CALIFORNIA WATER SERVICE GROUP (CWT) FY 2025 MD&A

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following sections include a discussion of results for fiscal 2025 compared to fiscal 2024 as well as certain 2023 results. The comparative results for fiscal 2024 with fiscal 2023 generally have not been included in this Form 10-K, but may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Overview

Net Income Attributable to California Water Service Group

In 2025 and 2024, net income attributable to California Water Service Group was $128.2 million and $190.8 million, respectively. Earnings per diluted common share decreased $1.10 from $3.25 to $2.15, or 33.8%, in 2025.

The $62.6 million decrease in net income was primarily due to a decrease in operating revenue of $36.7 million primarily as a result of a decrease in customer usage of $12.7 million and the cumulative adjustment for the impacts of the 2021 CA GRC, retroactive to January 1, 2023, that was recorded in 2024, partially offset by an increase in rates of $69.6 million. Total operating expenses also increased by $18.0 million. The total operating expense increase was primarily due to an increase in water production costs of $11.5 million, an increase in administrative and general expenses of $2.1 million, an increase in other operations expenses of $11.6 million, an increase in depreciation and amortization expenses of $12.5 million, and an increase in property and other taxes of $3.7 million. These increases were partially offset by a decrease in income tax expense of $24.7 million. Additionally, net interest expense increased by $9.1 million due to higher average outstanding borrowings, partially offset by lower interest rates.

The net income benefit of the 2021 CA GRC from 2023 interim rate relief was approximately $64.0 million, or $1.09 earnings per diluted common share, that is included in 2024 results.

Critical Accounting Policies and Estimates

We maintain our accounting records in accordance with accounting principles generally accepted in the United States of America and as directed by the Commissions to which our operations are subject. The process of preparing financial statements requires the use of estimates on the part of management. The estimates used by management are based on historic experience and an understanding of current facts and circumstances. A summary of our significant accounting policies is listed in Note 2 of the Notes to Consolidated Financial Statements. The following sections describe those policies where the level of subjectivity, judgment, and variability of estimates could have a material impact on the financial condition, operating performance, and cash flows of the business.

Regulated Utility Accounting

Because our primary business is operating a regulated business, we are subject to the accounting rules and standards for regulated utilities. The Commissions in the states in which we operate establish rates that are designed to permit the recovery of the cost of service and a return on investment. We capitalize and record regulatory assets for costs that would otherwise be charged to expense if it is probable that the incurred costs will be recovered in future rates. Regulatory assets are amortized over the future periods that the costs are expected to be recovered. If costs expected to be incurred in the future are currently being recovered through rates, we record those expected future costs as regulatory liabilities. In addition, we record regulatory liabilities when it is probable the Commissions will require a refund to be made to our customers over future periods.

Determining probability requires significant judgment by management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders, and the strength or status of applications for rehearing or state court appeals.

If we determine that a portion of our assets used in utility operations is not recoverable in customer rates, we would be required to recognize the loss of the disallowed assets.

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Income Taxes

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities at enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect on the deferred tax assets and liabilities of a change in tax rate in the period that includes the enactment date. We also assess the likelihood that deferred tax assets will be recovered in future taxable income and, to the extent recovery is not probable, a valuation allowance is recorded.

We anticipate that future rate actions by the regulatory commissions will reflect revenue requirements for the tax effects of temporary differences recognized, which have previously been passed through to customers. The regulatory commissions have granted the Company permission to reflect the normalization of the tax benefits of the federal accelerated methods and available Investment Tax Credits (ITCs) for all assets placed in service after 1980. ITCs are deferred and amortized over the lives of the related properties for book purposes. The CPUC requires flow through accounting for state deferred taxes.

On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this law temporarily disallows the use of state net operating losses for years beginning in 2024 through 2026.

On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the Tax Cuts and Jobs Act (TCJA). Among other provisions, the TCJA reduces the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018 and eliminated bonus depreciation for utilities. The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

As of December 31, 2025, the TCJA tax liability was $60.6 million. We continue working with state regulators to finalize the TCJA tax liability to confirm compliance with the federal normalization rules.

