Capitaliza on Rate Study January 2019 - Oklahoma Capitalization... · 2019-04-25 · Executive Summary . The income approach to value converts projected future income or cash flow

Capitaliza on Rate Study

January 2019

Oklahoma Tax Commission

Ad Valorem Division

Public Service Sec on

Post Office Box 269060

Oklahoma City, OK 73126‐9060

405‐319‐8200

EXECUTIVE SUMMARY

Executive Summary The income approach to value converts projected future income or cash flow into an estimate of present value. The accuracy of this approach is no greater than the validity of the assumptions used to estimate the key variables, particularly the capitalization rate variable. The mathematical techniques used in the approach convert those assumptions into an estimate of current market value. This booklet contains a study of each of the eight state assessed industry groups in Oklahoma. Industry data was gathered by group as identified by Value Line Investment Survey published from the period of November 2018 through January 2019. Generally accepted appraisal procedures were used to estimate the cost of capital for debt and equity. The long term debt cost is the cost for a particular risk class of debt on the lien date. The equity rate reflects the rate of return or compensation that will satisfy the risk that a prospective purchaser would assume by investing in the property. Authority for Valuation The Oklahoma Tax Commission, Ad Valorem Division, is charged with the responsibility for the valuation of Railroad, Air Carrier, and Public Service Corporation property in accordance with Title 68, Oklahoma Statutes, Section 2808. The term “public service” includes electric companies, fluid or product pipeline companies, gas distribution and transmission companies, telecommunication companies, and water companies. Band of Investment, Capital Structure A representative capital structure is developed for each industry using the market value of equity and the book value of long term debt. Using Value Line Investment Survey the market value of equity can be calculated by multiplying the number of shares outstanding by the listed stock price, or by utilizing the given market capitalization number already calculated. The debt components are book amounts unless market amounts are readily available and predetermined to be significantly different. Preferred stock was excluded in the calculations for all industry types. The rates of debt and equity capital are weighted by the respective amounts of such capital deemed most likely to be employed by a prospective buyer. The result is a representative or typical capital structure of an industry group of companies, not that of the present owner. Cost of Debt Cost of debt was calculated as the twelve month bond yield average from Mergent Bond Record for public utility and industrial bonds utilizing that bond rating perceived as typical for each industry.

Executive Summary Cost of Capital Equity rate calculations were derived upon review of Discounted Cash Flow, Capital Asset Pricing Model (CAPM), and Earnings Price Ratio. Discounted Cash Flow (Gordon Growth Model) allows for the calculation of two rates within its model utilizing the dividend yield, dividend growth rate estimates, and earnings growth rate estimates as listed in Value Line Investment Survey. Cost of capital being calculated for dividends by adding the dividend yield and the dividend estimate. Similarly the cost of capital for earnings is calculated by adding the dividend yield and the earnings estimate. No calculation is utilized where the resulting yield or growth estimate equity rate is below the chosen cost of debt for each respective industry.

Capital Asset Pricing Model (CAPM) in the application of the CAPM, the most sensitive component affecting the outcome is the estimate of the beta statistic. A choice of time frames and frequencies of measurement in the calculation of the beta can produce significantly different results. Another factor in the use of beta is the choice of whether to use an unadjusted beta or a beta adjusted to reflect the fact that betas revert to the mean over time. For this study the company levered betas as developed and presented in The Value Line Investment Survey for the selected industry groups are used.

Earnings Price Ratios (E/P Ratio) utilizing Value Line Investment Survey for the selected industry groups, the E/P Ratio was calculated with the projected earnings divided by the recent price. Flotation Costs Flotation costs are those costs associated with the issuance of new securities and include both the underwriting spread and the costs incurred by the issuing company from the offering. Financial theory suggests and evidence supports that firms do not typically issue new common equity as a matter of common practice. Therefore in determining a capitalization rate, no adjustment will be made in the capitalization rate or the income stream for hypothetical flotation costs. Flotation costs actually incurred may be accounted for in the income stream. Utilization of Other Studies and Data Valuation staff has considered and where appropriate utilized data and capitalization studies submitted by assessed and interested parties in the development of the derived rates. The capitalization rates published in this study are intended to be applied to the unitary operations of those companies subject to central valuation and assessment by the Oklahoma State Board of Equalization.

Industry Capitalization Rate Summary

Mergents 2018 Twelve Month Bond Yield Averages

Equity Debt Market Long Term CapitalizationIndustry Rate Rate Capitalization Debt Rate

AirlineCargo 13.70% 4.93% 81.50% 18.50% 12.08%

Passenger 13.75% 4.93% 75.02% 24.98% 11.55%

Electric 10.00% 4.67% 64.71% 35.29% 8.12%

Fluid Pipeline (Petroleum Integrated) 13.10% 4.93% 85.84% 14.16% 11.94%

Gas Distribution (Natural Gas Utility) 10.00% 4.67% 70.07% 29.93% 8.40%

Gas Transmission (Natural Gas Diversified) 14.00% 4.93% 61.74% 38.26% 10.53%

Oil/Gas Distribution 15.10% 4.93% 55.21% 44.79% 10.54%

Pipeline MLPs 14.60% 4.93% 62.95% 37.05% 11.02%

Railroad 13.55% 4.93% 83.96% 16.04% 12.17%

Telecommunications Services 12.80% 4.93% 62.90% 37.10% 9.88%

Telecommunications Utility 14.20% 4.67% 34.84% 65.16% 7.99%

Water 9.90% 4.67% 69.39% 30.61% 8.30%

Airline

Industry

2019 Capitalization Rate Study Airline Industry Notes

• Recognizing the different operational services as provided by this industry group, it was broken out into two segments, cargo and

passenger service. • From the passenger service segment, Bristow Group, Inc. was excluded as their core business involves helicopter transportation of

personnel from onshore bases to offshore drilling rigs, platforms, and other installations. WestJet Airlines Ltd. was excluded due to Value Line information listed in Canadian dollars.

• Staff considered capitalization studies submitted by:

No Submissions

• Staff relied upon the results of the following models and appraisal judgment in the development of equity rates:

1. Discounted Cash Flow 2. Capital Asset Pricing Model, Ex-Post and Ex Ante 3. Earnings/Price Ratio

Industry Capitalization Rate


Equity Market Long Term CapitalizationIndustry Rate Capitalization Debt Rate

AirlineCargo 13.70% 81.50% 18.50% 12.08%

Passenger 13.75% 75.02% 24.98% 11.55%

Industry Equity Rate Summary

AirlineCargo

CapM Ex Post Equity Rate 10.67%

CapM Ex Ante Equity Rate 17.52%

DCF (Dividend) Equity Rate 13.35%

DCF (Earnings) Equity Rate 21.23%

Earnings Price Ratio 11.82%

Passenger






CapM Equity Rates

b* Risk Free Rate (2.84%) plus Risk Premium Rate (6.91%)c* Risk Free Rate (2.84%) plus Risk Premium Rate (12.95%)Value Line Investment Survey, November 2018 through January 2019, Morningstar

Ex Post Ex Ante Value Line Ex Post Ex AnteRisk Premium Risk Premium Beta CAPM Equity Rate CAPM Equity Rate

Industry b* c* d (((b-2.84%)*d)+2.84%) (((c-2.84%)*d)+2.84%)

AirlineCargo 9.75% 15.79% 1.13 10.67% 17.52%

Passenger 9.75% 15.79% 1.21 11.23% 18.56%

Discounted Cash Flow (Gordon Growth)

Value Line Investment Survey, November 2018 through January 2019

Value Market Dividend Equity Rate Equity RateLine Capitalization Yield Dividends Earnings Dividend Earnings

Industry Company Strength d e f g (e+f) (e+g)

AirlineCargo

Atlas Air Wordwide Holdings B+ 1,400,000,000 0.00% 0.00% 39.50% 39.50%FedEx Corp. A++ 58,600,000,000 1.20% 15.50% 11.00% 16.70% 12.20%United Parcel Service, Inc. A 94,000,000,000 3.50% 6.50% 8.50% 10.00% 12.00%

