Artesian Resources Corporation Annual Report 2020

FY2020 Annual Report · Artesian Resources Corporation

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On the Cover
(top to bottom)

Our customer service
department is available in
person to assist customers
while implementing proper
protocols and ensuring
the safety of our customers
and employees.

Our crews work around-
the-clock to ensure reliable
service to our customers,
regularly visiting our 72
treatment facilities and
performing necessary
maintenance.

Pictured Above:

Continued growth in the areas we serve
and our commitment to reliable, high-
quality water service includes the need
to install new water main, and the
renewal and rehabilitation of existing
mains. In the past year alone, we
renewed 2.3 miles of main.

Our IT team (top picture), our 24/7 dispatch
center (middle), and our field employees
(bottom picture), as well as our many other
employees not shown, are all dedicated to
providing reliable, high-quality service so
essential to our customers.

T A B L E O F C O N T E N T S

Artesian, as an essential

business, upheld its core

Company Overview

Page 4

Company Highlights

Page 5

mission throughout the COVID-19

Jennifer L. Finch

Page 6

pandemic to provide uninterrupted

critical ser vices to our customers.

While Artesian continues to

Financial Highlights

Page 6

Letter to Our Shareholders

Page 8

remain focused on our strategic

Rodney Wyatt

mission of investing in

Water Service Facts

Page 16

Page 19

infrastructure and growth,

Jeff Price & Rob Penman

Page 19

our essential employees

demonstrated Artesian’s

commitment to provide

water and waste-

Officers

2021 Annual Meeting

Directors

water ser vices 24/7,

Investor Information

Artesian Subsidiaries

Financial Data

maintaining a record

safety rating while

water demands hit

an all-time high

in 2020.

Page 20

Page 21

Page 22

Page 23

Page 24

10-K

FOR MORE INFORMATION ABOUT

ARTESIAN RESOURCES CORPORATION,

PLEASE VISIT US: a r t e s i a n r e s o u r c e s . c o m

C O M P A N Y O V E R V I E W

It all started in 1905 when Aaron K. Taylor began

to supply a new housing development in

New Castle County, Delaware with water

that ran directly into homes; and so

Artesian Water Company was

formed. From small beginnings

as a local water company to

today as a total water resource

management company, Artesian

has flourished and is now the largest

regulated investor owned water utility

on the Delmarva Peninsula and the

ninth largest in the nation.

Since 1905 we have expanded our

territory and now provide water and wastewater

solutions to the state of Delaware and water

supply to nearby Cecil County, Maryland.

We are engaged in a wide variety of activities

from identifying new sources of supply to

developing wells, treatment plants and delivery

systems, and to planning, building and managing

responsible wastewater treatment systems.

We not only serve our customers but we serve

our communities as well through our employee

involvement with various charities throughout

our service area.

We are dedicated to our mission to provide our

customers with the very best service possible.

C O M P A N Y H I G H L I G H T S

• Completed the acquisition of the town of

Frankfordʼs water system as part of Artesianʼs
growth strategy in Sussex County.

• Completed the acquisition of the water

system of Delaware City after an
18-year-long operations partnership.

• Increased water service customer

base by 2.8%.

• Increased wastewater customer base
by almost 14.9%, outpacing 2019ʼs
historic growth rate.

• Renewed over 2.3 miles of main

and 35 services, and replaced nine
fire hydrants, as part of the Companyʼs
plan for replacing older transmission
and distribution systems that are
reaching the end of their useful lives.

• Installed an interconnection to supply

water to the town of Dagsboro in Sussex
County once Artesian completes construction
of a new 2.0-million-gallon-per-day (mgd)
water treatment plant in 2021.

• Increased available water capacity by

2.5 mgd upon completion of construction
of the Hyetts Corner and Riverside
water treatment plants.

• Installed an interconnection with the town
of North East, Maryland to provide water
supply in the growth corridor of Cecil
County, Maryland.

Jennifer L. Finch, CPA, was named Corporate

Treasurer and Senior Vice President of Finance of

Artesian Resources Corporation and subsidiaries

by the Board of Directors in 2020. Jennifer has

had over 30 years of accounting, auditing

and tax experience in both public practice

and private industry. She has been with

Artesian for 12 years. Her promotion is

a testament to her outstanding

contributions in financial management,

planning and performance. Jennifer’s

expanded role will position her to

play an integral part in corporate

strategic planning with respect

to financial projections,

funding and investments,

and risk management.