Pensions, which include the supplemental executive retirement plan (SERP), and Postretirement Benefits Other Than Pensions (PBOP)

We incur costs associated with our pensions and PBOP plans. To measure the expense of these benefits, our management must estimate compensation increases, mortality rates, future health cost increases and discount rates used to value related liabilities and to determine appropriate funding. Different estimates used by our management could result in significant variances in the cost recognized for pension and PBOP plans. The estimates used are based on historical experience, current facts, future expectations, and recommendations from independent advisors and actuaries. We use an investment advisor to provide advice in managing the plans’ investments. We anticipate any increases in funding for the pension, except for the SERP for Cal Water, and PBOP plans will be recovered in future rate filings, thereby mitigating the financial impact. We believe it is probable that future non-SERP costs will be recovered in future rates and therefore have recorded a regulatory asset in accordance with generally accepted accounting principles. As a result of the 2021 CA GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from our customers. At this time, we believe it is not probable that SERP costs will be recovered in rates for the three-year period in which the 2021 CA GRC is in effect. As a result, we record the changes in the funded status for the SERP for Cal Water to accumulated other comprehensive loss in accordance with generally accepted accounting principles.

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Changes to pension benefits actuarial assumptions can significantly affect pension costs, regulatory assets, and liabilities. The following table reflects the sensitivity of pension amounts reported for the year ended December 31, 2025, to changes in actuarial assumptions:

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(1)     The cost of living adjustment was assumed at 2.40% and has a floor of 2.0%.

Results of Operations

Operating Revenue

Operating revenue in 2025 was $1,000.1 million, a decrease of $36.7 million, or 3.5%, over 2024. Operating revenue in 2024 was $1,036.8 million, an increase of $242.2 million, or 30.5%, over 2023. The sources of change in operating revenue were:

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(1)In 2025, the net change due to rate changes and other items in the above table was primarily due to rate increases of $69.6 million.

(2)Due to the delay in the resolution of the 2021 CA GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 CA GRC had been effective January 1, 2023. Such variances were recorded as regulatory balancing account revenue. The 2021 CA GRC was approved in March of 2024 and final rates for the 2021 CA GRC were implemented on May 31, 2024. As a result Cal Water recorded IRMA revenue of $88.6 million in 2024, of which $67.6 million is attributable to 2023. No IRMA revenue was recorded in 2025.

(3)MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. In March of 2024, Cal Water received approval of the 2021 CA GRC which authorized the use of the MWRAM effective January 1, 2023. For 2025 and 2024, Cal Water recorded MWRAM revenue of $26.3 million and $35.3 million, respectively. Of the $35.3 million of MWRAM revenue recorded for 2024, $17.4 million is attributable to 2023.

(4)Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction occurred. Deferred revenue for 2025 decreased due to a decrease in the balancing account revenue expected to be collected beyond 24 months.

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Water Production Costs

Water production costs, which consist of purchased water, purchased power, and pump taxes, comprise the largest segment of total operating expenses. Water production costs accounted for 38.8% and 38.3%, of total operating costs in 2025 and 2024, respectively. The rates charged for wholesale water supplies, electricity, and pump taxes are established by various public agencies and utilities. As such, these rates are beyond our control.

The table below provides the change in water production costs during the past 2 years:

The principal factors affecting water production costs are the quantity, price, and source of the water. Generally, water pumped from wells costs less than water purchased from wholesale suppliers. Cal Water has an approved ICBA for purchased water, purchased power, and pump taxes. The ICBA mechanism is designed to recover changes in supplier prices from authorized amounts and has been recorded as part of the associated water production expense type.

The table below provides the amounts, percentage change, and source mix for the respective years:

For 2025, the $11.7 million increase in purchased water expenses is mostly due to a blended purchased water wholesaler rate increase of 6.9% partially offset by a 1.9% decrease in purchased quantities.

For 2025, the $2.4 million increase in pump taxes is primarily due to increases in pump tax rates.

Purchased power expenses are affected by the quantity of water pumped from wells and moved through the distribution system, rates charged by electric utility companies, and rate structures applied to usage during peak and non-peak times of the day or season. In 2025, purchased power expenses decreased $2.6 million mainly due to a decrease in production.

Changes associated with climate change regulations could increase the cost of power that in turn would result in an increase in the rates our power suppliers charge us. Any change in pricing of our purchased power in California would be recovered from our customers through the ICBA mechanism. Any change in power costs in other states would be requested to be recovered from the customers in those states. The impact of such regulations is dependent upon the enacted date, the factors that affect our suppliers’ cost structure, and their ability to pass the costs to us in their approved tariffs. These items are not known at this time.

Administrative and General Expenses

Administrative and general expenses include payroll related to administrative and general functions, all employee benefits charged to expense accounts, insurance expenses, legal fees, expenses associated with being a public company, and general corporate expenses.

