Good morning, and welcome to American Water's First Quarter 2020 Earnings Conference Call. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the company's Investor Relations website. Following the earnings conference call, an audio archive of the call will be available through May 14, 2020. U. S.
Callers may access the audio archive toll free by dialing 1-eight seventy seven-three forty four-seven thousand five hundred and twenty nine. International callers may listen by dialing 1-four twelve-three seventeen-eighty eight. The access code for replay is 10,142,727. The audio webcast archive will be available for 1 year on American Water's Investor Relations website at ir. Amwater.com/event.
I would now like to introduce your host for today's call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.
Thank you, Sean. Good morning, everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based upon our current expectations, estimates and assumptions.
However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties and factors, as well as a more detailed analysis of our financials and other important information is provided in the earnings release and in our March 31, 2020 Form 10 Q each has filed with the SEC. Reconciliations for non GAAP financial information discussed on this conference call, including adjusted income, adjusted earnings per share, adjusted return on equity and our adjusted regulated O and M efficiency ratio can be found in our earnings release and in the appendix of the slide deck for this call. Also, the slide deck has been posted to our Investor Relations page on our website. All statements in this call related to earnings and earnings per share refer to diluted earnings and earnings per share.
I should also note that consistent with our efforts to ensure the safety and health of our team, we're conducting this call while locations. We don't anticipate any technical issues, but if for any recent technical issues do arise, Walter will take over and lead us through the full presentation. That being said, I will now turn the call over to American Water's President and CEO, Walter Lynch.
Thanks, Ed. Good morning, everyone, and thanks for joining us. Today, I'll start by giving you a brief update on our COVID-nineteen response and then provide key updates on our business. Susan Hardwick, our CFO, will cover the Q1 financial results and provide a few additional comments related to the implications of COVID-nineteen. As you know, American Water provides clean, safe, reliable water and wastewater services and has continued to do so throughout this pandemic.
American Water has established clear priorities across our organization, focused in 3 areas. The first is the care and safety of our employees and their families. The second is the safety of our customers and the communities we serve. And the third area of focus is the execution of our preparedness plans, so we can continue to provide essential services and help our communities get through this crisis. Let me give some examples of the measures we've implemented.
Because safety is our top priority, we've implemented required work from home policy where possible, as well as social distancing and other enhanced safety measures for employees and customers. For example, we've suspended all non emergency in home appointments and limited the amount and nature of contact with customers during field appointments. We've also worked hand in hand with labor across the business and supported our employees with paid leave for COVID-nineteen diagnosis, quarantine and childcare. We've suspended building related service shutoffs, suspended leach fees and have restored service to customers who were previously shut off for non payment. We're also working with customers who are experiencing financial hardships by offering customer assistance programs and access to low income programs.
Susan will cover this a bit more later, but we've implemented actions to strengthen our liquidity and ensure access to capital. We also continue to execute on our core strategies such as making needed capital investment. We've increased communications with public service commissions, customers and public officials. As the COVID-nineteen impact continues to be assessed, American Water will work constructively with public service commissions as they look to address utility response measures, customer protection and cost recovery for all regulated utilities in their jurisdictions. Finally, we provided a $500,000 donation to the American Water Charitable Foundation to help fund COVID-nineteen relief efforts across the United States.
This was in addition to a $100,000 donation made to Feeding America to help support food banks. We understand we have a very important role during this crisis. We provide water and wastewater services for hygiene, hospitals, sanitation and fire protection. We thank all our employees for continuing to provide these essential services. Moving on to Q1 results, the employees of American Water delivered solid results and further strengthened our low risk profile and predictable growth story.
Our Q1 2020 adjusted earnings per share increased 9.8% compared to Q1 2019. We invested capital of $457,000,000 in the Q1 of 2020, which is a 36% increase over the same period last year. This increase is driven by the continued investment in our systems and the communities we serve along with more favorable construction weather this year versus last. As you know, we work hard to minimize the customer bill impacts of these investments through a continued focus on controlling O and M costs. I'll talk more in a moment about our regulated operations, our continuing progress in regulated acquisitions and their contributions to our long term growth story.
