California Water Service Group (CWT) Telefonkonferenz zum 3. Quartal 2026: Umsatz steigt um 6,7 %, CapEx erreicht 425 Mio. USD

Die California Water Service Group (NYSE: CWT) berichtete über höhere Umsätze und Gewinne im dritten Quartal sowie in den ersten neun Monaten, unterstützt durch Tariferhöhungen, Neukunden und Einnahmen aus Regulierungskonten. Das Management erläuterte zudem den fortlaufenden Kapitaleinsatz, Fortschritte bei Übernahmen und eine Finanzierungsreichweite, die bis ins Jahr 2027 reicht.

Wichtigste Erkenntnisse

• Der Umsatz im dritten Quartal 2026 stieg im Jahresvergleich um 6,7 % auf 332,2 Mio. US-Dollar, während der Nettogewinn auf 65,4 Mio. US-Dollar kletterte und das verwässerte Ergebnis je Aktie (EPS) 1,05 US-Dollar erreichte.
• Der Umsatz in den ersten neun Monaten stieg um 9,6 % auf 855,3 Mio. US-Dollar. Der Nettogewinn seit Jahresbeginn belief sich auf 125,9 Mio. US-Dollar bzw. 2,07 US-Dollar je verwässerter Aktie.
• Die Investitionen (CapEx) beliefen sich im dritten Quartal auf 148 Mio. US-Dollar und seit Jahresbeginn auf 425 Mio. US-Dollar. Das Management prognostiziert ein durchschnittliches jährliches Wachstum der Tarifbasis von nahezu 12 % auf rund 3,5 Mrd. US-Dollar bis Ende 2028, sofern die geplanten Investitionen zeitgerecht abgeschlossen werden.
• CWT rechnet damit, um den 15. November herum eine schrittweise Tariferhöhung für Kalifornien für das Jahr 2027 zu beantragen. Potenzial besteht für rund 49 Mio. US-Dollar, abhängig von einer Ertragsprüfung im Zusammenhang mit den genehmigten Kapitalinvestitionen.
• Behördliche Genehmigungen in Oregon und Nevada bringen das Unternehmen in die Lage, seine Nexus-Water-Übernahmen vor Jahresende abzuschließen. Die geschätzten einmaligen Integrationskosten liegen bei 7 Mio. bis 9 Mio. US-Dollar.
• Der Verwaltungsrat beschloss die 327. Quartalsdividende in Folge in Höhe von 0,34 US-Dollar je Aktie, womit sich die indizierte Dividende für 2026 auf 1,34 US-Dollar je Aktie beläuft – ein Plus von 8,1 % gegenüber 2025.

Wichtigste Finanzergebnisse

Der Umsatz seit Jahresbeginn enthielt zudem 15,7 Mio. US-Dollar aus einem Verrechnungskonto für Zwischentarife (Interim-Rates Memorandum Account), 9,9 Mio. US-Dollar aus der Erfassung verbleibender abgegrenzter Einnahmen aus dem Wasserumsatz-Anpassungsmechanismus (WRAM) sowie 3,9 Mio. US-Dollar an RBOMA-Einnahmen.

Geschäftliche und operative Entwicklung

Die California Water Service Group investierte in den ersten neun Monaten des Jahres 2026 insgesamt 425 Mio. US-Dollar. Nach Angaben des Managements hat das Investitionsprogramm eine 10-jährige durchschnittliche jährliche Wachstumsrate (CAGR) der Bruttoinvestitionen von etwa 11 % erzielt.

Das Unternehmen rechnet damit, dass seine Tarifbasis bis Ende 2028 rund 3,5 Mrd. US-Dollar erreichen wird, was einem prognostizierten jährlichen Wachstum von nahezu 12 % entspricht, vorausgesetzt, dass die geplanten Projekte zeitgerecht abgeschlossen werden.

Das erwartete PFAS-Programm von CWT umfasst Bruttoinvestitionen von insgesamt etwa 228 Mio. US-Dollar in Kalifornien, New Mexico und Washington. Im dritten Quartal investierte das Unternehmen 47,5 Mio. US-Dollar in Aufbereitungs- und Brunnenersatzprojekte und hat 65 Projekte geplant, darunter 18 Standorte in Kalifornien im Bau. Netto-Entschädigungen aus Rechtsstreitigkeiten beliefen sich auf insgesamt 59,4 Mio. US-Dollar und werden zur Deckung der Programmkosten verwendet.

