Thank you for being here. I would like to welcome everyone to the California Water Service Group Second Quarter 2025 Earnings Call. I will now hand over the conference to James Lynch, Senior Vice President, CFO and Treasurer. Please proceed.

Thank you, Jericho. Welcome, everyone, to the Second Quarter 2025 Results Call for California Water Service Group. With me today is Marty Kropelnicki, our Chairman and CEO, and Shilen Patel, our Chief Business Development Officer and Vice President of our Texas subsidiary, TWSC. Replay dial-in information for this call can be found in our quarterly results earnings release, which was issued earlier today. The call replay will be available until September 29, 2025. As a reminder, before we begin, the company has a slide deck to accompany today's earnings call. The slide deck was furnished with an 8-K and is also available on the company's website at www.calwatergroup.com. Before looking at our second quarter 2025 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 current shareholders and interested parties to carefully read the company's disclosures on risks and uncertainties found in our Form 10-K, Form 10-Q, press releases, and other reports filed with the Securities and Exchange Commission. And now I'll turn the call over to Marty.

Thank you, Jim. Good morning, everyone. Thank you for joining us here today. We have six main items on the agenda that we want to cover today with everyone and provide an update on. One, we want to talk about the strong performance during the second quarter. Just to remind everyone, earnings look pretty unusual. And as we have been saying on every earnings call, it's really driven by the fact that the 2021 general rate case was 16 months late. So when it was finally approved in 2024, it was retroactive. So that's kind of like the boa constrictor and the egg because it was retroactive, it's kind of made earnings look kind of funky year-to-year. I think kind of the punchline from an earnings perspective is when you look at the non-GAAP earnings per share, they were up 15% year-over-year, which is historically very, very good considering it's the third year of the rate case in California, which is our largest operating entity. Second thing, we will give an update on our capital program. Capital spending was up approximately 7% quarter-over-quarter, and we'll give you an update on where we are with the California General Rate Case. In addition, we have a new person attending us today, not new to the company, who's been around a long time, but new to helping give an update to our stockholders. Shilen Patel, who is the Lead Executive Officer, who heads up our business development activities and is also running our Texas operations for us. So Shilen will give you an update on what's going on in Texas as well as an exciting new contract we entered into in California and Silverwood, which is a new development that's being built in Southern California. We'll give you a quick update on where we are with PFAS. That's been a little bit of a political football, but we remain steadfast in our approach and making sure that the drinking water we provide our customers is safe and in compliance with our requirements. And then lastly, we recently got reaffirmed our very good A+ stable rating from S&P Global. So we're very happy to see that we maintained a very strong credit rating going into the second half of the year. So with that, Jim, I'm going to turn it over to you so you can go through the financial results for the quarter, please.

