(Dollar amounts in thousands, except per share amounts and otherwise noted) The information in this Item 2 should be read in conjunction with the financial information and the notes thereto included in Item 1 of this Form 10-Q and the consolidated financial statements and notes thereto and the related "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in SJW Group's Annual Report on Form 10-K for the year ended December 31, 2019. This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. For more information about such forward-looking statements, including some of the factors that may affect our actual results, please see our disclosures under "Forward-Looking Statements," and elsewhere in this Form 10-Q, including Item 1A under "Risk Factors."

General:

SJW Group is a holding company with four wholly-owned subsidiaries: San Jose
Water Company ("SJWC"), SJWNE LLC as of October 9, 2019, SJWTX, Inc. and SJW
Land Company.
SJWC is a public utility in the business of providing water service to
approximately 232,000 connections that serve a population of approximately one
million people in an area comprising approximately 139 square miles in the
metropolitan San Jose, California area.
The principal business of SJWC consists of the production, purchase, storage,
purification, distribution, wholesale, and retail sale of water. SJWC provides
water service to customers in portions of the cities of San Jose and Cupertino
and in the cities of Campbell, Monte Sereno, Saratoga and the Town of Los Gatos,
and adjacent unincorporated territories, all in the County of Santa Clara in the
State of California. SJWC distributes water to customers in accordance with
accepted water utility methods which include pumping from storage and gravity
feed from high elevation reservoirs. SJWC also provides non-tariffed services
under agreements with municipalities and other utilities. These non-tariffed
services include water system operations, maintenance agreements, and antenna
site leases.
SJWC has utility property including land held in fee, impounding reservoirs,
diversion facilities, wells, distribution storage, and all water facilities,
equipment, office buildings and other property necessary to supply its
customers. Under Section 851 of the California Public Utilities Code, properties
currently used and useful in providing utilities services cannot be disposed of
unless California Public Utilities Commission ("CPUC") approval is obtained.
SJWC also has approximately 411 acres of nonutility property which has been
identified as no longer used and useful in providing utility services. The
majority of the properties are located in the hillside areas adjacent to SJWC's
various watershed properties.
SJWTX, Inc., doing business as Canyon Lake Water Service Company ("CLWSC"), is a
public utility in the business of providing water service to approximately
18,000 connections that serve approximately 54,000 people. CLWSC's service area
comprises more than 246 square miles in the southern region of the Texas Hill
Country in Blanco, Comal, Hays and Travis counties, the growing region between
San Antonio and Austin, Texas. SJWTX, Inc. has a 25% interest in Acequia Water
Supply Corporation ("Acequia"). The water supply corporation has been determined
to be a variable interest entity within the scope of ASC Topic 810 with SJWTX,
Inc. as the primary beneficiary. As a result, Acequia has been consolidated with
SJWTX, Inc.
SJW Land Company owns undeveloped land and operates commercial buildings in
Tennessee. SJW Land Company also owns a 70% limited partnership interest in
444 West Santa Clara Street, L.P. which operated a California commercial
property that was sold in the second quarter of 2017. The limited partnership
has been determined to be a variable interest entity within the scope of
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 810 - "Consolidation" with SJW Land Company as the primary
beneficiary, and as a result, has been consolidated with SJW Land Company.
Connecticut Water Service, Inc. ("CTWS"), headquartered in Connecticut, is a
holding company for water utilities companies providing water service to
approximately 138,000 connections that serve a population of approximately
480,000 people in 80 municipalities throughout Connecticut and Maine and more
than 3,000 wastewater connections in Southbury, Connecticut. As part of the
merger transaction between SJW Group and CTWS on October 9, 2019, CTWS became a
wholly-owned subsidiary of SJWNE LLC which is a wholly-owned subsidiary of SJW
Group. The subsidiaries held by CTWS that provide utility water