Our market based businesses were up $0.01 in earnings per share. This was due primarily to growth in customer contracts from homeowner services. As a reminder, in the Q3 of 2019, our military services group was awarded 2 military contracts, Joint Base San Antonio in Texas and the United States Military Academy at West Point, New York. We're on track to assume operations by the Q2 of 2020. Moving to Slide 7, the foundation of our earnings growth continues to be the capital investment we make in our regulated operations to provide clean, safe and reliable service to our customers.
We believe that long term financial success depends on effectively executing the fundamentals of our business every day. We plan to invest $20,000,000,000 to $22,000,000,000 in capital over the next 10 years to ensure the quality and reliability of our services and to bring water and wastewater solutions to communities across the country. We're affirming our long term EPS compound annual growth rate in the 7% to 10% range. We also expect our 2020 adjusted earnings to be in the range of $3.79 to $3.89 per share. This is the same range we communicated in February, which should have been identified as an adjusted EPS range.
Our GAAP earnings are expected to be in the range of $3.85 to $3.95 per share. In her comments, Susan will provide additional information about the difference between our GAAP and adjusted guidance ranges. Also consistent with our previous dividend guidance, on April 29, our Board of Directors increased our quarterly cash dividend payment from $0.50 per share to $0.55 per share, a 10% increase. We understand that a secure and growing dividend is important to our shareholders striking the right balance with continued investment in our regulated operations. Turning to Slide 8, let's walk through some of the regulatory highlights of the Q1 2020.
Pennsylvania American Water filed a general rate case last week requesting $92,000,000 in the 1st year and $46,000,000 in the 2nd year. Since our last case in 2017, Pennsylvania American Water will have invested 1.6 $4,000,000,000 in infrastructure upgrades for the 4 year period of 2019 through 2022, including replacing more than 4 27 miles of aging water and sewer pipes. The case also includes enhancements to our customer assistance program. Traditionally, the Public Utility Commission's review of the filing may take up to 9 months and new rates would not be effective until 2021. Also in Pennsylvania, the Public Utility Commission approved the company's revision to its wastewater DSIC.
This action allows the DSIC to be applied to another 50,000 wastewater customers effective May 1. We also have 3 pending rate cases in New Jersey, Virginia and California. New Jersey American Water filed a general rate case in December 2019 requesting an overall revenue increase of approximately $88,000,000 excluding the revenue from DSIC. Since our last rate case, we've invested more than $1,000,000,000 in system upgrades. Virginia American Water filed a general rate case requesting an overall revenue increase of $5,600,000 in November 2018.
This case was driven by approximately $98,000,000 in infrastructure upgrades since April 2017. Became effective on May 1, 2019 and we expect a decision later this year. Moving west, California American Water filed for new rates in July 2019. The case covers 2021 through 2023 and requests an increase in authorized revenue of $46,600,000 over 3 years. The request seeks $197,000,000 for infrastructure improvements planned for 2021 2022.
Due to COVID-nineteen, the evidentiary hearings from April May to early June with final hearing dates expected in late August. We now expect a decision on this case as early as Q1 of 2021. In addition, we filed a motion for interim rates to be effective back to January 1, 2021. On the legislative front, during the quarter, Indiana Governor Holcomb signed 2 bills. The first one authorizes recovery for above ground infrastructure without a full rate case and the second establishes an appraisal process for non municipal utilities to establish fair value and a reasonable purchase price.
In West Virginia, Governor Justice signed the Water and Wastewater Investment and Infrastructure Improvement Act. Effective June 5, this legislation creates a voluntary process to use fair value assessments to determine the value of the water or wastewater systems, enables combined water and wastewater rate making and expands how municipalities can use the proceeds they receive from selling utility assets to better address needs in their communities. Finally, in Virginia, Governor Northam signed fair market value legislation, will go into effect on July 1. This is now the 9th state that has adopted fair market value legislation across our footprint. All this legislation is focused on helping communities and utilities address water and wastewater challenges.
