You may recall, in Q4, we closed the sale of our West Virginia Gas utility, very small unit with less than 15,000 customers. And we announced the sale of our 3 nonutility microgrid and district energy projects in Pittsburgh. We recently closed on the $165 million sale of those energy projects, which was, as you know, a very strong outcome. The proceeds of both were used to finance capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. Now during the year, we continue to build on our 30-plus year track record of consolidation in the U.S. water and wastewater industry. Last year, we acquired 7 systems, adding over $44 million in rate base and over 11,000 new customers. We currently have asset purchase agreements, signed for 6 municipal acquisitions, totaling approximately $380 million in purchase price.

This includes the recently signed agreement with North Versailles and [indiscernible] sales to acquire their wastewater system in Pennsylvania. Later in the call, I'll update you on the latest acquisition-related activity. Lastly on this slide, I'm pleased to tell you that we have been named to Newsweek's 2024 list of America's most responsible companies. This is the third consecutive year that we've been on this list, that recognizes the top 600 most responsible public companies headquartered in the United States that have demonstrated meaningful and impactful business practices. Now turning to the next slide. Maybe it goes without saying, but at Essential, our focus is on quality and reliability for our customers and sustainable returns for our investors.

Our 138-year history, 32 years of dividend increases and many, many years of continuously delivering on our environmental commitments is made possible by an organization with several competitive advantages. First, I think of the importance of operating in constructive regulatory environments. Essential operates in 9 states, most of which have received favorable regulatory rankings. Secondly, we want to operate where there is growth opportunity. We're well positioned to grow both organically being in states with high population growth like Texas and North Carolina and through acquisition and we've demonstrated our ability to do so. In the water and natural gas industry, there's a great advantage to possessing advanced technical and engineering expertise.

We were and plan to continue to be leaders on issues like PFAS mitigation and lead remediation, safety issues, et cetera. Last but not least, operational excellence. We have 3,000-plus dedicated people working every day to manage the complexity of thousands of projects, which have taken us to industry-leading quality and service levels. I want to share just a couple of those accomplishments of our operating team. By any measure, the numbers on this page make us a clear leader in both natural gas and water industries. The combination of operational excellence and capital investment have accelerated our quest to continue as leaders in the industry. Now the backbone of our capital program in both water and gas is our pipe replacement program. The tightening of our water and gas mains improves compliance, reduces outages and improves the environment.

According to a report by the Pennsylvania Public Utility Commission, we are running a larger pipe replacement program than our peers. This large amount of gas pipe replacement, combined with a refocused effort on addressing leaks, has allowed us to shift to a find-and-fix approach to leaks. And to put this in context, when we announced the acquisition of Peoples just a few years ago, the company, like most gas LDCs had a backlog of several hundred leaks. Over the period since we've acquired the company and run the company now, we have reduced outstanding leaks by 83%, so outstanding results. Our Water business continues to operate at a 99.9% compliance rate, which is also outstanding. You can imagine the confidence that this builds in our customers' minds, as they drink and cook with the water we provide.

From a reliability standpoint, our systems rarely have outages. And when they experience that rare outage, it's typically because a storm disrupts the power to a plant. Now of course, we have larger -- our larger plants are supported with generators, and we continue to position our portable generation near our smaller systems, especially during storm prep. I am really of our operating team and they continue to raise the bar on operational excellence in both gas and water. Now speaking of operational excellence on the next slide here, given the importance of the expected PFAS regulations from the U.S. EPA and the impact on our customers, we probably need to spend a few minutes on this topic. Now we're diligently working so that we are aligned with the EPA's time line and standards to ensure that our finished water does not exceed the federal maximum contaminant level of PFOA, PFOS and PFNA compounds.

Our most recent disclosure is that we expect to spend about $450 million or I should say, at least $450 million, and that's included in the new capital investment guidance that we're providing today. Our capital spending on this mitigation effort is somewhat fluid, though, I have to point out, and we expect that the $450 million could increase as plans for construction are refined, the EPA and states timelines for compliance is determined, and if any additional sites pop up and require treatment as we move forward. Now for clarity, if the EPA and the state environmental agencies require a 3-year compliance timeline, we would expect our costs to rise because it may not fit with the timelines associated with applications for low interest loans and grants, could also cause us to work over time and cost contractor cost to rise.