Great. Thanks, Marty. So as Marty mentioned, we have presented both GAAP and non-GAAP metrics for 2024, which you'll be able to see on the next several slides. The non-GAAP measures do remove the impact of the 2023 interim rate relief from our 2024 results. So in Q2 2025, revenue increased $20.7 million or 8.5% to $265 million. This compares with revenue of $244.3 million in Q2 of 2024. Compared to Q2 2024 non-GAAP revenue, second quarter revenue increased $17.9 million or 7.2%. Net income for the quarter was $42.2 million or $0.71 per diluted share, and this compares with the 2024 second quarter net income of $40.6 million or $0.70 per diluted share. Compared to non-GAAP 2024 net income, Q2 net income decreased $200,000 or $0.02 per diluted share. The $1.8 million GAAP to non-GAAP difference is due to the finalization of amounts recorded in 2024 that were related to the 2023 interim rates. Moving to Slide 6, you can see the impact of the activity during the second quarter on our earnings result as compared to the 2024 non-GAAP results. The primary drivers were tariff rate changes and increased customer usage, which combined added $0.52 per diluted share. The increases were offset mainly by revenue regulatory account decreases of $0.21 per share and water production rates and depreciation increases of $0.12 and $0.05 per share, respectively. Also, in the second quarter of 2024, we reduced bad debt expense as a result of payments received under the extended water arrearages program in California. As a result, we recognized a $0.06 per share benefit in the second quarter of 2024 that did not repeat in 2025. Slide 7 shows our year-to-date financial results. Revenue through the first 6 months of 2025 was $468.9 million compared to $515 million for the same period in the prior year. When adjusting 2024 results for interim rate relief, year-to-date 2025 revenue increased $41.3 million or 9.7%. Net income attributed to the group was $55.5 million or $0.93 per diluted share compared to $110.5 million or $1.90 per diluted share in the prior year. When adjusting for the 2023 interim rate relief, net income increased $9 million or 19.4% over non-GAAP 2024 year-to-date net income, while diluted earnings per share increased $0.12 or 14.8%. Turning to Slide 8. The primary drivers of our year-to-date diluted earnings per share compared to the non-GAAP 2024 results were tariff rate changes and increased customer usage, which combined added $0.75 per diluted share and the Palos Verdes Pipeline Recovery that added $0.05 per share. These increases were partially offset by regulatory revenue account decreases of $0.26 per share, water production rate and usage increases totaling $0.18 per share, and depreciation expense increase of $0.09 per share. We continue to make significant investments in our water infrastructure to ensure the delivery of safe and reliable water service. Our capital investments for the quarter and year-to-date were $119.4 million and $229.5 million, respectively. This represents a 14.2% increase for the quarter and a 7% increase year-to-date compared to the same periods in 2024. As a reminder, our capital investments do not include an estimated $220 million of remaining PFAS project expenditures, which we expect will be incurred over the next few years. The positive impact of our capital investment program is having on our regulated rate base is presented on Slide 10. If approved as requested, the 2024 GRC and infrastructure improvement plan, coupled with planned capital investments in our utilities and other states would result in a compounded annual rate base growth of almost 12%. Moving to Slide 11. We continue to maintain a strong liquidity profile to execute both our capital plan and strategic M&A investments. As of the end of the quarter, we had $50.5 million in unrestricted cash, $45.6 million in restricted cash and $240 million in available credit on our bank lines. Earlier in the quarter, we entered into an equity distribution agreement to sell shares under an at-the-market equity program with an available shelf of $350 million. While we expect to use the ATM strategically and from time to time, we did not use it in 2025 year-to-date. And finally, as Marty mentioned, in July, we received our annual credit rating update from S&P Global in which we retained our A+ stable rating. We're proud that we continue to maintain this strong credit rating. With that, I'll turn the call back over to Marty.