Moving to slide 9, customers remain at the center of every decision we make today and into the future. This means smart investments balanced by efficient operations and capital deployment. As I mentioned earlier, in the Q1, we invested $457,000,000 with the majority in our regulated businesses, including $432,000,000 in infrastructure investment and $21,000,000 in regulated acquisitions. As we make these critical investments to maintain reliable service, we must also ensure affordability for our customers. We'll continue to focus on O and M efficiency and work toward our O and M efficiency goal of 31.3% by 2024.
For the 12 month period ended March 31, 2020, our O and M efficiency ratio improved to 34.5% compared to 35.5% for the 12 month period ended March 31, 2019. Now to put this into perspective, our adjusted O and M expenses are just slightly higher today than they were in 2010. Since then, we've added approximately 276,000 customer connections, while expenses only increased at a compound annual growth rate of 0.7%. We're very proud of our employees' focus and commitment to controlling costs on behalf of our customers, especially given the current situation and economic challenges some of our customers are now facing. Moving on to slide 10, we believe our commitment to putting customers first is a key to growing our regulated footprint.
So far in 2020, we've closed on 5 acquisitions in 4 different states, adding about 6,200 new customer connections. We've also added more than 3,200 customer connections to organic growth in the Q1. We look forward to adding another 45 1,800 customer connections through currently signed agreements in 8 states, most of which we expect to close this year in 2020. These new agreements reflect our commitment to provide water and wastewater solutions to communities across our footprint. And with that, let me now turn it over to Susan.
Thank you, Walter, and good morning, everyone. Let me first start on Slide 12 with a bit more detail on results for the quarter. Q1 2020 consolidated GAAP earnings were $0.68 per share compared to $0.62 per share in 2019. In the Q1 of 2020, GAAP earnings were adjusted for depreciation expense that would have been recorded in the quarter related to the New York subsidiary assets had they not been classified for accounting purposes as assets held for sale. Also, 2019 GAAP earnings were adjusted for a reduction in the settlement liability related to the Freedom Industries Chemical spill.
Excluding these two adjustments, earnings per share as adjusted increased 0.06 dollars per share or 9.8 percent driven primarily by growth in the regulated business. The regulated business segment results increased $0.08 per share or an increase of 13.6 percent compared to 2019 earnings. The market based business results increased $0.01 per share and the parent company decreased 0.03 dollars per share compared to 2019, primarily reflecting higher interest expense to support growth in the business. Moving on to Slide 13, regulated operations increased $0.08 per share in total. We saw a $0.14 per share increase from additional authorized revenue and surcharges to support infrastructure investment, acquisition and organic growth.
O and M expense increased $0.06 per share and depreciation increased $0.03 per share both to support regulated acquisitions and growth. Also results reflect the $0.03 per share benefit primarily related to lower pension expense from a higher assumed return on assets used to set expense for 20 20. The market based businesses' 1st quarter results increased compared to 2019 primarily by the Homeowner Group's organic growth and contract price increases. Also as Walter already mentioned, we expect Joint Base San Antonio and the United States Military Academy at West Point, New York to assume operations by the Q2 of 2020. And finally, the parent results decreased $0.03 per share, primarily reflecting higher interest expense to support growth in the regulated business.
Moving on to Slide 14, the regulated businesses received $53,000,000 in annualized new revenue in 2020 and this includes 18,000,000 from step increases and $35,000,000 from infrastructure surcharges. We have also filed requests and are awaiting final orders on the 4 rate cases and 3 infrastructure surcharge proceedings for a total annualized revenue request of $224,000,000 The continued successful execution of our regulatory strategy is a key element of our ability to consistently deliver on these financial results. Before I wrap up on slide 15, let me add a few additional thoughts related to the expected implications of COVID-nineteen. First, as it relates to demand for our services, American Water has a predominantly residential customer base. Residential revenues, including bulk sales, are about 69%.
