American Water Works Company, Inc. Price & Performance (AWK)

At the end of our prepared remarks, we will open the call for your questions. Let me first go over some Safe Harbor language. Today, we will be making forward looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based on our current expectations, estimates and assumptions. However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such Additional information regarding these risks, uncertainties and factors well as a more detailed analysis of our financials and other important information, is provided in the fourth quarter earnings release and in our 2024 Form 10 ks, each filed yesterday with the SEC. Finally, all statements during this presentation related to earnings and earnings per share refer to diluted earnings and diluted earnings per share. Susan Hardwick, our CEO, will share a few opening remarks. Followed by our President, John Griffith, who will share highlights of 2024 and comment on our affirmation of 2025 EPS guidance and longer term targets. David Bowler, our Executive Vice President and CFO will discuss our 2024 financial results, provide rate case updates, discuss our strong financial position heading into 2025 review our EPS guidance drivers and five year financing plan.

Cheryl Norton, our Executive Vice President and COO. Will then discuss our capital investment program, our acquisition outlook, and we'll conclude with comments on our compelling growth drivers. After our prepared remarks, we'll then close by answering your questions. With that, I'll turn the call over to American Water's CEO, Susan Hardwick.

Thanks, Erin, and good morning, everyone. Let me start by making a few comments on the leadership news detailed in our earnings release last night. There we announced my retirement as of May 14, 2025, which is the date of our Annual Shareholders Meeting. At that same time, John will become our CEO. This is the next step in the succession plan we laid out in August of last year The American Water Board is deeply committed to building a strong succession and development strategy at American Water as evidenced by this thoughtful plan. This transition is just a part of that intentional effort to ensure we have the best leadership foundation for the long term throughout the entire organization. John, working with Cheryl, and the rest of our talented and highly experienced leadership team will continue American Water's strong record of industry leadership and high performance. John has more than twenty five years of industry knowledge and expertise and strategy development and execution. Most importantly, he has a deep understanding of our company's purpose and a strong commitment to our customers, employees and shareholders. I am very proud of the leadership team that we have built at American Water all of whom are committed to the mission of delivering safe, clean and reliable service to those we have the privilege of serving.

The success of this company reflects the cohesive leadership of this entire team. I also want to thank all of the employees of American Water. I have been in the utility business for over forty years now and it is an absolute privilege to work with you.

I'm thankful and humbled by the opportunity to spend the last six years in the water industry with each of you. Providing water and wastewater services that improve customers' lives, and make communities stronger is a true honor. But before I go, I want to reiterate my belief that American Water continues to be the leader in all aspects of the water and wastewater utility industry in The United States. If you compare our plans to our actual results, you will see that we've consistently executed exactly as we said we would. Including our results in 2024 that were squarely in line with our plan. This growing record of consistency continues to solidify the earned trust in our company from investors, analysts and other key stakeholders. And with that, let me turn it over to John to cover 2024 highlights and our affirmed outlook.

John?

Thank you, Susan, and congratulations. While we still have you until May, let me say what a tremendous privilege it has been for all of us to have worked alongside you over the years. You have made a very significant contribution to American Water's success and the company is stronger because of your because of your leadership. I'm excited and honored to work alongside this team as CEO starting in May and know we have a great future ahead of us as we continue to make communities stronger, the critical water and wastewater services we provide. Let's turn to Slide six and I'll start by covering some highlights of last year. You can see here an abbreviated list of some of our key accomplishments and David and Cheryl will add these in their remarks. We announced yesterday, we delivered 2024 financial results right in line with our expectations. Earnings were $5.39 per share for the year, which included $0.12 per share of favorable weather and $0.09 per share of incremental interest income from the HOS note. Our results reflect the clear execution of our plan in 2024 which delivered EPS growth of eight plus percent. I'm proud of our regulatory and state teams for successfully completing several significant general rate cases this past year.