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services are The Connecticut Water Company ("Connecticut Water"), The Heritage
Village Water Company ("HVWC"), The Avon Water Company ("Avon Water") and The
Maine Water Company ("Maine Water"). The remaining two subsidiaries are Chester
Realty, Inc., a real estate company in Connecticut, and New England Water
Utility Services, Inc. ("NEWUS"), which provides contract water and sewer
operations and other water related services.
CTWS also offers Linebacker, an optional service line protection program offered
by CTWS to eligible residential customers through NEWUS in Connecticut and Maine
Water in Maine covering the cost of repairs for leaking or broken water service
lines which provide drinking water to a customer's home. For customers who
enroll in this program, CTWS will repair or replace a leaking or broken water
service line and related equipment. Additionally, NEWUS offers expanded coverage
to Connecticut Water customers for failure of in-home plumbing, sewer and septic
drainage lines and implemented modified terms and conditions with limitations on
certain coverages.
The properties of CTWS consist of land, easements, rights (including water
rights), buildings, reservoirs, standpipes, dams, wells, supply lines, water
treatment plants, pumping plants, transmission and distribution mains and other
facilities and equipment used for the collection, purification, storage and
distribution of water throughout Connecticut and Maine. In certain cases,
Connecticut Water and Maine Water are or may be a party to limited contractual
arrangements for the provision of water supply from neighboring utilities.
SJW Land Company owned the following real properties during the three months
ended March 31, 2020:
                                                                          % for Three months ended
                                                                               March 31, 2020
                                                                            of SJW Land Company
      Description            Location      Acreage    Square Footage     Revenue           Expense
Warehouse building        Knoxville,
                          Tennessee              30          361,500         48 %              40 %
Commercial building       Knoxville,
                          Tennessee              15          135,000         52 %              60 %
Undeveloped land and      Knoxville,
parking lot               Tennessee              10              N/A        N/A               N/A
Undeveloped land          San Jose,
                          California            103              N/A        N/A               N/A

As of March 31, 2020, Chester Realty, Inc. owns less than 100 acres of property in the State of Connecticut.

Business Strategy for Water Utility Services: SJW Group focuses its business initiatives in three strategic areas: (1) Regional regulated water utility operations;




(2)    Regional non-tariffed water utility related services provided in
       accordance with the guidelines established by the CPUC in California, the
       Public Utilities Regulatory Authority in Connecticut ("PURA"), the Public
       Utilities Commission of Texas ("PUCT") in Texas, and the Maine Public
       Utilities Commission ("MPUC") in Maine; and

(3) Out-of-region water and utility related services.

As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets, including the recent CTWS merger which closed on October 9, 2019. However, we cannot be certain we will be successful in identifying and consummating any strategic business combination or acquisitions relating to such opportunities. In addition, the execution of our business strategy will expose us to different risks than those associated with the current utility operations. We expect to incur costs in connection with the execution of this strategy and any integration of an acquired business could involve significant costs, the assumption of certain known and unknown liabilities related to the acquired assets, the diversion of management's time and resources, the potential for a negative impact on SJW Group's financial position and operating results, entering markets in which SJW Group has no or limited direct prior experience and the potential loss of key employees of any acquired company. Any strategic combination or acquisition we decide to undertake may also impact our ability to finance our business, affect our compliance with regulatory requirements, and impose additional burdens on our operations. Any businesses we acquire may not achieve sales, customer growth and projected profitability that would justify the investment. Any difficulties we encounter in the integration process, including the integration of controls necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins and adversely affect our internal controls. SJW Group cannot be certain that any transaction will be successful or that it will not materially harm operating results or our financial condition. Real Estate Services: SJW Group's real estate investment activity is conducted through SJW Land Company. As noted above, SJW Land Company owns undeveloped land and operates commercial buildings in Tennessee. SJW Land Company also owns a limited partnership



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interest in 444 West Santa Clara Street, L.P. The partnership had a commercial building in San Jose, California that was sold in the second quarter of 2017. SJW Land Company manages its income producing and other properties until such time a determination is made to reinvest proceeds from the sale of such properties. Chester Realty, Inc. owns and operates land and commercial buildings in the State of Connecticut. Chester Realty, Inc. manages its income producing and other properties until such time a determination is made to reinvest proceeds from sale of such properties. SJW Land Company and Chester Realty, Inc.'s real estate investments diversify SJW Group's asset base.