Zu den jüngsten regulatorischen Entwicklungen gehörten:

• Eine Erhöhung der Einnahmen in Washington um 4,1 Mio. US-Dollar mit Wirkung zum 1. Oktober.
• Eine Umsatzsteigerung von 1,9 Mio. US-Dollar für die Systeme des Unternehmens auf Hawaii.
• Die Genehmigung eines Antragsverfahrens („Advice-Letter“-Verfahren) in Kalifornien für rund 130 Mio. US-Dollar an PFAS-bezogenen Kapitalkosten.
• Die fortgeführte Genehmigung der Eigenkapitalrendite von Cal Water in Höhe von 10,27 % für 2027, da der Anpassungsmechanismus des Moody’s Utility Bond Index nicht ausgelöst wurde. Die genehmigte Gesamtkapitalrendite auf die Tarifbasis bleibt bei 7,46 %, bei einer Kapitalstruktur von 53,4 % Eigenkapital und 46,6 % Fremdkapital.

Die Oregon Public Utility Commission genehmigte den Kontrollwechsel für die Nexus-Water-Transaktion, nachdem die Genehmigung in Nevada bereits im August erteilt worden war. Das Management rechnet mit dem Abschluss der Übernahmen in Oregon und Nevada vor Ende 2026. In Texas teilte das Unternehmen mit, dass die Entscheidung zum Tarifeinspruch von BVRT auf die Tagesordnung der Kommission für den 5. November gesetzt wurde. Die Kundenanzahl von BVRT stieg seit Jahresbeginn bis zum dritten Quartal um 12 %.

Ausblick des Managements

Das Management geht davon aus, um den 15. November herum die schrittweise Tariferhöhung für Kalifornien zu beantragen. Der geschätzte verfügbare Betrag liegt bei etwa 49 Mio. US-Dollar, jedoch hängt die Erstattung von einer Ertragsprüfung ab, die an die Umsetzung zuvor genehmigter Kapitalprojekte durch das Unternehmen gekoppelt ist.

CWT rechnet damit, die Nexus-Water-Übernahmen vor Jahresende abzuschließen. Die einmaligen Integrationskosten werden auf 7 Mio. bis 9 Mio. US-Dollar geschätzt und fallen in den Jahren 2026 und 2027 an.

Das Unternehmen gab an, dass seine abgeschlossenen und zugesagten Finanzierungen die Rückzahlung kurzfristiger Verbindlichkeiten, laufende Investitionen sowie die Übernahmen in Oregon und Nevada bis mindestens in die erste Hälfte des Jahres 2027 abdecken sollten. In der Fragerunde deutete das Management an, dass die Finanzierungskapazität bis ins dritte Quartal 2027 reichen könnte.

Bezüglich der Dividende beschrieb das Management einen Planungsrahmen von etwa 7 % jährlichem Wachstum und einer Ausschüttungsquote von 50 % bis 60 %, merkte jedoch an, dass die Ausschüttung im Laufe eines dreijährigen kalifornischen Tarifprüfungszyklus schwanken kann.

Risiken und Beobachtungspunkte

Die Inflation stellt weiterhin einen Kostendruck dar. Laut Management lagen die Treibstoffkosten im Jahresvergleich um etwa 20 % bis 30 % höher, was einen Fuhrpark von fast 1.000 Fahrzeugen betrifft. Auch die Materialkosten sind gestiegen, obwohl das Unternehmen mitteilte, dass dieser Druck innerhalb der Betriebsbudgets verkraftbar geblieben ist.

Die Investitionsausgaben können aufgrund von Verzögerungen durch Wetter, Genehmigungsverfahren und Umweltprüfungen von Jahr zu Jahr ungleichmäßig ausfallen. Das Management warnte davor, dass starke Regenfälle im Zusammenhang mit dem erwarteten Super-El-Niño die Bautätigkeit verlangsamen könnten, was zu Bemühungen führte, Projekte im vierten Quartal zu beschleunigen.

Höhere Preise für den Großeinkauf von Wasser erhöhten die Förderkosten seit Jahresbeginn, während ein geringerer Verbraucherverbrauch den Umsatz im dritten Quartal um 4,4 Mio. US-Dollar schmälerte. Planmäßige Verringerungen der Begünstigungen aus dem Tax Cuts and Jobs Act erhöhten zudem den Steueraufwand.

Zu den sonstigen kurzfristigen Belastungen des Ergebnisses gehören Übernahme- und Integrationskosten, geringere Gewinne aus Kapitalanlagen für nicht qualifizierte Vorsorgepläne sowie Verwässerungseffekte aus der Aktienemission. Das Management betonte, dass die Integrationskosten aus Übernahmen nicht an die Kunden weitergereicht werden können.