Commercial is 21%, mostly in the food and beverage sector, and industrial is only 4% of our total revenue. Our very early indications are that our residential load is higher and our commercial and industrial loads are trending down as business close and certain other slowdowns occur. Disconnections and late fees have been suspended and disconnection notices have stopped as Walter mentioned earlier. We have also reconnected customers previously disconnected for non payment and suspended reconnection fees. This is critical to our customers as they work through this difficult situation and we currently don't expect the impact of this temporary measure to be material.
It's too early to tell how customers' overall ability to pay will be impacted by COVID-nineteen, so estimating uncollectible accounts exposure to this risk is not yet possible. As is evidenced by regulatory actions across the country to date, we expect issues like this will be addressed timely and certainly in future rate cases at the very least. We will work closely with regulators in our jurisdictions on how the cost of this pandemic will be treated recovery purposes. As Walter mentioned, we invested capital of $457,000,000 in the Q1 of 2020 to better serve our customers. At this point, we believe our regularly scheduled capital projects will continue as planned, perhaps with some slowdowns that could be made up later in the year.
So I don't believe we'll have any adjustments to our 2020 CapEx levels at this time. Monitor our key suppliers and to date have had no major disruptions to our supply chain. Our key distributors are reporting an excess inventory of materials like pipes, valves, hydrants, couplings and our chemical providers are meeting our needs and are reporting no shortages as of this point. As we think about the impact of COVID-nineteen on our market based businesses for military services, O and M operations currently continue as normal, subject to each installation's individual requirement. As you know, our services are deemed essential, so we continue to do what the Department of Defense has hired us to do, which is to deliver safe, clean and reliable water to our military base partners.
For homeowner services, while development of new partner relationships may be delayed somewhat, we believe we can maintain our customer base during periods of economic downturn and that Homeowners really do see value in these products that protect them against large unexpected expenses. And perhaps maybe one final comment before I talk about how we've addressed liquidity. I'd simply mention that our pension plans were funded at just over 80% as of year end 2019. And though there has been much volatility in the equity markets, as you all know, I'd remind you that the pension obligation remeasurement will be done at the end of 2020. Moving to Slide 16, as it relates to liquidity, obviously the COVID-nineteen pandemic has caused a great deal of uncertainty and volatility in the debt capital markets.
And like many others, we some constraints in the commercial paper market and we have now seen a large general loosening in that area. We've been focused on liquidity since the situation really accelerated. In addition to our existing $2,250,000,000 revolving credit facility that supports working capital needs and capital spending, on March 20, we entered into a $750,000,000 3.64 day term loan at a very favorable rate of LIBOR plus 80 basis points. And we have drawn on that term loan at $500,000,000 and we're holding that amount in cash currently. As part of our planned financing for 2020, we executed on the issuance of $1,000,000,000 in long term debt on April 14.
The issue consisted of $500,000,000 2.8 percent coupon senior notes due 2,030 and $500,000,000 3.45 percent coupon senior notes due 2,050. The proceeds from the long term debt issuance were used primarily to repay outstanding commercial paper obligations draws against our revolving credit facility. We're confident we have sufficient liquidity available for the foreseeable future with $2,800,000,000 available at the end of April. Moving on to Slide 17, let me summarize now. As Walter said, we expect our 20 20 adjusted EPS to be in the range of $3.79 to $3.89 per share, which is consistent with the guidance range we last announced in February 2020 and which should have been identified as an adjusted guidance range at that time.
