AMERICAN STATES WATER CO

CONDENSED BALANCE SHEETS

CONDENSED STATEMENTS OF INCOME

CONDENSED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED FINANCIAL INFORMATION OF PARENT

Note 1 — Basis of Presentation

The accompanying condensed financial statements of AWR (parent) should be read in conjunction with the consolidated financial statements and notes thereto of American States Water Company and subsidiaries (“Registrant”) included in Part II, Item 8 of this Form 10-K. AWR’s (parent) significant accounting policies are consistent with those of Registrant and its wholly owned subsidiaries, Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. (“BVES”) and American States Utility Services, Inc. (“ASUS”), except that all subsidiaries are accounted for as equity method investments.

Related-Party Transactions:

As further discussed in Note 2 — Notes Payable to Banks, AWR (parent) currently has access to a$165.0 million syndicated credit facility. AWR (parent) borrows under this facility and provides funds to ASUS in support of their operations and itself. Prior to the new credit agreement in June 2023, described below, AWR (parent) had a credit facility with access of up to $280.0 million and had provided funds to both GSWC and ASUS in support of their operations. Any amounts owed to AWR (parent) for borrowings under this facility are reflected as intercompany receivables on the Condensed Balance Sheets. The interest rate charged to its subsidiaries is sufficient to cover AWR (parent)’s interest cost under the credit facility. AWR may, from time to time, also make equity investments in its subsidiaries.

In October 2020, AWR (parent) issued an interest-bearing promissory note to GSWC, which expired in May 2023. Under the terms of the note, AWR (parent) was permitted to borrow from GSWC amounts up to $30.0 million for working capital purposes. AWR (parent) agreed to pay any unpaid principal amounts outstanding under this note, plus accrued interest. During 2021, AWR (parent) borrowed and repaid a total of $26.0 million from GSWC under the terms of the note. There wereno borrowings or repayments made during 2022 and 2023. As of December 31, 2023 and 2022, there wereno amounts outstanding under this note.

In January 2023, the Board of Directors approved the issuance ofone GSWC Common Share to AWR (parent) for $10.0 million. In January 2023, GSWC issued $130.0 million in unsecured long-term notes in a private placement. GSWC used the proceeds from both the issuance of equity and long-term debt to pay-off all intercompany borrowings from AWR (parent).

AWR (parent) guarantees performance of ASUS’s contracts with the U.S. government and agrees to provide necessary resources, including financing, which are necessary to assure the complete and satisfactory performance of such contracts.

Note 2 — Note Payable to Banks

On June 28, 2023, AWR (parent) entered into a new credit agreement with a term offive years provided by a syndicate of banks and financial institutions. The credit agreement will mature on June 28, 2028. In connection with the new credit agreement, AWR (parent) incurred legal and other fees totaling $632,000. The syndicated credit facility replaced AWR (parents)’s previous credit agreement with a sole bank where it had a borrowing capacity of $280.00 million. Funds from the new facilities were used to pay-off in full all outstanding borrowings under AWR (parent)’s prior credit facility.

The new credit agreement provides for a $150.0 million unsecured revolving credit facility. Under the credit agreement, the borrowing capacity may be expanded up to an additional amount of $75 million, subject to the lenders’ approval. The aggregate amount that may be outstanding under letters of credit is $10.0 million. Loans may be obtained under the credit facilities at the option of AWR (parent) and bear interest at rates based on either a base rate plus an applicable margin or an adjusted term SOFR determined by the SOFR administrator, currently the Federal Reserve Bank of New York, plus an applicable margin. The applicable margin depends upon AWR’s credit ratings.

On November 6, 2023, the credit facility was amended to increase the borrowing capacity from $150.0 million to $165.0 million. In connection with the increase in borrowing capacity, the amendment also provides for the addition of a new bank to the existing syndicate group participating in AWR’s credit facility. As of December 31, 2023, outstanding borrowings under its credit facility of $141.5 million have been classified as non-current liabilities on its Condensed Balance Sheet.

The credit agreement contains affirmative and negative covenants and events of default customary for credit facilities of this type, including, among other things, affirmative covenants relating to compliance with law and material contracts, and negative covenants relating to additional in indebtedness, liens, investments, restricted payments and asset sales by AWR (parent) and its subsidiaries, other than BVES. AWR (parent) is not permitted to have a consolidated total capitalization ratio (as defined in the credit agreement), excluding BVES, greater than 0.65 to 1.00 at the end of any quarter. Default under any indebtedness of any subsidiary of AWR (parent), other than BVES, will result in a default under its credit agreement. As of December 31, 2023, AWR (parent) had a debt ratio of 0.54 to 1.00.

AWR (parent)'s borrowing activities (excluding letters of credit) for the years ended December 31, 2023 and 2022 were as follows:

Note 3 — Income Taxes

AWR (parent) receives a tax benefit for expenses incurred at the parent-company level. AWR (parent) also recognizes the effect of AWR’s consolidated California unitary apportionment, which is beneficial or detrimental depending on a combination of the profitability of AWR’s consolidated non-California activities as well as the proportion of its consolidated California sales to total sales.

Note 4 — Dividend from Subsidiaries

Cash dividends in the amount of$71.4 million, $56.4 million and $38.3 million were paid to AWR (parent) by its wholly owned subsidiaries during the years ended December 31, 2023, 2022 and 2021, respectively.