Median 58,600,000,000 13.35% 12.20%Arithmetic Mean 51,333,333,333 13.35% 21.23%

Passenger Alaska Air Group , Inc. B+ 8,300,000,000 1.90% 8.50% 4.50% 10.40% 6.40%Allegiant Travel Company B++ 2,300,000,000 2.30% 7.00% 5.00% 9.30% 7.30%American Airlines Group B+ 17,400,000,000 1.10% 12.00% 3.50% 13.10% Copa Holdings, S.A. B++ 3,400,000,000 4.40% 7.00% 21.00% 11.40% 25.40%Delta Air Lines, Inc. B+ 39,000,000,000 2.50% 26.00% 10.50% 28.50% 13.00%Hawaiian Holdings, Inc. B+ 1,900,000,000 1.30% 58.50% 5.00% 59.80% 6.30%JetBlue Airways Corp. B++ 5,600,000,000 0.00% 0.00% 5.50% 5.50%SkyWest, Inc. B+ 2,900,000,000 0.70% 15.00% 14.50% 15.70% 15.20%Southwest Airlines A 30,500,000,000 1.20% 17.50% 11.50% 18.70% 12.70%Spirit Airlines, Inc. B++ 3,700,000,000 0.00% 0.00% 5.00% 5.00%United Continental Holdings, Inc. B 25,200,000,000 0.00% 0.00% 2.50%


Growth Estimate

E/P Ratio


Value Market Recent Projected E/PLine Capitalization Price Earnings Ratio

Industry Company Strength c d e (e/d)

AirlineCargo

Atlas Air Wordwide Holdings B+ 1,400,000,000 54.82 9.85 17.97%FedEx Corp. A++ 58,600,000,000 222.51 20.00 8.99%United Parcel Service, Inc. A 94,000,000,000 109.40 9.30 8.50%

Median 58,600,000,000 8.99%Arithmetic Mean 51,333,333,333 11.82%

PassengerAlaska Air Group , Inc. B+ 8,300,000,000 67.58 7.45 11.02%Allegiant Travel Company B++ 2,300,000,000 121.87 14.20 11.65%American Airlines Group B+ 17,400,000,000 37.78 6.45 17.07%Copa Holdings, S.A. B++ 3,400,000,000 79.81 12.00 15.04%Delta Air Lines, Inc. B+ 39,000,000,000 56.82 8.90 15.66%Hawaiian Holdings, Inc. B+ 1,900,000,000 37.15 5.60 15.07%JetBlue Airways Corp. B++ 5,600,000,000 18.21 2.15 11.81%SkyWest, Inc. B+ 2,900,000,000 54.92 7.25 13.20%Southwest Airlines A 30,500,000,000 52.73 5.95 11.28%Spirit Airlines, Inc. B++ 3,700,000,000 53.41 5.50 10.30%United Continental Holdings, Inc. B 25,200,000,000 92.60 13.00 14.04%


Capital Structure


Value Market Long Term Debt/Equity Percentage PercentageLine Capitalization Debt Ratio Equity Debt

Industry Company Strength c d (d/c) (c/(c+d)) (d/(c+d))

AirlineCargo

Atlas Air Wordwide Holdings B+ 1,400,000,000 2,280,800,000 1.63 38.04% 61.96%FedEx Corp. A++ 58,600,000,000 15,241,000,000 0.26 79.36% 20.64%United Parcel Service, Inc. A 94,000,000,000 20,101,000,000 0.21 82.38% 17.62%

Median 58,600,000,000 15,241,000,000 0.26 79.36% 20.64%Arithmetic Mean 51,333,333,333 12,540,933,333 0.70 66.59% 33.41%Weighted Average 79,687,792,208 18,089,673,506 81.50% 18.50%

PassengerAlaska Air Group , Inc. B+ 8,300,000,000 1,684,000,000 0.20 83.13% 16.87%Allegiant Travel Company B++ 2,300,000,000 658,400,000 0.29 77.74% 22.26%American Airlines Group B+ 17,400,000,000 22,274,000,000 1.28 43.86% 56.14%Copa Holdings, S.A. B++ 3,400,000,000 918,700,000 0.27 78.73% 21.27%Delta Air Lines, Inc. B+ 39,000,000,000 8,115,000,000 0.21 82.78% 17.22%Hawaiian Holdings, Inc. B+ 1,900,000,000 612,600,000 0.32 75.62% 24.38%JetBlue Airways Corp. B++ 5,600,000,000 1,290,000,000 0.23 81.28% 18.72%SkyWest, Inc. B+ 2,900,000,000 2,751,700,000 0.95 51.31% 48.69%Southwest Airlines A 30,500,000,000 3,100,000,000 0.10 90.77% 9.23%Spirit Airlines, Inc. B++ 3,700,000,000 1,770,900,000 0.48 67.63% 32.37%United Continental Holdings, Inc. B 25,200,000,000 13,334,000,000 0.53 65.40% 34.60%


Beta


Value LineIndustry Company Levered Beta

Airline, Selected ComparablesCargo

Atlas Air Wordwide Holdings 1.35FedEx Corp. 1.15United Parcel Service, Inc. 0.90

Median 1.15Arithmetic Mean 1.13

PassengerAlaska Air Group , Inc. 1.05Allegiant Travel Company 0.85American Airlines Group 1.30Copa Holdings, S.A. 1.40Delta Air Lines, Inc. 1.20Hawaiian Holdings, Inc. 1.25JetBlue Airways Corp. 1.20SkyWest, Inc. 1.45Southwest Airlines 1.15Spirit Airlines, Inc. 1.25United Continental Holdings, Inc. 1.25


Beta



Airline, Value LineAlaska Air Group , Inc. 1.05Allegiant Travel Company 0.85American Airlines Group 1.30Atlas Air Wordwide Holdings 1.35Bristow Group Inc. 1.70Copa Holdings, S.A. 1.40Delta Air Lines, Inc. 1.20FedEx Corp. 1.15Hawaiian Holdings, Inc. 1.25JetBlue Airways Corp. 1.20SkyWest, Inc. 1.45Southwest Airlines 1.15Spirit Airlines, Inc. 1.25United Continental Holdings, Inc. 1.25United Parcel Service, Inc. 0.90WestJet Airlines Ltd. 0.75


Mergents 2018 Corporate Bond Yield Averages

Month Public Utility Industrial Aa A Baa Aaa Aa A Baa

January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%

Corporate by Groups Public Utility Bonds Industrial Bonds

Electric Industry

2019 Capitalization Rate Study Electric Industry Notes

• From the Electric Industry segment, Fortis, Inc. was excluded due to Value Line information listed in Canadian dollars. Evergy, Inc., a merger between Great Plains Energy and Westar Energy, was also excluded due to the lack of financial information.


No Submissions


1. Discounted Cash Flows 2. Capital Asset Pricing Model, Ex-Post and Ex-Ante 3. Earnings/Price Ratio




Electric 10.00% 64.71% 35.29% 8.12%

Industry Equity Rate SummaryElectric






CapM Equity Rates




Electric 9.75% 15.79% 0.63 7.20% 11.01%





Growth Estimate

ElectricAllete, Inc. A 4,100,000,000 2.90% 4.50% 3.50% 7.40% 6.40%Alliant Energy Corp. A 10,900,000,000 2.90% 6.00% 6.50% 8.90% 9.40%Ameren Corporation A 17,000,000,000 2.80% 5.50% 7.50% 8.30% 10.30%American Electric Power Company, Inc. A+ 39,000,000,000 3.50% 6.00% 4.50% 9.50% 8.00%CenterPoint Energy, Inc. B+ 14,000,000,000 4.10% 2.00% 3.50% 6.10% 7.60%CMS Energy Corporation B++ 15,000,000,000 2.90% 7.00% 7.00% 9.90% 9.90%DTE Energy Company B++ 22,000,000,000 3.20% 6.50% 7.50% 9.70% 10.70%Entergy Corporation B++ 16,000,000,000 4.10% 2.00% 1.00% 6.10% 5.10%MGE Energy Inc. A 2,200,000,000 2.10% 5.00% 7.50% 7.10% 9.60%OGE Energy Corp. A 8,000,000,000 3.70% 8.00% 6.00% 11.70% 9.70%Otter Tail Corporation A 1,900,000,000 2.90% 3.50% 9.00% 6.40% 11.90%Vectren Corp. A 6,000,000,000 2.70% 6.50% 5.50% 9.20% 8.20%WEC Energy Group, Inc. A+ 23,000,000,000 3.20% 6.00% 7.00% 9.20% 10.20%