Our 2020 GAAP earnings guidance range is $3.85 to $3.95 per share. The difference of $0.06 relates to the expected annual depreciation on the New York subsidiary assets, which have been presented as assets held for sale. With the accounting treatment of assets held for sale, GAAP requires a depreciation cease on those assets. And the only adjustment currently anticipated between our expected GAAP results and our expected adjusted earnings per share results is that $0.06 of depreciation expense. We have reflected $0.01 per share of that in the 1st quarter reconciliation of GAAP EPS to adjusted EPS.
As Walter also mentioned, we are affirming our long term earnings compounded annual growth rate expectation on an earnings per share basis of a range of 7% to 10%, while investing capital in the range of $8,800,000,000 to 9.4 $1,000,000,000 over the next 5 years. The decades of capital investment need continue and drives our $20,000,000,000 to $22,000,000,000 of investment over the next 10 years. The fragmented water and wastewater landscape continues to provide what we see as a growing pipeline for acquisition. The capital light market based businesses continue to increase customer experience and generate cash. And simply put, our business model and resulting quite resilient and we have built it in a way to endure challenges like this.
Finally, moving on to Slide 18, while working through these very difficult and turbulent times, we continue to deliver strong consolidated results. Our total company consolidated actual return on equity is 10.6% for the 12 months ended March 31, 2020. Regulatory execution along with strong results from our market based businesses allows us to consistently deliver on our earnings commitment. We believe that delivering on results combined with our strong earnings growth and superior dividend growth expectations continue to provide excellent value for our investors. We continue to be a top leader in dividend growth with our announced increase as a dividend 10%, we have grown our dividend at a compound annual growth rate of approximately 10% or more over the last 5 years, and we expect to continue that growth well into the 7% to 10% range.
Also, we continue to target a dividend payout ratio of 50% to 60% of earnings. And with that, let me simply turn it back to Walter for a few additional remarks.
Thanks, Susan. It's been a month since I've had the honor of leading this company as CEO. I want to take a moment to thank all the employees of American Water. Their response to the current health crisis has been simply incredible. Not only are we providing essential services while keeping safety as our top priority, We've invested in our water and wastewater systems, welcome new customers who close acquisitions and work with state leaders, regulators and other key officials.
We've also had a significant increase in customer satisfaction. We've achieved all this since the beginning of the year. Our company will emerge strong from this COVID-nineteen pandemic. How we work together throughout this crisis will have a lasting positive impact on our culture of trust and teamwork. I personally can't wait to once again get out to our business, to our plants, to our operating centers, to our call centers and say thanks to our employees.
They're simply the best. With that, we're happy to take your questions.
Thank you. We will now begin the question and answer Our first question today will come from Durgesh Chopra with Evercore ISI. Please go ahead.
Hey, good morning team. Thank you for taking my question.
Good morning.
Hi, Durgesh.
Hey, Walter and Susan. Maybe appreciate all the color. Just any quantifiable trends, I know it's early, on the regulated side in terms of you mentioned residential demand being higher and commercial industrial perhaps slower, but any quantifiable trends on the into April in your regulated subsidiaries? And then also, are you seeing any non payments or no payments in your market based businesses? I know it's early on, but any color you could provide, I appreciate it.
Okay, Durgesh. Thanks. Susan, you want to take that and then I'll jump in at the end.
Sure. Let me make just a few comments, Durgesh. And again, I would reiterate it is early. And as we think about across all of our jurisdictions, the various states implemented restrictions and stay at home orders at different times. So, obviously, depending on when that occurred in each of our jurisdictions, that's going to impact when we really started to see a shift in demand expectations.
I'd again reiterate what I said in our prepared remarks, roughly 70% of our load is residential. And as you can imagine, obviously, folks are at home. So, we are seeing in our early data that residential sales are up. And again, I hesitate to quantify it because it's still so early. In some cases, we may have 6 weeks' worth of demand data.
In other cases, we may only have 3 or 4 weeks, again, depending on when those measures were put in place. And in some cases, we have real time meters, some cases we don't. So we have to wait until we have actual billing data. But we certainly are seeing residential usage up. On the commercial side, again, it depends on the jurisdiction and it depends on the mix of customers in a particular state.