For 2025, administrative and general expenses increased $2.1 million, or 1.5%, compared to 2024. The increase was primarily due to increases of $4.6 million in employee related costs, $2.3 million in legal fees, $1.1 million in other general

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corporate expenses, and $0.7 million in travel. This was partially offset by a $6.4 million increase in the allocations to construction activities due to additional resources focused on capital delivery.

Other Operations Expenses

The components of other operations expenses include payroll, material and supplies, and contract service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, operations of district offices, and water conservation programs.

For 2025, other operations expense increased $11.6 million, or 9.8%, compared to 2024. The increase was primarily due to a $2.8 million increase in labor expense, $2.5 million increase in bad debt expense, $1.8 million increase in software expenses, a $1.8 million increase in miscellaneous office expenses, $1.3 million increase in conservation expenses, and a $1.0 million increase in water treatment costs. The increase in bad debt expense was primarily due to lower bad debt expense in 2024 as a result of applying arrearage funds to eligible, previously written-off accounts.

Depreciation and Amortization

For 2025, depreciation and amortization increased $12.5 million, or 9.4%, to $144.4 million compared to 2024 primarily due to utility plant placed in service in 2024.

Income Taxes

For 2025, income tax expense decreased $24.7 million, or 68.8%, to $11.2 million compared to an income tax expense of $35.9 million for 2024. The decrease in 2025 was primarily due to a decrease in pre-tax operating income, which resulted from the 2021 CA GRC decision in 2024.

Property and Other Taxes

For 2025, property and other taxes increased $3.7 million, or 9.2%, compared to 2024. The increase was primarily due to utility plant placed in service in 2024.

Other Income and Expenses

For 2025, net other income and expenses increased $1.6 million, or 7.1%, to $24.2 million compared to 2024. The increase was due primarily to a $2.4 million increase in other components of net periodic benefit credit and a $0.8 million increase in allowance for equity funds used during construction, which was partially offset by a $1.3 million increase in income tax expense on other income and expenses.

Net Interest Expense

For 2025, net interest expense increased $9.1 million, or 15.9%, compared to 2024. The increase was primarily due to higher average outstanding borrowings, partially offset by lower interest rates.

Water Supply

Information with respect to Water Supply may be found under the subheading “Water Supply” in Part I - Item 1 above.

Liquidity and Capital Resources

Cash Flow from Operating Activities

During 2025, we generated cash flow from operations of $302.6 million, compared to $290.9 million during 2024. The increase in 2025 was primarily due to an increase in cash collections due to an increase in customer rates and the recovery of MWRAM and IRMA receivables. This was partially offset by a decrease in customer usage and the receipt of $83.0 million from California’s Extended Water and Wastewater Arrearages Payment Program in 2024 that did not recur in 2025.

The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is typically used compared to the warm, dry summer months when water use is typically the highest. This seasonality results in the possible need for short-term borrowings under the bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings. Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.

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Cash Flow from Investing Activities

During 2025 and 2024, we used $517.0 million and $470.8 million, respectively, of cash for Company-funded and developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner.

Cash Flow from Financing Activities

During 2025, we issued $170.0 million of Senior Unsecured Notes and $200.0 million of First Mortgage Bonds (see Note 8 of the Notes to Consolidated Financial Statements). We also borrowed $550.0 million on our unsecured revolving credit facilities, received PFAS settlement proceeds of $40.9 million after fees and expenses, and received $37.5 million of advances and contributions in aid of construction. These increases were partially offset by a pay down of $625.0 million on our unsecured revolving credit facilities, dividend payments of $73.9 million, retirement of long-term debt of $70.9 million primarily for First Mortgage Bonds that matured during the year, and refunds of advances of $9.5 million to developers.

The net IRMA, MWRAM, WRAM and MCBA regulatory asset balances were $96.5 million and $113.4 million as of December 31, 2025 and 2024, respectively. The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates.

In January 2026, the Board declared the quarterly dividend, increasing it for the 59th consecutive year. The quarterly dividend was raised from $0.30 to $0.335 per common share. This represents an indicated annual rate of $1.34 per common share. Dividends have been paid for 80 consecutive years. The annual dividends paid per common share in 2025, 2024, and 2023 were $1.24, $1.12 and $1.04, respectively. The 2025 annual dividend included a one-time special dividend of $0.04 per common share. Earnings not paid as dividends are reinvested in the business. The dividend payout ratio was 57.6% in 2025, 34.3% in 2024, and 113.8% in 2023 for an average of 68.6% over the 3-year period. Our long-term targeted dividend payout ratio is 60%.