Highlights der Fragerunde für Analysten

Inflation und Lieferkette: Das Management erklärte, dass das Hauptproblem in höheren Beschaffungskosten und nicht in der Produktverfügbarkeit liege. CWT habe während der Pandemie seine Lieferkette gestärkt und Käufe bestimmter Lagerbestände vorgezogen, wodurch das Unternehmen bei der Versorgung besser aufgestellt sei.

Finanzierung 2027: Das Unternehmen nahm im dritten Quartal 49,8 Mio. US-Dollar über sein ATM-Aktienprogramm auf und schloss Terminverkaufsvereinbarungen ab, die voraussichtlich weitere 77,8 Mio. US-Dollar an Nettoerlösen einbringen werden. Zudem arrangierte es unbesicherte Anleihen in Höhe von 125 Mio. US-Dollar bei der Holdinggesellschaft sowie Grundpfandbriefe von Cal Water in Höhe von 150 Mio. US-Dollar mit Laufzeiten von 2031 bis 2050.

Kapitaleinsatz und Umsetzung: Das Management riet Anlegern, den Kapitaleinsatz über den dreijährigen kalifornischen Tarifzyklus hinweg zu beurteilen und nicht anhand eines einzelnen Jahres. Genehmigungen, Umweltprüfungen und das Wetter können den Zeitplan von Projekten verschieben, obwohl das Unternehmen ein jährliches Kapitalwachstum von etwa 10 % bis 11 % anstrebt.

Dividendenrahmen: Das Management gab an, mit einer Untergrenze für das Dividendenwachstum von etwa 7 % und einer Ausschüttungsquote von 50 % bis 60 % zu planen, vorbehaltlich der Zustimmung des Verwaltungsrats und üblicher Schwankungen im Verlauf des Tarifprüfungszyklus.

Vollständiges Transkript der Telefonkonferenz zu den Quartalszahlen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Ladies and gentlemen, welcome to California Water Service Group Q3 2026 earnings call. [Operator Instructions] I will now turn the call over to James P. Lynch. You may begin.

James Lynch

Thank you, Colby. Welcome, everyone, to the third quarter 2026 results call for the California Water Service Group. With me today is Martin A. Kropelnicki, our Chairman and CEO. A replay of this call and webcast can be found in our quarterly results earnings release, which was issued earlier today. The call replay will be available until December 28th. A reminder, before we begin, a copy of the slide deck to accompany today's earnings call, the slide deck (with an 's') and is also available on the company's website at www.calwatergroup.com. Before looking at our third quarter 2026 results, I'd like to cover forward-looking statements. During our call, we may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company's current expectations. As a result, we strongly advise all our shareholders and interested parties to carefully read the company's disclosures on risks and uncertainties found in our 10-K or 10-Qs, press releases, and other reports filed with the Securities and Exchange Commission. And now, I'll turn it over to Marty.

Martin Kropelnicki

Good morning, everyone, and thank you for joining us today. We're very pleased with the continued execution of our 2026 business plan. As we are only three quarters in the year with one to go, there are five major areas that we would like to provide an update on. First, a general update on the financials for the quarter, which include the results of our rate on for general rate case, which rates took effect in the third quarter. Second, we want to talk about our record infrastructure investment that brings it up to just under $425 million to date. We continue to balance system needs with affordability. Third, we want to talk about our progress on closing our announced acquisition of the Oregon and Nevada assets that we are acquiring from Nexus Water Service Company. Yesterday, the Board of Directors declared our 327th consecutive quarterly dividend, which puts our anticipated dividend for the year at $1.34 for the year, which is up 8.1% year-over-year. And finally, I'd like to spend a few moments to talk about emergency preparedness and emergency response. I think, as we know, this super El Niño has gotten a lot of press recently, and we'll talk about how we prepare for the winter that's ahead. So, prior to going through some of the other topic items that Jim outlined, I'm going to turn it over to Jim to talk about the financials for the quarter.