But as you can imagine, commercial is trending down because of business closures, restaurants closing, etcetera. And on the industrial side, while in a particular state, it can be a material change. And I'll give you an example. In Kentucky, we've got a large plant there, an auto manufacturer. So, in the state of Kentucky, we're seeing a pretty substantial decline in industrial sales because of the concentration there.
But overall, our industrial sales makeup is only about 4% of our total. So again, as you sort of roll all that together, residential is up, the other 2 are down. Our current thinking is that they may tend to offset each other. But I think it also depends on how long this goes. It depends on sort of a variety of factors in each of the jurisdictions.
So again, I'm not getting directly to you or quantify it, but hopefully a bit more color there, it's helpful. On the collection side, again, I'd say it's too early to really see much on the regulated side and we certainly haven't seen anything on the market based side either that gives us immediate concern about collection. On the market based side in particular, I don't think we expect much in the way of difficulties there. Again, we think customers appreciate and are willing to sort of stay with these programs because it helps them avoid unexpected future expenditures. So we're quite confident we'll be able to retain customers and with that goes the ability to collect on the fees under those contracts.
Yes. And I think that the key to the usage again back to what Susan was talking about is when do these states get back to normal, when do they start opening up, a lot of the commercial establishments and industrial and obviously we're tracking that very closely as we work with the Governor's offices and our plans and working with them.
Got it. That's super helpful guys. And then maybe just can you update us on the timing of the New York American water sale? Is that still expected to close? I believe it was late this year, is that still on track?
Yes, we're still moving forward with the sale. There's no delay in the regulatory process. We're working very well with Liberty and we expect to close on that late this year or early in 2021, Durgesh.
Got it. And then just final one for me, I apologize. In terms of just some of your peers have talked about O and M savings, Walter and Susan, just folks staying home, less mileage expense, less expenses in general travel, meals, etcetera. Are you seeing that? And is it sort of what was the experience, I guess, maybe it's still early to tell, but any color into what you might have seen versus your original plan year to date in terms of those expense savings?
Let me start and then I'll hand it off to Susan. I mean, Durgesh, as you know in my prepared remarks and over the years, we focus very closely on O and M expenses. And so that's part of our culture. We're going to continue to do that. We're going to continue to drive O and M expenses down so that when we invest, we're asking our customers to pay for that investment and not the O and M cost.
So again, it's part of our culture. We just it's embedded, everybody understands it. And that's again the continued focus that we're going to have in this business, not just during the pandemic as you know. So I'll ask Susan for additional comments.
Yes, I think Walter, you're right on target. The only thing I would add maybe just as a specific examples and you mentioned travel is 1, obviously, we've implemented no travel across all of our jurisdictions. But what you might not be thinking about is added PPE that we've added for all of our employees, including office employees. So there's added expense there, while we may have saved in other areas. So the bigger picture is we are still on target for our earnings expectations for the year.
And I think our ability to navigate all the variables and the result is our expectations remain the same, I think that gives you a pretty good indication of how we're managing.
Super guys. Thank you. And Walter, your Q1 as CEO, congrats on a very solid quarter.
Thank you, Durgesh. Appreciate it.
Now our next question will come from Richard Verdi with Coker and Palmer. Please go ahead.
Hi, good morning, everyone. Thank you for taking my call. And, Walter, I just wanted to say congrats on your first call as CEO of the company. I think it was great so
far. Thanks, Rich.
Sure. My pleasure. I just wanted to start very quickly with the military operation. Typically, a turnaround on new contracts can take 12 to 18 months and it's the same with your peers obviously. And so it just seems kind of quick of a turnaround that we're going to start to see work being done here here in the Q2 of 2020.
And I was just wondering if you could talk a little bit about what made that turnaround so quick and when we could start to maybe see positive impact on the financials from such turnaround?