These cases, which were driven by needed infrastructure investments, punctuate the focus we have on providing safe, clean, reliable and affordable service to over 14,000,000 people across our footprint. And as you can see, we invested over $3,000,000,000 in 2024 to help achieve that mission. This included a solid year for acquisitions, which at nearly 70,000 customer connections met our 2% compounded annual growth target. Overall, I'm very proud of our company's ability to stay focused on serving our customers safely and reliably this past year. I believe the takeaway today for investors is that our strong execution in 2024 coupled with our low risk top tier capital growth plan demonstrates American Water's ability to deliver on our long term plan. I'm confident we will execute on our plans for 2025 and beyond building on the momentum we have from 2024. Turning to Slide seven, we are affirming our 2025 earnings guidance of $5.65 to $5.75 per share. This represents our expectation of 8% EPS growth in 2025 compared to our weather normalized 2024 EPS. The comments that we'll share today are an affirmation of the financial plan long term targets and guidance we laid out last fall, highlighted by 7% to 9% EPS and dividend growth and driven by 8% to 9% rate base growth.

We have a geographic footprint and resulting regulatory diversity that is rivaled by few. This, along with our capital plan that has decades of basic infrastructure renewal at its core drives the low risk nature of our growth plans. Along with our affordability and sustainability leadership, I believe American Water offers a top tier shareholder return opportunity and merits our position as a premium regulated utility. Closing, on Slide eight, I want to emphasize that we expect to achieve consistent EPS growth well within the 7% to 9% range through 2029 and beyond. Have demonstrated during these last few years and with our guidance for 2025, that our business plan is strong and compelling. Our commitment to solving problems for our customers remains steadfast. Including addressing aging infrastructure and water quality challenges. Foundation coupled with the capital investment needs that lie ahead, uniquely positions American Water to achieve consistently strong earnings and dividend growth for many years to come.

With that, I'll hand it over to David to cover our financial results rate case updates and balance sheet strength in further detail. David?

Thanks, John, and good morning, everyone. Before I start, I'd like to also congratulate Susan on her her upcoming retirement and John on his succession into the CEO. CEO role. Susan, I echo John's comments on it being a pleasure to work with you over the years. It will certainly be missed by all of us here.

Now turning to Slide 10, let me provide a few more details on 2024 results as compared to 2023.

You'll also find details of fourth quarter results in the appendix.

Consolidated reported earnings were $5.39 per share in 2024, higher by $0.49 per share compared to 2023.

As John noted, earnings in 2024 benefited from an estimated $0.12 per share as a result of revenue from drier than normal weather experience across our states. As compared to $0.13 per share of favorable weather in 2023.

Excluding the impacts of weather, revenues were higher by $1.28 per share, primarily due to authorized rate increases from general rate cases and infrastructure surcharges to recover investment across our states.

Revenues were also higher from closed water and wastewater acquisitions, organic customer growth and an increase from changes in customer demand. One additional item to note is that purchase water cost which were higher by $0.08 per share year over year have been netted against revenues. As these costs are generally recovered on a dollar for dollar basis.

And looking at operating cost, O and M was higher by $0.22 per share driven primarily by employee related cost and other increases to support growth in the business as we expected. Production costs related to fuel, power and chemicals were also slightly higher compared Next, general taxes, which are comprised of property and gross receipts [indiscernible] higher by $0.05 per share and higher grocery seats tax driven by higher revenue primarily in New Jersey. Depreciation increased $0.31 per share and long term financing costs increased $0.33 per share both as expected and And finally, we had $0.09 per share of additional interest income from the February 2024 amendment of the note related to to the sale of homeowners homeowner services. We will continue to break this out quarterly so investors can track the ongoing growth of American Waterfirm, our core regulated strategy, Turning to Slide 11, we summarize the seven rate cases we successfully complete five of which we covered on prior calls. In the fourth quarter, we received orders in Illinois and California as well as an up updated final order in Kentucky. Hundred and $5,000,000 in annualized revenues effective 01/01/2025. This order includes an allowed return on equity of 9.84% and an equity layer of 49%.