Having said that, we are in the process of meeting with the heads of all the agencies involved to press for accelerated approval processes for loans and grants to protect our customers and where appropriate, look for extensions in time to comply with this new regulation we expect in the coming month, year or so. Now the effort to comply with the 4 parts per trillion standard will be significant. There's no doubt about that. Each of our 300-plus sites that need mitigation must be engineered, permitted, procured and constructed. To accomplish this in what is anticipated to be a 3-year time line, will be a huge and very expensive effort. Now make no mistake, our team is up to the task and we will meet compliance deadlines. So with that, let me hand it over to Dan to talk about the year's financial results.

Daniel Schuller: Thanks, Chris, and good morning, everyone. On Slide 9, let's take a few minutes to review the fourth quarter highlights, before moving into the full year. Well, many of you focus on the company over a longer period of time, which we believe is appropriate, we did want to provide a quick update on how the fourth quarter of 2023 concluded. On a GAAP basis, we had revenues for the quarter of $479.4 million, compared to $705.4 million in the fourth quarter last year. As we experienced in prior quarters, the largest contributor to the decrease in revenues for the fourth quarter was the recovery of lower natural gas commodity prices, with purchased gas costs decreasing by $209.6 million, from the same period last year.

Additionally, the weather in Q4 was warmer than normal and therefore, contributed to reduced gas usage by our customers. Our Regulated Water Segment contributed $281.8 million in revenue and our Regulated Natural Gas segment contributed $188.7 million. Incremental revenues from regulatory recoveries and water and wastewater customer growth contributed positively. However, these impacts were offset by the lower purchase gas costs, lower volumes in both the Natural Gas and Water segments and other items for the quarter. Operations and maintenance expenses decreased 15% to $157 million for the quarter, down from $184.7 million in the same quarter of last year. Decreases in other items, lower recoverable costs related to our Natural Gas customer rider and lower bad debt were the primary drivers of the decrease.

These were offset by higher water production costs and operating expenses related to acquired systems. Net income was up year-over-year from $114.9 million to $135.4 million and GAAP EPS was up 13.6%, from $0.44 in the fourth quarter last year to $0.50 for the quarter this year. Next, we'll discuss the full year financial highlights. Let's talk high level, and then we'll get into the details when we go to the waterfall. We ended the year with $2.05 billion in revenue compared to $2.29 billion last year. For the year, our Regulated Water segment contributed $1.15 billion of revenue, and our Regulated Natural Gas segment contributed nearly $864 million. Purchase gas costs decreased by $249.7 million or 41.5%, compared to prior year. Operations and maintenance expenses decreased 6.2%, from $613.6 million to $575.5 million.

Operating income was up 4.7% from $661.2 million, to $692.1 million. Year-over-year, net income increased $33 million or 7.1%, from $465.2 million to $498.2 million and GAAP earnings per share increased 5.1% to $1.86, which was solidly in our $1.85 to $1.90 guidance range for the year. And earnings would have certainly been higher were it not for the balmy December weather in Pittsburgh. Next, let's walk through the full year waterfalls, including how we successfully overcame adverse weather impacts in the first and fourth quarters of 2023, which caused a $43 million net revenue shortfall versus budget or normal weather. Let's start with revenue on Slide 11. In 2023, revenues decreased $234 million or 10.2% on a GAAP basis. Starting on the left-hand side of the waterfall regulatory recoveries added $69.1 million in revenues year-over-year, which includes the impact of base rate cases or other regulatory proceedings.

Next, organic and acquisition growth from our Regulated Water segment provided an additional $13.1 million. The largest driver of the decreased revenue was the $249.7 million impact of lower purchased gas costs. Now this is simply a comparison of last year's purchased gas cost line on the income statement to this year's. So it reflects both a significant decline in natural gas commodity prices, as well as the lower quantity of gas being purchased. Clearly, lower commodity prices are a good thing for our customers, who benefit with lower overall bills for heating and cooking. As a result of unfavorable weather throughout the quarter -- I should say, throughout the year, lower gas usage decreased revenue by $53.1 million, from 2022, and 2022 was colder than normal.