James Lynch

Thanks, Marty. Our third quarter net income was $65.4 million, or $1.05 per diluted share. That compares to $61.2 million, or $1.03 per diluted share in the third quarter of 2025. Revenue increased $21 million, or 6.7%, to $332.2 million, compared to $311.2 million last year. The primary revenue drivers included $22.1 million from new customers and $3.9 million from changes in our Rate Base Offset Memorandum Account (RBOMA). These increases were partially offset by a $4.4 million reduction related to lower customer water usage. Operating expenses increased $8.9 million, or 3.7%, to $249.5 million. Water production costs for the third quarter were largely unchanged, as wholesale water costs were partially offset by lower customer usage. Other operations expenses increased $4.1 million, primarily driven by a $2.8 million increase in water conservation program expenditures. Income taxes on operating income increased $7.1 million, and that reflects higher pretax income and scheduled reduction in the Tax Cuts and Jobs Act (TCJA) reform. We also experienced a $3.9 million decline in gains on our non-qualified benefit plan investment assets. Finally, you can see the impact of this activity on our change in Q3 diluted earnings per share. Now at the diluted earnings per share, impacting through the issuance of new shares during the quarter, it's through our ATM program to partially fund our ongoing capital investment, our planned acquisition activities, and to pay down balances on our bank line of credit. I'll discuss this financing in more detail later in the call. Turning to year-to-date net income, from the end of the third quarter, it was $125.9 million, or $2.07 per diluted share, comparing to net income of $116.7 million, or $1.96 per diluted share for the same period in 2025. Revenue was $855.3 million, which is an increase of $75.1 million, or 9.6%, compared to $780.2 million year-to-date in 2025. The primary revenue drivers included rate increases and new customers, which added $51.9 million. Interim rates memorandum account revenue, which is associated with the California OII GRCE, added $15.7 million. Recognition of the remaining deferred water revenue adjustment mechanism (WRAM) revenue added $9.9 million, and RBOMA revenue contributed $3.9 million. Operating expenses increased $48.2 million, or 7.63%, to $683.6 million, compared to $635 million in 2025. The contributors to the change included water production costs that increased 14.1% due to higher wholesale water costs, which were partially offset by a lower customer usage. Other operations expenses increased $19.9 million, and that increase is primarily due to the recognition of $8.1 million in deferred RAMs and higher water conservation program expenses. A $5.5 million in additional income taxes increased $13.1 million, due to higher pretax operating income and the scheduled reduction of the TCJA reform. We also experienced a $3 million decline in gains on our non-qualified benefit plan investment assets year-over-year, and an increase in business acquisition expenses related to the two acquisitions Marty just referred to, of $4.1 million. On slide 8 of the slide deck, you can see the impact of this activity on our change in Q3 year-to-date diluted earnings per share. Looking at our infrastructure investments on slide 9, the reported capital expenditures was $148 million, and year-to-date we have invested $425 million, or a 10-year compounded annual growth rate of gross capital is right around 11%. Yet, it's probably noteworthy to add that in California regulation, we have the ability to on what's called a step increase. In the outbound years of the rate case, so year one of the rate case for new rates next year, 2027, and 2028, we have the ability for what's called that step increase. But it's subject to an earnings test. This earnings test is based on our ability to get the capital that was pre-approved in our rate case in the ground. Given the size and aggressive pace of our capital program, at the end, we're very well positioned to capture a big chunk of the $49 million step increase available. We'll be closing the order now, and around November 15th, we will be filing for that step increase, but anticipate that we're going to do very, very well on that step increase for 2027 rates.

Martin Kropelnicki

Thanks, Jim. And then you can see, in addition to the effective rate increase on slide 10 of the slide deck, the growth in our capital program has been on our rate base. Our projected compounded annual rate base growth is nearly 12%, to approximately $3.5 billion by the end of 2028, assuming we complete our planned capital investments on schedule. Overall, we're really pleased with the progress we're making in our capital program and our future rate-based growth opportunity. Moving to slide 11, at the end of the quarter, we had $45.1 million in cash and cash equivalents and $45.8 million restricted cash. We also had $200 million of available short-term borrowing capacity at Group and $225 million at Cal Water, and those borrowing capacities are subject to credit line borrowing conditions. Regarding our financing activities, during the quarter, we raised $49.8 million from our at-the-market (ATM) equity program. We also entered into forward sales agreements that we can settle up to 12 months from the agreement date and will generate an additional $77.8 million in net proceeds. The quarter also signed agreements for $125 million in unsecured debt at Group and $150 million in mortgage bonds to Cal Water, with maturities that range from 2031 to 2050. With the long-term debt agreements and equity forward agreements in place, our retained earnings and the equity issued in Q3, we believe we have the resources necessary now to pay down our existing short-term debt balances and to finance our ongoing initiatives into the first half of 2027, including the acquisitions of the Oregon and Nevada systems. Lastly, recall that Cal Water's cost of capital decision includes an adjustment mechanism for movement in the Moody's Utility Bond Index. This adjustment mechanism was not triggered during the most recent measurement period, and as a result, our current authorized 10.27% return on equity in Cal Water will remain in effect for 2027. In addition, the authorized return on rate base will remain at 7.46%, and the authorized capital structure at 53.4% equity and 46.6% debt. With that, I'll turn the call back over to Marty.