Both of which were consistent with our last rate case in Illinois. We continue to believe that Illinois is a constructive environment for American Water and is supportive of the investment needed to continue to provide safe and reliable service for the benefit of our Illinois American Water Switching over to California, also on December, the commission there approved and adopted a partial settlement agreement providing incremental annualized revenues of $53,000,000 over three years. Beginning with rates retroactive to 01/01/2024. The commission's decision included a partial decoupling mechanism and approval of an important sales adjustment mechanism that allows annual updates of forecasted water sales for rate making purposes. While the decision didn't recognize the importance of a full decoupling mechanism in promoting affordable rates and conservation we filed an application in December for rehearing the commission and are exploring other avenues to ensure that customers can achieve the benefits a Also in California, the commission granted the request for an additional one year extension of the cost of capital filing to May 1, of twenty twenty six which will set the authorized cost of capital beginning January 1, 2027. Our authorized ROE through 12/31/2026. And finally, in Kentucky, Public Service Commission approved a final order providing for $17,000,000 of annualizing in water revenues, which is higher by about $6,000,000 from the initial order May of twenty twenty four.

As a reminder, received in May, we filed a motion for clarification on their authorized amount of annualized revenues in this case. New rates provided in the final order were effective November 6. Turning to Slide 12, you can see we have general rate cases in progress in four jurisdictions. The most prominent rate case for us this year is in Missouri. Where we are seeking recovery of $1,100,000,000 of capital investments. Hearing to begin at the end of this month, and settlement discussions are underway. Ahead of briefs due at the March. We expect new rates to go into effect in the middle of twenty twenty five. Overall, the key parties in this case have filed similar positions as they did in our prior case, which was settled. As a reminder, in this case, the commission allows all parties to propose specific adjustments beyond 12/31/2024 and we have proposed to capture investments through May 2025. Separately, we are continuing to work alongside an informal coalition of water and gas utilities in Missouri on a legislative path for future test year.

Have supported the introduction of four separate bills in the current session related to that effort. Missouri legislative session ends on May sixteen. Finally, in Virginia, the filed stipulation of settlement remains subject to commission review and approval. Which we are awaiting. Now provide a list of the dates we filed our most recent general rate cases by state. As we've said in the past, we expect to file rate cases about every two years supported by our ongoing investments to continue to provide safe, clean and reliable water and wastewater services for the long term benefit of our Turning to Slide 13. Let's review the strength of our balance sheet metrics and liquidity position as we began 2025. Our total debt to cap ratio at the end of the year net of $96,000,000 to cash on hand was 57%. Which was well within our target of less than 60%. Investors can expect our company to continue to be focused on this target over the long term. We remain A rated at S and P with a stable outlook and just last month, Moody's affirmed our solid Baa1 investment grade credit rating and stable outlook. Both agencies note our skill, strong regulatory and operational diversity across 14 states, Low risk business and our steady financial performance and their analysis.

They also note our trend of credit supported regulatory outcomes and expected sustained FFO to debt ratios well within the current ratings thresholds. We're confident our business and financial profile including FFO to debt, will continue to support either our current or higher investment grade credit ratings. A review of our guidance and five year financing plan. As John mentioned, we affirmed our 2025 EPS guidance. Which again represents 8% annual growth. The backbone of the plan continues to be earning our allowed returns on capital we invest to serve our customers, while prudently managing operating costs so that we can deliver on our customer affordability target. It's really that simple. As a reminder, our 2025 guidance range includes $0.1 per share of incremental interest income from the amendment of the HOS note a year ago.

Which is on top of the interest income from the original note terms As we've said in the past, repayment of the note is a component of our long term financing plan, as a source of funding for our growth.

We are also affirming our financing plan shared last fall. Now covering 2025 to 2029. As we said previously, the plan includes an estimated total $2,500,000,000 of external equity issuances with no equity plan for 2020 The level and timing of external equity is tied very simply to our need to fund growth, and maintain our strong financial position. Based on our current projections of capital spending and cash flows we currently expect to issue $1,000,000,000 of equity at some point in 2026 and $1,500,000,000 in 2029. The timing of future equity is subject to market conditions, as well as the underlying assumptions around our projected CapEx and cash flows. Since we are already in alignment with our targets for debt to cap, and dividend payout, ratios, we have the flexibility to adjust these plans and respond to market conditions if and when they change for the benefit of of our customers and investors alike. Overall, investors should expect equity financing to occur routinely as determined by our investment program, rate case cycle and as appropriate to maintain our strong balance sheet credit metrics. [indiscernible] Highlight I'll wrap up by noting our financing plan for calendar year 2025 includes $1,500,000,000 to 2,000,000,000 billion dollars of long term debt financing.

