California Water Service Group
Annual Report 2021

Plain-text annual report

HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS TODAY California Water Service Group 2021 Summary Annual Report TOMORROW HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS We are more than just a utility company. We are supporters of charitable organizations, pouring HEART & SOUL into enhancing the quality of life for all of our stakeholders. We are defenders of the planet, making meaningful contributions to CONSERVE & PROTECT our natural resources. We are planners and doers, working day in and day out to ensure that we are READY & ABLE to respond to emergencies. We are disciplined visionaries, investing in both the NEW & IMPROVED— purchasing new water and wastewater systems and upgrading our existing infrastructure. We are all of these things, because we are dedicated to meeting the needs of TODAY & TOMORROW. 1 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS HEART SOUL 2 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 2021 SUMMARY ANNUAL REPORT People are at the heart of everything we do. Whether we are conducting a water quality test, responding to an after-hours emergency, or enrolling a customer in our low-income assistance program, we are motivated by our commitment to improving the quality of life for those we serve. That’s why we support organizations that share our dedication to making good things happen in our communities. Much of our philanthropy is focused on helping people meet their day-to-day needs. But we also recognize the importance of nurturing the soul, and nothing does that better than nature. That’s why we invest in programs that teach young people how to protect the planet. The centerpiece of this effort is our H2O Challenge, a classroom competition that teaches students about water. Now, a new partnership will enable disadvantaged kids to experience firsthand the wonder of the ocean. 3 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 1.6 Million IN TOTAL CONTRIBUTIONS Spreading the Love Each year, we contribute to a wide variety of charitable organizations in our service areas. On any given day, you might find us delivering new school shoes to underserved kids, unloading badly needed pallets of toilet paper and paper towels at a warehouse serving the homeless, or packing dinner boxes and toys into car trunks while the families inside wait for Santa Claus to arrive. 38% At-Risk/Underserved Communities 25% Community Improvement 11% Local Economic Renewal 10% Environment 9% Education & Youth Support 3% First Responders 2% Veterans 1% Animal Welfare 1% Health Care 4 4 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Putting Others First In 2021, our philanthropy was augmented by $600,000 in personal contributions from our executive team and Board of Directors, enabling us to make a meaningful difference in even more people’s lives. CHICO HOUSING ACTION TEAM FOR EVERHART VILLAGE We contributed to this high-barrier transitional housing shelter for patients of Butte County Behavioral Health who have demonstrated a desire to change their lives and an ability to rejoin the community in a safe and productive way. BOYS & GIRLS CLUBS OF AMERICA We’re helping to fund desperately needed satellite clubs within two public housing developments in Stockton, California. The clubs will offer transformational educational opportunities, including science, technology, engineering, and math, for hundreds of disadvantaged youth. OTHER RECIPIENTS We donated the remaining $200k to food banks, missions, shelters, and other organizations throughout our service areas. 5 600,000 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Partnering for Conservation In 2021, we entered into a partnership with the Monterey Bay National Marine Sanctuary Foundation, which supports the Monterey Bay National Marine Sanctuary in its efforts to protect marine life and their habitat. We look forward to working with the Foundation to provide opportunities for kids from disadvantaged communities in our Salinas and King City Districts to experience the beauty of the Monterey Bay and motivate them to take part in conservation efforts. 6 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Inspiring Students to Make a Difference Our annual Cal Water H2O Challenge is a free, project-based competition for fourth-, fifth-, and sixth-grade classrooms and school-based clubs to develop and implement solutions to local water challenges. In 2021, Barbara Elrod and her fifth- and sixth- grade students from Munsey Elementary in Bakersfield, California, took first place for their project, “Greywater: It’s Not Grey, It’s Blue.” Their research and experiments culminated in a water website that educates the community on the value of greywater. “ It gave them a reason to be invested in math, science, writing, and research … I believe the biggest impact of this project is that greywater will be seen as a benefit, and