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DATE

Feb. 26, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • Chair of the Board and Chief Executive Officer — Andrew Walters
  • Chief Financial Officer and Treasurer — Ann Kelly
  • President and Chief Operating Officer — Bruce Hauk
  • Senior Director of Treasury and Investor Relations — Jonathan Reeder

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TAKEAWAYS

  • Diluted EPS -- $2.92 GAAP and $2.99 adjusted for 2025, at the upper end of management's $2.95 to $3.00 guidance range.
  • 2026 Guidance -- Standalone adjusted diluted EPS outlook of $3.08 to $3.18, excluding pending QuadVest and Cibolo Valley impacts.
  • CapEx -- $501 million invested in 2025, up 41% from 2024, exceeding the increased $486 million budget.
  • Five-Year CapEx Outlook -- $2.7 billion planned for 2026 -- 2030, 31% above the 2025 -- 2029 plan.
  • Dividend -- Quarterly dividend raised 4%, with expected annual payout of $1.76 per share in 2026 versus $1.68 in 2025, marking 58 consecutive years of increases.
  • Rate Base -- Estimated at nearly $2.8 billion at 2025 year-end, projected to reach $5.1 billion by 2030, a 13% CAGR.
  • Pending QuadVest Acquisition -- $540 million enterprise value; $483.6 million ratemaking rate base, targeting mid-2026 close.
  • Texas Customer Growth -- QuadVest connections rose 16% in 2025, now exceeding 54,400 total.
  • Legislative/Regulatory Highlights -- Third deferral of California cost of capital filing, Connecticut's adoption of the WQTA for PFAS, Texas approval for hybrid test years, and accelerated infrastructure surcharge processing.
  • Long-Term EPS Growth Target -- Increased to 6% -- 8%, using 2025 adjusted EPS of $2.99 as base; prior target was 5% -- 7% off 2022 results.
  • Near-Term Dilution Warning -- Ann Kelly stated, "dilution relative to our standalone plan could be in the 10% to 20% range before becoming accretive in 2028 and beyond."
  • Equity Raising -- In 2025, $123 million issued via ATM; plan to raise $350 -- $450 million of equity for QuadVest, and $100 -- $125 million for regular CapEx in 2026.
  • Credit Metrics -- FFO-to-debt was 11.2% in 2025, above S&P's 11% downgrade threshold; guidance for 11% -- 12% through 2027, rising after 2028.
  • AMI Rollout -- Roughly 53% of California meters AMI-enabled by 2025 year-end, aiming for full completion by year-end 2026.
  • Affordability Metrics -- Average H2O America bills in all four states are 1% or less of median household income, per EPA methodology.
  • Customer Assistance Expansion -- New needs-based financial assistance rate program to be introduced in Maine, with intent to expand to Texas.

SUMMARY

Management reported that 2025 delivered near-guidance-high earnings with record infrastructure investment and completed regulatory milestones that underpin the updated financial outlook. The company’s five-year capital plan, rate base expansion strategy, and earned returns remain anchored by explicit legislative and regulatory advancements across all states, supporting a newly raised 6% -- 8% non-linear EPS CAGR target. H2O America confirmed that the QuadVest deal is expected to be accretive from 2028, but will dilute consolidated EPS by 10% -- 20% in 2026 and 2027, with current equity and debt issuance plans sized to preserve the A- credit rating through the acquisition cycle.

  • H2O America quantified that 80% of its forward five-year capital spending is expected to receive timely rate recognition, reducing regulatory lag risk.
  • The rollout of AMI-enabled meters in California enabled over 46,000 leak alerts to customers in the second half of 2025, supporting operational efficiency and customer savings.
  • Ann Kelly stated, "we do not factor in any potential M&A opportunities beyond QuadVest and Cibolo Valley into our growth rate target," signaling disciplined focus on execution before new transactions.
  • The updated capital plan includes a roughly $400 million allocation for PFAS remediation through 2030, up from $300 million in the prior plan, reflecting refined project cost estimates.
  • CEO Andrew Walters highlighted that any new acquisitions outside of recent major deals are expected to be "small tuck-in acquisitions," with limited near-term impact on financial guidance.

INDUSTRY GLOSSARY

  • QuadVest: A privately held water and wastewater utility in Texas, the subject of H2O America's pending $540 million acquisition, with a ratemaking rate base of $483.6 million.
  • WQTA: Water Quality and Treatment Adjustment—a regulatory mechanism in Connecticut enabling recovery of PFAS and other water treatment capital investments up to 7.5% per year, and 15% between rate cases.
  • PFAS: Per- and polyfluoroalkyl substances—man-made chemicals subject to costly water treatment requirements.
  • AMI: Advanced Metering Infrastructure—smart meters enabling real-time water usage readings and enhanced leak detection.
  • WICA: Water Infrastructure and Conservation Adjustment—a Connecticut mechanism for timely recovery of eligible infrastructure costs between general rate cases.
  • SIC: System Improvement Charge—a Texas mechanism for infrastructure cost recovery with accelerated application review.
  • FFO-to-debt: Ratio of funds from operations to total debt, a credit metric used by rating agencies.
  • ATM Program: At-the-Market equity issuance program enabling incremental share sales for capital raising.
  • Step Rate Increase: A series of rate hikes built into a multi-year rate case, allowing automatic incremental revenue increases without a new filing.
  • FMV Process: Fair Market Value process—Texas law requiring third-party asset appraisals to set the regulatory rate base on acquisitions.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the H2O America Fourth Quarter financial results call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jonathan Reeder, Senior Director of Treasury and Investor Relations. Please go ahead.