E/P Ratio




ElectricAllete, Inc. A 4,100,000,000 80.12 4.00 4.99%Alliant Energy Corp. A 10,900,000,000 46.17 2.60 5.63%Ameren Corporation A 17,000,000,000 70.04 4.00 5.71%American Electric Power Company, Inc. A+ 39,000,000,000 78.42 5.00 6.38%CenterPoint Energy, Inc. B+ 14,000,000,000 28.05 1.50 5.35%CMS Energy Corporation B++ 15,000,000,000 52.57 3.00 5.71%DTE Energy Company B++ 22,000,000,000 119.17 7.75 6.50%Entergy Corporation B++ 16,000,000,000 88.98 6.25 7.02%MGE Energy Inc. A 2,200,000,000 64.68 3.35 5.18%OGE Energy Corp. A 8,000,000,000 40.07 2.50 6.24%Otter Tail Corporation A 1,900,000,000 47.88 2.80 5.85%Vectren Corp. A 6,000,000,000 71.91 3.50 4.87%WEC Energy Group, Inc. A+ 23,000,000,000 73.28 4.25 5.80%


Capital Structure




ElectricAllete, Inc. A 4,100,000,000 1,461,700,000 0.36 73.72% 26.28%Alliant Energy Corp. A 10,900,000,000 5,248,200,000 0.48 67.50% 32.50%Ameren Corporation A 17,000,000,000 7,614,000,000 0.45 69.07% 30.93%American Electric Power Company, Inc. A+ 39,000,000,000 20,870,000,000 0.54 65.14% 34.86%CenterPoint Energy, Inc. B+ 14,000,000,000 7,252,000,000 0.52 65.88% 34.12%CMS Energy Corporation B++ 15,000,000,000 8,944,000,000 0.60 62.65% 37.35%DTE Energy Company B++ 22,000,000,000 13,620,000,000 0.62 61.76% 38.24%Entergy Corporation B++ 16,000,000,000 15,802,000,000 0.99 50.31% 49.69%MGE Energy Inc. A 2,200,000,000 494,400,000 0.22 81.65% 18.35%OGE Energy Corp. A 8,000,000,000 2,896,800,000 0.36 73.42% 26.58%Otter Tail Corporation A 1,900,000,000 590,000,000 0.31 76.31% 23.69%Vectren Corp. A 6,000,000,000 1,978,900,000 0.33 75.20% 24.80%WEC Energy Group, Inc. A+ 23,000,000,000 9,119,000,000 0.40 71.61% 28.39%


Beta



Electric, Selected ComparablesAllete, Inc. 0.65Alliant Energy Corp. 0.60Ameren Corporation 0.55American Electric Power Company, Inc. 0.55CenterPoint Energy, Inc. 0.85CMS Energy Corporation 0.55DTE Energy Company 0.55Entergy Corporation 0.60MGE Energy Inc. 0.60OGE Energy Corp. 0.85Otter Tail Corporation 0.75Vectren Corp. 0.60WEC Energy Group, Inc. 0.50


Beta



Electric, Value LineAllete, Inc. 0.65Alliant Energy Corp. 0.60Ameren Corporation 0.55American Electric Power Company, Inc. 0.55CenterPoint Energy, Inc. 0.85CMS Energy Corporation 0.55DTE Energy Company 0.55Entergy Corporation 0.60Evergy, Inc.Fortis Inc. 0.60MGE Energy Inc. 0.60OGE Energy Corp. 0.85Otter Tail Corporation 0.75Vectren Corp. 0.60WEC Energy Group, Inc. 0.50




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Fluid

Pipeline

2019 Capitalization Rate Study Fluid Pipeline (Petroleum Integrated) Industry Notes

• From the Fluid Pipeline (Petroleum Integrated) Industry segment, Petroleo Brasileiro S.A. was excluded. While publicly traded, the

Brazilian Government is a majority holder of the common stock. Cenovus Energy Inc., Husky Energy Inc., and Suncor Energy, Inc. were excluded due to Value Line information listed in Canadian dollars.


Enterprise Products Partners, L.P. – Liquid Pipeline Industry






Fluid Pipeline (Petroleum Integrated) 13.10% 85.84% 14.16% 11.94%

Industry Equity Rate SummaryFluid Pipeline (Petroleum Integrated)






CapM Equity Rates




Fluid Pipeline (Petroleum Integrated) 9.75% 15.79% 1.29 11.75% 19.53%





Growth Estimate

Fluid Pipeline (Petroleum Integrated)BP p.l.c. B 137,000,000,000 6.00% 2.50% 0.00% 8.50% 6.00%CVR Energy, Inc. B 3,900,000,000 7.80% 10.00% 25.00% 17.80% 32.80%CVR Refining, LP B+ 2,400,000,000 16.00% 17.00% 27.00% 33.00% 43.00%Chevron Corp. A++ 228,000,000,000 3.80% 2.50% 0.00% 6.30% Delek US Holdings, Inc. B+ 3,200,000,000 2.70% 20.50% 0.00% 23.20% Exxon Mobil Corp. A++ 335,000,000,000 4.20% 3.00% 18.00% 7.20% 22.20%Hess Corporation B 16,900,000,000 1.80% 0.00% 0.00% HollyFrontier Corporation B++ 10,800,000,000 2.20% 3.50% 25.00% 5.70% 27.20%Imperial Oil Ltd. A 25,000,000,000 1.90% 8.50% 28.50% 10.40% 30.40%Marathon Petroleum Corp. A 43,800,000,000 3.30% 17.00% 14.50% 20.30% 17.80%Murphy Oil Corp. B 5,500,000,000 3.20% 6.50% 0.00% 9.70% Occidental Petroleum A 55,400,000,000 4.30% 3.00% 0.00% 7.30% PBF Energy, Inc. B+ 4,600,000,000 3.10% 2.50% 18.00% 5.60% 21.10%Par Pacific Holdings, Inc. B+ 750,000,000 0.00% 0.00% 0.00% Phillips 66 A+ 43,800,000,000 3.60% 10.00% 8.00% 13.60% 11.60%Royal Dutch Shell plc A+ 263,000,000,000 5.90% 2.50% 31.00% 8.40% 36.90%Total S.A. A++ 148,000,000,000 5.20% 5.50% 18.50% 10.70% 23.70%Valero Energy Corp. A+ 34,200,000,000 4.20% 9.50% 10.00% 13.70% 14.20%


E/P Ratio




Fluid Pipeline (Petroleum Integrated)BP p.l.c. B 137,000,000,000 40.92 5.70 13.93%CVR Energy, Inc. B 3,900,000,000 38.30 3.35 8.75%CVR Refining, LP B+ 2,400,000,000 15.96 3.75 23.50%Chevron Corp. A++ 228,000,000,000 119.42 10.00 8.37%Delek US Holdings, Inc. B+ 3,200,000,000 38.91 5.55 14.26%Exxon Mobil Corp. A++ 335,000,000,000 79.22 8.00 10.10%Hess Corporation B 16,900,000,000 56.96 2.75 4.83%HollyFrontier Corporation B++ 10,800,000,000 62.33 9.50 15.24%Imperial Oil Ltd. A 25,000,000,000 31.49 3.90 12.38%Marathon Petroleum Corp. A 43,800,000,000 63.41 8.50 13.40%Murphy Oil Corp. B 5,500,000,000 31.65 4.45 14.06%Occidental Petroleum A 55,400,000,000 73.36 6.30 8.59%PBF Energy, Inc. B+ 4,600,000,000 38.78 6.35 16.37%Par Pacific Holdings, Inc. B+ 750,000,000 16.49 2.40 14.55%Phillips 66 A+ 43,800,000,000 94.90 8.00 8.43%Royal Dutch Shell plc A+ 263,000,000,000 63.49 8.35 13.15%Total S.A. A++ 148,000,000,000 56.64 7.50 13.24%Valero Energy Corp. A+ 34,200,000,000 80.69 10.50 13.01%