F I N A N C I A L

H I G H L I G H T S

9
1.7
$

0
1.6
$

4
1.5
$

1
1.5
$

1
1.4
6 $
1.2
$

3
1.1
$

7
1.0
4 $
0.9
$

3
0.8
$

2
6.8
1
$

3
4.9
1
$

8
4.2
1
$

8
3.9
1
$

5
2.9
1
$

1
1.3
1
$

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
2
0
2

EEaarrnniinnggss PPeerr CCoommmmoonn SShhaarree
(at December 31st)

5
9.8
$

1
9.5
0 $
8.3
$

5
6.7
$

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
0
2
2
0
0
2
2

NNeett IInnccoommee (in millions)

1 0 Y E A R S U M M A R Y O F F I N A N C I A L H I G H L I G H T S

For the year ended December 31,

per share amounts

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Operating Revenues

Operating Expenses

$ 88.14
$ 65.85

$ 83.60

$ 80.41

$ 82.24

$ 79.09

$ 77.02

$ 72.47

$ 69.07

$ 70.56

$65.07

63.67

61.46

62.64

60.27

59.44

56.42

54.59

54.71

51.33

Operating Income

$ 22.30

19.93

18.96

19.60

18.82

17.58

16.05

14.48

15.85

13.74

Net Income

$ 16.82

14.93

14.28

13.98

12.95

11.31

9.51

8.30

9.85

6.75

Net Income Per Common

Share - Diluted

$$ 11..7799

1.60

1.54

1.51

1.41

1.26

1.07

0.94

1.13

0.83

Cash Dividend
Per Common Share

$ 1.01

0 .98

0.95

0.93

0.90

0.87

0.85

0.82

0.79

0.76

Rate Base

$ 315.71

$267.55

$258.56 $249.00 $240.39 $233.46 $235.69 $225.10 $220.05 $214.42

4
8.1
8
$

4
2.2
8
$

1
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8
$

9
9.0
7
$

0
3.6
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$

2
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7
7 $
2.4
7
$

6
0.5
7
7 $
5.0
6
$

7
9.0
6
$

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
2
0
2

OOppeerraattiinngg RReevveennuuee (in millions)

7
0
7
$

7
6
6
$

5
2
6
$

7
7
5
$

5
3
5
0 $
1
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9
4
8 $
6
4
$

0
5
4
0 $
3
4
$

1
1
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2

2
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4
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5
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7
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8
1
0
2

9
1
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2

0
2
0
02
2
0
2

UUttiilliittyy PPllaanntt aatt CCoosstt (in millions)

8
4.3
$

8
4.1
$

6
3.8
$

9
3.9
$

0
3.6
$

7
3.3
$

6
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2 $
2.7
$

5
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3 $
2.1
$

1
1
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2

2
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3
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2

4
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5
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6
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2

7
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8
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9
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0
0
2
2
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2
2

SSeerrvviiccee LLiinnee PPrrootteeccttiioonn PPllaann RReevveennuuee
(in millions)

D E A R S H A R E H O L D E R

Every year presents unexpected difficulties,

but for many of us, 2020 was more challenging

than any other year in memory. As the

COVID-19 pandemic spread

across our communities, we

experienced tremendous upheaval

in our working and personal lives.

Through all of it, however, the

employees of our water and wastewater

companies performed admirably, providing

critical services to ensure that our customers

could maintain a clean and safe environment

in their homes and businesses. Moreover,

not only did we carry out our core mission of

providing essential services to customers throughout

the Delmarva Peninsula, but we also continued

Dian C. Taylor

Chair, President
and CEO

to focus on strategic initiatives to grow our

water and wastewater business.

The result was a record year

for earnings.

4
0.8
$

1
0.8
$0.77 $

3
1.0
0 $
1.0
7 $
0.9
4 $
0.9
1 $
0.9
9 $
0.8
6 $
0.8
$

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
2
0
2

Annualized Dividend Per Common Share
(at December 31st)

D E A R S H A R E H O L D E R

favorable results was increased water demand

from our existing residential customers who,

It is my pleasure now to review the

because of the pandemic, were working from

progress we have made and our path

home rather than in an office located elsewhere.

to continued success.