Jonathan Reeder: Thank you, Liz. Welcome to the 2025 financial results and five-year plan update conference call for H2O America. My name is Jonathan Reeder, and I am the Senior Director of Treasury and Investor Relations for H2O America. Presenting today will be Andrew Walters, Chair of the Board and Chief Executive Officer; Ann Kelly, Chief Financial Officer and Treasurer; and Bruce Hauk, President and Chief Operating Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at h2o-america.com. Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements.

These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances. Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that could cause actual results to be different from statements in the presentation, we refer you to the financial results press release and to our most recent Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website.

All forward-looking statements are made as of today, and H2O America disclaims any duty to update or revise such statements. We will have an opportunity to ask questions at the end of the presentation. This webcast is being recorded, and an archive of the webcast will be available until May 26, 2026. You can access the press release and the webcast at H2O America's website. In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that may not have been calculated in accordance with generally accepted accounting principles in the United States, or GAAP.

These non-GAAP financial measures should be considered as a supplement to the financials prepared on a GAAP basis rather than as an alternative to the respective GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation. I will now turn the call over to Andrew.

Andrew Walters: Welcome, everyone, and thank you for joining us. I want to take a few minutes to briefly discuss some of our team's successes over the last year and where we are today as an organization before we get into what I believe is an exciting updated five-year outlook. 2025 was another strong year both strategically and financially, and builds upon prior years' successes. I am pleased to share that we delivered full-year 2025 diluted EPS of $2.92 per share and adjusted, or non-GAAP, diluted EPS of $2.99 per share, which was near the top end of our upwardly narrowed $2.95 to $3.00 per share guidance range.

Our performance in 2025 reflects continued execution of our proven growth strategy, which focuses on making much-needed water infrastructure investments across our national footprint of systems while constructively engaging our key local stakeholders in a consensus-building process to provide timely regulatory recovery while maintaining customer affordability. We will touch on these more later in the call. Some highlights during the year include: in early July, we announced the transformative deal to acquire Houston, Texas-based QuadVest for $540,000,000. Upon closing, QuadVest is expected to add $483,600,000 of ratemaking rate base plus a small complementary wholesale business.

In the base business, we had a number of constructive regulatory and legislative developments in each of our states, including in California, where we were able to secure another one-year deferral in our filing of a new cost of capital application, which provides certainty as the current return parameters and construct remain in place through the end of 2027. In Connecticut, legislation was passed and signed into law creating the Water Quality and Treatment Adjustment. The WQTA is the nation's first mechanism established to recover the capital investments needed to treat PFAS and other emerging contaminants. In Texas, legislation was passed and signed into law authorizing water utilities to adopt a future or hybrid test year in general rate cases.

And in Maine, regulators approved our stipulation reached with the Office of Public Advocate to consolidate our 10 districts into one, as well as established our first affordability rate for low-income customers in the state. On the CapEx front, we invested $501,000,000 in 2025, which exceeded our upwardly revised budget of $486,000,000. 2025's actual spend represented a 41% increase over 2024. This record execution in 2025 bodes well as we see elevated CapEx needs for the foreseeable future across our four states, as evidenced by the 31% increase in our five-year 2026 to 2030 CapEx budget to $2,700,000,000. And then last month, our board increased the quarterly dividend by 4%.

The 2026 annualized dividend is expected to be $1.76 per share compared with $1.68 per share in 2025. The 8¢ annual increase is consistent with our recent annual increase cadence and marks the fifty-eighth consecutive year of increasing the annual dividend. I would be remiss if I did not take this opportunity to again thank our former Chairman and CEO, Eric Thornburg, who I am sure is listening to this call as we speak, who retired in June 2025 from the company and then from the board at the end of last month, for all of his contributions over the years.

Eric has been a mentor to me and helped instill the foundational strategy and culture that I believe our current team is poised to take to the next level as we enhance our executional capabilities, both operationally and financially, and progress towards further growing and diversifying our business with the transformational QuadVest transaction. We have been active in recent years enhancing the company's capabilities by attracting highly accomplished industry leaders to our H2O America team, both at the corporate and state levels. Many have come to us from much larger, well-respected utilities, bringing with them the knowledge of these organizations' best practices. The most recent addition is Nicholas Whitley, our new Vice President of Business Development.