Critical Accounting Policies: The discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2019 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2019, that was filed with the SEC on March 2, 2020. Our critical accounting policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2019. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the 2019 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2019.

New Accounting Pronouncements: In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20: "Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans," which aims to improve the overall usefulness of disclosure to financial statement users and reduce unnecessary costs to companies when preparing defined benefit plan disclosures. This update is effective for SJW Group's Form 10-K for the year ending December 31, 2020. Retrospective adoption is required and early adoption is permitted. Management is currently evaluating the effect that the new standard will have on its defined benefit plan disclosures.



Results of Operations:
Water sales are seasonal in nature and influenced by weather conditions. The
timing of precipitation and climatic conditions can cause seasonal water
consumption by customers to vary significantly. Due to the seasonal nature of
the water business, the operating results for interim periods are not indicative
of the operating results for a 12-month period. Revenue is generally higher in
the warm, dry summer months when water usage and sales are greater, and lower in
the winter months when cooler temperatures and increased rainfall curtail water
usage and sales.
Overview
SJW Group's consolidated net income for the three months ended March 31, 2020,
was $2,417, a decrease of $3,456, or approximately 59%, from $5,873 for the same
period in 2019. The decrease in net income for the three months ended March 31,
2020, was primarily due to an increase in production expenses at SJWC due to a
decrease in the use of available surface water and an increase in customer
usage, and an increase in interest on long-term debt used to acquire SJWNE LLC
and issuance of SJWC's Series M note. These increases were partially offset by
the addition of net income from the company's new SJWNE LLC utility operations,
and customer usage and rate increases at SJWC.an increase in operating revenue.
Operating Revenue
                             Operating Revenue by Segment
                             Three months ended March 31,
                                    2020                  2019
Water Utility Services $         114,384                 76,316
Real Estate Services               1,370                  1,366
                       $         115,754                 77,682



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The change in consolidated operating revenues was due to the following factors:


                                                  Three months ended
                                                       March 31,
                                                    2020 vs. 2019
                                                 Increase/(decrease)
Water Utility Services:
Consumption changes                            $       6,029       7  %
Increase in customers                                    425       1  %
Rate increases                                         3,508       5  %
Balancing and memorandum accounts:
Water Conservation Memorandum Account ("WCMA")         1,140       2  %
All others                                              (438 )    (1 )%
SJWNE LLC                                             27,404      35  %
Real Estate Services                                       4       -  %
                                               $      38,072      49  %


Operating Expense
                             Operating Expense by Segment
                             Three months ended March 31,
                                    2020                  2019
Water Utility Services $          97,378                 61,426
Real Estate Services                 831                    891
All Other                          2,118                  2,957
                       $         100,327                 65,274

The change in consolidated operating expenses was due to the following factors:


                                                                   Three months ended
                                                                        March 31,
                                                                      2020 vs. 2019
                                                                   Increase/(decrease)
Water production expenses:
Change in surface water use                                  $       5,437              8  %
Change in usage and new customers                                    5,292              8  %

Purchased water and groundwater extraction charge and energy price increase

                                                       1,523              2  %
Balancing and memorandum accounts cost recovery                     (1,512 )           (2 )%
SJWNE LLC                                                            6,256             10  %
Total water production expenses                                     16,996             26  %
Administrative and general                                           9,202             14  %
Balance and memorandum account cost recovery                          (231 )            -  %
Maintenance                                                          1,761              2  %
Property taxes and other non-income taxes                            3,335              5  %
Depreciation and amortization                                        6,237             10  %
Merger related expenses                                             (2,247 )           (3 )%
                                                             $      35,053             54  %