Pursuant to our strategic plan for growing

We reported $88.1 million in revenues

our business, we completed the acquisition

in 2020, an increase of 5.4% over 2019.

of two municipal water systems in Delaware

Our net income increased 12.7% to $16.8

during 2020. These two purchases were

million. Diluted earnings per share increased

Artesianʼs sixth and seventh over the past

by 11.9%, to $1.79. In recognition of the

three years, the Company having previously

Companyʼs sustained growth and record

acquired the water systems of Slaughter

annual earnings, the Board approved a 3.0%

Beach, High Point, Cantwell, Odessa and

increase in dividends paid to shareholders,

historic Fort DuPont.

raising the annualized dividend per share

to $1.0284 in November 2020.

On April 2, 2020, we acquired the water

system of the town of Frankford, in Sussex

A key contributor to our strong financial

County. The town, which neighbors Delawareʼs

results in 2020 was the continued addition of

rapidly developing beach communities, is

water and wastewater customers served.

adjacent to Artesianʼs South Bethany water

We saw customer growth in our water busi-

system and the soon-to be-interconnected

ness of 2.8%, and customer growth in our

town of Dagsboro. To ensure continued

wastewater business of 14.9%. The added

reliability of service for this rapidly expanding

customers included people who relocated

area, Artesian will install over 7 miles of new

to our service areas, particularly those close

water main and install 45 fire hydrants in 2021.

to Delawareʼs beaches, from nearby urban

This project will complete the regionalization

centers. Also contributing to last yearʼs

of our water system in southeastern

Sussex County. This newly regionalized

with the water system for neighboring

service area will cover over 20 square miles

Fort DuPont, which is currently being

and serve nearly 6,000 existing customers

redeveloped and revitalized. Our investments

and future growth. In addition, Artesianʼs

in Delaware Cityʼs system will not only

Dagsboro Water Treatment Plant,

enhance water pressure and reliability, but

currently under construction, will provide

its interconnection with Fort DuPont will also

an additional supply of 2.0 million gallons

provide the two communities with a stronger

per day (mgd) to the region.

foundation for future economic development.

Our second acquisition in 2020, which we

During 2020, we invested over $40.0 million

completed on August 3, was the water system

in critical infrastructure to ensure that our

of Delaware City, in New Castle County. That

customers continue to enjoy safe, secure and

acquisition was the culmination of our 18 year

high-quality utility service. These investments

operating partnership with the city. Artesian

included our new Hyetts Corner Water Treat-

will invest over $2.3 million to renew aging

ment Plant, located just below the C&D Canal

water mains, upgrade treatment technologies

in New Castle County. The plant is capable

and enhance pumping efficiencies. The

of providing 2 mgd of water to over 33,000

Delaware City water system will be interconnected

residents in the fast-growing Middletown-

Pictured top to bottom:

On April 2, 2020, Artesian acquired

the town of Frankford's water system.

This system will be interconnected

with the town of Dagsboro and

neighboring beach communities,

serving an area of over

20 square miles.

Artesian's Dagsboro Water Treatment

Plant, currently under construction,

will provide an additional supply of

2.0 million gallons per day to the

expanding regional system.

As we continue to expand, Artesian's

Southern Maintenance Center in Dagsboro

will provide an efficient location for

storage and maintenance of equipment.

Pictured top to bottom:

Artesian completed the construction

of the Riverside Water Treatment Plant

in Kent County, Delaware.

Reflecting our commitment as an

environmental steward, Artesian

doubled its solar system footprint at

the new Hyetts Corner Water

Treatment Plant.

Inside the Hyetts Water Treatment

Plant are the workings of the electrical,

chemical and pipeline components

that deliver reliable, safe, high-quality

water to our customers.

Odessa-Townsend area. Additionally, reflecting

Sussex County to provide water service

our commitment to environmental responsibility,

to the underserved community of Ellendale

we doubled our solar power footprint at the

and to manage the regionʼs wastewater in the

Hyetts Corner facility. We also completed

and placed in service the Riverside Water

Treatment Plant in Kent County, providing

additional supply to the area. Moreover,

throughout 2020, we continued our proactive

water main replacement program, renewing

over 2.3 miles of main and 35 services,

and replacing nine fire hydrants.

Preparing for Future
Growth Opportunities

most efficient and environmentally responsible

manner possible. Through this partnership,

Artesian is providing customers with

environmentally sound, reliable and cost-

effective service.

Cecil County, Maryland-located at the top of

the Chesapeake Bay and close to big-city

amenities-is one of the most desirable areas

in the country in which to live, work and play.