Nick joined us at the end of 2025 from Northwest Natural Holdings, where he was the Managing Director of Business Development. Nick brings deep transaction expertise, strategic discipline, and a proven ability to scale infrastructure platforms. His leadership and experience across complex multi-acquisitions will be instrumental as we continue to grow responsibly and serve more communities across the country. Nick shares our commitment to culture, service, and pursuing disciplined strategic growth opportunities, and we look forward to introducing him to many of you in the future. I will now turn the call over to Ann to provide details on our full-year 2025 results, as well as key components of our updated five-year plan and long-term EPS growth rate target.

Ann Kelly: Thank you, Andrew. Yesterday, after the market closed, we released our full-year 2025 and fourth-quarter operating results. We were pleased to report full-year 2025 diluted EPS of $2.92 and adjusted diluted EPS of $2.99. This compares to full-year 2024 diluted EPS of $2.87 and adjusted diluted EPS of $2.95. And, as Andrew mentioned, we were near the top end of our upwardly narrowed guidance range. For 2026, we are offering standalone guidance of $3.08 to $3.18, which reflects $483,000,000 of capital investment as well as the issuance of $100,000,000 to $125,000,000 of equity to fund the standalone CapEx budget.

This standalone guidance excludes the potential impacts of the pending QuadVest and Cibolo Valley acquisitions given uncertainty regarding the timing of the deal closures and planned external capital raises. Shifting to our five-year outlook, I am excited to share the results of our updated and rolled-forward plan. We list a few of the key highlights here. As Andrew mentioned, we plan to invest $2,700,000,000, an increase of 31% over our 2025 to 2029 budget, to renew and replace aging infrastructure across our systems, improve reliability and service quality, and comply with environmental regulations. Those capital investments, along with our pending Texas acquisitions, are expected to drive a 13% rate base CAGR over the period.

And as a result of our 2025 achievements and the groundwork that we have been putting in place over the last few years, as well as our expectations to be able to continue to build upon this momentum into the future, we are increasing our nonlinear, long-term EPS growth rate target to 6% to 8%. The 6% to 8% CAGR reflects what we believe is a long-term, sustainable growth rate that extends beyond our five-year plan and is predicated on a solid yet fairly straightforward organic growth plan plus the addition of the QuadVest business in the high-growth Houston market.

This plan is well supported by our regulatory and financial execution track record and elevated capital investment needs for decades to come. In the near term, we expect to deliver a nonlinear EPS growth rate at or above the top end of the 6% to 8% range over the 2026 to 2030 period using our actual 2025 adjusted diluted EPS of $2.99 as the new base. I will discuss the details of our five-year plan and guidance in more depth in a few minutes, but first let me walk you through the key year-over-year drivers that impacted the $0.04 increase in 2025 adjusted EPS. As shown on slide 9, revenue increased $1.42 per share.

This includes $1.20 of rate increases driven by general rate cases and infrastructure surcharge recovery mechanisms, and $0.63 of higher revenues for pass-through water supply costs that are offset in our water production expenses and do not impact our net income. These positive factors were partially offset by lower usage and the impact of our regulatory mechanisms. The revenue increase was partially offset by higher water production expense of $0.51, which reflects $0.66 of higher water supply costs and an increase from less surface water availability in California. These increases were partially mitigated by the lower usage and our mechanisms. Other operating expenses increased $0.73, driven primarily by two items. First was higher A&G expenses.

This primarily reflects our decision to opportunistically reinvest back into our business in order to advance various strategic priorities during 2025, as well as higher insurance costs. The second item was increased customer credit losses. This was due to the fact that during 2024, we received funds under the California Water and Wastewater Arrearages Payment Program that did not repeat in 2025. Beyond those two primary items were your more typical drivers of higher operating expenses such as depreciation, property taxes, and increased maintenance.

The remaining drivers relate to share increases due to issuances under our ATM program, a positive benefit in the prior year due to a tax method change, and other, which includes higher AFUDC equity as a result of our record CapEx deployment during 2025. These drivers were generally consistent with the quarterly variances that we highlighted throughout 2025. Expanding on taxes, our effective income tax rate in 2025 was 11%, versus 9% in 2024. Our ETR increase in 2025 was primarily due to a lower uncertain tax position reserve release and lower reversals of excess deferred income taxes along with the impact of the accounting method change that I just mentioned, partially offset by higher flow-through tax benefits.

Shifting from 2025 results to 2026 and beyond, as Andrew mentioned, the team did an outstanding job deploying over $500,000,000 in capital for infrastructure improvement across our service territories in 2025. This was a record amount of capital investment for our company and includes ongoing work on some of our higher-profile projects, such as rolling out AMI meters in California and developing the KT water wells in Texas to shore up much-needed supply in the Hill Country region. Our 2025 CapEx represented a 41% increase over 2024, and we see these elevated infrastructure needs persisting well into the future.