James Lynch

Thanks, Jim. On slide 12, I want to provide everyone an update on recent regulatory approvals that support our continued investment in safe, reliable, and affordable water service. There are three things that happened that are noteworthy. First, the Washington UTC approved a $4.1 million revenue increase effective October 1st for our service company in Washington. In addition, the Hawaii Public Service Commission approved a $1.9 million revenue increase for our Populous systems in Hawaii. Additionally, during the quarter, the State of California Public Utilities Commission authorized an advice letter process to seek approximately $130 million in capital costs associated with our PFAS program. That was driven by the application with out of the Foster City reach an additional $2.5 million in expenses for certain PFAS projects going on. On slide 13, we continue to advance our PFAS plans program with approximately $228 million in capital investment. That's a gross amount. That's been brought back. Just a minute. The investment will be made in California, New Mexico, and Washington. This includes anticipated and new wipe your water construction as well. In the third quarter, we invested $47.5 million in treatment and well replacement, with a total program investment to date of $47.5 million. We currently have 65 projects planned, including 18 California sites, all under construction. In addition, I think, as many of you know, we've been a very active participant representing the water industry on recovery of a pass-through from the polluters that contributed PFAS to the water systems. To date, we have recovered a net $59.4 million in litigation costs. That amount will be used to offset the $228 million. As of right now, projected $228 million minus the $59.4 million, you get about $159 million net rate base addition for the PFAS projects. Moving on to slide 14, and I think this is a very important slide, as it's always had a keen focus on affordability. We've been able to maintain 100% growth rate on our capital investment, while keeping rates affordable and affordability.