And lower water and wastewater volumes decreased revenue by $7.5 million as well. And lastly, other items of $6.1 million, which includes the impact of lower customer assistance program recoveries also contributed to the reduction in revenues. I'd like to remind everyone that we currently do not have weather normalization for our Pennsylvania Natural Gas business. In these results, we're seeing the significant impact of 2023's warmer than normal weather. However, had it been equally colder than normal, our customers would have seen significantly higher bills, resulting in higher revenues. Now as many of you know, we recently filed the first Pennsylvania Gas rate case, since our acquisition in 2020. And in that case, we proposed a weather normalization mechanism.

Next, we'll review the operations and maintenance expenses. Operations and maintenance expenses were $575.5 million for the year, a decrease of 6.2%, compared to $613.6 million in 2022. Increased production costs, primarily related to chemicals, purchased water and purchased power contributed $12.2 million and operating expenses from newly acquired systems in our Regulated Water segment added another $5.8 million. These were offset by other items, including lower outside services costs and the prior year impact of a lease-related charge, as well as lower contributions to our foundation, which decreased operations and maintenance expenses by $27.6 million. The gas customer rider, which is recoverable through a revenue surcharge, decreased $18.7 million, again due to lower commodity prices in the regulated natural gas segment.

Employee-related costs decreased by $5.4 million, partly due to the incremental pension contributions and an accrual for onetime inflation-related incentive compensation for non-officer level employees, back in 2022. And finally, lower bad debt decreased operations and maintenance expenses by another $4.4 million. Next, let's spend a minute on the earnings per share waterfall. Beginning on the left side of the slide, GAAP EPS for 2022 was $1.77. Regulatory recoveries contributed $0.19, lower O&M expenses contributed another $0.08 and organic and acquisition growth from our Regulated Water segment added $0.02. These were offset by decreased volume from our Regulated Natural Gas segment of $0.14 and other items of $0.03, as well as decreased volume from our Regulated Water segment of $0.02.

The result is GAAP EPS was $1.86 for the year. And given the fact that weather in Pittsburgh was approximately 16% warmer than normal for 2023, we believe this is an outstanding result. Now in this waterfall, the other bar includes the impacts of increased interest and depreciation, offset by an increased tax benefit. This increased tax benefit is a result of both increased pipe replacement capital and the ongoing and onetime benefits related to the IRS' Natural Gas Safe Harbor, which we've discussed previously. The onetime benefit related to the IRS change was about $0.045. So all of these impacts, along with the pickups from the O&M items we discussed earlier and the purchase water pass-through in Texas as well as a tax-related change in New Jersey, these were all critical in offsetting the impacts of the unfavorable first and fourth quarter weather.

I will note that regarding 2024 financings, you may have seen that last month, we completed a $500 million issuance of 10-year debt, at a rate of 5.38%. We also expect to raise approximately $250 million in 2024 through an ATM equity program. And given this, we'll file soon for an ATM of up to $1 billion, which should be viewed to cover our equity needs for multiple years. Now moving to regulatory activity and other matters. In 2023, we completed rate cases or surcharge filings in all 9 states in our footprint with total annualized revenue increases of $47.2 million for Water and $21.3 million for Natural Gas. So far in 2024, we've completed rate cases or surcharge filings in 3 of our Water states with total annualized revenue increases of $9.1 million and achieved $22 million -- $22.1 million in our Regulated Natural Gas segment.

We have a busy but manageable regulatory calendar in 2024, with base rate cases or surcharge filings underway in Illinois, New Jersey, Texas and Virginia for our Regulated Water segment. And just before the end of 2023, we filed a base rate case for our Regulated Pennsylvania Natural Gas utility, which I'll discuss in more detail on the next slide. Now this is the first Pennsylvania Natural Gas rate case that we filed under our ownership. It's also the first since the adoption of tax repair in the Gas business and also the first case in which there's a request for weather normalization, which is a mechanism that a number of our peers in Pennsylvania have today. As a reminder, as part of this case, we expect the tax repair benefit to shift from the shareholders to the customers, as the tax benefit is incorporated into rates.