As mentioned earlier and as shown on slide 10, we refreshed and rolled forward our five-year CapEx budget to the 2026 to 2030 period. We plan to invest $2,700,000,000, an increase of 31% over our 2025 to 2029 budget. The increase in our five-year CapEx budget is driven primarily by three factors. First, increased pipeline replacement work as we progress towards our goal of replacing 1% of our distribution pipe annually. We believe a 1% annual replacement cycle best reflects the expected useful life of the assets in our distribution system. We are not yet to this target, which means this component of our CapEx budget is expected to increase annually until we get there in addition to expected inflation.

To give you a sense of the magnitude of this effort, replacing 1% of our existing distribution pipeline across our four states would amount to nearly $175,000,000 of annual capital expenditures. Second, an updated estimate of roughly $400,000,000 to install treatment for PFAS, as compared to $300,000,000 in our prior five-year plan. The increase reflects a refinement in our initial estimates to the actual bids that we have received to complete the required remediation work. And third, including our elevated level of planned investments in Texas following the anticipated closing of our pending acquisition.

Also on this slide, and I know a lot of investors have been asking for this, we show what our expected rate base growth looks like over the five-year period. These amounts represent our estimated rate base at year end and not necessarily what was or will be recognized in rates by our state regulators in those particular years. At year-end 2025, our estimated consolidated rate base was nearly $2,800,000,000. Between the addition of QuadVest and our $2,700,000,000 of planned capital investments, we expect rate base to grow to $5,100,000,000 by year-end 2030. This represents a 13% CAGR.

You will note that this exceeds our EPS growth guidance due to the anticipated equity needed to fund our capital plan and delever our balance sheet as well as some regulatory lag. We are laser focused on not only delivering the roughly 13% rate base CAGR but translating it into attractive earnings growth by minimizing regulatory lag and continually seeking ways to operate more efficiently in order to keep rates affordable while providing our customers with best-in-class service. On slide 11, we provide a breakdown of our 2026 to 2030 capital budget both by state and by category. As you can see, nearly half of the total is spent for distribution system improvement; another 15% is PFAS-related.

And with California's three-year forward test year rate construct, as well as infrastructure surcharge mechanisms in Connecticut, Maine, and Texas, plus the recently passed WQTA in Connecticut for PFAS spend, we expect timely rate recognition of roughly 80% of this five-year budget. On slide 12, we present a bridge from our 2025 actual adjusted diluted EPS of $2.99 to the $3.13 midpoint of our standalone 2026 guidance. I will highlight a few of the key drivers.

Starting with revenue, we expect an increase driven primarily by rate relief, including the second-year step increase as part of San Jose Water's 2025 to 2027 general rate case, incremental infrastructure surcharge revenues in Connecticut, Maine, and Texas, and the pass-through of higher purchased water costs. The higher revenues are partially offset by increased water costs. Next, operating expenses are expected to be lower in 2026, which reflects the absence of the strategic investments that I mentioned earlier that we made during 2025, as well as our ongoing expense efficiency efforts, partially offset by inflationary pressures.

And then in terms of headwinds, most of the items are what you would expect to see from a utility with meaningful organic rate base growth and include higher depreciation expense as well as the associated cost of the debt and equity needed to finance capital investments. Moving to slide 13, and as I mentioned earlier, we are increasing our nonlinear long-term EPS growth rate target to 6% to 8% and updating the anchor year to 2025 adjusted diluted EPS of $2.99. This compares to our prior target of 5% to 7% through 2029 with expectations to be in the top half anchored off a 2022 diluted EPS of $2.43.

Our new 6% to 8% EPS growth rate target reflects a long-term sustainable organic growth rate that extends beyond 2030 and is supported by elevated CapEx investment needs. I also want to be clear that we do not factor in any potential M&A opportunities beyond QuadVest and Cibolo Valley into our growth rate target.

In the near term, over the 2026 to 2030 period, we expect to deliver a nonlinear EPS growth rate at or above the top end of the 6% to 8% range given the line of sight that we have with respect to: one, our increased five-year capital expenditure plan; two, the previously discussed accretion that we expect to realize from the pending QuadVest acquisition beginning in 2028; and three, our expectation to continue to work constructively with key stakeholders in each of our states to achieve fair and timely regulatory outcomes.

As a reminder, the QuadVest acquisition is expected to be initially dilutive to our EPS prior to our ability to implement new rates reflecting the ratemaking rate base of the acquired assets. This will come from a consolidated Texas general rate case that we expect to file in early 2027. During this time period, we will have the financing cost, including share dilution, along with recognizing depreciation expense based on the higher asset values determined through the FMV process, weighing on our operating results without the associated revenues. Because of this, we expect our 2026 and 2027 consolidated EPS, including QuadVest, to fall below the ranges implied by our new 6% to 8% growth rate.