Capital Structure




Fluid Pipeline (Petroleum Integrated)BP p.l.c. B 137,000,000,000 55,000,000,000 0.40 71.35% 28.65%CVR Energy, Inc. B 3,900,000,000 1,166,000,000 0.30 76.98% 23.02%CVR Refining, LP B+ 2,400,000,000 537,000,000 0.22 81.72% 18.28%Chevron Corp. A++ 228,000,000,000 29,854,000,000 0.13 88.42% 11.58%Delek US Holdings, Inc. B+ 3,200,000,000 1,830,000,000 0.57 63.62% 36.38%Exxon Mobil Corp. A++ 335,000,000,000 20,624,000,000 0.06 94.20% 5.80%Hess Corporation B 16,900,000,000 6,609,000,000 0.39 71.89% 28.11%HollyFrontier Corporation B++ 10,800,000,000 2,409,100,000 0.22 81.76% 18.24%Imperial Oil Ltd. A 25,000,000,000 3,859,000,000 0.15 86.63% 13.37%Marathon Petroleum Corp. A 43,800,000,000 18,423,000,000 0.42 70.39% 29.61%Murphy Oil Corp. B 5,500,000,000 2,903,900,000 0.53 65.45% 34.55%Occidental Petroleum A 55,400,000,000 10,198,000,000 0.18 84.45% 15.55%PBF Energy, Inc. B+ 4,600,000,000 2,176,000,000 0.47 67.89% 32.11%Par Pacific Holdings, Inc. B+ 750,000,000 395,300,000 0.53 65.49% 34.51%Phillips 66 A+ 43,800,000,000 11,021,000,000 0.25 79.90% 20.10%Royal Dutch Shell plc A+ 263,000,000,000 64,500,000,000 0.25 80.31% 19.69%Total S.A. A++ 148,000,000,000 41,100,000,000 0.28 78.27% 21.73%Valero Energy Corp. A+ 34,200,000,000 8,877,000,000 0.26 79.39% 20.61%


Beta



Fluid Pipeline (Petroleum Integrated), Selected ComparablesBP p.l.c. 1.25CVR Energy, Inc. 1.40CVR Refining, LP 1.10Chevron Corp. 1.25Delek US Holdings, Inc. 1.50Exxon Mobil Corp. 1.05Hess Corporation 1.70HollyFrontier Corporation 1.15Imperial Oil Ltd. 1.20Marathon Petroleum Corp. 1.40Murphy Oil Corp. 1.70Occidental Petroleum 1.20PBF Energy, Inc. 1.40Par Pacific Holdings, Inc. 0.90Phillips 66 1.25Royal Dutch Shell plc 1.25Total S.A. 1.30Valero Energy Corp. 1.20


Beta



Fluid Pipeline (Petroleum Integrated), Value LineBP p.l.c. 1.25CVR Energy, Inc. 1.40CVR Refining, LP 1.10Cenovus Energy, Inc. 1.20Chevron Corp. 1.25Delek US Holdings, Inc. 1.50Exxon Mobil Corp. 1.05Hess Corporation 1.70HollyFrontier Corporation 1.15Husky Energy Inc. 1.15Imperial Oil Ltd. 1.20Marathon Petroleum Corp. 1.40Murphy Oil Corp. 1.70Occidental Petroleum 1.20PBF Energy, Inc. 1.40Par Pacific Holdings, Inc. 0.90Petroleo Brasileiro S.A. (Petrobas) 1.85Phillips 66 1.25Royal Dutch Shell plc 1.25Suncor Energy Inc. 1.10Total S.A. 1.30Valero Energy Corp. 1.20




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Gas

Distribution

2019 Capitalization Rate Study Gas Distribution (Natural Gas Utility) Industry Notes

• From the Natural Gas Utility Industry segment, UGI Corp. was excluded as they presented to be primarily engaged in the marketing and

delivery of propane gas.


Northern Natural Gas Company -Tegarden & Associates Interstate Natural Gas Pipeline Industry Southern Star Central Gas Pipeline, Inc. – K.E. Andrews & CO.






Gas Distribution (Natural Gas Utility) 10.00% 70.07% 29.93% 8.40%

Industry Equity Rate SummaryGas Distribution (Natural Gas Utility)






CapM Equity Rates




Gas Distribution (Natural Gas Utility) 9.75% 15.79% 0.65 7.33% 11.26%





Growth Estimate

Gas Distribution (Natural Gas Utility)Atmos Energy Corporation A+ 11,000,000,000 2.10% 7.00% 7.50% 9.10% 9.60%Chesapeake Utilities Corporation B++ 1,400,000,000 1.80% 9.00% 8.50% 10.80% 10.30%New Jersey Resources Corp. A+ 4,400,000,000 2.30% 4.00% 9.50% 6.30% 11.80%NiSource Inc. B+ 9,400,000,000 3.00% 9.00% 18.00% 12.00% 21.00%Northwest Natural Holding Co. A 2,000,000,000 2.70% 2.50% 30.50% 5.20% 33.20%ONE Gas, Inc. A 4,500,000,000 2.40% 10.00% 10.50% 12.40% 12.90%South Jersey Industries, Inc. A 2,800,000,000 3.70% 4.00% 9.50% 7.70% 13.20%Southwest Gas Holdings, Inc. B++ 4,200,000,000 2.60% 6.50% 9.00% 9.10% 11.60%Spire Inc. B++ 4,100,000,000 2.90% 3.50% 6.50% 6.40% 9.40%


E/P Ratio




Gas Distribution (Natural Gas Utility)Atmos Energy Corporation A+ 11,000,000,000 99.34 5.15 5.18%Chesapeake Utilities Corporation B++ 1,400,000,000 84.33 4.50 5.34%New Jersey Resources Corp. A+ 4,400,000,000 50.18 2.95 5.88%NiSource Inc. B+ 9,400,000,000 25.93 1.80 6.94%Northwest Natural Holding Co. A 2,000,000,000 69.49 3.50 5.04%ONE Gas, Inc. A 4,500,000,000 85.10 4.75 5.58%South Jersey Industries, Inc. A 2,800,000,000 32.27 2.30 7.13%Southwest Gas Holdings, Inc. B++ 4,200,000,000 84.14 5.40 6.42%Spire Inc. B++ 4,100,000,000 80.37 5.00 6.22%


Capital Structure




Gas Distribution (Natural Gas Utility)Atmos Energy Corporation A+ 11,000,000,000 2,617,900,000 0.24 80.78% 19.22%Chesapeake Utilities Corporation B++ 1,400,000,000 241,600,000 0.17 85.28% 14.72%New Jersey Resources Corp. A+ 4,400,000,000 1,220,200,000 0.28 78.29% 21.71%NiSource Inc. B+ 9,400,000,000 7,094,500,000 0.75 56.99% 43.01%Northwest Natural Holding Co. A 2,000,000,000 724,700,000 0.36 73.40% 26.60%ONE Gas, Inc. A 4,500,000,000 893,900,000 0.20 83.43% 16.57%South Jersey Industries, Inc. A 2,800,000,000 1,281,000,000 0.46 68.61% 31.39%Southwest Gas Holdings, Inc. B++ 4,200,000,000 2,123,600,000 0.51 66.42% 33.58%Spire Inc. B++ 4,100,000,000 1,900,100,000 0.46 68.33% 31.67%


Beta



Gas Distribution (Natural Gas Utility), Selected ComparablesAtmos Energy Corporation 0.60Chesapeake Utilities Corporation 0.65New Jersey Resources Corp. 0.70NiSource Inc. 0.50Northwest Natural Holding Co. 0.60ONE Gas, Inc. 0.65South Jersey Industries, Inc. 0.80Southwest Gas Holdings, Inc. 0.70Spire Inc. 0.65


Gas Distribution (Natural Gas Utility), Value LineAtmos Energy Corporation 0.60Chesapeake Utilities Corporation 0.65New Jersey Resources Corp. 0.70NiSource Inc. 0.50Northwest Natural Holding Co. 0.60ONE Gas, Inc. 0.65South Jersey Industries, Inc. 0.80Southwest Gas Holdings, Inc. 0.70Spire Inc. 0.65UGI Corp. 0.80




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Gas

Transmission

2019 Capitalization Rate Study Gas Transmission (Natural Gas Diversified) Industry Notes

• From the Gas Transmission Industry segment, Antero Resources Corporation, Cabot Oil & Gas, Callon Petroleum Co., Centennial

Resource Development, Inc., Chesapeake Energy, Cimarex Energy Co., CNX Resources Corp., Concho Resources, Inc., Devon Energy Corp., Encana Corporation, Enerplus Corporation, EOG Resources, Inc., Newfield Exploration Company, Paramount Resources Ltd., PDC Energy, Inc., QEP Resources, Inc., Southwestern Energy Company, and WPX Energy, Inc. were excluded as they presented to be primarily engaged in the exploration and production of oil and natural gas.