Short-Term Financing

Short-term liquidity is provided by the Company’s unsecured revolving credit facility (the Company facility) and the Cal Water unsecured revolving credit facility (the Cal Water facility) and by internally generated funds. As of December 31, 2025, there were borrowings of $130.0 million outstanding on our unsecured revolving lines of credit, compared to $205.0 million outstanding on our unsecured revolving lines of credit as of December 31, 2024.

Given our ability to access our lines of credit on a daily basis, cash balances are managed to levels required for daily cash needs and excess cash is invested in short-term or cash equivalent instruments. Minimal operating levels of cash are maintained for Washington Water, New Mexico Water, Hawaii Water, and Texas Water.

The Company and subsidiaries that it designates may borrow up to $200.0 million under the Company facility. Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all of Cal Water’s borrowings under the Cal Water facility must be repaid within 24 months as authorized by the CPUC. The proceeds from the Company and Cal Water facilities may be used for working capital or general corporate purposes.

The Company and Cal Water facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ debt portion of the Company’s consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more to one (each as defined in the respective credit agreements). As of December 31, 2025, our consolidated total capitalization ratio was 48.8% and the interest coverage ratio was greater than five to one. In summary, as of such date, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.

Long-Term Financing

Long-term financing is accomplished using both debt and equity. Cal Water was authorized to issue $1.3 billion of new debt and equity to finance capital projects and operations by a CPUC decision dated August 2, 2024. In addition, the decision retained approximately $179.0 million of prior financing authority and determined that refinancing long-term debt did not count against the authorization. The CPUC requires that any loans from Cal Water to the Company be at arm’s length. This restriction

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did not materially affect the Company’s ability to meet its cash obligations in 2025. Management does not expect this restriction to have a material impact on the Company’s ability to meet its cash obligations in 2026 and beyond.

Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund capital expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our capital expenditure requirements. Management expects this trend to continue given our capital expenditure plans for the next five years. Some capital expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are refundable. Management believes long-term financing is available to meet our cash flow needs through issuances in both debt and equity instruments.

Additional information regarding the bank borrowings and long-term debt is presented in Notes 7 and 8 in the Notes to Consolidated Financial Statements.

Equity Issuance

On May 14, 2025, we entered into an equity distribution agreement to sell shares of our common stock having an aggregate gross sales price of up to $350.0 million (2025 Equity Agreement) from time to time depending on market conditions through an at-the-market equity program over the next three years. The 2025 Equity Agreement replaced the previous agreement that ended in the second quarter of 2025. We intend to use the net proceeds from these sales, after deducting commissions and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities. Additional information regarding this program is presented in Note 6 of the Notes to Consolidated Financial Statements.

Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities.

On April 17, 2009, Cal Water (Issuer) issued $100.0 million aggregate principal amount of 5.5% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company (Guarantor). Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors. The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the due and punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal of, premium, if any, and interest on the bonds. The bonds rank equally among Cal Water’s other First Mortgage Bonds.

The following tables present summarized financial information of the Issuer and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer. The summarized information excludes financial information of the Non-issuers, including earnings from and investments in these entities.

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PFAS Settlement Proceeds

See Note 15 of the Notes to Consolidated Financial Statements for details on settlement proceeds from PFAS manufacturers.

Off-Balance Sheet Arrangements

We do not have commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources even when the arrangement results in no obligation being reported in our Consolidated Balance Sheets.

Contractual Obligations

The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions and changes in interest rates, as well as action by third parties and other factors, may cause these estimates to change. Therefore, our actual payments in future periods may vary from those presented in the table below.

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The following table summarizes our contractual obligations as of December 31, 2025. We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities. In 2025, we issued First Mortgage Bonds and Senior Unsecured Notes to refinance existing indebtedness, to fund capital expenditures, and for general corporate purposes.

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a.Long-term debt payments include maturities of long-term debt and annual payments on other long-term obligations, exclusive of unamortized debt issuance costs of $6.3 million.

b.Pension and postretirement benefits include $3.7 million of short-term pension obligations.

c.Finance lease obligations represent total cash payments to be made in the future and includes interest expense of $0.1 million.

d.Estimated annual contractual obligations are based on the same payment levels as 2025.

For pension and postretirement benefits other than pensions obligations, see Note 11 of the Notes to Consolidated Financial Statements.