The actual magnitude will depend on the timing of the closing and the financing structure, but dilution relative to our standalone plan could be in the 10% to 20% range before becoming accretive in 2028 and beyond. We are excited about our updated five-year plan and long-term prospects and believe our team is fully capable of delivering on it. Turning now to the financing and credit side of things on slide 14, our $370,000,000 bank lines of credit provide ample liquidity to fund our daily operation, and our A- credit rating affords us access to the capital needed to fund our longer-term investments. In 2025, we also raised $123,000,000 of gross equity proceeds through our ATM program.

As previously disclosed, we expect to raise $100,000,000 to $200,000,000 of debt across the parent and operating company level and $350,000,000 to $450,000,000 of equity or equity-like products in 2026 to fund the QuadVest transaction and protect our A- credit rating. We would likely include $100,000,000 to $125,000,000 of equity needed to support our regular CapEx budget and the pending Cibolo Valley deal with any offering, and would, therefore, not plan to use our ATM through 2026.

Assuming a receptive equity market, we will likely look to satisfy our 2026 equity needs during our upcoming open window prior to the Q1 2026 blackout period, and follow up with the debt component of the deal financing closer to the actual closing date. In terms of our credit metrics, our FFO-to-debt ratio in 2025 was 11.2%. This remains above the S&P downgrade threshold of 11% and is consistent with our expectations. We expect to be in the 11% to 12% range through 2027, above 12% in 2028, and we will continue to delever throughout the rest of the plan through increased cash flows and the anticipated pay down of our 2029 Holdco maturity.

And with that, I will turn the call over to Bruce to provide updates on the QuadVest and Cibolo Valley acquisitions as well as key state regulatory and legislative developments.

Bruce Hauk: Thank you, Ann. As Andrew and Ann have discussed, 2025 was a great year for H2O America. I am very proud of the progress the team has made on both the operational and regulatory sides of the business. While 2025 was great, I am even more excited for what is in store for our company, including the positive benefits of the transformative QuadVest deal. We continue to progress through the regulatory process for our pending $540,000,000 acquisition of Houston-based water and wastewater utility QuadVest. In late December 2025, Texas Water received the appraised fair market values from the three Public Utility Commission of Texas-appointed appraisers for the regulated assets of QuadVest.

In accordance with the Texas FMV statute, the purchase price of $483,600,000 will serve as the ratemaking rate base. We appreciate the hard work of all parties involved during the appraisal process and believe the FMV determination supports the transaction benefits that we laid out when announcing the deal last July. The PUCT approval process for QuadVest started with the filing of the sale-transfer-merger application in January 2026. As a reminder, the STM requests approval of Texas Water's acquisition of the QuadVest regulated assets and certification of the value of the rate base. Meanwhile, we continue to see robust connection growth in the QuadVest system, which now has more than 54,400 connections as of 12/31/2025.

This represents a 16% increase during 2025. And as QuadVest converts its under-contract and pending development pipeline into active connections, it is worth noting that the pool of future connections continues to be replenished, extending the longevity of the growth profile. Of course, future connection growth will vary based on a number of conditions, so this is no guarantee of future growth rates. However, these results are in line with our range of expectations, and we believe solid growth will continue in the greater Houston area, which is the second-fastest-growing metropolitan area in the United States.

We continue to anticipate a mid-2026 close for the transformative transaction and expect QuadVest to drive Texas from 8% of our consolidated customer base today to 26% by 2029. Slide 17 provides a brief update on our other pending Texas deal. In late August, we announced the acquisition of Cibolo Valley wastewater treatment plant and associated collection system. The acquisition will bring approximately 1,500 active connections and the opportunity for more than 250 additional ones that are under contract and pending construction. Like QuadVest, we are progressing through the Texas regulatory process. We are using FMV, and we expect to file the STM application with the PUCT around April 2026. We anticipate Cibolo Valley to close in 2026.

Between QuadVest and Cibolo Valley, we are very excited about our long-term growth potential in Texas. I am pleased to share that our constructive engagement with regulators and other key stakeholders continues to create value for our customers and the company. Starting with California, some of the noteworthy 2025 achievements included securing a third one-year deferral of cost of capital. This means, absent an adjustment from the water cost of capital mechanism, SJWC's authorized 10.01% ROE and 54.55% equity ratio will remain in place through 2027. I would also like to highlight the approval of two advice letters. First was our requested $6,800,000 revenue increase in mid-2025 to recover investments for our ongoing AMI project.

As of year-end 2025, roughly 53% of SJWC's total meters have been retrofitted or replaced with AMI-enabled meters that provide near real-time usage information and greater clarity in discrepancies between system flows and billed consumption, which allows for an earlier identification of potential leaks within the distribution system. We expect to complete the AMI rollout by year-end and are encouraged by customer benefits we already are seeing. For instance, during the latter half of 2025, SJWC issued more than 46,000 leak alert notifications, which enabled customers to identify issues earlier, more effectively manage water usage, and reduce customer-side water loss.