Sources of Water Supply SJWC's water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from the Santa Clara Valley Water District ("Valley Water") under the terms of a master contract with Valley Water expiring in 2051. Surface water is the least expensive source of water. Changes and variations in quantities from each of these sources affect the overall mix of the water supply, thereby affecting the cost of the water supply. In addition, the water rate for purchased water and the groundwater extraction charge may be increased by Valley Water at any time. If an increase occurs, then SJWC would file an advice letter with the CPUC seeking authorization to increase revenues to offset the cost increase. The Connecticut water utility services' infrastructure consists of 65 noncontiguous water systems in the State of Connecticut. These systems, in total, consist of approximately 1,800 miles of water main and reservoir storage capacity of 2.4



                                       24

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billion gallons. The dependable yield from our 235 active wells and 18 surface water supplies is approximately 65 million gallons per day. Water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. CLWSC's water supply consists of groundwater from wells and purchased treated and untreated raw water from local water agencies. CLWSC has long-term agreements with the Guadalupe-Blanco River Authority ("GBRA"), which expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide CLWSC with an aggregate of 6,900 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA. CLWSC also has raw water supply agreements with the Lower Colorado River Authority ("LCRA") and West Travis Public Utility Agency ("WTPUA") expiring in 2053 and 2046, respectively, to provide for 250 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies. Production wells located in a Comal Trinity Groundwater Conservation District, a regulated portion of the Trinity aquifer, are charged a groundwater pump tax based upon usage. Maine Water's infrastructure consists of 12 noncontiguous water systems in the State of Maine. These systems, in total, consists of approximately 500 miles of water main and reservoir storage capacity of 7.0 billion gallons. The dependable yield from our 14 active wells and 7 surface water supplies is approximately 120 million gallons per day. Water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. The following table presents the change in sources of water supply, in million gallons, for Water Utility Services:


                                                 Three months ended
                                                      March 31,         Increase/      % of Total
                                                   2020       2019      (decrease)       Change
Purchased water                                   3,635      3,162            473          7 %
Groundwater                                       4,345      1,832          2,513         38 %
Surface water                                     2,051      1,577            474          7 %
Reclaimed water                                      86         45             41          1 %
                                                 10,117      6,616          3,501         53 %


The changes in the source of supply mix were consistent with the changes in the
water production expenses.
SJWC's unaccounted-for water on a 12-month-to-date basis for March 31, 2020, and
2019 approximated 8.0% and 6.6%, respectively, as a percentage of total
production. The unaccounted-for water estimate is based on the results of past
experience and the impact of flows through the system, partially offset by
SJWC's main replacements and lost water reduction programs.
CTWS's unaccounted-for water on an acquisition-to-date basis for the period
ending March 31, 2020 was approximately 16.1% as a percentage of total
production. The unaccounted-for water estimate is based on the results of past
experience and the impact of flows through CTWS's systems, unadjusted for any
required system flushing, partially offset by WICA and WISC main replacement
programs and lost water reduction initiatives.
Water Production Expenses
The change in water production expenses for the three months ended March 31,
2020, compared to the same period in 2019, was primarily attributable to the new
SJWNE LLC operations, a decrease in the use of surface water, an increase in
customer usage and higher per unit costs for purchased water, groundwater
extraction and energy charges, offset by a decrease in cost-recovery balancing
and memorandum accounts. Effective July 1, 2019, Valley Water increased the unit
price of purchased water by approximately 6.1% and the groundwater extraction
charge by approximately 6.6%.
Other Operating Expenses
Operating expenses, excluding water production expenses, increased $18,057 for
the three months ended March 31, 2020, compared to the same period in 2019. The
increase was primarily attributable to an increase of $15,951 due to the new
SJWNE LLC operations, and increases of $1,533 in administrative and general
expenses primarily due to legal and accounting fees, $1,106 in depreciation and
amortization expense due to increases in utility plant, and an increase of
COVID-19 related reserves and expenses of $555, partially offset by a decrease
in merger related expenses due to the completion of the merger with CTWS.
Other (Expense) Income
For the three months ended March 31, 2020, compared to the same periods in 2019,
the change in other (expense) income was primarily due to an increase in
interest on long-term debt as a result of the issuance of SJW Group's Series
2019A, B and C