Thanks, Jim. I'm going to piggyback off those last comments about the credit rating. Obviously, the company's balance sheet continues to be very, very strong, which is important given the growth that we have in our capital investment program and our infrastructure improvement plans. Likewise, that also dovetails right into our dividend program. And I'm very proud to announce that yesterday, our Board of Directors approved our 322nd quarterly dividend in the amount of $0.30 a share. I'd just remind everyone the dividend increase that the Board approved earlier this year represented a 10.71% increase, which gives us a 5-year 7.7% compound annual growth rate for our dividend. We believe this dividend growth rate reflects our continued growth in our balance sheet as well as our continued expansion on our infrastructure improvement plan, which we think is important as we continue to build out the balance sheet. So balance sheet is in good shape, and we have a lot to do in the second half of 2024. Moving on to Slide 13. I want to give everyone an update on where we are with the rate case in the state of California. As you may recall, in the application, the company is requesting $398 million over the years and over the years of 2026, 2027, and 2028, and a corresponding $1.6 billion budget for infrastructure improvements in the state of California, especially as we continue to move forward with our climate change adaptation plans. During the quarter, well, first of all, the rate case continues to be on schedule from where it is. And that's really the good news here. So far, the administrative law judge and the assigned commissioner have kept everything on task to date. Settlement discussions took place during April, and hearings before the administrative law judge took place in May. After the hearings in May, the ALJ requested additional information from the parties, and they were responded to in June. We then filed opening briefs on July 7, with reply briefs that were filed earlier this week as we move into the last phase of the rate case. So there was no settlement that was reached while there were a number of undisputed items in the rate case process, we did not reach a settlement with the ratepayer advocate. And so hence, we had to file the opening briefs on July 7 and the reply briefs on July 28 to set up the final motion hearing, which will take place on August 5. After that August 5 hearing, that's the point at which all the information is submitted to the ALJ to draft the proposed decision. So August, September, and October are critical months for the commission as they work through the rate case and hopefully keep it on time, so it goes into effect on 1/1/2026. Moving on to Slide 14 to give you a quick update on what's happening with PFAS. The EPA has confirmed the maximum contaminant level for PFOA and PFAS will remain at 4 parts per trillion while it continues to evaluate standards for the other PFAS compounds, so other compounds in the PFAS family or the Forever chemicals family. The agency has also proposed extending the compliance deadline for PFOA and PFAS treatments from approximately 2 years from 2029 to 2031 with a final ruling expected in 2026. Some states such as Washington or what's currently going to the legislature in California are looking at implementing their regulatory rules around this, consistent with the 4 parts per trillion, but on the original implementation timeline. So we're closely monitoring that on a state-by-state basis to see where ultimately each state ends up with the implementation of the PFAS rules. From a group perspective, we remain committed to investing in water quality and infrastructure across Washington, New Mexico, California, and making sure that we do everything we can to ensure that we stay ahead of schedule to ensure water quality for all our customers and we'll continue with our plans as they are right now. We might push or pull a couple of things from year to year now that there's a little bit more room, but the original $226 million investment that we forecast is still on the table, and we are moving forward with that program. Looking on Page 15, our approach to PFAS-related investments is intentionally aligned with the evolving EPA guidelines. It has been a little bit of a moving ball. But if you think about it, they just extended the implementation date a couple of years. And given what we're seeing within a few of the larger states that we operate in, there's a good chance that the states will adopt standards that will keep us in line with the original implementation timeline set by EPA. So again, we're watching that. But nonetheless, we remain committed to doing what we need to do to make sure that we exceed the water quality standards every day that we operate. And the PFAS and PFOA teams are going full steam ahead as of right now and moving forward with our projects. And we'll start to see that investment start to show up in the capital investment line as we move forward in the second half of 2025 and certainly well into 2026 and '27. In addition, I want to talk a little bit about the settlement on where we are in dealing with the people who contaminated the water supply. We continue to make good progress on recovering those costs through litigation. Cal Water is a party to 4 separate class action settlements related to PFAS. In May of 2025, so May of this year, we received the first $10.6 million in net proceeds from a settlement with 3M. This represents the first of 10 scheduled installments that we will get from 3M, and we expect to begin receiving proceeds from the other 3 settlements potentially later on this year. Now I want to take a moment to introduce someone new to the call, but not new to Cal Water. He's been here a while driving all our business development efforts, and he's certainly a veteran in the water space. So I'm going to turn over to Shilen Patel to give everyone an update on what we have going on, on the business development side and in Texas. So Shilen, take it away.