will open the door for the community to have an inevitable conversation about this untapped resource.” Barbara Elrod, teacher 4,255 students have participated in the H2O Challenge since its inception in 2013 7 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS CONSERVE PROTECT 8 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 2021 SUMMARY ANNUAL REPORT One of the most significant ways we mitigate climate change is by helping our customers conserve water, because saving water doesn’t only save water, it also saves the energy required to treat and deliver the water. And water conservation isn’t just good for the planet; it also helps us weather increasingly severe droughts. It’s so much more than low-flow showerheads, and it’s critically important for both sustainability and reliability. Protecting the planet is key to the sustainability of our business. Our climate change strategy is focused on reducing our own and our customers’ contributions to climate change; managing the impact of climate change on our water systems and supplies; ramping up collaboration with government and other agencies; setting time-bound mitigation and adaptation goals; and reporting transparently on our progress. 9 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Making Water Conservation Easy We offer conservation programs that reflect the unique needs of each customer and community. For example, we provide rebates on water-efficient appliances and devices, free showerheads and shut-off hose nozzles, and information about everything from detecting leaks to irrigating efficiently. And we are always looking for ways to enhance our programs. Investing in projects that save water SPRAY-TO-DRIP LAWN-TO-GARDEN The Spray-to-Drip program provides a rebate to customers who replace standard sprinklers with drip irrigation, which uses 20% to 50% less water. Our Lawn-to-Garden program provides a rebate for turf removal when a portion of the lawn is replaced with drought- tolerant plant material. SMART LANDSCAPE TUNE-UP Through the Smart Landscape Tune-Up program, we identify and repair irrigation leaks and upgrade broken or leaking sprinklers, all at no charge to the customer. Our programs saved 48 million gallons of water in 2021 10 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS HAWAII WATER COMPLETES IN-LINE HYDRO-TURBINE On the Big Island of Hawaii, we constructed an in-line hydro-turbine that will use the flow of water to generate electricity, reducing the amount of power required to pump water to customers. When commissioned in 2022, it will reduce the water system’s environmental footprint and reduce costs for customers. Prioritizing Sustainability We provide a precious natural resource, so protecting the environment has always been core to our business. In 2021, we adopted a formal climate change strategy that will enable us to make an even greater impact on sustainability. One key element of that strategy is managing the effects of climate change on our Company. Our 2021 Climate Change Risk Assessment & Adaptation Framework, which analyzes how climate change could impact each facility in every water system we own in California, will help us do just that. Investing in projects that minimize our contribution to climate change RECYCLED WATER PUT TO WORK IN CALIFORNIA In 2021, Cal Water began providing recycled water to a community near Madera, California. This new Membrane Bioreactor and Ultraviolet Disinfection Plant provides recycled water for use on construction sites and for irrigation of landscaping, including vineyards and tree nurseries. This is one small step toward our long-term goal of increasing recycled water use to 5% of our total water supply by 2035. 11 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS READY ABLE 12 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 2021 SUMMARY ANNUAL REPORT We make it our business to ensure that our employees are ready for anything. Whether we are establishing protocols and supplying personal protective equipment to keep them healthy and safe through a global pandemic or providing emergency response training to help them manage everything from wildfires to storms, we provide the tools our people need to be successful. When tested, our employees show time and time again that they are able to handle whatever comes their way. While every emergency is unique, our primary responsibility is to provide a safe and reliable water supply. That can mean deploying crews and making operational changes to keep water flowing through the system or, if that’s impossible, distributing an emergency water supply to the community. 