Martin Kropelnicki

Inflation and what's happening in the U.S. today, as well as it's a pretty hot political topic. We like to show this slide because it shows the company has actually done a really good job at balancing affordability with our maintained 10% company growth rate on our capital investment line. What this slide really shows is that the median Cal Water bill represents about 0.88% of the median household income. So the EPA, Environmental Protection Agency, publishes some guidelines on rate affordability. And water rates that are generally below 2% of an average household income is considered affordable. The slide we show from 2021, 2022, 2023, 2024, and 2025, how we've been able to keep that rate right around 1% while we continue to grow our asset rate base. And we think that's a very important point and a key part of our strategy as we balance affordability with the needs of the system. A number of ways we do the balance of affordability. Obviously, the litigation with the PFAS project is a good example of that. We actively pursue grants. We do invest heavily in conservation programs. And then we try to do a number of things for our customers, including we have a rate support fund. We have a great online tool. If a customer can't afford to pay the bill, they can spread it out over multiple months and do it through the portal itself. And so all these things kind of work together in terms of helping us balance affordability with the needs of maintaining safe and reliable water service. Moving on to slide 15, many of you have seen this slide before. I think it best represents our commitment to our shareholders as it reflects our 59 years of consecutive dividend increases. Obviously, 2027 will be a new year, and as we move into the new year, Jim and I will start our dialogue with our Board of Directors and looking at what should our dividend be for 2027. Yesterday, our Board of Directors declared our 327th quarterly dividend at $0.34 a share, and that sets up our indicated dividend for 2026 at $1.34 a share, which is an increase of 8.1% over 2025. Moving on to slide 16, I want to give everyone an update on our strategic initiatives. We continue to advance the Oregon and Nevada acquisitions from Nexus Water. The integration planning remains on schedule and within budget. Yesterday, we received approval for our change of control applications from the Oregon Public Utility Commission. And this is on top of the approval we received from the Nevada Commission in August. So this sets us up to close these acquisitions before the end of the year. Integration planning and cooperation among the two companies has gone very, very well. In fact, I don't think we could ask for a better partner to work on an acquisition than what we have with Nexus Water. And we estimate our total integration costs. These will be one-time costs that we incur as we move the assets over and bring them onto our platform, to be between $7 million and $9 million. Part of that will be incurred this year as we're doing all the integration planning and setup work now, and part of it will be incurred next year as we actually bring them onto our platform and bring them live onto our systems. So, it's looking very good as Jim indicated. You know, we got the financing lined up and we will be working hard to close this out before the end of the year. At BVRT, the consolidated rate case has been returned to the Commission for approval with interim rates that still remain in effect. One of the nice things about Texas is you get interim rates where you're waiting for regular approval. In addition, the change in control application has been reviewed and is deemed complete, quote unquote, complete and sent back to the Commission for final approval that we are expected to get sometime soon. It's not on the docket yet. Texas is a little different than the other states. It can take a little longer to get through the approval process. But the application itself was deemed complete and now we're just waiting for a final approval. In addition, BVRT continues to grow at a very healthy rate. This year, year-to-date, we've increased 12% new customers during the third quarter. So we are continuing to see the growth that we're seeing in that Texas corridor, and we expect that will continue well into the new year. Looking at some other highlights during the third quarter, we continue to celebrate and recognize the century of service. On October 14th was our actual 100-year anniversary. October 14th, 2026, our founders acquired the water system in Chico, followed by acquiring the water systems in Visalia and Bakersfield, all on October 15th. All three of these systems are still owned and operated by California Water Service Group and still growing, which I think is fantastic. So we had a number of customer and community outreach events to help celebrate our 100-year anniversary. It's been very well received and it's been a fun year reflecting on our 100 years of service. During the quarter, we also started providing water service to approximately 400 students at Indianola Elementary School, which is outside our service territory in Selma. They were having a lot of water quality problems, so we built the connection from our system to their school. And I think this is a good example of projects we've done. We do in the community where we can help a disadvantaged community that does not have access to clean, reliable water by connecting them to our existing system. So it helps lower the marginal costs for all the participants, but it helps expand the service territory to places where they may not have good quality drinking water. And then lastly, I want to take a moment to talk about emergency preparedness and response in light of it being forecasted a super El Niño year. For many of you that know us, Cal Water does spend a lot of time on emergency preparedness and emergency planning. Over the years, we have developed a set of standing operating procedures that we use in order to work off of as we prepare for and respond to certain disasters. Whether it's a wildfire, whether it's a hurricane, whether it's a flood, whether it's red flag conditions that you'll get down in Southern California with the Santa Ana winds, which you've probably read about the last couple of weeks. There's a whole set of policies and procedures that we follow as we deal with these events. It's really about the preparation behind the event. Then it's about the methodology responding to the event. For example, we have had three hurricanes in Hawaii, one of which was a direct hit on the island of Hawaii in the area of Waipu, which we serve, and I'm very happy to report that yes, it was a direct hit. Yes, we had probably $2 million worth of damage. We had no service outages because the team did a good job preparing and responding to the event. And so obviously going into the new year, we've spent a lot of time with our field operations, which is led by Mike Mares, and he's done a great job making sure everyone's ready, all of our systems are in place, all of our backup generators are working, and we have the extra equipment and tools needed to respond to things that may happen as we go into what is anticipated to be a pretty strong winter for the West Coast. Looking ahead at what to watch for in the fourth quarter, obviously the step increase that I mentioned, you know, there's kind of $49 million, an estimated $49 million in the bucket that's available, depending on how well we did our capital program. I'm feeling very comfortable about that, and we will file for that around November 15th. We anticipate the planning of the transaction with Nexus Water before the end of the year. And as Jim said, financially, things are lined up, the teams are working very well together, and I anticipate that closing before the end of the year. And of course, we have a lot of capital to get in the ground during the fourth quarter. And with the anticipated rains that might come with El Niño, we want to try to accelerate as much capital as we can in the fourth quarter, because in the event of heavy rains, it'll certainly slow down the capital program as we move into. And, of course, all the emergency preparedness and emergency response things that we are doing. So with that, Colby, that ends the formal part of our presentation. And let's go ahead and open up for Q&A, please.

Operator

Thank you. We will now begin the question and answer session. [Operator Instructions] I will pause just for a moment to compile the Q&A roster.

Martin Kropelnicki

Hey, Colby, while we're waiting for that roster to come in, we just got some news that just came in from the Texas Commission that our rate case decision is on the agenda for approval on November 5th. So that literally just came in across the wire. So we want to share that information as well.

Operator

Okay, thank you. And our first question is going to come from Davis Sunderland from Baird. Your line is open.

Fragen und Antworten

Davis Sunderland

Good morning, guys. That's got to be the most real-time update. I think I've ever heard on a conference call. Congrats on that. That's great news. Maybe two questions for me today and appreciate the time. Obviously, the pushback against utility rate cases and just kind of this general environment we're in of inflation and heightened focus on affordability has been well covered. I guess on the flip side of that, I wanted to focus a bit more on inflation, just impacting expenses for you guys. And specifically, if you could just talk about what you're seeing on the OpEx and CapEx fronts, if there's been any material changes in supply chain or other expense items. I guess I'll leave it there for our first question.