The second advice letter relates to the second-year step rate increase as part of SJWC's 2025 through 2027 general rate case. We were approved to increase revenue $17,200,000 at the start of 2026. SJWC's next general rate case filing is expected to be made in early January 2027 and will cover the 2028 to 2030 period. In Connecticut, as was mentioned earlier, legislation was passed and signed into law creating the Water Quality and Treatment Adjustment. The WQTA is the nation's first mechanism established to recover the capital investment needed to treat PFAS and other emerging contaminants.

The WQTA provides for an annual filing to recover the total capital invested during the period, and the maximum surcharge is 7.5% per year and 15% between general rate cases. We made our initial WQTA filing in late January requesting $600,000 of incremental revenues, reflecting a relatively small amount of investment given we are in the early stages of constructing our PFAS remediation facility. As for our more traditional infrastructure recovery mechanism, the WICA, PURA approved our second-half 2025 application as filed for a $3,100,000 increase in late September. CWC submitted a new WICA filing in late January requesting a $2,700,000 increase in annualized revenues for $25,700,000 invested in completed projects.

If approved, the cumulative WICA surcharge as of 04/01/2026 will be 9.9%, collecting $12,100,000 on an annual basis. The combination of the WICA and the WQTA mechanisms will allow for timely recovery of a meaningful amount of our planned Connecticut investments between general rate cases. And, consistent with our roughly three-year rate case cycle in Connecticut, we expect to file a general rate case during 2026. Shifting to Texas, two key pieces of water legislation were passed by the state legislature and signed by Governor Abbott in 2025 that provide an opportunity to reduce lag. The first authorizes water utilities to adopt a future or hybrid test year in general rate cases.

Traditionally, Texas has been a historical test year jurisdiction for water utilities. The second reduces the timeline for processing our infrastructure surcharge mechanism, or SIC, applications from 120 days to 60 days. Texas Water supported these pieces of legislation, and we believe they are in the best interest of customers and the company. Speaking of SIC, Texas Water filed for its third SIC increase in early October, requesting a $5,100,000 increase for completed water and wastewater projects, and we expect a decision from the PUCT in mid-2026. Texas Water expects to file a combined company general rate case in early 2027 with new rates effective in early 2028.

The timing of the case will follow the close of our pending QuadVest acquisition as well as the completion of our significant investments to bring an additional 6,000 acre-feet of water annually into our existing system so that these and other additions to Texas Water's rate base can be recognized in rates. Finally, I want to briefly discuss Maine and the approval last month of a stipulation that Maine Water reached with the Office of Public Advocate in the rate unification proceeding. The stipulation enables the consolidation of Maine Water's 10 rate divisions into a single division on a revenue-neutral basis.

The consolidation will set comparable rates for service across all communities that Maine Water serves and provide a more efficient regulatory structure for Maine Water to make important infrastructure investments while creating administrative efficiencies in the regulatory process, which benefits customers. To limit effects on customer bills, a transition rate took effect on February 1 and will adjust over time through future rate filings until the uniform rate target is achieved. The stipulation also approves a needs-based financial assistance rate program compliant with recent water affordability legislation in Maine. With successful completion of the unification proceeding, Maine Water filed a notice of intent in January that it plans to file a consolidated general rate case around March.

I believe the aforementioned regulatory and legislative accomplishments, combined with the pending acquisitions in Texas, position our company to deliver on the five-year plan that Ann previously laid out. With that, I will turn it back over to Andrew.

Andrew Walters: Thank you, Bruce. I wanted to briefly touch on bill affordability for our ratepayers. We know affordability is of paramount importance to our customers and regulators. We also know that it is a key investor concern across the utility industry given the rising levels of planned capital expenditures and the fact that 2026 is an election year in many states. Already, we have seen electric bill affordability play a prominent role in some politicians' campaigns. Affordability is a top priority of ours; we will continue to work with our partners in our states to keep rates affordable for customers.

But we do have to balance affordability with the extensive infrastructure needs throughout our service territories, all while providing safe, reliable, and high-quality service. A recent Environmental Protection Agency study said that water and wastewater bills are affordable if, combined, they are less than 4.5% of median household income. This is up from 3% previously. As shown on slide 22, average H2O America bills are 1% or less across the four states as of year-end 2025. It should be noted that includes water and wastewater individually, so you have to divide the EPA rates by half. We believe that these statistics are beneficial for our customers but also provide reasonable bill headroom for recovery of our planned infrastructure investments.

In addition, we continue to work to offer customer assistance programs to help with affordability for those that need it. As Bruce mentioned, with the approval of Maine's rate unification stipulation, we are excited to be able to introduce for the first time a needs-based financial assistance rate program for eligible Maine customers. We are pleased to be able to offer this affordability tariff for our Maine customers who need it, as we already offer similar tariffs to our customers in California and Connecticut. Further, we hope to be able to introduce this benefit to our Texas customer base as part of a future rate proceeding.