13 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Remaining Alert and Ready Preparing for wildfires takes planning and a sustained effort that is informed by previous emergencies. Every year, our Wildfire Taskforce takes a systematic approach to ensuring that our teams are adequately trained, vegetation around our facilities is maintained, facilities and equipment are functional and strategically located, and lines of communication are open with fire agencies and other first responders. To augment the Taskforce’s efforts, we are forming regional Operations Rapid Response Teams. These teams will have advanced training on first aid and CPR, emergency response leadership, safety, and water system operations—and will be ready to deploy at a moment’s notice. BRING IN THE GOATS! Vegetation management is fundamental to protecting our water systems from wildfires. In Oroville, we developed a sustainable, low-cost solution for the four acres of wildlife habitat adjacent to our water treatment plant. How did we get the job done? With 250 hungry goats, of course. PARTNERSHIP PROVIDES EARLY WARNING SYSTEM In 2021, we partnered with Pano.AI, which helps fire professionals detect and respond quickly to fires. The innovative company requires sites that offer long-distance views and are equipped with both power and cell service. One of our facilities in Los Altos, California fit the bill. Now, a panoramic camera is mounted and connected, providing an early warning system to first responders should a fire start. 14 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Springing Into Action When a small forest blaze grew into the French Fire in August 2021, our Kern River Valley District team kicked into high gear, activating our Emergency Operations Center and reaching out to Kern County Fire Department to offer support. We worked around the clock to keep our water systems operational, placing emergency generators and modifying operations in order to monitor water levels. Embedded in the fire camp, our management shared water supply status with the fire strike team and worked with first responders to get behind fire lines to refuel our generators. After the danger passed, we provided bottled water to customers to use until water quality testing could be completed, collected water samples for testing, and issued bill credits to evacuated customers. Within 5 days of one of our pump stations being burned in the fire, we had partially reconstructed it to provide water to customers returning from mandatory evacuation. “ Cal Water stepped up to figure out a way to assist and be an asset for first responders. As a result of their commitment, we were very successful with the French Fire.” Dionisio Mitchell, Deputy Chief Operations, Kern County Fire 15 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Responding to a Historic Storm In October 2021, the Bay Area of northern California marked the end of an extraordinarily dry year with a brutal storm that brought historic rainfall and strong winds. In our Redwood Valley District, the storm caused a large water main break, which drained our storage tanks and reduced water pressure in the system that serves 275 customers. Within an hour of receiving a report of a leak, our team arrived on scene, located the problem, and called in reinforcements to make repairs. Over the next four days, our employees showed off their emergency response skills and their commitment to our customers. 36,504 That’s how many bottles of water we distributed. It’s not required; it’s just one way we help during emergencies. 16 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS REDWOOD VALLEY STORM RECOVERY: RIGHT ON SCHEDULE DAY 1 DAY 2 DAY 3 8:30pm Customer reports leak 9:15pm Cal Water on site, shuts off well pump and tank valve to isolate leak and calls in construction crew 10:00pm Emergency Operations Center (EOC) is activated and staffed 10:15pm Construction crew begins repairs 10:30pm Cal Water notifies state’s health department 10:45pm Team calls for more employees and resources from Stockton 11:00pm Team notifies fire department of water loss 1:00am Cal Water notifies elementary school superintendent 7:30am Team has bottled water distribution center up and running, Bay Area team arrives with additional bottled water and Emergency Response Trailer 8:15am Crews begin door-to-door notification 11:00am Door-to-door notification is complete 2:30pm Crew completes repairs, begins flushing system 7:30am Flushing completed, crews collect samples for water quality testing 1:00pm Lab receives first set of samples 9:00am Crews begin collecting second set of samples for testing DAY 4 3:00pm Lab receives second set of samples DAY 5 3:00pm All water quality tests are good. Customers are notified by email, text, and phone. Crews also go door to door. 6:30pm Emergency response complete 17 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS NEW IMPROVED 18 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 2021 SUMMARY ANNUAL REPORT One part of our growth strategy is seeking opportunities to acquire water and wastewater systems that not only add value to our business, but also benefit the new customers and communities we’ll be serving. When people are better off than they were before we stepped in to serve them, we build upon our success. And we often get the opportunity to do that because our purpose-driven reputation precedes us. An equally important part of our growth strategy is investing capital in the infrastructure needed to provide the water and wastewater service our communities require to survive and thrive. As a regulated utility company, we earn a return on capital invested in aging infrastructure replacement and upgrades that increase reliability and improve quality. That’s why the successful execution of our capital improvement plan is a win-win for both customers and stockholders. 