Thank you, Marty. On Slide 16, you'll see that California Water continues to prioritize growth through acquisitions and capital investments. A key example is our agreement with DMB Development, a national developer working on a master-planned community near the city of Hesperia in San Bernardino County. Under this agreement, Cal Water will build, own, operate, and finance the wastewater treatment facility that will serve the development. Once fully built out, the community will consist of over 15,000 customer connections. At full capacity, the facility will deliver more than 3 million gallons per day of tertiary treated wastewater. More importantly, 100% of this water will be reused within the community and will be the largest wastewater treatment and reuse facility in Cal Water's asset portfolio. We plan to file a certificate of public convenience and necessity with the CPUC to establish a regulated service area and include this district in future general rate case filings. Now turning to Slide 17. Our Texas utility subsidiary continues to grow in step with the rapid expansion of the state. As a reminder, California Water made its initial investment in this subsidiary in 2021. The goal was to support water and sewer utility development in the Austin, San Antonio Mega region. This region currently has a population of about 5 million people and is projected to exceed 8 million by 2050, which is comparable to the Dallas-Fort Worth region today. The biggest challenge to this growth is timely infrastructure development, especially roads and water systems. This presents a strong opportunity for California Water to partner with state and local governments and the private sector to align our utility investments to support the state's economic development objectives in the region. On Slide 18, you'll see continued momentum in customer growth for our utility in Texas. Both connected customers and paid customer commitments are increasing, which reflects the sustained demand in the Austin, San Antonio Mega region. Additionally, BVRT filed a general rate case for 5 utilities in June of 2024. A settlement agreement has been reached and is currently awaiting commission approval. Thank you, and I'll hand it back to Marty.

Great, Shilen. Shilen, I believe DMB, we've done other business with successful projects with them in other states. I believe Kukio, which is the high-end estates on the Big Island of Hawaii was one of the ventures we did with them a number of years ago, correct?

That is correct. And we have another one as well as KSSCS in Kauai.

Kauai. So it's good to work with a partner we have, boy, I guess, 16 years of experience with working with them, which is good. On the settlement with BVRT, it's not filed yet with the commission, right? But we have an all-party settlement.

That is correct. We do have an all-party settlement, and it is not filed with the commission yet. It should be filed shortly, and we'll share more information with us within that settlement when it's filed.

Perfect. So that means for everyone on the call, we can't take any questions as to the particulars of the settlement. But overall, I would say we're very pleased that we reached an all-party settlement and Shilen and the team in Texas have done a really good job working on that rate case. And that's our first rate case that's being filed, which will actually establish the rate base for the Texas entities for us. So really good work there. All right. Moving ahead to Slide 19. I want to take a moment to talk about our sustainability report and just hit a couple of highlights on that. In June, we published our 2024 report. I believe this is our third report that we published, and we continue to focus on 4 key areas: protecting the planet, serving our customers, engaging the workforce, and governing with integrity. Among some of the highlights are our goals of reducing Scope 1 and Scope 2 greenhouse gas emissions by 23.5% from our 2021 baseline and the fact that we're investing nearly $3 million in energy-efficient upgrades within our service territory. In addition, we had 100% compliance with the water quality standards, the primary and secondary water quality standards, and we conducted more than 615,000 water quality tests on behalf of our customers in the states that we operated in. From a philanthropic perspective, the company donated more than $1.1 million to community organizations, including our firefighter grant program, which is very successful as well as our local scholarship programs for children of customers, especially those that are first-generation college students. In addition, we expanded our employee training program by approximately 17%, and we continue to develop new career pathways for our employees, which have been very successful. And the significance of those pathways, it's not just a way to get promoted, but there are certification requirements that go along with it. And so for everyone that operates a water system, we all know how important those certifications are. So it's a way to let people grow and move up their certification chain and move into higher-level jobs as they get those higher-level certifications. In fact, we always say higher pay for higher certs. So it's been a very, very successful program. In addition, we've expanded our supplier oversight and our diversity efforts in terms of adding more suppliers that we procure goods and services from at the local level. So I encourage everyone to read the report. It's in the consistent reporting format that meets the majority of standards out there for sustainability reports, and we remain 100% dedicated to our ESG efforts, emphasizing the strong G for governance. So lastly, I want to talk about what to watch for in the fourth quarter because certainly, we have a lot going on. First and foremost, we're maintaining our focus on the 2024 general rate case. That's really important. And as I mentioned before, it represents 90% of our business as a utility. In addition to that, we also have important rate proceedings in Hawaii, Washington, as Shilen has just talked about, Texas, as well as New Mexico. So the rates team is very, very busy with everything they got going on. As we move into the warm dry summer months, that allows us the opportunity to speed up our capital investment program. So the third quarter is one of the busiest quarters from an investment standpoint. So the team is busy working on that. It is interesting to note that while the Southeast of the U.S. is going through a heat wave, in California, we are having a below-average summer. So it's been cooler and a little more pleasant, which has been great from a fire season perspective. But all this means it allows us to really kind of put the pedal to the metal on the capital investments as we go through the summer months and prepare to go into winter. Obviously, with the cool weather, it gives us a little bit of a break from fire season. But nonetheless, that does not allow us to slow down our efforts or back off our efforts for wildfire readiness. And the operating teams have been very, very busy since May implementing our readiness programs for 2025. So overall, there's a lot going on. And of course, lastly, we have to continue to execute prudently and efficiently. And as I started with this discussion here today, it is the third year of the rate case. The third year of the rate case is where we tend to see the most regulatory lag. And overall, I'm very happy to see that 15% growth in our earnings for the second quarter of 2025, given the fact it's the third year of the rate case. So with that, Jericho, we will open it up for questions from the analysts, please.

