividend of $0.3255 per share, representing a 6.0% increase. This marks the company’s 34th increase in the last 33 years. The dividend will be payable on September 3, 2024, to shareholders of record on August 12, 2024. Essential has paid a consecutive quarterly cash dividend for over 79 years.
Financing and Infrastructure Investments
As of June 30, 2024, Essential’s weighted average cost of fixed-rate long-term debt was 3.97%, and the company had $895.5 million available on its credit lines. Aqua Pennsylvania secured $77.5 million in low-interest loans through PENNVEST to support infrastructure replacement across the state. Over the past three years, Essential has received approximately $192 million in funding from state-administered programs, including $133 million in low-cost loans and $59 million in grants.
Rate Activity
In 2024, Essential’s regulated water segment received rate awards or infrastructure surcharges totaling $25.8 million in Illinois, North Carolina, Ohio, and Pennsylvania. Its natural gas segment received $2.0 million in surcharges in Kentucky and Pennsylvania. The company has pending rate cases and surcharges in Illinois, New Jersey, Pennsylvania, Texas, and Virginia, which could add $169.9 million in annual revenues for the water segment and $156.0 million for the natural gas segment. A final order on the Pennsylvania natural gas rate case is expected in September 2024.
Capital Expenditures
Essential invested approximately $548.9 million in the first half of the year to improve its water and natural gas infrastructure. The company plans to invest $1.3 to $1.4 billion in 2024 and $7.2 billion from 2024 to 2028. These investments include addressing PFAS contamination, replacing and expanding infrastructure, and reducing methane emissions.
Acquisitions and Growth
Essential continues to grow through acquisitions, providing safe and reliable water and wastewater services. Aqua Illinois closed on the acquisition of the Westfield Homeowners Association wastewater system in May 2024. Aqua Texas signed an agreement to acquire the Dril-Quip water and wastewater systems in June 2024. The company has six signed purchase agreements pending, expected to serve over 217,000 customers and worth approximately $385 million.
Financial Guidance
Essential’s guidance for 2024 includes:
- Net income per diluted common share to exceed $1.96 to $2.00.
- Regulated infrastructure investments of $1.3 to $1.4 billion in 2024.
- A compounded annual growth rate of over 8% for the regulated utility rate base through 2028.
- Raising approximately $250 million in equity in 2024.
Sustainability Commitments
Essential aims to reduce Scope 1 and Scope 2 greenhouse gas emissions by 60% by 2035 from its 2019 baseline. The company plans to achieve these reductions through pipeline replacements, renewable energy purchases, and enhanced methane leak detection and repair.
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