Northern Natural Gas Company -Tegarden & Associates Interstate Natural Gas Pipeline Industry Southern Star Central Gas Pipeline, Inc. – K.E. Andrews & Co.






Gas Transmission (Natural Gas Diversified) 14.00% 61.74% 38.26% 10.53%

Industry Equity Rate SummaryGas Transmission (Natural Gas Diversified)






CapM Equity Rates




Gas Transmission (Natural Gas Diversified) 9.75% 15.79% 1.39 12.44% 20.84%





Growth Estimate

Gas Transmission (Natural Gas Diversified)EQT Corporation, Inc. B++ 4,400,000,000 0.70% 0.00% 0.00% Extraction Oil & Gas, Inc B 1,200,000,000 0.00% 0.00% 0.00% MDU Resources Group, Inc. A 5,200,000,000 3.00% 2.00% 14.00% 5.00% 17.00%National Fuel Gas Company B+ 4,600,000,000 3.20% 5.50% 34.50% 8.70% 37.70%Targa Resources B 10,800,000,000 7.70% 4.00% 0.00% 11.70% 7.70%


E/P Ratio




Gas Transmission (Natural Gas Diversified)EQT Corporation, Inc. B++ 4,400,000,000 17.10 2.80 16.37%Extraction Oil & Gas, Inc B 1,200,000,000 7.01 1.50 21.40%MDU Resources Group, Inc. A 5,200,000,000 26.58 2.55 9.59%National Fuel Gas Company B+ 4,600,000,000 53.77 6.50 12.09%Targa Resources B 10,800,000,000 47.25 2.75 5.82%


Capital Structure




Gas Transmission (Natural Gas Diversified)EQT Corporation, Inc. B++ 4,400,000,000 7,336,600,000 1.67 37.49% 62.51%Extraction Oil & Gas, Inc B 1,200,000,000 1,422,100,000 1.19 45.76% 54.24%MDU Resources Group, Inc. A 5,200,000,000 1,911,500,000 0.37 73.12% 26.88%National Fuel Gas Company B+ 4,600,000,000 2,131,400,000 0.46 68.34% 31.66%Targa Resources B 10,800,000,000 5,678,900,000 0.53 65.54% 34.46%


Beta



Gas Transmission (Natural Gas Diversified), Selected ComparablesEQT Corporation, Inc. 1.10Extraction Oil & Gas, Inc 1.90MDU Resources Group, Inc. 1.00National Fuel Gas Company 1.00Targa Resources 1.95


Gas Transmission (Natural Gas Diversified), Value LineAntero Resources Corporation 1.35Cabot Oil & Gas 1.10Callon Petroleum Co. 2.00Centennial Resource Development, Inc. 1.30Chesapeake Energy 2.25Cimarex Energy Co. 1.45CNX Resource Corp. 1.50Concho Resources, Inc. 1.55Devon Energy Corp. 1.80Encana Corporation 1.80Enerplus Corporation 2.10EOG Resources, Inc. 1.45EQT Corporation, Inc. 1.10Extraction Oil & Gas, Inc 1.90MDU Resources Group, Inc. 1.00National Fuel Gas Company 1.00Newfield Exploration 1.90Paramount Resources Ltd. 2.05PDC Energy, Inc. 1.55QEP Resources, Inc. 1.85Southwestern Energy Company 1.45Targa Resources 1.95WPX Energy, Inc. 2.10




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Oil/Gas

Distribution

2019 Capitalization Rate Study

Oil/Gas Distribution Industry Notes

• From the Oil/Gas Distribution Industry, Clean Energy Fuels Corp was excluded as they develop and operate fueling stations and are presented to be a provider of natural gas for vehicle fleets. Enbridge Inc. and Pembina Pipeline Corp. were excluded due to Value Line reporting all figures in Canadian dollars. World Fuel Services Corp. was excluded as they presented to be primarily engaged in the marketing and sale of fuel and related products.


Southern Star Central Gas Pipeline, Inc. – K.E. Andrews & Co.






Oil/Gas Distribution 15.10% 55.21% 44.79% 10.54%

Industry Equity Rate SummaryOil/Gas Distribution






CapM Equity Rates




Oil/Gas Distribution 9.75% 15.79% 1.50 13.21% 22.27%





Growth Estimate

Oil/Gas DistributionCheniere Energy, Inc. B 15,300,000,000 0.00% 0.00% 0.00% Kinder Morgan, Inc. B 38,400,000,000 4.60% 7.50% 0.00% 12.10% ONEOK, Inc. B+ 25,600,000,000 5.60% 10.50% 20.50% 16.10% 26.10%TransCanada Corp. B++ 36,900,000,000 5.40% 11.00% 56.50% 16.40% 61.90%The Williams Companies, Inc. B+ 30,700,000,000 5.40% 2.00% 22.50% 7.40% 27.90%


E/P Ratio




Oil/Gas DistributionCheniere Energy, Inc. B 15,300,000,000 59.71 4.00 6.70%Kinder Morgan, Inc. B 38,400,000,000 17.42 1.80 10.33%ONEOK, Inc. B+ 25,600,000,000 62.28 4.75 7.63%TransCanada Corp. B++ 36,900,000,000 40.39 4.20 10.40%The Williams Companies, Inc. B+ 30,700,000,000 25.33 2.00 7.90%


Capital Structure




Oil/Gas DistributionCheniere Energy, Inc. B 15,300,000,000 27,400,000,000 1.79 35.83% 64.17%Kinder Morgan, Inc. B 38,400,000,000 34,600,000,000 0.90 52.60% 47.40%ONEOK, Inc. B+ 25,600,000,000 8,325,700,000 0.33 75.46% 24.54%TransCanada Corp. B++ 36,900,000,000 31,661,300,000 0.86 53.82% 46.18%The Williams Companies, Inc. B+ 30,700,000,000 21,409,000,000 0.70 58.91% 41.09%


Beta



Oil/Gas Distribution, Selected ComparablesCheniere Energy, Inc. 1.45Kinder Morgan, Inc. 1.45ONEOK, Inc. 1.55TransCanada Corp. 1.10The Williams Companies, Inc. 1.95


Oil/Gas Distribution, Value LineCheniere Energy, Inc. 1.45Clean Energy Fuels Corp. 1.80Enbridge Inc. 1.00Kinder Morgan, Inc. 1.45ONEOK, Inc. 1.55Pembina Pipeline Corp. 1.10TransCanada Corp. 1.10The Williams Companies, Inc. 1.95World Fuel Services Corp. 1.20




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Pipeline

MLPs Industry

2019 Capitalization Rate Study Pipeline MLPs Industry Notes

• From the Pipeline MLPs Industry segment, AmeriGas Partners L.P. and Suburban Propane Partners, L.P. were excluded due to being

primarily involved in the marketing and distribution of propane gas.

• Staff considered capitalization studies submitted by: Enterprise Products Partners, L.P. – MLP Pipelines Industry Southern Star Central Gas Pipeline, Inc. – K.E. Andrews & Co.