With that, I'll turn it over to Cheryl to talk more about our capital program our recent acquisition activity and a look at our key growth drivers. Cheryl?

Thanks, David, and good morning, everyone. Let me start by echoing John and David's comments about Susan. And I have worked closely together over the past six years and I'm a better leader I'm a better leader as a result of that time together and American Water is definitely stronger because of her time here. I'm excited about John's leadership and in his new role, I know we're going to accomplish great things over the next years.

On Slide 16, we have combined a few slides to show a more comprehensive view of our investment program that has always I want to start by acknowledging that our teams have done a great job executing our capital investment plans these last few years. We have consistently met our capital deployment goal each year and we've done it again in 2024 by investing $3,300,000,000 which includes the acquisition investments that I'll speak about later.

These investments represented by hundreds of discrete projects are crucial to continuing to deliver safe, and clean water and support continued reliability of service to our customers.

We expect these capital investments in infrastructure and in acquisitions to grow regulated rate base at a long term rate of 8% to 9%. We believe the high degree of visibility to our capital uniquely positions American Water in the utility sector and is fundamental to our investment thesis. We, of course, remain very focused on balancing customer affordability with the magnitude of the necessary system investments in our plan.

Customer affordability is a key variable in our annual capital planning analysis We believe that the average residential water bill across our footprint will continue to be at or below 1% of median household income throughout our ten year plan.

The pie chart on the bottom right side of the page shows the breakdown of our capital spend by purpose over the next decade. While the majority of our capital is dedicated to basic replacement of aging pipes, we are also focused on fortifying our systems through resilient spending. And making investments in water quality projects to allow our systems to continue to meet our own high standards of compliance. Turning to Slide 17, I'm proud to report that we had a solid year of investment in regulated acquisitions, successfully closing on 13 systems totaling $417,000,000 which added nearly 70,000 new customers.

Looking ahead, we continue to be well positioned for strong growth through acquisition as of the beginning of the year. We've added significant business development capability over the last few years across our footprint and we're confident these investments and additional resources and enhanced processes will help us meet our compounded annual growth rate target of 2% for customers added through acquisitions. Overall, we expect to continue to invest about $300,000,000 to $400,000,000 on average each year in acquisitions, a small but important part of our over $3,000,000,000 capital We expect growth through acquisitions will become more consistent on an annual basis over time, but will remain lumpier than our organic CapEx as timelines for details can shift throughout the closing process. And when that happens, we have the flexibility to reallocate and easily place these acquisition dollars with various other projects to meet system needs such as additional replacements of aging pipe. To close on Slide 18, today you've heard a recap of our long term strategy.

Which should sound very consistent.

Beyond our words though, I believe we have a proven track record of executing on our plans including achieving our EPS guidance year after year. I fully expect 2025 to be another success Slide 18 is a compilation of the predictable and steady growth drivers trajectory from other utilities enable us to stand out as a premium utility. We replaced approximately 400 miles of pipe in 2024. This replacement effort reflects our commitment to reliable service with the work prior The prioritization is balanced by affordability and cost of material, labor, permitting, restoration and an annual increase in the actual amount of miles of pipe we have acquired via acquisitions. Our mission to provide safe, clean, reliable and affordable services to the customers we are privileged to serve is the foundation for all we do. As our team has said, we're confident we can fulfill this mission and provide a fair return to our investors. American Water has been doing this work for decades, but there is much left to be done and we must have urgency in our work. As we've witnessed in West Virginia, for example, our teams provided assistance to six different municipal systems in January alone, that were dealing with service disruptions due to extreme weather and the inability to keep up with leaks.

In one of those towns, a local elementary school was without water service for more than two weeks until we provided a 7,000 gallon tanker to supply water directly to the school.