Tax repair allowed us to stay out of rates for 5 years, and we would likely have stayed out longer, but the commission order associated with our repair election, required us to file by the end of 2023. And in this case, as you see on the slide, we've requested an increase of $156 million or 18.7% in terms of revenue. Now through the fully projected forward-looking test year, we'll have replaced over 1,000 miles of gas mains in Pennsylvania since the last rate case. And therefore, rate base growth at Peoples is significant. The $4.2 billion in rate base in this case is up from $2.1 billion in the prior case. So that's a doubling in a 5-year period. This investment has made our system safer and more reliable, while significantly reducing our greenhouse gas emissions since 2019.

Given the fully projected future test year, we anticipate recovering the impact of rising interest rates and inflation, through much of 2025. And in addition, we did want to mention that we expect to file a rate case for Aqua Pennsylvania in the second quarter, as it's been nearly 3 years since our last filing. We believe our rate activity, especially in Pennsylvania is very different than some of what you may be seeing across the industry. We've been out of rates for nearly 3 years for Aqua Pennsylvania. Our plans are known by the regulators in advance, and we've maintained a strong focus on affordability. We will also take a responsible approach to our Proposed Act 11 subsidization. And with that, I'll hand it back over to Chris. Chris?

Christopher Franklin: Thanks, Dan. And it's hard to believe it's been 5.5 years under your leadership as CFO, and I want to thank you for that. I also want to recognize the great work done by Dan and his team in achieving our 2023 financial results. It was a challenging year on the weather front.

Daniel Schuller: Thank you, Chris.

Christopher Franklin: Yes. Let's talk for a moment about our Water and Wastewater acquisition program. As you know, the program has been successful and continuously evolving for nearly 30 years now. I have to tell you that we're really pleased with the leadership of the Pennsylvania Public Utilities Chairman -- Commission Chairman, Steve DeFrank, on addressing some of the issues that have arisen associated with the use of the fair market value statute that was passed in 2016. We believe that the proposal he has made at a recent PUC public meeting will make a real difference in moderating rate increases for customers, while still providing a fair price to governmental entities when they decide to sell their water or wastewater utilities.

We view this as a very positive development in our acquisition program in Pennsylvania and believe that the pipeline remains strong. As I mentioned earlier in the call, in 2023, we acquired 7 systems, adding over 11,000 customer equivalents to our current water and wastewater footprint. We have now acquired over $500 million of rate base via acquisitions, since this leadership team came together in 2015. That statistic just doesn't do justice though to the amount of work that goes into the program. I fully expect that the company will continue to be a major player in the consolidation of the water and wastewater utility industry in the United States. Now moving to the next slide, let's take a minute to review the pending transactions. As of this call, we have 6 signed asset purchase agreements in 2 states, in which we have existing water and wastewater operations.

These acquisitions will add over 215,000 customer equivalents and total approximately $380 million in purchase price. As I noted in my opening remarks, this includes the recently signed agreement with North Versailles Township Sanitary Authority to acquire their wastewater system in Allegheny County, Pennsylvania, which is expected to add approximately 4,400 customers to our Regulated Water segment. Now, this is another transaction that resulted from the reputation and relationships of our Peoples Gas team in Western Pennsylvania. You had another opportunity to leverage that relationship between the gas and water utilities. We continue to see a strong and healthy pipeline of opportunities for additional growth, and we're currently engaged in active discussions with municipalities, which have over 400,000 potential water and wastewater customers.

If Chairman DeFrank's proposal is successful, there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future, and that is a bright spot. Now before moving on, I just want to note that the DECLORA regulatory process continues to be under a stay by the federal bankruptcy court, but we remain confident that we will ultimately close the DECLORA transaction. In early February, we filed another motion requesting the Federal Bankruptcy Court judge lift the stay that has now been in place for 9 months. In April, there is a scheduled hearing at the Pennsylvania Commonwealth Court to rule on Delaware County's appeal of the validity of our asset purchase agreement with DECLORA. You'll recall that was upheld successfully in the lower court.