Advances for construction represent annual contract refunds to developers for the cost of water systems paid for by the developers. The contracts are non-interest bearing, and refunds are generally on a straight-line basis over a 40-year period. System and facility leases include obligations associated with leasing water systems and rents for office space.

For finance and operating lease obligations, see Note 15 of the Notes to Consolidated Financial Statements.

Cal Water has water supply contracts with wholesale suppliers in 12 of its operating districts and for the two leased systems in Hawthorne and Commerce. For each contract, the cost of water is established by the wholesale supplier and is generally beyond our control. The amount paid annually to the wholesale suppliers is charged to purchased water expense on our Consolidated Statements of Operations. Most contracts do not require minimum annual payments and vary with the volume of water purchased. For more details related to water supply contracts, see Note 15 of the Notes to Consolidated Financial Statements.

Capital Requirements

Capital requirements consist primarily of new construction expenditures for expanding and replacing utility plant facilities and the acquisition of water systems. They also include refunds of advances for construction.

Utility plant expenditures in 2025 were $517.0 million, including Company-funded of $488.4 million and developer-funded of $28.6 million. Utility plant expenditures in 2024 were $470.8 million, including Company-funded of $450.4 million and developer-funded of $20.4 million.

A majority of capital expenditures were associated with mains and water treatment equipment.

For 2026, the Company is estimating its capital expenditures to be between $580.0 million and $640.0 million based on the 2024 CA GRC and normal capital needs in the other subsidiaries. This range includes an estimated PFAS compliance cost of $79.2 million. See “Water Supply” in Part I - Item 1 above for details on the currently effective regulation. We expect our annual capital expenditures to increase during the next five years due to increasing needs to replace and maintain infrastructure.

Management expects there will be developer-funded expenditures in 2026 and expects that these expenditures will be financed by developers through refundable advances for construction and non-refundable contributions in aid of construction. Developers are required to deposit the cost of a water construction project with us prior to our commencing construction work, or the developers may construct the facilities themselves and deed the completed facilities to us. Funds are generally received in advance of incurring costs for these projects. Advances are normally refunded over a 40-year period without interest. Future payments for advances received are listed under contractual obligations above. Because non-Company-funded construction

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activity is solely at the discretion of developers, we cannot predict the level of future activity. The cash flow impact is expected to be minor due to the structure of the arrangements.

Capital Structure

Total equity was $1,692.0 million at December 31, 2025, compared to $1,638.3 million at December 31, 2024. The Company sold 33,497 and 1,638,977 shares of its common stock in 2025 and 2024, respectively, through its at-the-market equity program.

Total capitalization, including the current portion of long-term debt, was $3,166.2 million at December 31, 2025 and $2,815.3 million at December 31, 2024. In future periods, the Company intends to issue common stock and long-term debt to finance operations. The capitalization ratios will vary depending upon the method we choose to finance our operations.

At December 31, capitalization ratios were:

The return (from both regulated and non-regulated operations) on average equity was 7.7% in 2025 compared to 12.5% in 2024. Cal Water does not include construction work in progress in its regulated rate base; instead, Cal Water was authorized to record allowance for funds used during construction (or AFUDC) on construction work in progress, effective January 1, 2017. Construction work in progress for Cal Water was $259.6 million at December 31, 2025 and $260.8 million at December 31, 2024.

Acquisitions

There were no significant acquisitions in 2025 or 2024.

In November of 2025, we entered into an agreement to purchase the remaining membership interests of BVRT for $45.0 million. The acquisition of the remaining membership interests is subject to satisfaction of customary closing conditions in addition to PUCT and our Board of Director’s approval. We expect to fund the purchase with cash from operations (see “Regulated Business” in Part I - Item 1 above for more details).

In February of 2026, we agreed to purchase Nexus’s Nevada and Oregon water and wastewater systems for approximately $218.0 million, subject to the finalization of closing adjustments. Our Board of Directors has approved the acquisition. We expect to fund the purchase with a combination of cash from operations and debt and equity capital raises (see “Regulated Business” in Part I - Item 1 above for more details).

Real Estate Program

We own real estate. From time to time, certain parcels are deemed no longer used or useful for water utility operations. Most surplus properties have a low-cost basis. We developed a program to realize the value of certain surplus properties through sale or lease of those properties. The program will be ongoing for a period of several years. There were no significant sales in 2025 and 2024. As sales are dependent on real estate market conditions, future sales, if any, may or may not be at prior year levels.