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notes and SJWC's Series M note. In addition, interest income decreased due to
use of previously invested money market funds for the merger with CTWS.
Provision for Income Taxes
For the three months ended March 31, 2020, compared to the same period in 2019,
income tax expense decreased $1,607. The decrease in income tax expense of
$1,607 is primarily due to a lower pre-tax income in the three months ended
March 31, 2020 and the flow-through tax benefits of certain CTWS tax attributes.
The effective consolidated income tax rates were 15% and 26% for the three
months ended March 31, 2020 and 2019, respectively.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES")
Act was signed into law. The CARES Act includes, among other items, measures
concerning income taxes. Many of the CARES Act's requirements are subject to
further clarification. The Company has considered the income tax provisions of
the CARES Act in the first quarter of 2020.
SJW Group expects the Internal Revenue Service to issue guidance in future
periods that will determine the final disposition of the excess deferred taxes
and other impacts of the Tax Cuts and Jobs Act (H.R. 1). At this time, the
company has applied a reasonable interpretation of the Tax Act. Future
clarification of the Tax Act may change estimated amounts.
California Water Supply
On April 1, 2020, Valley Water's 10 reservoirs were approximately 35% of total
capacity with 58,563 acre-feet of water in storage, which is 56% of the
twenty-year average for this date. As reported by the Valley Water, there was
7.24 inches of rainfall in San Jose during the current annual rainfall season
that commenced on July 1, 2019, that included one of the driest February's on
record. Rainfall at SJWC's Lake Elsman was measured at 23.78 inches during the
current rainfall season. Under normal hydrologic conditions, state and federal
water allocations represent approximately 40% of the Valley Water's total annual
water supply. As of April 1, 2020, the Valley Water reported that allocations
from the state and federal water project are approximately 15% and 65%,
respectively, of amounts requested in 2020. Valley Water also reported that the
managed groundwater recharge from January to March in the Santa Clara Plain was
121% of the five-year average. The groundwater level in the Santa Clara Plain is
approximately four feet lower than a year ago in February and nine feet higher
than the five-year average. The groundwater level in the Santa Clara Plain was
not measured in March due to the COVID-19 shelter in place order. According to
Valley Water, the projected total groundwater storage at the end of 2020 is
expected to fall within the normal stage of the Valley Water's Water Shortage
Contingency Plan.
On April 1, 2020, SJWC's Lake Elsman contained 1,384 acre-feet of water, of
which approximately 924 acre-feet can be utilized for treatment. This Lake
Elsman volume represents 50% of the five-year average. Local surface water is a
less costly source of water than groundwater or purchased water and its
availability significantly impacts SJWC's results of operations. SJWC will
utilize surface water and additional water from its portfolio of groundwater
supplies to supplement imported water from the Valley Water. Production from the
Montevina Surface Water Treatment Plant through the first quarter was 334
million gallons, which is 46% of the five-year average. Production at SJWC's
smaller Saratoga Water Treatment Plant through the first quarter was 48 million
gallons, which is 48% of the five-year average. SJWC believes that its various
water supply sources will be sufficient to meet customer demand through the
remainder of 2020.
Regulation and Rates
Almost all of the operating revenue of SJW Group results from the sale of water
at rates authorized by the subsidiaries' respective state utilities commissions.
The state utilities commissions set rates that are intended to provide revenue
sufficient to recover operating expenses and the opportunity to achieve a
specified return on common equity. The timing of rate decisions could have an
impact on the results of operations.
See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements for
a discussion of regulatory activities that have occurred during the quarter.