We will continue to do this critical work and execute on our regulatory operational and financial plans, which we believe will drive the superior return With that, I'll turn it back over to our operator to begin Q and A in take any questions you may have. We will now begin the question and answer session. Our first question comes from Durgesh Chopra of Evercore ISI. Go ahead please.

Hey, team. Good morning, Susan. All the best and John congrats. Look forward. Thanks, Rakesh. Certainly. So two questions. One, a lot of news flow information coming out of DC.

A lot of executive orders. I was just curious if anything has changed from your perspective on your strategy to attack PFAS, PFAS you have like $1,000,000,000 in the capital plan.

Just and I know you announced the contract very recently. Anything has changed on the ground?

Andrew Gesch, this is Sheryl.

Thanks so much for the question.

We haven't made any changes to our plans at all. We haven't seen anything coming out of DC that makes us think that we're not going to need to invest the capital that we've talked about in the past We want to make sure that we're meeting all the regulatory requirements and also just providing clean, safe water according to our standards. So we've made no changes at all to our capital plans related to PFAS or anything else.

Got it. Perfect. Thanks, Harold. And then just one housekeeping question. As we think about the 7% to 9% EPS growth, rate for our models, should we be including the $0.1 the remarketing of the loan [indiscernible] with the base including that $0.1 or should we just be separating that out and see think of them as like onetime earnings?

Hey, Birkesh, this is David. Yes, you be separating that out and excluding it from the base And that's what we tried to indicate that in our presentation here.

Got it. I thought so. Wanted to confirm that. Thank you, David. Thanks, guys. Appreciate the time.

The next question comes from Paul Zimbardo of Jefferies. Go ahead, please.

Hi, good morning.

Congratulations, John. Susan, I hope you have a fruitful retirement.

Thanks, Paul.

Of course. The first question I had was on the the acquisition slide, just the call out box on the right when you talk about significant business development capabilities added across the footprint and just some of the color you gave there. Could you describe like if this is something new kind of where you've been adding capabilities you make the references to, multiple states, some of the mid sized states. If you could just elaborate on What you're alluding to there?

Sure. Paul, this is Sheryl. And we have added some staffing in our BD group. Just to to be more have more boots on the ground, do more origination work. In general, but we've also really kind of ramped up our corporate support team so that we are driving consistency through our integration [indiscernible] taken the whole entire organization and taken a look at what's working really well and how we build on that. So that's why we're starting to see more growth across our entire footprint because we're not just focused in one or two states. We are truly focused all across our footprint on growth and we're seeing the fruits of that.

Okay. Understood.

Understand. Following on Gurgesh's question in slightly different direction, Just going through the 10 ks, I noticed some word changing like some of the references to ESG diversity. Removed in the K. Just there any fundamental changes in the company's approach to hiring and otherwise Or is that just kind of changing some language?

Paul, it's John here. It's the latter. We're not changing our strategy at all. For us, ESG is a very business driven proposition. Everything we do is to drive the results that we expect to achieve.

Okay.

Understood. Thank you both American congratulations. Thanks, Paul.

Next question The next question comes from Greg O'Rourke of UBS. Go ahead please. Yes, thank you. Congratulations Susan and John.

Thanks, Greg. Just Just in terms of the Procurement can you comment on there's been any disruptions there, how things are going, And then I have another question. Thank you. Greg, procurement of what, please?

Capital to procurement of for large capital projects, pipe replacement, have there been any disruptions there that you're seeing?

Yes. No, Greg, we have a very robust supply chain organization that that sits both here at corporate, but also is embedded into our states.

And we've just done a really great job of being able to procure all of the supplies, the necessary supplies we need for all the capital investments that we're making, including all the PFOS work. We announced earlier that we had signed a contract with Calgon Carbon to make sure that we can, obtain all the vessels and the necessary carbon and the regeneration of the carbon long term So we feel like we're in a really good spot in that space. And also with all the materials for all of our projects across the footprint.