19 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 4,600* new customers added in 2021 We added 3,585 customers through acquisitions and 1,015 through expansion in existing services areas. Expanding Our Footprint into the Lone Star State In 2021, we made company history when we expanded into a fifth state: the great state of Texas. Our newest subsidiary, Texas Water Service, invests in water and wastewater infrastructure through a joint venture with utility owner/operator BVRT Utility Holding Company. BVRT currently operates five wastewater utilities that will serve up to 61,000 connections. Opportunities for future growth abound, as the population increases and more and more businesses choose to call the area home. Apple Campus Amazon Expansion General Motors Indeed Austin Facebook Expansion Intel Google Austin Expansion Samsung Tesla Giga Factory San Antonio Austin New Texas Utilities Rackspace Technology San Antonio 20 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS $96 million invested to replace 27 miles of water lines in 2021 $293 million invested in infrastructure in 2021 Investing in the Future of Our Communities Water system infrastructure delivers the lifeblood of the communities we serve. Something so critical cannot be allowed to age and deteriorate, which is why we invest time and effort into capital investment planning and execution. In 2021, we faced headwinds: the continuing pandemic, supply chain shortages, and a never-before-seen acceleration in drought conditions. With significant effort, we completed many projects that are key to future reliability. 52 capital projects were advanced in 2021 to prepare us for wildfires and power interruptions, including emergency generators, power transfer switches, fire hydrants, and new water lines. STATE-OF-THE-ART LAB We cut the ribbon on a newly updated water quality laboratory, welcoming our team of scientists and chemists into an expanded and reconfigured space equipped with new lab equipment. 21 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Our Business at a Glance OUR MISSION To be the leading provider of water and wastewater services OUR PURPOSE To enhance the quality of life for our customers, communities, employees, and stockholders OUR OPERATING IMPERATIVES Affordable, Excellent Service / Sustainability and Community Impact / Public Health and Safety / Enhanced Stockholder Value / Employees as Best Advocates 22 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS FOUNDED IN 1926 2M+population served through 547,600 service connections 1,200 EMPLOYEES SERVICE CONNECTIONS BY STATE Washington 36,400 California 494,500 Hawaii 6,200 New Mexico 8,600 111 billion gallons of drinking water delivered annually 550 million gallons of wastewater processed annually Texas 1,900 23 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS To Our Shareholders There are two schools of thought: One says live in the present moment. The other says plan, prepare, and work for the future. We say for us, both are necessary. Water is the lifeblood of our communities, and there is nothing more important than providing the safe, reliable water and wastewater services our customers need today. But it is also critical for us to look ahead, anticipate change, and take action to ensure that we are ready for the challenges tomorrow brings. 24 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS MEETING THE NEEDS OF TODAY In 2021, we faced significant headwinds: COVID transmission flared, supply chains slowed, inflation grew, and the drought worsened. In spite of it all, we delivered on our promise to provide quality, service, and value. In addition to the highlights featured on the previous pages, we: Met or surpassed all primary state and federal water quality standards, which are set to protect public health, in all 315 of our water systems Treated 550 million gallons of wastewater safely and with no adverse environmental impacts Expanded customer service hours at our regional service centers to 7 a.m. to 7 p.m., and introduced service via chat Activated our Drought Response Taskforce, initiated Drought Response Plans, and mobilized to accelerate critical water supply projects Recruited a former California Public Utilities Commission Water Division Director to support our regulatory affairs efforts Offered cash incentives