Liquidity:

Cash Flow from Operating Activities During the three months ended March 31, 2020, SJW Group generated cash flows from operations of approximately $7,900, compared to $25,200 for the same period in 2019. Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, gains or losses on the sale of assets, and changes in working capital items. Cash flow from operations decreased by approximately $17,300. This decrease was the result of a combination of the following factors: (1) decrease in collection in balancing and memorandum accounts of $13,100, (2) payments of amounts previously invoiced and accrued, which increased by $9,200, (3) an up-front payment of $5,000 for renewal of the Cupertino service concession agreement, offset by (4) an increase of $5,100



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in interest accruals for new debt and debt acquired by the merger with CTWS.,
and (5) general working capital and net income, adjusted for non-cash items
increased by $4,900.
As of March 31, 2020, Water Utility Services' write-offs for uncollectible
accounts represent less than 1% of its total revenue, unchanged from March 31,
2019. In March 2020, the regulated utilities commissions of the respective
states we operate in have made executive orders suspending water service
disconnections due to non-payment from customers in light of the current
stay-at-home orders, quarantines and similar governmental restrictions for the
global COVID-19 pandemic. Management believes that the historical collection
rate for its accounts receivable will decrease during the COVID-19 pandemic and
although any financial impact is currently tracked to be filed through the
rate-making process, there is no guarantee that such recovery will be approved
by the respective regulatory utility commissions.
Cash Flow from Investing Activities
During the three months ended March 31, 2020, SJW Group used cash flows in
investing activities of approximately $42,500, compared to $34,400 for the same
period in 2019. SJW Group used approximately: (1) $38,300 of cash for
company-funded capital expenditures, (2) $3,600 for developer-funded capital
expenditures, and (3) $300 in utility plant retirement costs.
Water Utility Services' budgeted capital expenditures for 2020, exclusive of
capital expenditures financed by customer contributions and advances, are
approximately $225,800. As of March 31, 2020, approximately $38,300 or 17% of
the $225,800 has been spent.
Water Utility Services' capital expenditures are incurred in connection with
normal upgrading and expansion of existing facilities and to comply with
environmental regulations. Over the next five years, Water Utility Services
expect to incur approximately $1.2 billion in capital expenditures, which
includes replacement of pipes and mains, and maintaining water systems. A
significant portion of this amount is subject to future CPUC, PURA, PUCT or MPUC
approval. Capital expenditures have the effect of increasing utility plant rate
base on which Water Utility Services earns a return. Water Utility Services
actual capital expenditures may vary from their projections due to changes in
the expected demand for services, weather patterns, actions by governmental
agencies, and general economic conditions. Total additions to utility plant
normally exceed Company-financed additions as a result of new facilities
construction funded with advances from developers and contributions in aid of
construction.
The Water Utility Services' distribution systems were constructed during the
period from the early 1900's through today. Expenditure levels for renewal and
modernization will occur as the components reach the end of their useful lives.
In most cases, replacement cost will significantly exceed the original
installation cost of the retired assets due to increases in the costs of goods
and services and increased regulation.
Cash Flow from Financing Activities
Net cash provided by financing activities for the three months ended March 31,
2020, increased by approximately $36,700 from the same period in the prior year,
primarily as a result of (1) an increase in net borrowings on our lines of
credit of $82,200, and (2) $1,500 increase in net cash receipts from advances
and contributions in aid of construction, offset by (3) a decrease in net
proceeds from new long-term debt of $45,000.

Sources of Capital:
SJW Group's ability to finance future construction programs and sustain dividend
payments depends on its ability to maintain or increase internally generated
funds and attract external financing. The level of future earnings and the
related cash flow from operations is dependent, in large part, upon the timing
and outcome of regulatory proceedings.
SJW Group's unsecured senior note agreements has terms and conditions that
restrict SJW Group from issuing additional funded debt if: (1) the funded
consolidated debt would exceed 66-2/3% of total capitalization, and (2) the
minimum net worth of SJW Group becomes less than $175,000 plus 30% of Water
Utility Services cumulative net income, since June 30, 2011. SJW Group was not
restricted from issuing future indebtedness as a result of these terms and
conditions at March 31, 2020.
SJWC's financing activity is designed to achieve a capital structure consistent
with our CPUC authorized structure of approximately 47% debt and 53% equity. As
of March 31, 2020, SJWC's funded debt and equity were approximately 49% and 51%,
respectively.
Funding for SJWC's future capital expenditure program is expected to be provided
primarily through internally-generated funds, the issuance of new long-term
debt, the issuance of equity, all of which will be consistent with regulator
guidelines.
SJWC's unsecured senior note agreements generally have terms and conditions that
restrict SJWC from issuing additional funded debt if: (1) the funded debt would
exceed 66-2/3% of total capitalization, and (2) net income available for
interest charges for the trailing 12-month-calendar period would be less than
175% of interest charges. SJWC was not restricted from issuing future
indebtedness as a result of these terms and conditions at March 31, 2020.