Okay, great. And then in terms of usage, Per customer, are you seeing any any sort of changes there, strengthening through your classes Yes, Greg, what we've seen related to kind of declining use, we had talked about that for a very long time. We are starting to see that plateau just a bit, but we do still have a bit of declining use across our footprint. It's just has to do with fixtures and people being a little more aware in the conservation space. But nothing that we're concerned about in either direction. We have plenty of capacity in most all of our locations and and we're not seeing any declines that are troubling to us.

Okay. Thank you.

Our next question comes from Jonathan Reeder of Wells Fargo. Go ahead please.

Hey, good morning team. Congrats Susan and John on the formal transition announcements made today.

Thanks, Jonathan. Enjoy the retirement, Susan.

I know Thank you.

I think we all want to get to that position, well deserved. But I think Paul already asked my question on the M and A pipeline.

I've got another regarding pending rate case in Missouri. It sounds like things are on track. In that Missouri rate case. Do you expect to reach a settlement prior to the start of hearings?

Hey, Jonathan. It's John here. That's certainly been our experience and we'll see how it plays out, but that would be our expectation. Okay, great.

And then On customer growth, obviously electric and to some degree [indiscernible] has been experiencing an uptick in customer growth usage from resurgence in manufacturing demand, Obviously, AI data center related stuff like that. Is any of that starting to trickle into your service territory where this economic development is kind of promoting more customer growth than you've seen historically and maybe taking a little pressure off either the cadence of rate cases or at least the degree of of rate relief that you need to request?

Jonathan, I'd say your term trickle in is appropriate. As we think about AI data centers, generally speaking, they're more power hungry than they are water hungry. But we are seeing economic development opportunities [indiscernible] may come in the form of additional pipe to get to locations things like that in the same way that an electric utility might need to build out some transmission for a renewable project. But I'd say for us, it's relatively early days and we're not expecting to see kind of massive increases in demand in water Generally speaking, Water as an industry is in a position of of excess capacity. So we expect to see a little bit of infrastructure build but the end that's I'd say how we think about it.

Great.

Thanks. No, congrats on a solid update today. Appreciate the time.

Thanks, Jonathan.

The next question comes from Angie Storozynski of Seaport. Go ahead please. Thank you. And Susan, John, what a transition. Congratulations to Susan. Bethany and at the end of an era.

So Thank you, Angie. I appreciate that.

Now on the financing, so do you guys consider maybe using hybrids instead of traditional equity, if only because the water sector has sharply derated I'm sure that that's probably more dilutive to the original plan from like an equity perspective? And again, is there a way to manage the dilution going forward? Yes. Andrew, this is David.

We certainly look at all products, but we just don't see these the hybrids being cost effective for us and they are more dilutive and just straight equity based on how we trade.

Okay.

And then And then about the lumpiness of the M and A and an ability to basically manage the earnings impact with with some other organics CapEx. Is this just more simply because you have so many growth opportunities that again you can smooth out the earnings trajectory. Or are you trying to say that municipal M and A is less of an earnings driver overall given again plenty of organic growth?

Yes, that's a great question, Angie. Those deals are lumpy because there are so many things that can slow down the closing process. So we can plan for a certain number of deals in a given year and they may spill over into the next year or so on an annual basis. There's some lumpiness there. We do target that 2% of the customer growth. But if we see that some of these deals are going to get pushed out, we've got plenty of capital projects kind of in the wings that we can bring in to ensure that we spend that $3,300,000,000 or whatever our target is for a given year to absolutely smooth out that EPS growth. But it's really important that we're adding the customers because adding customers helps us with that affordability story. It helps us spread our costs out. Amongst more customers. So we're going to continue to push on that acquisition piece. In some years, it will be more than 2%, some years it might be less than 2%. But when we make that commitment to our capital spend, we're going to do we have the flexibility to do what we need to, to make sure that we get that capital spend.

And Andy, just to follow on Cheryl's comments, to be clear, The need is very much there in terms of target systems. Right? And as we've talked about a little bit in the past, the list of reasons why a target company a municipality would sell is getting longer and not shorter. Right? There continues to be deferred capital investment, deferred maintenance increasing regulatory need for clean water and delivery. So the fundamentals haven't changed. And if anything, we see a broadening opportunity base. And a lot of what we've been spending our time on is is broadening out the opportunity to set it across our system which takes a little bit of time, but we feel very good about in terms of the progress that we're making.

