Risk Factors Update Summary

• Water Utility Services' operating revenue is generated primarily from the sale of water at rates authorized by state public utility commissions. If the Regulators disagree with calculations of balancing and memorandum accounts, adjustments may adversely affect results of operations.
• Under a 2007 Connecticut law, PURA authorizes regulated operations through WISC, similar to WICA in Connecticut. There is no guarantee that Regulators will approve applications to recover all costs, including regulatory assets and liabilities.
• Fluctuations in customer demand for water due to seasonal changes or conservation efforts may impact operating results. For example, a drought may lead to lower water usage by customers, affecting revenue.
• Water Utility Services' reliance on information technology exposes them to cybersecurity risks. Any disruption compromising information could lead to liability and business operation impacts. Compliance with privacy laws like CCPA and CPRA is crucial to avoid legal consequences.
• Water Utility Services face risks from industrial operations, including chemical spills and mechanical failures, which could result in property damage, environmental harm, and legal proceedings. Shutdowns or losses from these risks could significantly impact profitability and operations.
• The business and financial performance of Water Utility Services may be affected by union agreements, with a significant number of union members. Delays in funding capital expenditures and limited access to liquidity through capital markets could impact operations.
• Water Utility Services must comply with various financial covenants and restrictions related to debt levels and revenue bonds. Failure to meet these requirements may lead to default events, affecting financial conditions.