And Artesianʼs ability to reliably deliver high-

As part of our planning for the future, we

quality water in Cecil County is continuing

have forged strong relationships throughout

to play a critical role in the areaʼs economic

the state of Delaware. In Yorklyn, in northern

development. As one example, Clene

New Castle County, we have partnered with

Nanomedicine announced its intent in late

the state to provide water service to a 119-

acre area known as Auburn Valley that is

poised for redevelopment. We are also en-

gaged in three other active projects in northern

New Castle County that will provide water

service to planned logistics facilities that will

total more than 5 million square feet and are

expected to employ more than 3,000 people.

In addition, Artesian has partnered with

2020 to fast-track construction of a 102,600-

square-foot pharmaceutical manufacturing

facility in the Principio Business Park.

Clene is on the cutting edge of its industry,

developing a new class of drugs called bioen-

ergetic nanotherapeutics aimed at addressing

neurodegenerative diseases such as ALS,

Parkinsonʼs and multiple sclerosis. In November,

Maryland Governor Larry Hogan recognized

a firm that specializes in industrial real

Clene as one of Marylandʼs Future 20,

estate development is planning to proceed

innovative start-ups likely to be the stateʼs

next major successful businesses. Although

Cleneʼs corporate offices are in Utah, about

three-fourths of its employees are in Maryland,

where Clene conducts all of its R&D, manu-

this year with construction of two buildings

in Port Deposit at the site of the former

Bainbridge Naval Training Center. The two

buildings will total about 2 million square feet.

Phase 1 of this construction will kick off with

the development of about 420 acres of the

facturing and commercialization activities.

1,200-acre Bainbridge site.

All of this development activity in Cecil

County is supported by our ongoing program

to add additional sources of water supply.

We are drilling new wells in the area of Princi-

pio Business Park, and we expect to put a

second interconnection with the town of North

East into service in 2021 to tie into our Route 40

service area between North East and Elkton.

Elkton recently approved a transformational

master development project on 630 acres,

which is expected to break ground within the

next year. The mixed-use project will include

both residential and light-industrial construction.

Nor is Cleneʼs facility the only new building on

the fast track for construction in the Principio

Business Park. Interest in locating logistics

operations in Cecil County remains high given

We continue to provide 250,000 gallons per

its location in the I-95 mid-Atlantic corridor.

day of water to the town of Elkton, and

As a result, two new warehouse facilities

113,000 gallons per day to the town of

totaling 500,000 square feet are expected to

Chesapeake City through interconnections

be started in 2021 at Principio. In addition,

with each town.

Artesian has remained focused on expansion
opportunities and relationships in Cecil County, Maryland
by providing additional sources of water supply and
establishing interconnections with neighboring systems.

North East, at the head of the Chesapeake Bay,
is equidistant from Baltimore and Philadelphia.
This ideal location is poised for substantial
residential and commercial development.

Elkton has a population of over 15,000
people and is fast becoming one of the
most desirable places to work and live.
Artesian provides 250,000 gallons of
water per day to the town of Elkton and
113,000 gallons a day to the town
of Chesapeake City through
interconnections.

Phase 1 commercial development
on 420 of the 1,200 acres at the
Bainbridge Naval Training Center
in Port Deposit will begin in 2021.

Clene Nanomedicine (Clene)
announced in 2020 its intent to
fast-track construction of a 102,600
square foot pharmaceutical
manufacturing facility in the
Principio Business Park.

In February 2021, Rodney Wyatt was appointed Vice President

of Artesian Wastewater Management, Inc. Rodney joined

Artesian in 2005 with over 40 years of professional engineering

and operations management experience in the water

and wastewater fields. In his new role,

Rodney will be responsible for managing

Artesian’s water recharge program,

which provides the best possible

treatment and disposal of waste-

water in a safe, environmentally

beneficial manner. He will also have

a key role in planning, engineering

and construction, as well as in the

regionalization of smaller systems and

implementation of new systems.

The effluent from Artesianʼs

lagoon systems is treated to land

application standards for spray

irrigation, while retaining its

high-nutrient content.

Page 17 (left to right)

Artesian ensures the wastewater process is

environmentally beneficial and done safely.

From our proper collection, treatment and disposal,

to the spray irrigation that recharges our ground water.

Rodney Wyatt was appointed Vice President
of Artesian Wastewater Management, Inc.