Okay. And then lastly, on California, you mentioned that there's looking at ways to If I understood correctly, basically, retained the previous full decoupling, right? So So versus the commission's decision. So are we talking about a legal challenge? I mean, again, I'm just wondering what is the option?

That's correct, Angie. It is. We have filed motion for rehearing for that.

The next question comes from Anthony Crowdo Mizuho. Go ahead please.

Brad, Susan and John.

Great news for both. Just want to just follow-up a little Angie's question, just a quick one.

On the equity financing, it's very clear you guys state in 2026 and then also in 2029.

Do you time that with CapEx needs or thoughts of maybe some not an annual program versus a block Just curious the pluses and minuses on the approach here?

Yes. I'd say we time it when we have a need for to maintain our strong balance sheet And we're not going to issue too early and we're not going to issue late We're going to issue when we need we need the financing or the funding Great. That's all I had. Thanks so much. The next question comes from Richard Sunderland of JPMorgan.

Go ahead, please.

Hey, good morning and congrats as well to Susan and John Great news to hear. Just one quick cleanup from me. I think you you hit this with Dargesh earlier, but just thinking through the growth going forward, is the 7% to 9% growth, is that based on 2025 guidance less that $0.1 of incremental interest income. Is that the right way to think about the base for 7% to 9% to 9%? That is right, Rich. And I think we've got that in David's slides. And just as a reminder, when we set our 7% to 9%, that goes back to when we put the note in place originally. Which was a $720,000,000 note at a 7% interest rate. And then we amended the note about a year ago and early twenty twenty four increased the interest rate to 10% And we also collected on an earn out payment of $75,000,000 that was rolled into the note. As we think about note repayment, We're only trying to make up the 7% interest And to do that, we'll be able to we'll have proceeds of $795,000,000 not $720,000,000 which is why you won't see a dividend in earnings as we're as we're moving forward.

So yes, you've got to correct, Rich. And as a reminder for the group, the note the final termination date of the note is December of twenty twenty six. But the owner of the business has the right to call the note as early as December of this year And so we'll see how how the timing of repayment works out But one way or another, we're very prepared for the timing and any sort of impact to earnings.

Great. Thank you for running through that. And then on the Missouri legislation, I know there are a couple of different bills out there. There's also been some actions around think it's SB-four and some language change there to pull in more of the broader utility efforts. Can you just walk through a little bit of what's been going on recently in the legislature? I think there were some actions on SB4 yesterday. Just give us an update on how you see that playing out? Yes, sure, Rich. This is Sheryl.

In Missouri, we have been working for quite some time to try to improve the regulatory environment there They have historically when I was President there, historically had a historical test year, which makes it really challenging when you're talking about regulatory [indiscernible] the other utilities as well as talking with the commission with the Chair of the commission to say, what are ways that we can improve this environment for us from a regulatory lag perspective. And so as these bills got submitted early on, they were kind of separated. Now they've they've been several of them have been joined together. And we are very focused on the future test year aspect of this legislation and we'll continue to work together with the other utilities, the Chair of the Commission, and all of the allies that we can bring to the table to ensure that we improve that regulatory environment.

Great. Thanks for the time today. The next question comes from Greg Orell of UBS.

Yes. Thank you. One follow-up, please. Just what were the results of the non utility business for the year and some context on where you're you're taking that part of the company?

Yes, Greg, we don't disclose that level of detail Probably, it's in the other business segment Yes, I can talk to kind of what we have in mind in the future for that other part of the organization, if you will. It's essentially our military services group. And we're still really excited about that part of our business and we think it's a great mission. It aligns very well with our regulated businesses. And we're excited about the relationships we have at all of the existing bases and we'll continue to encourage the different arms of the military to move forward with utility privatization. We do expect see some movement there. We just don't know exactly what's coming or the timing of that. But our team is poised and ready to bid on any of the projects that make sense for us in the future. [indiscernible] The Q and A session and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.