And, as always, we will continue to strive to run the business as efficiently as possible, as we recognize that every dollar of avoided operating expenses enables the recovery of $7 of capital investments with a neutral impact on customer bills. As we look to balance affordability with the extensive investment required to replace aging infrastructure and treat emerging contaminants, all while providing high-quality water and reliable service, we will continue to work constructively with our state regulatory partners. There have been a few commissioner changes that I would like to highlight, starting with Governor Newsom's recent announcement in California. We congratulate John Reynolds on his appointment to be the new CPUC President and thank Alice Reynolds for her service.

We also welcome Commissioner Christine Harada to the CPUC. Then in Texas, we welcomed Commissioner Morgan Johnson to the PUCT, who Governor Abbott appointed in October to fill one of the two commissioner vacancies. In closing, 2025 was another strong year for H2O America by pretty much all accounts—financial, regulatory, legislative, strategic, you name it—and I believe our company is poised to deliver great things in 2026 and beyond.

Our dedicated team remains focused on driving shareholder and customer value through disciplined infrastructure investment and executing on our financial goals, advancing the transformational QuadVest acquisition as well as Cibolo Valley, deepening our strong partnerships with local stakeholders, and our unrelenting pursuit of operational excellence in identifying creative and sustainable solutions to serve generations to come while maintaining the focus on affordability. And now I will turn the call back over to the operator for questions.

Operator: To ask a question at this time, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Nicholas Campanella with Barclays.

Nicholas Campanella: Hey, good morning, everyone. Thanks for the updates. Good morning. Great to hear you. And thanks for all the updates today. Thank you. Just a little bit more on slide 13. You have this 6% to 8% EPS CAGR now, mentioned that it is not linear, like you said. I appreciate the disclosures that we have to get through this financing and some ROE lag in 2026 and 2027. Just maybe at what point do you think you are going to be really in that 8% plus level, like you said on the press release? Would that come as soon as 2028? How would you kind of frame that? Thank you.

Ann Kelly: Yes. I will take that one, Nick. We want to be respectful of the PUCT process. You know that the outcome of the planned consolidated Texas rate case will be a key driver of our earnings in 2028 and beyond, not just the magnitude of the rate increase, but also the effective date. So we do forecast accretion in 2028 versus our standalone plan under a number of different scenarios that we have worked, and, as indicated in our prepared remarks, we do plan to be at or above the top end of our 6% to 8% for the total period. But I do not want to get ahead of the regulatory process to say exactly when that could happen.

Nicholas Campanella: Okay. I understand. And then maybe just, Andrew, maybe, you know, you kind of also mentioned in the slides here and then in the prepared that this outlook does not contemplate future M&A. Maybe just if you—what is the timeline to announce something further here? Do you want to wait until you get on the other side of the Texas rate case? Are you guys going to be out there remaining active across the jurisdictions? And then maybe where do you kind of see some of the best opportunities in your states or maybe even outside of your states today?

Andrew Walters: Well, Nick, I appreciate the question. And there are a couple things that I would just highlight. So, first of all, the velocity typically in the water space is not that regular for acquisitions. Our typical acquisitions that we do are small tuck-in acquisitions. We will continue to remain active nonstop on those tuck-in acquisitions, but I would not expect that to be as groundbreaking as the QuadVest acquisition is for us. I would say that for us, as it stands today, we are very much focused on completing the QuadVest acquisition. That is going to be our focus for the near and medium terms. And we will see what happens in the future.

There is nothing—we do not comment on specific transactions, but I can assure you we are very focused on QuadVest right now.

Nicholas Campanella: Thanks a lot. Really appreciate the time.

Andrew Walters: You bet. Thank you, Nick.

Operator: Our next question comes from Angie Storozynski with Seaport. Thank you.

Angie Storozynski: Morning. I have to admit that I am still in awe of the 13% rate base growth and then the $2,700,000,000 CapEx. I mean, I was bullish in my estimates, but that was far more than I had expected. I am just wondering—and, again, you obviously show me the CapEx per subsidiary—but how did that change? So is it fair to say that the vast majority of the pickup in that longer-term CapEx came from the acquisition from QuadVest?

Ann Kelly: No. I think it is a combination of things. You do have some additional CapEx related to the QuadVest acquisition, but as we look forward and get more granular in our project forecasting going forward, we are seeing additional projects. You are seeing increased costs as some of the bids come in. We saw the increase in the PFAS by about $100,000,000. So that is really what is driving that. Bruce, anything else you want to add?

Bruce Hauk: We just mentioned in our prepared remarks a little bit of opportunity on the 1% main replacement, and quite a bit of investment on water supply, Angie, as well. So I think it is a very balanced approach, but it is not just the acquisition step-up. It is quite a bit of capital beyond that as well.