for employee vaccinations and continued to vigorously protect employee health and safety Stepped up our supplier diversity efforts and increased our spending with diverse vendors to 20.85% Added new customers in every state we serve, signed an agreement to purchase a wastewater system serving 1,800 customers on the island of Kauai, and invested in a growing wastewater utility company in Texas Secured more than $20 million in relief funds for customers who accrued overdue balances during the height of the pandemic 25 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Capital Investment in Infrastructure $300M $250M $200M $150M $100M $50M $0 $1.4 billion invested over five years 2017 2018 2019 2020 2021 infrastructure investment = safety + quality + reliability Financial Highlights Dollars in thousands, except per common share data YEAR ENDED DECEMBER 31 Market price at year end Book value per share Earnings per share (diluted) Dividend per share Operating revenue Net income attributable to California Water Service Group 2021 $71.86 $22.02 $1.96 $0.92 2020 $54.03 $18.30 $1.97 2019 $51.56 $16.07 $1.31 2018 $47.66 $15.19 $1.36 2017 1 $45.35 $14.56 $1.52 $0.850 $0.790 $0.750 $0.720 $790,909 $794,307 $714,557 $698,196 $676,113 $101,125 $96,831 $63,116 $65,584 $72,940 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, net income attributable to California Water Service Group, and earnings per share. 26 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS PREPARING FOR A BRIGHT TOMORROW We recognize the critical role we play in the lives of those we serve, and each day we do what it takes to keep our water flowing and our communities thriving. We also take steps each day to meet the challenges of tomorrow. One of the most impactful ways we prepare for the future is by investing strategically in our water system infrastructure. By maintaining and upgrading our systems today, we ensure that they will be reliable for our customers’ kids and grandkids. In 2021, we invested $293 million in water infrastructure, enhancing our lab, replacing water lines, building treatment plants, and making other vital upgrades. Our ability to invest in water system infrastructure is directly tied to our success in managing the rate-setting process with our regulatory commissions. This process is not simply a mathematical exercise; it is foundational to the sustainability of our business. It’s making a case to the commissions that will enable us to make the investments necessary to deliver safe, clean water now and in the future—one that will satisfy customers, provide financial stability, and give us the resources we need to take care of our employees. In our 2021 California filing, we requested approval to invest $1.02 billion in water infrastructure from 2022 through 2024 and proposed a rate structure that balances the needs of our customers and the business. We are already planning for our next filing in 2024, using the findings from our engineering studies, Water Supply Reliability Plans, and Climate Change Risk Assessment and Adaptation Framework as a basis for our capital planning. 27 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS Environmental, Social & Governance (ESG) Accomplishments in 2021: Published first framework-aligned ESG Report Adopted four new ESG-related policies Established an ESG governance framework Developed a climate change strategy Completed our Climate Change Risk Assessment & Adaptation Framework Conducted a robust ESG goal-setting process Some Highlights from ESG Objective-Setting: Invest Purchase Develop no less than $5 million in emissions- reducing energy solutions, such as renewables and low-carbon energy sources, over the next 10 years Increase the use of recycled water in our operations to no less than 5% of total water supply to customers by 2035 100% zero-emission passenger vehicles in California by 2035 Meet the per-capita water use targets mandated by the state of California for each district, effective in 2027 an enterprise-wide renewable power purchasing strategy by 2023 to pursue opportunities to increase renewable electricity use and decrease Scope 2 greenhouse gas emissions 28 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS PROGRESSING ON OUR ESG JOURNEY Another key to the sustainability of our Company: our Environmental, Social, and Governance (ESG) efforts. In 2021, we continued to make significant progress that will drive results well into the future. We adopted a climate change strategy and completed a very detailed climate change risk assessment. We also brainstormed with subject matter experts throughout the business and set a number of measurable, time-bound, short- and long-term ESG objectives with input and approval from our Officers and Board of Directors. Most importantly, we have fully integrated ESG into our strategic planning and our Enterprise Risk Management, and it will continue to be a priority throughout the Company