Yes. On our 2 new bases, we've been in transition services since we got the award. And we work very well at both installations with Joint Base San Antonio and West Point showing the value to the communities and we're going to be starting full operations as I said in my prepared remarks in the Q2. So I think it's the trust and confidence that they have in our military services group to take over their water and wastewater systems and do it in a professional and an amazing way as our group does with our military services group. So again, we're really proud to have those 2 new installations, particularly West Point, one of the most important military installations in the country.
I'm a graduate of West Point. Right. I like to say that, but no, we're really proud of our military services group. They've developed a tremendous reputation and brand with the government. And I think it's the confidence that they have in our group that's moved those forward as quickly as we have.
Okay. Thank you for that, Walter. And then kind of a follow-up to that. What sort of indication has the company received on potential delays in new awards, new bases being awarded because of the COVID crisis. Is that doing any at all or what's kind of going on there?
Yes. So we're in 5 active solicitations right now and we expect still this year to hear on 3 of those. So we're not seeing any measurable delay on behalf of the government and moving those forward.
Okay, okay, perfect. Thank you. And then for the municipal acquisition front, do you think that COVID could cause I mean, what's the feeling internally there where COVID causes municipalities to somewhat become cash strapped and maybe accelerate sale of their water systems to American Water?
Well, we believe looking at the impact that COVID-nineteen crisis is going to have on communities that there are going to be a lot of municipalities that are facing financial challenges. And so when you look at the efforts that we've put in already over the years of building our pipeline, and again, our pipeline is 650,000 customer connections. We've worked on fair market value legislation. We've worked on water quality accountability legislation. And when you really add this COVID-nineteen crisis in, we think it will have an impact on the number of communities that we're having discussions with.
So, we're being able to show what we can do in providing solutions for them. We do think it's going to have an impact on those discussions, absolutely.
Okay, great. Thank you. And then just I know I'm dragging on, just the last question here. Thank you for the time. When you look at the guidance for the year of $3.79 to $3.89 and you look into the model and you also think back to the Analyst Day of how the company now intends to issue equity at some point over the next five years, debt to capital is targeted to come down to the 59% to 60% range over time.
And then we have a CapEx plan and then there's also COVID now. At least in my model, when you start to bring down diluted earnings per share below that 3 $79 figure into a low $3.70 s the flow through impact of that is that your cash your operating cash drops and you either need to make up for that by issuing debt, which will increase your debt to total capital before you issue more equity, which could possibly dilute the EPS growth rate or you peel back on CapEx. And no one knows what you guys are doing a great job, obviously, at CIFAR, but no one knows, right? To go on for a long time, it could be really unfavorable. So let's just assume a doomsday scenario.
What would be the where would the company look to try to remedy the situation, but it also tried to keep the long term growth guidance in a range. Does the company say, okay, we're going to let our debt ratios maybe kind of lift at risk of further credit downgrades? We're going to do we issue more equity? Do we peel back CapEx? I mean, I'm sure you guys have kind of ran scenarios internally there.
What's kind of a doomsday scenario? What would be a strategy if that occurred?
Okay. I think Susan, you want to take that one?
Yes. Rich, there's a lot in that question, obviously. And I'd start with just simply saying that where we are today, we are confident in our ability to hit all of the various targets we've laid out. And I think we said that sort of throughout our remarks. We like I'm sure everyone has done a variety of scenarios in sort of worst case, best case types of analyses.
And that's just good financial planning. I would say to you that as you outlined them in all of your remarks, we would have many levers to pull. And I'm probably not going to comment beyond that. I just think the strength of the balance sheet and the strength of our credit, the diversity of our operations, there's a whole variety of things about our business model that are set up in a way that makes it possible for us to navigate through situations like this. I made the comment in my remarks that, again, we're built on fundamentals and we believe this is a very resilient business and I believe that to be absolutely true.
So to the extent we've got to look at different approaches to manage whatever crises come along, I'm confident in our ability to do so.