And our first question comes from Davis Sunderland from Baird.

Maybe I could start. You started actually to answer my question at the tail end of your last comments there, Marty, just about the GRC, but it sounds like you guys are still expecting a decision by year-end. So I guess, one, is that correct? And then maybe more specifically, I mean, what is there that you guys are looking for in the case? Or what can we monitor in that timeframe of August to October that you kind of defined as the critical months? And then I have one follow-up.

Yes, the assigned commissioner has indicated that completing the rate case on time is a top priority for him. Since there’s no settlement, the assigned administrative law judge has a lot to review. The judge managing our case is very procedural and has been following the set schedule, so everything has been on track this year. However, this is a crucial time for the judge to consolidate the case. The judge requested a list of undisputed items, which we have provided. We are entering a blackout period where we can only respond to questions from the judge through August, September, and possibly October. So we will have to wait and see. The commissioner has stated it is a priority, and the judge is maintaining the schedule and asking insightful questions. Thus, we are optimistic about the direction this is heading. From our end, our part is complete as of August 5, after the final hearing, and it will be up to the judge from that point. I have no reason to doubt the commissioner’s commitment to finishing on time, so we will see how that develops. Meanwhile, we will continue to respond to any inquiries. In summary, it’s currently on schedule, with both the commissioner and the judge focused on it.

I appreciate the detail. And then maybe just one more for me. Just on the comments relating to the PFAS pushout or potential pushout, I should say, from the EPA. Is the right way to think about this as a positive that you guys are still moving forward on your timeline as it relates to maybe getting some regulatory recovery and earning a return on those investments, and then maybe a negative or a slowdown in potentially accelerating some M&A for smaller systems? Or I guess any other thoughts there would be helpful.

Yes. Thanks, Davis. I think from the perspective of the timing of the CapEx investments, we're still focusing on delivering the treatment according to the original schedule that we had put in place. Since our last call, we've taken a look at whether or not it makes sense for us to put treatment in some of our well locations as opposed to replacing the wells. And we have identified a couple of areas where we are going to go ahead and just replace those wells. That's typically a little longer process. That takes about 5 to 7 years from the time we first identify property to the time we actually get the well and place it in service. So initially, we were going to treat all of the wells we identified. But since this reassessment, we probably have about $160 million or so that we expect to be in place in the next 2 years related to treatment with the remainder being pushed out a little bit further as we look at our well replacements.

Yes. And I would say, David, too, kind of putting politics aside for a moment, it's really hard. The EPA could shift the dates, but the fact is PFOA and PFAS is a known cancer-causing agent. And so it's really hard to look at customers in the eyes saying, yes, there's a compound of water, it may cause cancer, but the government just moved the implementation out a couple of years. Don't worry about it. The water is safe to drink. So I was happy to see that the state of Washington is keeping the original timelines. I know in the legislature in the state of California, that's seriously being looked at right now. I think from a customer perspective, we'll always put the customers' health and safety first. Even if it means we need some depreciation dollars for a year or so if something gets kind of messed up on the EPA side. But PFAS, the train is moving. The projects are planned. We have contracts that have all been signed. The engineers are working on it. And we have room to move a couple of things around, as Jim said, and we'll change a couple of treatment options. But I don't think you're going to see hundreds of millions of dollars shift out 2 more years. I think you're going to see pretty much stay on track with the exception of some stuff will get pushed and pulled a little bit.