Martin Kropelnicki

Yeah, so on the supply chain side, obviously, you know, we're not immune to inflationary increases. And one of the things I pointed out to our board yesterday when Jim and I were updating them on the financials, you know, we're paying, you know, essentially 20% to 30% more for fuel year over year, and we have, you know, almost 1,000 vehicles that we roll on a daily basis. So we've been able to absorb the inflationary increases into our operating budgets. And so it's there. It's real. That step increase that we have in California is really important. One of the nice things about California is they do approve the capital in advance, which means it's in the tariff rates. And that's why it's subject to an earnings test. And with California being our largest subsidiary, that's why that pot of money is so big, that $49 million. And so, you know, obviously getting that step increase and getting a big piece of that money, that $49 million, will go a long way to offset a lot of the inflation that we're seeing in California. So I would say we haven't seen anything that's a line item buster when you look at the operating budgets and the line items. But certainly, you know, fuel costs are up, material costs are up. I don't think, you know, from an economist perspective, you've seen the full oil shock effect or the diesel shock effect of what's going to happen to inflation here in the rest of the fourth quarter. If you saw the Producer Price Index, you know, it had its largest increase that it's had since 2022, which that increase in 2022 was driven by, really the COVID and the excess government spending on the COVID response. So I don't think we're through the worst of it yet, but I will say from a company perspective, we've been able to manage it and work through the budget lines. And generally speaking, the management team at Cal Water does a very good job at hitting their budget targets. We're just pivoting and turning and saving where we can, realizing we've got to spend more in other areas like fuel.

James Lynch

Yes, I think the other part of your question, Davis, with regards to supplies, we did a really good job during COVID to kind of strengthen our supply chain and to advance purchase certain supplies, inventory that was hard to get. And, you know, we've kept a pretty keen eye on that since. So I think we're pretty well positioned relative to our supply chain. It's really a cost issue that Marty was talking about.

Davis Sunderland

That's great perspective. Thank you, guys, very much. And then maybe I guess I'll direct the second one to you, Jim, but also, of course, Marty, if you have any thoughts, just wondering how you guys are thinking about equity and debt needs for 2027 or starting to do the planning process for next year. Obviously, inflation is one thing, but we've also got a higher interest rate environment and inflation. I guess, links to one another there, but just wondering how you guys are thinking about the outlook for next year or any other financing considerations. And thank you very much.

James Lynch

Yes, I think I think we're pretty well set going into the first half of next year. We did, you know, the debt offering that we did, we've not yet taken possession of the proceeds, if you will, and it's not reflected yet in our results, and so it's not included in Q3, but it was a really successful offering. We were oversubscribed six, seven times, eight times, depending upon where in the structure you're looking at. We got really good spreads on it with the understanding that T-Bills, which the debt is tied to, is higher now than it was this time last year. But we, I think, did a good job in terms of raising the amount that we're going to need into the first half of 2027, maybe into the first three quarters of 2027. And then from an equity perspective, you know, we have 12 months to draw down on the equity that we raised through the forward. And we were already reflecting the equity that was raised during Q3 through our results, and that'll continue. So I think we're looking pretty good into Q3 of next year. And then we'll, as we go into 2027 and start to put together our capital budgets, we'll assess when we think we might need to be back in the market. But I'm pretty confident that going into the first half of the year, we're pretty well situated and we're not going to be looking to raise much going forward.

Davis Sunderland

during that period. Great stuff. Appreciate it, guys. Thank you very much.

Martin Kropelnicki

All right, David. Thank you.

Operator

Our next question comes from the line of Matt V. Gay with Frieden Broker. Your line is open.

Unknown Speaker

Yes. Hey, Marty. How are you? Good morning. Yes, very good. Thank you. Thank you for the call. Yes. Strong operating results, yeah, congratulations. So, the question is just about the CapEx line. So I see that with the forecast of $627 million and your actual nine-month result, pretty much left for Q4, which is a bit higher. Share of nine months. So do you think your plan is still intact, or we can expect some slip into 2027 from what's expected, and how is it overall going on with the CapEx? So if everything is smooth enough. Thank you so much.

