California Water Service Group (CWT) held its annual meeting on May 25, 2010 at a downtown San Jose hotel. Chairman Robert Foy, looking dapper in a bowtie, commemorated Dr. Edward Day Harris, Jr., a board member who recently passed away.
Mr. Foy then formally began the meeting by introducing California Water Service Group's executive team. Mr. Foy explained that CWT was holding its annual meeting in a hotel because of new construction on its nearby campus. After completing the formal portion of the meeting, he began a slideshow presentation. The first slide was a Vince Lombardi quote: "Individual commitment to a group effort is what makes a team work." Mr. Foy provided detailed background information on the Board's members and showed several comments praising them ("integrity," "beacon of consistency," etc.). After praising the Board, Mr. Foy turned the meeting over to CEO Pete Nelson.
Mr. Nelson complimented Mr. Foy for his service to the company and elsewhere, noting that the city of Stockton had recently awarded Mr. Foy "Stocktonian of the Year." Mr. Foy--clearly the most charismatic man in the room--was the CEO of Pacific Storage before he came to CWT. In addition, he is involved with numerous community, religious, political and charitable groups.
Mr. Nelson focused on the employees of the company, reminding us that there are "a thousand employees behind one glass of water." He explained that the company has meter readers (52 employees), customer service agents (119 employees), district managers, and many other employees who ensure safe and reliable drinking water. Customer service is a top priority--"96% of calls" get resolved on the first call. Meter readers, who handle five million reads a year, are also trained to be "field ambassadors."
Mr. Nelson said CWT values employee feedback. He said that "the people who do the work are best able to say how to do the work," i.e., "decisions must be local." He ended the meeting by saying that "each individual employee is important to the company."
I asked why someone would want to own CWT over San Jose Water Company (SJW
Mr. Nelson said that the companies were "sister utilities" and cooperated with each other. While different, they are "both good companies." (SJW owns some of CWT, and the Chairman of SJW's Board was present at the meeting.)
I also asked about the financial status of the company's pension plan. The CFO, Martin Kropelnicki aka "Marty," provided a delightfully detailed answer, mentioning the applicable IRS/FASB code sections from memory. The condensed answer is that the plan is over 80% funded, which is a reasonable amount.
Another shareholder complained about the service he was receiving from Delaware Water Company and asked CWT to buy them out. Mr. Nelson said he did not comment on acquisitions.
Another shareholder asked about desalination. Mr. Nelson indicated that "as a supply source, desalination is not economic yet," and there are also "environmental issues" associated with it.
Finally, a shareholder (and retired employee) complained about his medical care benefits and pension checks. Mr. Nelson said that the company had "dropped the ball" and planned on communicating with retirees better.
After the meeting, shareholders received a complimentary box that included a shower head and other water-saving tools.
As an investor, it's difficult to differentiate between publicly traded water companies such as SJW
, and SWWC
. They all know each other, so no one seems willing to badmouth anyone else. Also, much of the revenue is based on unpredictable political factors, such as the willingness of a water board to grant rate increases. Having a charismatic Chairman like Mr. Foy may give CWT an advantage over its competitors when it comes to political schmoozing, but it's still hard to predict which water companies will outperform. One interesting issue with water companies is that conservation may work against them; in other words, the more users conserve and cut back on water use, the less money water companies make. Overall, I enjoyed meeting Mr. Foy and the rest of the SJW team, especially Mr. Kropelnicki.
Disclosure: I own an insignificant number of shares of CWT, AWK, and SJW. Of the aforementioned holdings, I own the most number of shares in AWK.