Yes. And I think with regards to the impact that, that would have on our M&A, we've got a really strong balance sheet right now. And I think you can look at those two initiatives independent of one another.

Our next question comes from Jonathan Reeder from Wells Fargo.

A couple of questions for me. First, the rate base outlook outlined on Slide 10 did not change, but it looks like there were some shifts in the CapEx by year, including like pushing out $50 million from 2025. I apologize if you mentioned it in the prepared remarks, but what caused the shift? I mean, as it sounds like that anticipated PFAS well replacement CapEx shift has not yet been incorporated? And then further, does the increase in 2027 represent any of the $60 million to $70 million of anticipated investment related to the Silverwood opportunity?

Well, with regards to Silverwood, yes, we are right now coming up with a budget for what that plant is going to entail, and that is going to provide an opportunity for us to invest additional capital over the next few years. Shilen, I think we have a 2-year time window with which to get that plant up and operating.

That's correct.

We will be including those numbers in the presentation, and they will ultimately be factored into the rate base as we navigate the regulatory process. Our CapEx plans remain unchanged regarding our core investments. We are continuing forward with the expectation of receiving a significant portion, if not the entirety, of our requests in the general rate case. It's worth noting that 2025 marks the first year of the current rate case, although the other aspects won't take effect until 2026. We are moving ahead under the assumption that whatever we are permitted to implement regarding our rate base plan, we will be able to achieve.

Okay. So the shift was just some timing stuff because, yes, I mean, overall, the 3-year period pretty much the same thing?

I think that's a good characterization, yes.

I'll just say this is also why we got memo account treatment for part of the PFAS stuff because part of this is we're going through the process of discovery, what do we need to do at locations. You got to do all the testing, then you got to develop the implementation plans. And so it meets the criteria of memo account treatment with the PUC, especially in California, where we got the most number of wells that we got to treat. And that's why that number is carved out and put in a footnote because ultimately, most of those costs will roll into a memo account.

Okay. But the Silverwood spend, that $60 million to $70 million you say on the slide, that's still incremental to the current budget?

Yes. In fact, our Board yesterday just approved the expenditures for that over the next 2 years. Yesterday, I was at our Board meeting; we go through the annual capital program in detail. So the engineering team comes in, the finance committee meets, and we go through all the details of the plan for the next year and the next really couple of years because they authorize us to start some other capital projects in advance. So that was approved yesterday.

Okay. And then my other question relates to something that AWK mentioned earlier today that there's a water decoupling bill working its way through the California legislature this session. Can you discuss what all the bill may do? Like does it mandate that the CPUC adopt fully decoupled rates if requested by the utility? And what sort of support do you believe it has to pass both chambers and hopefully garner governing news and signature?

The bill has been a significant focus for our government affairs team. Initially, we led the efforts on this bill individually, but as other water providers joined in support, we came together. It's Senate Bill 473, which would mandate the Public Utilities Commission to adopt full decoupling for water utilities. We believe this is a crucial piece of legislation, especially in light of climate change and water scarcity in the West. In discussions with the governor on this matter, we clarified that this bill essentially proposes to cap our earnings as a regulated utility, which is ultimately beneficial for our customers in the long run. It enhances affordability for underserved communities and improves our ability to plan for climate-related challenges while stabilizing rates. As of July 28, the bill passed the Senate unanimously with a 37 to 0 vote, and it has progressed through the assembly, gaining a 15 to 0 approval in the assembly committee on utilities and energy. It is now waiting for the assembly committee on appropriations. There is some opposition from the California advocates, who argue that it would increase the commission's operating costs by $1 million. However, we counter that we had decoupling successfully for several years without impacting operating costs and that other utilities have managed decoupling since the 1970s without issues. The bill has received strong support from lawmakers, and while California's budget situation is challenging, we have built a large coalition in favor of decoupling. The state legislature is currently on recess and will reconvene in the fall to continue discussions on this matter.