Martin Kropelnicki

Yeah, you know, I think that the easiest way to think about our CapEx, especially in California, which is, you know, 90% of our company is California. The best way to think about it is really looking at the three-year rate cycle. And I say that because capital will get push and pulled year to year, given a number of issues, one of which I talked about, which is El Niño. Sometimes permits take longer, you know, the permitting process and the California Environmental Quality Act (CEQA) process, which is the environmental review in California, can be very cumbersome. So we planned for, you know, as Jim said, that kind of nice 10% to 11% growth year over year. But we also say, you know, capital can be lumpy based on factors that the company can't control like weather and permitting and so forth. So, you know, we have a pretty long-planned out capital plan. And when something slows down, we try to accelerate something else on it. But generally speaking, we do plan for that 10% to 11% growth year over year in trying to anticipate where some of the capital projects may get hung up. Now there's a very important proposition in California that's on the ballot called Prop 45, which is the Affordable California Act. Cal Water has been a leading company involved in that with the State Chamber of Commerce. If that bill passes, it will essentially expedite the permitting process, which is one of the biggest bottlenecks that we face. And believe it or not, we, you know, Southern California, which is a very water-constrained area, we've had cases where it's taken us up to almost 10 years just to get permits. And so if Prop 45, it essentially starts a shot clock when you file for your application and the government agency, whether it's a city or local county or state, have to issue their permit within a certain timeline. And so watch Prop 45 because that will be a nice benefit for any utility that does construction in the state of California.

Unknown Speaker

Okay, great. Thank you so much. Thank you. Thank you. Have a good day.

Operator

And again, if you'd like to ask a question, please press star, then the number one on your telephone keypad to raise your hand and enter the queue. Our next question comes from Angie Stroh-Zsai from Seaport. Your line is open.

Unknown Speaker

Thank you. Okay. So a couple of questions. So one is, you know, that you guys had pretty high unregulated costs. Like, I mean, I'm not sure if you had year-to-date results. Is it just some sort of an aberration and it's going to get, you know, recognized in the amortization on regulated revenues in the fourth quarter.

James Lynch

So, Angie, thanks for the question. The real things driving the unregulated cost are the fact that that's where we're housing our business acquisition expenses. And we also have the lower gains than normal that we have recently experienced anyway from our non-qualified investments for our non-qualified benefit plan. So those are kind of the two key drivers in non-operating income that are kind of bringing that number down a bit in terms of net non-regulated income. So I think that, you know, we're going to have to wait and see if the market rebounds a little bit. Remember, we took a pretty good rate shock in Q3, you know, the bond financing market and what have you. So our fixed income investments didn't perform as well as what they were. And then from an integration standpoint, we'll continue to experience costs related to the Nautica acquisition into Q1. To date, we have recorded almost $4 million there. So, you know, those are temporary, and we do recognize that once we get the integration activities behind us, that the acquisition will be accretive for us going forward.

Unknown Speaker

Okay. Okay. The other question about your dividend growth, and granted that the board hasn't set the growth rate for next year, but I'm just wondering if there is some sort of a targeted payout ratio, at least a cap on it, like a... like, I'm just looking at the estimates. I mean, you would be approaching 60% in the payout and I'm over the next couple of years, and I'm just wondering what's the comfort zone?

Martin Kropelnicki

Yes, good question, Angie. Jim and I have started saying this publicly, and this is something really we started doing, I think, over the last 12 months. We've kind of set the floor for the dividend growth at 7%. And so if you set that as kind of a target that we kind of drive for, and then look at, we try to have between a 50% and 60% kind of payout ratio, you know, recognizing, again over a rate case cycle like in California, it's three years, you know, that'll that'll shift around a little bit depending on where you are on the rate case cycle. But, you know, a 50% to 60% payout ratio with a 7% kind of growth target is what we plan off of.

Unknown Speaker

Awesome. Thank you. Thank you.

Martin Kropelnicki

Hey, Jim, it's probably noteworthy too because Angie asked a very good question about where those integration costs are going. It's kind of going below the, yes, it's in the non-regulated line below the utility line. We were very happy with both approvals we got from Nevada and Oregon with not a whole lot of issues.

James Lynch

Other than the integration costs, you know, we have to bear those by the company. You can't pass those on to customers. So there's no stay out provisions in Oregon and Washington are some of the things that you've seen in other states. They're very clean kind of rules that were approvals that were passed. So we're really happy with how those came out with to build Oregon and Washington. Absolutely.

Operator

And there are no further questions in queue, so at this time I'd like to turn the conference back over to Marty.

Martin Kropelnicki

Great. Thanks, Colby. Thanks, everyone, for joining us today. Jim and I are around today. If you have any further questions, feel free to reach out to us. And thank you for your continued interest in the company. And we'll look forward to finishing the year strong and being back in touch about the earnings test, as well as when we close the Nexus deal here before the end of the year.

Operator

So thank you. Everyone have a great day. This concludes today's earnings call. You may now disconnect.

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