Based on what we know today, we still believe we can close this transaction by mid-2025. Now before I get to guidance, I just want to reaffirm our strategy and visit some of our high priorities for the year. First, with regard to strategy, we're going to continue investing significant capital in needed infrastructure. This will drive quality, safety and reliability for our customers. It will also drive rate base growth, which in turn also drives shareholder value. Importantly, customer affordability is always a priority. We know a key piece of driving shareholder value is continued growth in our dividend, and we have a long track record of returning cash to our shareholders, and that will continue. In fact, we've raised our dividend continuously for 30 years now.

Lastly, we continue to see opportunities for further consolidation through acquisitions in the Water and Wastewater space, and we'll pursue transactions that broaden the customer base in a constructive regulatory environment, allow us to apply economies of scale to manage our costs and give us the opportunity to be a solution to communities that need our expertise or financial strength. We believe that this strategy puts us in a great position to continue building and delivering value for our shareholders. As we think about 2024, we have some important work to accomplish. I share my priorities each year with the Board and, of course, the management team, and I'll summarize them quickly for you here. First, we'll remain focused on operational excellence, throughout the year.

I'll continue to share examples with you on our calls and meetings and this will include increased exposure to our segment presidents, Colleen Arnold and Mike Huwar. Secondly, we'll continue to look for opportunities to make tangible improvement in the service we provide to our customers. In fact, we just rolled out an exciting new customer portal, to provide our water and wastewater customers with more visibility into outages and restoration, as well as allow them to see the details of their usage more easily and pay their bills online. Also this year, we'll continue our leadership role in remediating PFAS and lead across our footprint, and we'll share our knowledge across the industry to help others leverage what we know. Now sustainability.

We're going to continue to focus on our continued commitments and sustainability and our accomplishments. We will continue to grow the company through accretive water and wastewater acquisitions. And last, we have some pretty important regulatory things in front of us this year, including 2 rate cases that Dan mentioned in Pennsylvania, among others, the FMV refinement and also the finalization of the PFAS regulations. It's going to be a very busy year this year, folks. All right. Let's get to guidance. Before we walk through this, I want to acknowledge what you read in the release last night. Now throughout this year, we will be working through 2 critical rate cases, both in our largest divisions in Gas and Water and both in Pennsylvania. Thus, we are refraining from providing a multiyear earnings per share growth rate guidance range.

Now once both base rate cases are complete, which will be around this time next year, we will return to our normal longer-term earnings per share guidance range. So let's review the guidance that we're providing, which we believe is significant and provides a clear line of sight to the opportunities in front of the company. In 2024, we expect to earn $1.96 to $2, which is a 5% to 7% earnings growth range. Through 2028, we plan to invest approximately $7.2 billion annually on regulated infrastructure in our existing utilities. And let me point out, that some of this increase is being driven by the regulatory requirements associated with PFAS and lead mitigation. Now in 2024, we expect to invest between $1.3 billion to $1.4 billion. The annual amount may be a bit lumpy, based on the needs and regulatory recovery activity throughout the 5-year period and I'll point again to PFAS, as I mentioned earlier in the call.

I also want to point out that we're providing a 5-year outlook on capital investments for the first time. We've always provided you a 3-year capital outlook, and we hope that moving to a longer-term view of capital spending will provide a better picture of our long-term opportunities. Now based on this investment, we expect rate base will grow at a compounded annual growth rate of approximately 8% for Water and approximately 10% for Natural Gas through 2028. Defined utility base will grow at a compounded annual growth rate of over 8%. We continue to expect that together, organic customer growth and growth from acquisitions for Water and Wastewater will continue at a growth rate of 2% to 3%, on average. We are always reminding our investors that growth from acquisitions are lumpy and should be viewed over a 3-year average.

We expect continued stability in our Natural Gas customer base. Now as Dan mentioned, we also expect to raise about $250 million in 2024, using an ATM equity program. And we remain committed to reducing our Scope 1 and Scope 2 greenhouse gas emissions by 60% by 2035 from our 2019 baseline. As you know, we've already made significant progress on this and we estimate it to be about 25%, as of the year-end 2023. All right. We've covered a lot. That concludes our formal remarks, and we're happy to take your questions. So let me turn it back to Francois.

Operator: [Operator Instructions]. The first question comes from the line of Ryan Connors from Northcoast Research.

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