Okay. That's great color. Thank you for that, Susan. And I just actually have one more question. I'll wrap it up with this.
Can you guys just refresh my memory again, please, with the $379,000,000 to $389,000,000 guidance, assuming that was created around a magic number of an expectation of $384 for the end of the year, the midpoint of the guidance. What must happen from that $384,000,000 for 379 to be reported? What would need to happen to have that low end of the guidance be reported?
Yes. Susan, you want to take that? I mean, mostly it's weather impact, as you know.
Right.
Okay. Okay. Okay.
Yes. I that's all I would say. Yes, I just think just variables like that, that are beyond our control. And that's why we give a range to be able to account for things like that. I think weather would be the largest potential impact.
Okay, great. Okay, great. I appreciate the time guys. Thank you.
Yes. Thanks, Rich.
Thanks, Rich.
Our next question will come from Jonathan Reeder with Wells Fargo. Please go ahead.
Hey, good morning, Walter and Susan. Hope you're all having a good day.
Good morning.
It was nice for Susan
to step aside right when the pandemic was coming down the pikes towards you, right?
Timing is everything, isn't it, Jonathan?
It is. I know you said you expect constructive treatment, but have any of your largest states like PA or New Jersey, Missouri, Illinois taken concrete action with respect to the treatment recovery of incremental COVID-nineteen costs?
Susan, you want?
Yes. And I'm going to get to sort of an analysis here we've done. We've actually obviously been active with regulators across all the jurisdictions monitoring their actions. And then, we certainly developed our own strategy on how we would approach. But we know for certain that California, Maryland, Virginia have addressed.
They've already issued orders on cost deferrals. We have pending proceedings in Illinois and Iowa to do similarly, and we have discussions ongoing in every state but Hawaii, which is easier to probably say the ones that we don't have. So active discussions or actions already taken across our jurisdictions.
Okay. That's great. And then, Walter, can you maybe talk about the calculus on your end as well as the feedback in the states where you have major rate requests pending? I think you're planning on filing another major rate case yet this year in, I forget if it was Missouri or Illinois, but any apprehension with being in for rates, what many customers are facing these economic hardships? You've seen some companies kind of defer filing requests or extend out the timeline, stuff like that, but it sounds like for you guys it's kind of full steam ahead in some regards.
Yes, Jonathan, let me say first that we're very sensitive to the situation that our customers are facing right now. We've been investing as you know significant amounts in our systems and this is really getting a recovery in that investment. And if you look to Pennsylvania, I know we did file last week, but those rates will not be effective for 8 to 10 months. So we took that into consideration as we made that decision. New Jersey was already filed in December, so we continue to work with the commission on that and in Virginia and California the same.
But we did look at that very closely, but again because of the timing, we felt like filing now for an outcome that's in 2021 is a reasonable decision on our behalf.
And Walter, I might just add to that, that we certainly are working closely with regulators around this very question. And we have not received direction or signals really from regulators that we should not proceed sort of as usual. So that's a different answer than customer considerations. It's really just also taken into account what regulators are expecting and we've not really been pushed to delay the normal process so far.
Got it. That's helpful information. And then the last question ranges on the military front. Do you expect any new bases will be awarded through the RFP process later this year to either AWK or one of your competitors?
Yes, that's right, Jonathan. We of the 5 that we're pursuing, all indications are they'll award 3 this year.
Great. Well, good luck on getting those and looking forward to the update and stay safe and strong through the pandemic. Appreciate the time. Well,
I appreciate that, John. Thank you.
Thank you, John.
This will conclude today's question and answer session. I would like to turn the conference back over to Walter Lynch for any closing remarks.
Well, thank you all for participating in our call today. Please know that we value you as investor owners and as the financial analysts who research our company for the benefit of your clients and their futures. We always want to be open and transparent in stock. If we've not been able to address your question or if you have additional questions, please call Ed and Ralph and they'll be happy to help. Stay safe and thanks again for listening.
Have a nice day everybody.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.