Pipeline MLPs 14.60% 62.95% 37.05% 11.02%

Industry Equity Rate SummaryPipeline MLPs






CapM Equity Rates




Pipeline MLPs 9.75% 15.79% 1.38 12.38% 20.73%





Growth Estimate

Pipeline MLPsAndeavor Logistics LP B+ 9,200,000,000 11.00% 6.50% 15.50% 17.50% 26.50%Antero Midstream Partners, LP B+ 5,200,000,000 6.90% 21.50% 21.50% 28.40% 28.40%Buckeye Partners, L.P. B+ 5,700,000,000 9.60% -5.00% 2.00% 11.60%Cheniere Energy Partners, L.P. C++ 17,600,000,000 6.90% 13.50% 0.00% 20.40% 6.90%DCP Midstream LP B+ 5,200,000,000 8.50% 2.50% 13.50% 11.00% 22.00%EQT Midstream Partners, LP B++ 5,800,000,000 10.40% 12.50% 4.50% 22.90% 14.90%Enable Midstream Partners, LP B+ 6,000,000,000 9.20% 5.50% 18.00% 14.70% 27.20%Energy Transfer, L.P. B+ 38,700,000,000 8.40% 7.50% 17.50% 15.90% 25.90%Enlink Midstream Partners L.P. B 4,700,000,000 11.60% 2.50% 0.00% 14.10% 11.60%Enterprise Products Partners, LP B+ 58,700,000,000 6.50% 8.50% 12.00% 15.00% 18.50%MPLX, LP B+ 26,600,000,000 7.60% 6.00% 27.00% 13.60% 34.60%Magellan Midstream Partners, L.P. B++ 14,200,000,000 6.60% 9.50% 8.00% 16.10% 14.60%Phillips 66 Partners LP B++ 6,000,000,000 6.60% 22.00% 20.50% 28.60% 27.10%Plains All American Pipeline, L.P. B+ 15,800,000,000 5.80% 0.50% 23.00% 6.30% 28.80%Shell Midstream Partners, L.P. B+ 4,300,000,000 8.60% 16.50% 12.00% 25.10% 20.60%Western Gas Partners, LP B+ 7,600,000,000 8.80% 7.00% 13.50% 15.80% 22.30%


E/P Ratio




Pipeline MLPsAndeavor Logistics LP B+ 9,200,000,000 37.30 5.00 13.40%Antero Midstream Partners, LP B+ 5,200,000,000 27.97 3.50 12.51%Buckeye Partners, L.P. B+ 5,700,000,000 31.31 4.00 12.78%Cheniere Energy Partners, L.P. C++ 17,600,000,000 36.36 4.20 11.55%DCP Midstream LP B+ 5,200,000,000 36.59 2.15 5.88%EQT Midstream Partners, LP B++ 5,800,000,000 47.80 6.50 13.60%Enable Midstream Partners, LP B+ 6,000,000,000 13.94 2.25 16.14%Energy Transfer, L.P. B+ 38,700,000,000 14.80 2.50 16.89%Enlink Midstream Partners L.P. B 4,700,000,000 13.43 1.00 7.45%Enterprise Products Partners, LP B+ 58,700,000,000 26.88 2.50 9.30%MPLX, LP B+ 26,600,000,000 33.48 3.15 9.41%Magellan Midstream Partners, L.P. B++ 14,200,000,000 62.31 5.70 9.15%Phillips 66 Partners LP B++ 6,000,000,000 48.14 7.00 14.54%Plains All American Pipeline, L.P. B+ 15,800,000,000 21.71 2.50 11.52%Shell Midstream Partners, L.P. B+ 4,300,000,000 19.11 2.50 13.08%Western Gas Partners, LP B+ 7,600,000,000 45.51 3.65 8.02%


Capital Structure




Pipeline MLPsAndeavor Logistics LP B+ 9,200,000,000 4,829,000,000 0.52 65.58% 34.42%Antero Midstream Partners, LP B+ 5,200,000,000 1,516,900,000 0.29 77.42% 22.58%Buckeye Partners, L.P. B+ 5,700,000,000 4,985,000,000 0.87 53.35% 46.65%Cheniere Energy Partners, L.P. C++ 17,600,000,000 16,059,000,000 0.91 52.29% 47.71%DCP Midstream LP B+ 5,200,000,000 4,575,000,000 0.88 53.20% 46.80%EQT Midstream Partners, LP B++ 5,800,000,000 3,477,300,000 0.60 62.52% 37.48%Enable Midstream Partners, LP B+ 6,000,000,000 2,880,000,000 0.48 67.57% 32.43%Energy Transfer, L.P. B+ 38,700,000,000 42,117,000,000 1.09 47.89% 52.11%Enlink Midstream Partners L.P. B 4,700,000,000 3,836,000,000 0.82 55.06% 44.94%Enterprise Products Partners, LP B+ 58,700,000,000 22,508,500,000 0.38 72.28% 27.72%MPLX, LP B+ 26,600,000,000 12,889,000,000 0.48 67.36% 32.64%Magellan Midstream Partners, L.P. B++ 14,200,000,000 3,718,600,000 0.26 79.25% 20.75%Phillips 66 Partners LP B++ 6,000,000,000 2,922,000,000 0.49 67.25% 32.75%Plains All American Pipeline, L.P. B+ 15,800,000,000 9,140,000,000 0.58 63.35% 36.65%Shell Midstream Partners, L.P. B+ 4,300,000,000 2,090,500,000 0.49 67.29% 32.71%Western Gas Partners, LP B+ 7,600,000,000 4,566,500,000 0.60 62.47% 37.53%


Beta



Pipeline MLPs, Selected ComparablesAndeavor Logistics LP 1.45Antero Midstream Partners, LP 1.15Buckeye Partners, L.P. 1.25Cheniere Energy Partners, L.P. 1.05DCP Midstream LP 1.60EQT Midstream Partners, LP 1.25Enable Midstream Partners, LP 1.25Energy Transfer, L.P. 2.20Enlink Midstream Partners L.P. 1.70Enterprise Products Partners, LP 1.30MPLX, LP 1.40Magellan Midstream Partners, L.P. 1.20Phillips 66 Partners LP 1.10Plains All American Pipeline, L.P. 1.50Shell Midstream Partners, L.P. 1.30Western Gas Partners, LP 1.40


Beta



Pipeline MLPs, Value LineAmeriGas Partners L.P. 0.80Andeavor Logistics LP 1.45Antero Midstream Partners, LP 1.15Buckeye Partners, L.P. 1.25Cheniere Energy Partners, L.P. 1.05DCP Midstream LP 1.60EQT Midstream Partners, LP 1.25Enable Midstream Partners, LP 1.25Energy Transfer, L.P. 2.20Enlink Midstream Partners L.P. 1.70Enterprise Products Partners, LP 1.30MPLX, LP 1.40Magellan Midstream Partners, L.P. 1.20Phillips 66 Partners LP 1.10Plains All American Pipeline, L.P. 1.50Shell Midstream Partners, L.P. 1.30Suburban Propane Partners, L.P. 0.95Western Gas Partners, LP 1.40




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Railroad

2019 Capitalization Rate Study Railroad Industry Notes

• For the Railroad Industry segment, American Railcar Industries, Inc. and Trinity Industries were excluded as they design and

manufacture railcars and component parts. GATX Corp. was excluded as they specialize in tank, freight car, and locomotive leasing. Greenbrier Companies, Inc. excluded as they design, manufacture, repair, and market railroad freight cars and related equipment.