Thank you, Marty. I know you're always very plugged into what's going on in Sacramento, so I didn't expect anything less in terms of color.

Well, again, Jonathan, you know how we are. I mean we were the first water company to decouple. And we took a couple of hard knocks for that, and people say, why would you want to do it? But decoupling when you deal with water scarcity, when you deal with sustainability type of issues and tiered rates, I mean, it really helps drive down consumption over the long term. And we've got to stay focused on that in California. It's a massive state that continues to grow. And so you have the largest ag business in the union in the state of California. You got some of the largest urban centers in the state of California compared to anywhere else in the U.S. and you've got a growing population; you got to be very proactive with this stuff. And so we believe in taking a leadership role, and that's what we've been doing.

Yes. No, good luck with it. It's hard to imagine that the $1 million figure would become a hangup in a state beside California, but yes, I guess you never know. So good luck with that, and best of luck as you move into the second half of the year with keeping the GRC on time.

Yes, and as you know, Jonathan, we attend your conference as well. As we approach the fall, Jim and I will be actively engaging with investors. We will be glad to provide updates during our various investor relations meetings this fall.

Our next question comes from Michael Gaugler from Janney Montgomery Scott.

Just one question on PFAS. Looking through your deck today, it seems like visibility is improving on the settlements across all 4 class actions. I'm just wondering at this point, what percentage of the total costs that you're going to incur do you think you can cover with the settlements?

That's a challenging question, Michael, but I appreciate it in a good way. It's a fair question, and it's tough to determine. My best estimate would be that between $40 million and $60 million of the $226 million estimate could be covered. If I had to make a prediction, that's the range I would suggest. As I mentioned earlier to Jonathan, Shawn Bunting, our Senior Vice President and General Counsel, is one of the industry representatives involved in the lawsuit that pertains to the water industry. We are heavily engaged in these lawsuits alongside our outside counsel, actively representing the water sector. We are present during negotiations and have insight into how things are progressing. One of the reasons we decided to invest was to ensure fair distribution of the settlements. We are committed to maintaining that leadership role, and Shawn Bunting is doing an excellent job advocating for the water industry as a skilled attorney. If I had to place a bet, I would estimate that $40 million to $60 million seems like a reasonable range based on my current understanding. Jim, do you have anything to add on that?

Yes, Michael, the only thing I'd say is part of the difficulty in estimating it is that it's predicated not only on the settlement dollars we're able to negotiate, but then the application for those dollars by the different water providers that could benefit from it. And until the total applications are known and can be identified in terms of how much they're requesting, it's hard to say how much is going to go to the individual water companies. So they're working through that process right now. As we said on the call, by the end of this year, we think we'll have a real good sense of where that's going to land. And quite frankly, we believe we'll start to get some of the other payments by the end of this year also. So more to come on that. But right now, it's moving ahead in a real good direction for us.

There are no further questions at this time. I would now like to turn the call back over to Martin Kropelnicki, Chairman, President and Chief Executive Officer.

Great. Thank you, Jericho, and thanks, everyone, for joining us here today. First half of the year is done and dusted, as they say, in my spin class. It's been recorded, and we're moving forward. Looking forward to the second half of the year; obviously, we got a lot going on, but the company is in very, very good shape, very happy with earnings, very happy with the balance sheet. And we just got a lot going on. And with everything Shilen's got going on in Texas on the business development side with Silverwood, etc., as well as the rate case, it's going to be a very, very busy second half of the year, and we will look forward to updating you at the end of Q3. So until then, be safe, and have a good day. Thank you very much.

Thank you.

This concludes today's conference call. You may now disconnect.