H2O America (HTO)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	174,327	157,087	140,386	123,186	124,150
Interest expense	US$ in thousands	71,390	66,144	58,062	54,339	54,255
Interest coverage		2.44	2.37	2.42	2.27	2.29

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $174,327K ÷ $71,390K
= 2.44

The interest coverage ratios for H2O America over the specified period reflect a relatively stable level of earnings relative to interest expenses, indicating consistent capacity to meet interest obligations. As of December 31, 2020, the ratio stood at 2.29, which slightly declined to 2.27 by December 31, 2021. This marginal decrease suggests a minor reduction in the company's earnings before interest and taxes (EBIT) relative to its interest expenses during that period.

Following this, an improvement is observed in December 31, 2022, with the ratio rising to 2.42, signifying enhanced earnings ability to cover interest costs. However, this upward trend was not maintained in the subsequent year; by December 31, 2023, the ratio slightly declined again to 2.37 but remained above the 2021 level. The most recent data for December 31, 2024, indicates a modest increase to 2.44, reflecting a marginal improvement in interest coverage capacity.

Overall, the ratios consistently hover around a value of approximately 2.3 to 2.4 across the four-year span. This suggests that H2O America maintains a stable, though moderate, cushion in earnings to cover interest expenses. While the ratios are comfortably above 1.5 — commonly considered a minimum for prudent coverage — they indicate that the company’s earnings could potentially be affected by unforeseen declines, potentially impacting its ability to service interest obligations without strain.