Union Pacific Railroad Company

National Association of Railroad Property Tax Representatives submitted by BNSF Railway Company






Railroad 13.55% 83.96% 16.04% 12.17%

Industry Equity Rate SummaryRailroad






CapM Equity Rates




Railroad 9.75% 15.79% 1.19 11.03% 18.20%





Growth Estimate

RailroadCanadian National Railway A 63,100,000,000 2.10% 11.00% 10.00% 13.10% 12.10%Canadian Pacific Railway Limited B++ 29,600,000,000 1.30% 11.50% 11.50% 12.80% 12.80%CSX Corporation B++ 59,300,000,000 1.30% 11.00% 13.50% 12.30% 14.80%Gennesee & Wyoming B+ 4,700,000,000 0.00% 0.00% 6.00% 6.00%Kansas City Southern, Inc. A 10,000,000,000 1.50% 8.50% 12.50% 10.00% 14.00%Norfolk Southern Corp. A+ 45,400,000,000 1.90% 6.00% 11.50% 7.90% 13.40%Union Pacific Corporation A++ 109,000,000,000 2.20% 8.50% 11.00% 10.70% 13.20%


E/P Ratio




RailroadCanadian National Railway A 63,100,000,000 84.93 6.40 7.54%Canadian Pacific Railway Limited B++ 29,600,000,000 207.37 16.50 7.96%CSX Corporation B++ 59,300,000,000 70.28 5.65 8.04%Gennesee & Wyoming B+ 4,700,000,000 79.00 5.85 7.41%Kansas City Southern, Inc. A 10,000,000,000 98.31 9.50 9.66%Norfolk Southern Corp. A+ 45,400,000,000 166.82 12.40 7.43%Union Pacific Corporation A++ 109,000,000,000 148.59 11.65 7.84%


Capital Structure




RailroadCanadian National Railway A 63,100,000,000 7,755,000,000 0.12 89.06% 10.94%Canadian Pacific Railway Limited B++ 29,600,000,000 6,011,000,000 0.20 83.12% 16.88%CSX Corporation B++ 59,300,000,000 13,754,000,000 0.23 81.17% 18.83%Gennesee & Wyoming B+ 4,700,000,000 2,300,600,000 0.49 67.14% 32.86%Kansas City Southern, Inc. A 10,000,000,000 2,680,700,000 0.27 78.86% 21.14%Norfolk Southern Corp. A+ 45,400,000,000 10,635,000,000 0.23 81.02% 18.98%Union Pacific Corporation A++ 109,000,000,000 20,943,000,000 0.19 83.88% 16.12%


Beta



Railroad, Selected ComparablesCanadian National Railway 1.05Canadian Pacific Railway Limited 1.20CSX Corporation 1.20Gennesee & Wyoming 1.50Kansas City Southern, Inc. 1.10Norfolk Southern Corp. 1.15Union Pacific Corporation 1.10


Railroad, Value LineAmerican Railcar Industires, Inc. 1.35Canadian National Railway 1.05Canadian Pacific Railway Limited 1.20CSX Corporation 1.20GATX Corp. 1.30Gennesee & Wyoming 1.50The Greenbriar Companies, Inc. 1.85Kansas City Southern, Inc. 1.10Norfolk Southern Corp. 1.15Trinity Industries Inc.Union Pacific Corporation 1.10




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Telecommunication

Services

2019 Capitalization Rate Study Telecommunication Services Industry Notes

• From the Telecommunication Services segment, America Movil, TELUS Corporation, Liberty Latin America Ltd., China Mobile Ltd., and

Vodafone Group PLC, were excluded as being principally and primarily involved in non-domestic operations. Dycom, Inc. was excluded as the company is principally engaged in the telecommunications and electrical services business providing engineering, construction, maintenance and installation to telecommunication providers. Gogo Inc. was excluded as they offer wireless services to airlines. J2 Global Communications was excluded as they principally offer value-added and tandem interconnection services.


Duff & Phelps – Communications Wireline Carriers on behalf of Windstream Companies, Cox Oklahoma Telecom, LLC, and

CenturyLink Communications, LLC






Telecommunications Services 12.80% 62.90% 37.10% 9.88%

Industry Equity Rate SummaryTelecommunications Services






CapM Equity Rates




Telecommunications Services 9.75% 15.79% 0.96 9.44% 15.21%





Growth Estimate

Telecommunications ServicesAT&T Inc. A++ 224,000,000,000 6.60% 4.50% 7.00% 11.10% 13.60%ATN International, Inc. B++ 1,200,000,000 0.90% -6.00% 15.00% 15.90%IDT Corporation B 175,000,000 0.00% 0.00% 8.00% 8.00%Iridium Communications Inc. B 2,500,000,000 0.00% 0.00% 10.00% 10.00%Shenandoah Telecommunications Company B 2,300,000,000 0.60% 8.00% 16.50% 8.60% 17.10%Sprint Corporation C++ 25,100,000,000 0.00% 0.00% 0.00% Telephone & Data Systems, Inc. B 4,000,000,000 1.90% 2.00% -3.50% T-Mobile US, Inc. B+ 56,500,000,000 0.00% 0.00% 27.00% 27.00%U.S. Cellular B+ 4,700,000,000 0.00% 0.00% 4.00% Verizon Communications A++ 240,000,000,000 4.10% 2.00% 4.50% 6.10% 8.60%Vonage Holdings Corp. C++ 2,400,000,000 0.00% 0.00% 17.00% 17.00%


E/P Ratio




Telecommunications ServicesAT&T Inc. A++ 224,000,000,000 30.73 4.35 14.16%ATN International, Inc. B++ 1,200,000,000 78.11 4.20 5.38%IDT Corporation B 175,000,000 7.31 1.15 15.73%Iridium Communications Inc. B 2,500,000,000 22.62 1.25 5.53%Shenandoah Telecommunications Company B 2,300,000,000 46.81 1.75 3.74%Sprint Corporation C++ 25,100,000,000 6.16 0.65 10.55%Telephone & Data Systems, Inc. B 4,000,000,000 35.09 1.40 3.99%T-Mobile US, Inc. B+ 56,500,000,000 66.57 5.60 8.41%U.S. Cellular B+ 4,700,000,000 54.49 1.75 3.21%Verizon Communications A++ 240,000,000,000 58.09 5.05 8.69%Vonage Holdings Corp. C++ 2,400,000,000 10.04 0.70 6.97%


Capital Structure




Telecommunications ServicesAT&T Inc. A++ 224,000,000,000 168,513,000,000 0.75 57.07% 42.93%ATN International, Inc. B++ 1,200,000,000 87,200,000 0.07 93.23% 6.77%IDT Corporation B 175,000,000 0 100.00% 0.00%Iridium Communications Inc. B 2,500,000,000 1,856,500,000 0.74 57.39% 42.61%Shenandoah Telecommunications Company B 2,300,000,000 694,000,000 0.30 76.82% 23.18%Sprint Corporation C++ 25,100,000,000 35,329,000,000 1.41 41.54% 58.46%Telephone & Data Systems, Inc. B 4,000,000,000 2,422,000,000 0.61 62.29% 37.71%T-Mobile US, Inc. B+ 56,500,000,000 29,139,000,000 0.52 65.97% 34.03%U.S. Cellular B+ 4,700,000,000 1,609,000,000 0.34 74.50% 25.50%Verizon Communications A++ 240,000,000,000 106,440,000,000 0.44 69.28% 30.72%Vonage Holdings Corp. C++ 2,400,000,000 200,700,000 0.08 92.28% 7.72%


Beta



Telecommunications Services, Selected ComparablesAT&T Inc. 0.75ATN International, Inc. 0.75IDT CorporationIridium Communications Inc. 1.10Shenandoah Telecommunications Company 0.95Sprint Corporation 1.25Telephone & Data Systems, Inc. 1.15T-Mobile US, Inc. 1.00U.S. Cellular 1.05Verizon Communications 0.75Vonage Holdings Corp. 0.80


Beta



Telecommunications Services, Value LineAmerican Movil, S.A.B. de C.V. 1.05AT&T Inc. 0.75ATN International, Inc. 0.75China Mobile Ltd. 0.85Dycom Industries, Inc. 1.35Gogo Inc. 1.15IDT CorporationIridium Communications Inc. 1.10j2 Global, Inc. 1.10Liberty Latin America Ltd.Shenandoah Telecommunications Company 0.95Sprint Corporation 1.25Telephone & Data Systems, Inc. 1.15TELUS Corporation 0.60T-Mobile US, Inc. 1.00U.S. Cellular 1.05Verizon Communications 0.75Vodafone Group Plc 1.10Vonage Holdings Corp. 0.80




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Telecommunications

Utility

2019 Capitalization Rate Study Telecommunications Utility Industry Notes

• From the Telecommunication Utility segment, BCE Inc., BT Group, Deutsche Telekom AG, and Telefonica, S.A. were excluded as being

principally and primarily involved in non-domestic operations.