Our wastewater subsidiary increased its

The culmination of this project will be the

customer base by 14.9% last year, outpacing

construction of a new 625,000-gallon-per-day

its historic 2019 growth rate. The subsidiary

wastewater treatment facility at our Sussex

added three new developments and nine new

phases of existing developments to its service

area in Sussex County. We have made signif-

icant efforts over the last few years to inter-

connect our wastewater treatment plants to

create a regional system that will let us add

customers throughout our service territory

without having to construct expensive smaller

systems. An interconnected system will also

allow for more efficient and cost-effective

Regional Recharge Facility on the northern

side of our service territory. The new facility

will incorporate a 3.0 million-gallon equaliza-

tion and diversion lagoon to provide peak-

day storage. Once the facility is completed,

anticipated in 2022, we will be able to utilize

the full capabilities of an interconnected

system, which will let us shift wastewater

flow to different treatment facilities based on

real-time conditions. The new facility will

also give us the additional capacity necessary

treatment of effluent. One of the steps we

to implement an enhanced preventative

took toward this goal was the installation of over

maintenance program to ensure long-term

4.5 miles of force main to enable us to serve a

uninterrupted service throughout our service

growth corridor along Delaware Route 1 and

territory. The interconnected system covers

other major access roads in Sussex County.

over 94 square miles of service territory.

Being a Good Neighbor

Artesian has long believed in being involved

as a good neighbor in the communities it

serves. Artesianʼs management team holds

leadership positions in numerous local

community organizations, including the

Delaware Business Roundtable, Delaware

Prosperity Partnership, Delaware Nature

services when needed most, efficiently

utilizing our Personal Protective Equipment,

distancing our core groups of employees,

quickly transitioning to remote work when

possible, and communicating with our

customers throughout this trying time.

With our Emergency Response Plan and

Safety program in place, we were able not

only to maintain our life-sustaining services

Society, Easterseals Delaware and Marylandʼs

throughout 2020 but also to continue

Eastern Shore, Delaware State Chamber of

executing our growth strategy.

Commerce and Junior Achievement of

Delaware, to name a few. As many of these

nonprofit organizations struggled throughout

2020, Artesian remained consistently

dedicated to helping our communities while

focusing on future economic development

in our other organizations.

I would be remiss if I did not take a moment

to note our pride in the election of Delawareʼs

own Joseph Biden as President of the United

States, making him the first President from

the First State (Delaware) in our nationʼs

history. For his and our countryʼs benefit,

we wish him much success in meeting

The safety of our employees and customers

every challenge.

remains a high priority. We maintain our own

safety program, which includes extensive

training and inspections. With this proactive

approach, we were able to record no work-

place injuries last year and decreased our

workersʼ compensation insurance premium

by 23.8%. Our diligence, moreover, positioned

us to be well prepared to respond to the

In closing, I would like to thank you,

our shareholders, for your investment

in our company and for your continuing

confidence in our long-term success.

COVID-19 pandemic. As an essential

Dian C. Taylor

business, we continued to provide our critical

Chair, President and CEO

The Chesapeake Section of the American Water Works Association

(CSAWWA) presented its Operator of the Year Award to Jeff Price,

Manager of Artesian’s Southern Delaware Water Operations.

Jeff was the fourth Artesian employee in the past eight

Jeff Price (left) Operator of the
Year and Rob Penman (right)
past chair of Chesapeake
years to receive this prestigious award.
Section AWWA

W A T E R S E R V I C E F A C T S

Population served ....................... approximately 301,000

Metered customers .................................. 92,900

Annual production ....................... 8.3 billion gallons

Presenting the award to Jeff was fellow

Artesian employee Rob Penman,

Director of Operations Administra-

tion for Artesian. Rob served as

Chair of the Chesapeake section of

AWWA until officially passing the

gavel on October 1, 2020. Additionally,

Rob was a past recipient of the Carl John

Lauter Award, another prominent award

bestowed by the CSAWWA to a distinguished

member to acknowledge outstanding work

Miles of main.........................................1,368

as a water works professional.

Active wells ......................................... 205

Treatment facilities ............................ 72

Storage capacity .........174 million gallons

Water service
territory ....................... 298 sq. miles

Wastewater
service territory ....... 30 sq. miles

Average
cost per day
for residential
water service ........ $1.69

Rob Penman (left), past chair of the

Chesapeake Section of the AWWA and

Jeff Price (right), Operator of the Year

O F F I C E R S

Top to Bottom, Left to Right

Dian C. Taylor
President and Chief Executive Officer