going forward. For more information, please see the full 2021 ESG Report at www.calwatergroup.com/esg2021. These accomplishments would not have been possible without the commitment and dedication of our people. In 2o21, we welcomed Dr. Yvonne (Bonnie) Maldonado as our newest Director. Internationally renowned for her research, knowledge, and expertise in infectious disease control and international health, Dr. Maldonado brings unique perspective and valuable insight to our Board. And at the beginning of 2022, we added two officers to our leadership team who will most certainly contribute to our continued success: Sophie M. James, our Chief Water Quality Officer, and Kenneth G. Jenkins, our Chief Water Resource Sustainability Officer. We are confident in our entire team and look forward to what lies ahead. We thank you for your confidence and continued investment in California Water Service Group. martin a. kropelnicki President & Chief Executive Officer peter c. nelson Chairman of the Board 29 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS CWT 20-YEAR TOTAL RETURN ON INVESTMENT On $100 stock purchase on December 31, 2001, with dividends reinvested $613 $1,021 $100 $100 $1,000 $800 $600 $400 $200 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 JAN 2021 DEC 2021 30 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS 8-YEAR FINANCIAL REVIEW Summary of Operations Operating revenue1 Operating expenses1,2 Interest expense, other income and expenses, net2 Net income1 Common Share Data Earnings per share (diluted)1 Dividend declared Dividend payout ratio Book value Market price at year end Common shares outstanding at year end (in thousands) Return on average common stockholders’ equity Long-term debt interest coverage Balance Sheet Data Net utility plant Total assets Long-term debt, including current portion Capitalization ratios: Common stockholders’ equity Long-term debt Other Data Water production (in million gallons) Customers at year end, including Hawthorne and Commerce 547,600 New customers added Operating revenue per customer Utility plant per customer Employees at year end 4,600 $1,439 $7,638 1,182 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, operating expenses, net income, and earnings per share. 2 The eight-year financial review for 2017, 2016, 2015, 2014, and 2013 reflect the retrospective adoption of new pension accounting requirements (ASU 2017-07). The Company adopted this guidance on January 1, 2018. The eight-year financial review for 2015, 2014, and 2013 reflect the retrospective adoption of ASU 2015-03, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The Company adopted this guidance on January 1, 2016. Dollars in thousands, except per common share and other data 2021 2020 2019 2018 2017 2016 2015 2014 $790,909 $664,139 $25,791 $101,125 $794,307 $657,641 $39,835 $96,831 $714,557 $698,196 $676,113 $609,370 $588,368 $597,499 $615,145 $587,656 $569,030 $526,734 $506,803 $508,631 $36,296 $63,116 $44,956 $65,584 $34,143 $72,940 $33,961 $48,675 $36,548 $45,017 $32,130 $56,738 $1.96 $0.920 47% $22.02 $71.86 53,716 9.6% 3.52 $2,846,862 $3,623,271 $1,060,986 52.7% 47.3% 110,519 $1.97 $0.850 43% $18.30 $54.03 50,334 11.4% 3.87 $1.31 $0.790 60% $16.07 $51.56 48,532 8.4% 3.10 $1.36 $0.750 55% $15.19 $47.66 48,065 9.2% 3.57 $1.52 $0.720 47% $14.56 $45.35 48,012 10.7% 4.58 $1.01 $0.690 68% $13.75 $33.90 47,965 7.5% 3.45 $0.94 $0.670 71% $13.41 $23.27 47,875 7.1% 3.67 $1.19 $0.650 55% $13.11 $24.61 47,806 9.3% 4.29 $2,650,558 $2,406,370 $2,232,723 $2,047,965 $1,859,277 $1,701,768 $1,590,431 $3,394,248 $3,111,308 $2,837,704 $2,744,710 $2,411,745 $2,241,253 $2,182,711 $786,227 $808,622 $814,938 $531,713 $557,953 $514,045 $421,200 54.0% 46.0% 49.10% 50.90% 47.3% 52.7% 56.8% 43.2% 54.2% 45.8% 55.5% 44.5% 59.8% 40.2% 110,742 543,000 22,400 $1,463 $7,165 1,192 104,735 520,600 3,100 $1,373 $6,820 1,207 107,589 517,500 3,200 $1,349 $6,240 1,184 104,986 514,300 2,800 $1,315 $5,775 1,176 99,096 98,899 511,500 509,000 2,500 $1,191 $5,312 1,163 2,900 $1,156 $4,925 1,155 118,282 506,100 3,200 $1,181 $4,628 1,105 31 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS BOARD OF DIRECTORS Gregory E. Aliff Former Vice Chairman and Senior Partner of U.S. Energy & Resources, Deloitte LLP Director since 2015. Chair of the Audit Committee. Member of the Enterprise Risk Management, Safety, and Security Committee. Martin A. Kropelnicki President and Chief Executive Officer of California Water Service Group Director since 2013 Terry P. Bayer Former Chief Operating Officer, Molina Healthcare Inc. Director since 2014. Chair of the Finance and Capital Investment Committee. Member of the Audit Committee and the Organization and Compensation Committee. Thomas M. Krummel, M.D. Emile Homan and Chair Emeritus, Department of Surgery, Stanford University School of Medicine Director since 2010. Chair of the Organization and Compensation Committee. Member of the Nominating and Corporate