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SJWC's loan agreements with the California Pollution Control Financing Authority
contain affirmative and negative covenants customary for loan agreements
relating to revenue bonds, including, among other things, complying with certain
disclosure obligations and covenants relating to the tax exempt status of the
interest on the bonds and limitations and prohibitions relating to the transfer
of the projects funded by the loan proceeds and the assignment of the loan
agreement. As of March 31, 2020, SJWC was in compliance with all such covenants.
CTWS has outstanding term loans with a commercial bank and under the master loan
agreement, CTWS is required to comply with certain financial ratio and
operational covenants. The most restrictive of these covenants is to maintain a
consolidated (CTWS and its subsidiaries) debt to capitalization ratio of not
more than 60%. As of March 31, 2020, CTWS was in compliance with all covenants
under the master loan agreement.
Connecticut Water has outstanding term loans with a commercial bank and under
its master loan agreement, Connecticut Water is required to comply with
financial and operational covenants substantially identical to those found in
CTWS's master loan agreement. Connecticut Water is required to maintain a debt
to capitalization ratio of not more than 60%. As of March 31, 2020, Connecticut
Water was in compliance with all covenants under its master loan agreement.
Connecticut Water has tax exempt and taxable Water Facilities Revenue Bonds
issued through Connecticut Innovations (formerly the Connecticut Development
Authority). The bond indentures and loan agreements contain customary
affirmative and negative covenants and require compliance with financial and
operational covenants, and also provide for the acceleration of the Revenue
Bonds upon the occurrence of stated events of default. As of March 31, 2020,
Connecticut Water was in compliance with all covenants of the bond indentures
and loan agreements.
On March 12, 2020 Connecticut Water entered into a note purchase agreement with
the purchasers listed in the agreement, pursuant to which Connecticut Water sold
an aggregate principal amount of $35,000 of its 3.51% Senior Notes, due March
12, 2050. The notes are unsecured obligations of Connecticut Water. Interest is
payable semi-annually in arrears on March 12th and September 12th of each year.
The note purchase agreement contains customary representations and warranties.
Under the note purchase agreement, Connecticut Water is required to comply with
certain customary affirmative and negative covenants for as long as the notes
are outstanding. The notes are also subject to customary events of default, the
occurrence of which may result in all of the notes then outstanding becoming
immediately due and payable. The closing occurred simultaneously with the
signing of the note purchase agreement.
Connecticut Water's unsecured senior notes have terms and conditions that
restrict Connecticut Water from issuing additional debt or paying a dividend to
CTWS if such debt or distribution would trigger an event of default. The senior
note agreements also requires Connecticut Water to maintain a debt to
capitalization ratio of not more than 60% and an interest coverage ratio at each
fiscal quarter end of no less than three-to-one. As of March 31, 2020,
Connecticut Water was in compliance with all financial ratio and operational
covenants under this agreement.
SJWTX, Inc.'s unsecured senior note agreement has terms and conditions that
restrict SJWTX, Inc. from issuing additional funded debt if: (1) the funded debt
would exceed 66-2/3% of total capitalization, and (2) net income available for
interest charges for the trailing 12-month-calendar period would be less than
175% of interest charges. In addition, SJW Group is a guarantor of SJWTX, Inc.'s
senior note which has terms and conditions that restrict SJW Group from issuing
additional funded debt if: (1) the funded consolidated debt would exceed 66-2/3%
of total capitalization, and (2) the minimum net worth of SJW Group becomes less
than $125,000 plus 30% of Water Utility Services cumulative net income, since
December 31, 2005. As of March 31, 2020, SJWTX, Inc. and SJW Group were not
restricted from issuing future indebtedness as a result of these terms and
conditions.
Maine Water has First Mortgage Bonds issued to the Maine Municipal Bond Bank
through the State Safe Drinking Water Revolving Loan Fund and First Mortgage
Bonds issued to One America. The associated bond indentures and loan agreements
contain customary affirmative and negative covenants, including a prohibition on
the issuance of indebtedness secured by assets or revenue of Maine Water where
the lien is senior to the lien of the bond trustee under the above bonds except
as permitted by the bond indentures and related loan and security agreements, a
requirement to maintain a debt to capitalization ratio of not more than 65%,
required compliance with various financial and operational covenants, and a
provision for maturity acceleration upon the occurrence of stated events of
default. As of March 31, 2020, Maine Water was in compliance with all covenants
in its bond indentures and related loan agreements.
Maine Water has outstanding term loans with a commercial bank and under its
master loan agreement. Maine Water is required to comply with financial and
operational covenants substantially identical to those found in CTWS and
Connecticut Water's master loan agreements. Maine is required to maintain a debt
to capitalization ratio of not more than 60%. As of March 31, 2020, Maine Water
was in compliance with all covenants under its master loan agreement.
HVWC has a term loan with a commercial bank, due in 2034. The loan is secured by
real property owned by HVWC. The loan agreement restricts HVWC's ability to
incur additional debt and requires compliance with a funded debt to
capitalization covenant and other operational covenants. As of March 31, 2020,
HVWC was in compliance with all covenants of the loan.