Duff & Phelps – Communications Wireline Carriers on behalf of Windstream Companies, Cox Oklahoma Telecom, LLC, and CenturyLink Communications, LLC


1. Discounted Cash Flow 2. Capital Asset Pricing Model, Ex-Post and Ex-Ante 3. Earnings/Price Ratio




Telecommunications Utility 14.20% 34.84% 65.16% 7.99%

Industry Equity Rate SummaryTelecommunications Utility






CapM Equity Rates




Telecommunications Utility 9.75% 15.79% 1.19 11.05% 18.22%





Growth Estimate

Telecommunications UtilityCenturyLink, Inc. B 19,300,000,000 12.10% 0.00% 2.50% 12.10% 14.60%Cincinnati Bell C+ 600,000,000 0.00% 0.00% 0.00% Consolidated Communications Holdings, Inc. C++ 875,000,000 12.70% 0.00% 0.00% 12.70% 12.70%Frontier Communications Corporation C 350,000,000 0.00% 0.00% 0.00%

Median 737,500,000 12.40% 13.65%Arithmetic Mean 5,281,250,000 12.40% 13.65%

E/P Ratio




Telecommunications UtilityCenturyLink, Inc. B 19,300,000,000 17.85 1.65 9.24%Cincinnati Bell C+ 600,000,000 12.01 0.60 5.00%Consolidated Communications Holdings, Inc. C++ 875,000,000 12.19 1.20 9.84%Frontier Communications Corporation C 350,000,000 3.42 3.00 87.72%

Median 737,500,000 9.54%Arithmetic Mean 5,281,250,000 27.95%

Capital Structure




Telecommunications UtilityCenturyLink, Inc. B 19,300,000,000 35,749,000,000 1.85 35.06% 64.94%Cincinnati Bell C+ 600,000,000 1,909,400,000 3.18 23.91% 76.09%Consolidated Communications Holdings, Inc. C++ 875,000,000 2,302,800,000 2.63 27.53% 72.47%Frontier Communications Corporation C 350,000,000 16,402,000,000 46.86 2.09% 97.91%

Median 737,500,000 9,352,400,000 2.91 25.72% 74.28%Arithmetic Mean 5,281,250,000 14,090,800,000 13.63 22.15% 77.85%Weighted Average 17,691,745,562 33,081,987,692 34.84% 65.16%

Beta



Telecommunications Utility, Selected ComparablesCenturyLink, Inc. 1.00Cincinnati Bell 1.35Consolidated Communications Holdings, Inc. 1.00Frontier Communications Corporation 1.40


Telecommunications Utility, Value LineBCE Inc. 0.75BT Group PLC 0.95CenturyLink, Inc. 1.00Cincinnati Bell 1.35Consolidated Communications Holdings, Inc. 1.00Deutsche Telekom AG 1.00Frontier Communications Corporation 1.40Telefonica, S.A. 1.10




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Water

2019 Capitalization Rate Study Water Industry Notes

• From the Water Industry segment, Consolidated Water Company Ltd. was excluded as being primarily involved in non-domestic

operations. • Staff considered capitalization studies submitted by:

No Submissions • Staff relied upon the results of the following models and appraisal judgment in the development of equity rates:





Water 9.90% 69.39% 30.61% 8.30%

Industry Equity Rate SummaryWater






CapM Equity Rates




Water 9.75% 15.79% 0.67 7.46% 11.50%





Growth Estimate

WaterAmerican States Water Co. A 2,500,000,000 1.70% 8.00% 6.00% 9.70% 7.70%American Water Works Company, Inc. B+ 16,400,000,000 2.10% 10.00% 10.00% 12.10% 12.10%Aqua America, Inc. A 6,100,000,000 2.70% 9.00% 7.50% 11.70% 10.20%California Water Service Group B++ 2,300,000,000 1.60% 6.50% 9.50% 8.10% 11.10%Connecticut Water Service, Inc. B+ 800,000,000 1.90% 5.50% 5.50% 7.40% 7.40%MiddleSex Water Company B++ 875,000,000 1.80% 5.50% 9.00% 7.30% 10.80%SJW Group B+ 1,100,000,000 2.20% 8.50% 6.00% 10.70% 8.20%The York Water Company B+ 425,000,000 2.20% 8.00% 9.00% 10.20% 11.20%


E/P Ratio




WaterAmerican States Water Co. A 2,500,000,000 67.04 2.50 3.73%American Water Works Company, Inc. B+ 16,400,000,000 90.77 4.50 4.96%Aqua America, Inc. A 6,100,000,000 34.19 1.95 5.70%California Water Service Group B++ 2,300,000,000 47.66 1.90 3.99%Connecticut Water Service, Inc. B+ 800,000,000 66.87 2.90 4.34%MiddleSex Water Company B++ 875,000,000 53.35 2.25 4.22%SJW Group B+ 1,100,000,000 55.62 3.45 6.20%The York Water Company B+ 425,000,000 32.06 1.60 4.99%


Capital Structure




WaterAmerican States Water Co. A 2,500,000,000 281,000,000 0.11 89.90% 10.10%American Water Works Company, Inc. B+ 16,400,000,000 7,577,000,000 0.46 68.40% 31.60%Aqua America, Inc. A 6,100,000,000 2,287,100,000 0.37 72.73% 27.27%California Water Service Group B++ 2,300,000,000 714,300,000 0.31 76.30% 23.70%Connecticut Water Service, Inc. B+ 800,000,000 250,900,000 0.31 76.13% 23.87%MiddleSex Water Company B++ 875,000,000 141,100,000 0.16 86.11% 13.89%SJW Group B+ 1,100,000,000 431,300,000 0.39 71.83% 28.17%The York Water Company B+ 425,000,000 79,300,000 0.19 84.28% 15.72%

Median 1,700,000,000 356,150,000 0.31 76.21% 23.79%Arithmetic Mean 3,812,500,000 1,470,250,000 0.29 78.21% 21.79%Weighted Average 10,508,401,639 4,635,797,213 69.39% 30.61%

Beta



Water, Selected ComparablesAmerican States Water Co. 0.70American Water Works Company, Inc. 0.55Aqua America, Inc. 0.70California Water Service Group 0.70Connecticut Water Service, Inc. 0.60MiddleSex Water Company 0.75SJW Group 0.60The York Water Company 0.75


Water, Value LineAmerican States Water Co. 0.70American Water Works Company, Inc. 0.55Aqua America, Inc. 0.70California Water Service Group 0.70Connecticut Water Service, Inc. 0.60Consolidated Water Co. Ltd. 0.95MiddleSex Water Company 0.75SJW Group 0.60The York Water Company 0.75




January 3.91% 3.85% 3.69% 3.86% 4.18% 3.55% 3.66% 3.84% 4.33%

February 4.15% 4.12% 3.94% 4.09% 4.42% 3.82% 3.95% 4.09% 4.60%

March 4.21% 4.19% 3.97% 4.13% 4.52% 3.87% 4.00% 4.14% 4.75%

April 4.24% 4.20% 3.99% 4.17% 4.58% 3.85% 4.03% 4.17% 4.76%

May 4.36% 4.34% 4.10% 4.28% 4.71% 4.00% 4.13% 4.31% 4.94%

June 4.37% 4.33% 4.11% 4.27% 4.71% 3.96% 4.11% 4.29% 4.95%

July 4.35% 4.26% 4.10% 4.27% 4.67% 3.87% 4.03% 4.23% 4.91%

August 4.33% 4.25% 4.08% 4.26% 4.64% 3.88% 4.01% 4.20% 4.89%

September 4.41% 4.35% 4.18% 4.32% 4.74% 3.98% 4.09% 4.30% 5.02%

October 4.56% 4.52% 4.31% 4.45% 4.91% 4.14% 4.24% 4.45% 5.22%

November 4.65% 4.62% 4.40% 4.52% 5.03% 4.22% 4.34% 4.53% 5.42%

December 4.51% 4.47% 4.24% 4.37% 4.92% 4.02% 4.16% 4.36% 5.34%

4.34% 4.29% 4.09% 4.25% 4.67% 3.93% 4.06% 4.24% 4.93%


Documents

Capitaliza on Rate Study January 2019 - Oklahoma Capitalization... · 2019-04-25 · Executive Summary . The income approach to value converts projected future income or cash flow