Governance Committee. Yvonne A. Maldonado, M.D. Professor of Global Health and Infectious Diseases, Departments of Pediatrics and Epidemiology and Population Health, Stanford University Director since 2021. Member of the Enterprise Risk Management, Safety, and Security Committee and Nominating and Corporate Governance Committee. Scott L. Morris Chairman, Avista Corporation Director since 2019. Member of the Enterprise Risk Management, Safety, and Security Committee and the Organization and Compensation Committee. Carol M. Pottenger Principal and Owner of CMP Global, LLC, and Retired U.S. Navy Vice Admiral Director since 2017. Vice Chair of the Enterprise Risk Management, Safety, and Security Committee. Member of the Finance and Capital Investment Committee and the Nominating and Corporate Governance Committee. Lester A. Snow Former Director of the California Department of Water Resources Director since 2011. Chair of the Enterprise Risk Management, Safety, and Security Committee. Member of the Finance and Capital Investment Committee and the Organization and Compensation Committee. Shelly M. Esque Former Vice President and Global Director of Corporate Affairs, Intel Corporation Director since 2018. Member of the Enterprise Risk Management, Safety, and Security Committee and the Nominating and Corporate Gover- nance Committee. Richard P. Magnuson Managing Director, Orpheum Capital and Lead Director of California Water Service Group Director since 1996. Chair of the Nominating and Corporate Governance Committee. Member of the Audit Committee and the Finance and Capital Investment Committee. Peter C. Nelson Chairman of the Board of California Water Service Group Director since 1996 Patricia K. Wagner Former Group President, U.S. Utilities, Sempra Energy Director since 2019. Member of the Audit Committee and the Finance and Capital Investment Committee. 32 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS CORPORATE OFFICERS Shannon C. Dean Vice President, Customer Service & Chief Citizenship Officer David B. Healey Vice President & Corporate Controller Martin A. Kropelnicki President & Chief Executive Officer Robert J. Kuta Vice President, Engineering & Chief Water Quality & Environmental Compliance Officer Michael B. Luu Vice President, Information Technology & Chief Risk Officer Michael S. Mares Vice President, Operations Lynne P. McGhee Vice President, General Counsel Greg A. Milleman Vice President, Rates & Regulatory Affairs Michelle R. Mortensen Vice President, Corporate Secretary & Chief of Staff Elissa Y. Ouyang Vice President, Fleet, Facilities, & Procurement Todd K. Peters Chief Engineering Officer Thomas F. Smegal, III Vice President, Chief Financial Officer & Treasurer Paul G. Townsley Vice President, Corporate Development Ronald D. Webb Vice President, Chief Human Resources Officer 33 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS CORPORATE INFORMATION To Transfer Stock A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assignment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations, and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15. A notary’s acknowledgment is not acceptable. This certificate should then be sent to Computershare Investor Services (Computershare) by registered or certified mail with complete transfer instructions. Alternatively, the Direct Registration System can be utilized, which allows electronic share transactions between your broker or dealer and Computershare. Anticipated Dividend Dates for 2022 QUARTER DECLARATION RECORD DATE PAYMENT DATE First January 26 February 7 February 18 Second April 27 May 9 May 20 Third July 27 August 8 August 19 Fourth October 26 November 7 November 18 Annual Report for 2021 on Form 10-K A copy of the Company’s annual report for 2021 filed with the Securities and Exchange Commission (SEC) on Form 10-K is available and can be obtained by any stockholder at no charge upon written request to the Company. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system on the Company’s website. Computershare Investor Services 462 South 4th Street, Suite 1600 Louisville, Kentucky 40202 Bond Registrar U.S. Bank Trust, N.A. One California Street San Francisco, California 94111 415.273.4580 Executive Office and Stockholder Information California Water Service Group Attn: Stockholder Relations 1720 North First Street San Jose, California 95112 408.367.8200 or 800.750.8200 www.calwatergroup.com Annual Meeting The Annual Meeting of Stockholders will be held online on Wednesday, May 25, 2022, at 9:30 a.m. PT. Details of the business to be transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on or about April 13, 2022. 34 HOME WHO WE ARE SERVICE AREAS LETTER TO STOCKHOLDERS FINANCIAL REVIEW DIRECTORS & OFFICERS ™ 1720 North First Street San Jose, California 95112-4508 Phone: 408.367.8200 www.calwatergroup.com NYSE: CWT 35 

Continue reading text version or see original annual report in PDF format above