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Avon Water has a mortgage loan that is due in 2033. The loan agreement (1) generally restricts the ability of Avon Water to incur additional debt or make dividend payments other than in the ordinary course of business, and (2) requires submission of periodic financial reports as part of loan covenants. As of March 31, 2020, Avon Water was in compliance with all covenants of the loan. As of March 31, 2020, SJW Group and its subsidiaries had unsecured bank lines of credit, allowing aggregate short-term borrowings of up to $235,000, of which $15,000 was available to SJW Group and SJW Land Company under a single line of credit, $5,000 was available to SJWTX, Inc. under a second line of credit, $125,000 was available to SJWC under a third line of credit, and $15,000 and $75,000 under a fourth and fifth, respectively, lines of credit was available to CTWS. At March 31, 2020, SJW Group and its subsidiaries had available unused short-term bank lines of credit totaling $103,598. The lines of credit bear interest at variable rates. On April 24, 2020, SJW Group terminated the $15,000 joint unsecured bank line of credit held by SJW Group and SJW Land Company effective April 29, 2020. On May 11, 2020, SJWC amended its $125,000 unsecured line of credit to increase the lending commitment $15,000 to $140,000. In addition, on May 11, 2020, SJWC entered into an additional unsecured line of credit allowing borrowings of up to $50,000 during a six month period. The $140,000 and $50,000 lines of credit of SJWC expire on June 1, 2021 and November 11, 2020, respectively. The line of credit for SJWTX, Inc. expires on June 1, 2021. The lines of credit for CTWS expire July 1, 2020 and December 14, 2023. During 2020, the cost of borrowing on SJW Group's short-term credit facilities has averaged 2.91%. All of SJW Group's and subsidiaries lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes. All of the lines of credit also include certain financial covenants that require the borrower and, in some cases SJW Group, to maintain a maximum funded debt to capitalization ratio and a minimum interest coverage ratio. As of March 31, 2020, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit. The condition of the capital and credit markets or the strength of financial institutions could impact SJW Group's ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income. In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase SJW Group's cost of capital. While our ability to obtain financing will continue to be a key risk, we believe that based on our 2020 activities, we will have access to the external funding sources necessary to implement our on-going capital investment programs in the future. On October 16, 2019, Standard & Poor's Ratings Service initiated coverage on SJW Group assigning a company rating of A-, with a stable outlook and affirming its company rating of SJWC of A, with a stable outlook. In addition, on October 14, 2019, S&P affirmed its ratings of CTWS and Connecticut Water of A- with a stable outlook.

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