Angie Storozynski: Okay. And then on the earnings trajectory—and yes, I understand how CAGR works. The starting and ending point, I understand that. But I am just wondering, like, the accretion of the acquisition starts in 2028, then it accelerates in 2029. But I am asking about the step change between 2029 and 2030. Is it fair to assume that there is an even bigger earnings step-up between 2029 and 2030? And I am not just asking about Texas; I am asking vis-à-vis all of the rate case timings in other jurisdictions.

Ann Kelly: Maybe I will start on that. So, Angie, when you think about our rate case cadence right now, as we mentioned in the prepared remarks, Maine has already filed an intent. Of course, Maine is our smallest jurisdiction. And Connecticut's three-year cycle has them filing again this year, so we would expect those to be implemented sometime next year. And then we have the Texas rate case that is effective in 2028, as well as the increases in California. Now, California, of course, has step increases each year, but they do not have a net new rate case.

So I would not expect any new rate cases that would have new rates effective in 2029, just any incremental step-ups from the current one, and, of course, our infrastructure mechanisms such as the WISC, the WICA, the SIC, and the WQTA, of course, for PFAS.

Angie Storozynski: Understood. But, okay, I was more asking about 2029 to 2030. That step-up—if there is basically sort of this accelerating growth, mostly from QuadVest, but also other jurisdictions. I am frankly fishing a little bit for another sort of equity inject, given the size of this plan. I mean, if I should just assume that there is some slowdown to the growth versus, for example, 2029 simply because I need to dilute myself a bit to fund the growth.

Ann Kelly: Yes. I mean, the one thing to note is that in Connecticut and Maine, if they do a three-year cycle, which Connecticut has been, they would have actually new rates coming in 2030. So that is one. I think the rest is just the capital plan. And we did mention in 2029 that we would have the maturity coming due of the parent company debt that we would expect to pay down.

Angie Storozynski: Okay. Understood. I am going to follow up. Okay. Thank you so much.

Andrew Walters: Thank you so much, Angie.

Operator: Our next question comes from Alex Kania with BTIG.

Alex Kania: Hey. Good morning. Thanks for taking my question. Maybe just thinking, coming off the last question, first, just on equity issuance. It is helpful that you broke out the QuadVest-related equity versus the ongoing equity needed to support the overall program. Is that $125,000,000 or whatnot type of number kind of a reasonable sort of expectation on an ongoing basis as you think about funding the updated CapEx plan?

Ann Kelly: Yes. I would say on average that is probably about right. You may have some variances year to year just depending on timing of capital payments. I would expect that on just an average basis. And, of course, as our CapEx plan increases, you would expect that to increase somewhat as well.

Alex Kania: Okay. Great. Thanks. And then, again, going back to the EPS long-term growth, just as I was looking at the slide, I think the way that we should be reading this is that once we get to, let us say, 2030, that from whatever that number is—you have been presumably growing at the kind of at or above the 6% to 8% range through 2030. From 2030, whatever that level is, you still see line of sight where 6% to 8% can actually continue off of that 2030 as kind of a base year.

Ann Kelly: Yes, that is correct.

Alex Kania: Okay. Great. Thank—maybe one last question is just on Texas and the upcoming rate case post-QuadVest. Just how do you—and I appreciate, Andrew, the discussion on affordability—just thinking about the rate trajectory for that jurisdiction in particular, given refresh of rates overall in the rate case, but also there is certainly much higher customer growth there as well. But just how do you see, looking through the regulatory process, the impact to kind of so-called average customer bills or whatnot?

Andrew Walters: I am going to ask Bruce if he would not mind answering that.

Bruce Hauk: Yes, thanks for the question. And again, as we had mentioned earlier, we do not want to get ahead of the PUCT process and portray any outcomes without actually getting closer to that and getting through the process. But we have a duty and obligation to make prudent investments and recover those. And we did mention that it has been 13 years since we have been in. So we have made quite a bit of investment in some water supply. So we think that the increase is substantial, but we do not want to get ahead of what that is. But affordability continues to be important to us and to our customers.

And so, in that process, as we have done in Connecticut, Maine, and California, we will be seeking ways to help our customers with affordability and propose a low-income tariff to help support that and other ways that will be creative in the process.

Alex Kania: Great. Thank you so much.

Andrew Walters: You are very welcome. Thank you.

Operator: That concludes today's question-and-answer session. I would like to turn the call back to Andrew Walters for closing remarks.

Andrew Walters: All right. Thank you again for joining us today. H2O America proudly leverages our national platform to support our distinct local operations, all united by a shared mission: delivering reliable service and high-quality water to 1,600,000 people across four states. At the same time, we continue executing our growth strategy and delivering shareholder value, including our unwavering commitment to the dividend, which we have paid for more than eighty consecutive years and increased it in each of the past fifty-eight. Our success is built on a culture of service and partnership. We value our customers, the communities, the environment, and capital providers, and I could not be prouder of our team, whose dedication makes it all possible.

I am always available for follow-up along with my partners, Ann and Bruce. We appreciate your interest in H2O America.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.