Essential Utilities, Inc.

Our regulated water and gas business is capital intensive and requires a significant level of capital spending. The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows and external debt and equity financing. The Company’s condensed consolidated balance sheet historically has had a negative working capital position whereby our current liabilities routinely exceed our current assets. Management believes that internally generated funds along with existing credit facilities, and the proceeds from the issuance of commercial paper notes, long-term debt and equity will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements for at least the next twelve months.

Net cash flows from operating activities were $804,347 for the first nine months of 2025, compared to $622,510 for the first nine months of 2024. Operating cash flow increased by $181,837 primarily due to an increase in operating income in 2025 resulting from additional revenues from regulatory recoveries, and an increase in gas volumes delivered due to colder weather conditions during the first quarter of 2025 as compared to 2024.

During the first nine months of 2025, we incurred $983,089 of capital expenditures, obtained net proceeds of $152,525 from our commercial paper program (the “CP Program”), issued long-term debt of $1,312,446, and repaid short-term debt and other long-term debt in aggregate of $1,236,664. The capital expenditures were related to new and replacement water, wastewater, and natural gas mains, improvements to treatment plants, tanks, hydrants, and service lines, well and booster improvements, information technology improvements, and other enhancements and improvements. Cash inflows from financing activities were higher during the first nine months of 2025 compared to 2024, primarily due to the issuance of common stock from the Company’s at-the-market equity sales program (“ATM”), partially offset by greater repayments of long-term debt.

On August 7, 2025, the Company issued $500,000 of senior notes, less expenses of $1,220, due on August 15, 2035 with an interest rate of 5.25%. The Company used the proceeds from the issuance of senior notes to repay a portion of its commercial paper borrowings and for general corporate purposes.

On June 3, 2025, Aqua Pennsylvania and Peoples Natural Gas Companies amended and restated their respective $100,000 and $300,000 revolving credit agreements, extending the maturity date by another 364-day period. The funds borrowed under these revolving credit agreements are classified as loans payable and are used to provide working capital.

On May 29, 2025, the Company’s subsidiary, Aqua Pennsylvania, issued $100,000 in aggregate principal amount of first mortgage bonds. The bonds consisted of $75,000 of 5.38% first mortgage bonds due in 2035; and $25,000 of 5.63% first mortgage bonds due in 2040. The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes.

On March 19, 2025, the Company established the CP Program that allows it to issue, through private placement, short-term, unsecured commercial paper notes (the “CP Notes”) in an aggregate principal amount not to exceed $1,000,000. Maturities of CP Notes may vary, but cannot exceed 364 days from the date of issue. Amounts available under the CP Program may be borrowed, repaid, and re-borrowed from time to time. The CP Program is reinforced by the Company’s revolving credit facility, as amounts undrawn under the Company’s revolving credit facility are available to repay the CP Notes. Notes issued under the CP Program rank equally with the Company’s present and future unsecured indebtedness. The Company utilizes the proceeds from the sale of the CP Notes for general corporate purposes, which may include working capital, capital expenditures, water and wastewater utility acquisitions, and repaying outstanding indebtedness, including under the Company’s revolving credit facility or the revolving credit facilities of its subsidiaries. As of September 30, 2025, outstanding borrowings under the Company’s CP Program were $152,982, net of unamortized discount on issuance of $18.

On August 13, 2024, the Company established an ATM, under which we may issueand sell shares of our common stock up to an aggregate offering price of $1,000,000 (“2024 ATM”). During the three months ended September 30, 2025, we issued 2,379,579 shares of common stock for net proceeds of approximately $91,500 under the 2024 ATM. During the nine months ended September 30, 2025, we issued 7,671,350 shares of common stock for net proceeds of approximately $300,100 under the 2024 ATM. As of September 30, 2025, the 2024 ATM had approximately $660,700 of equity available for issuance. The Company used the net proceeds from the sales of shares through the 2024 ATM for working capital, capital expenditures, water and wastewater utility acquisitions, and repaying a portion of outstanding indebtedness.

At September 30, 2025, we had $6,397 of cash and cash equivalents compared to $9,156 at December 31, 2024. During the first nine months of 2025, we used the proceeds from long-term debt, the proceeds from the issuance of commercial paper, and the proceeds from issuance of common stock, as well as internally generated funds, for capital expenditures, repayment of existing indebtedness, payment of dividends, and general corporate purposes.

At September 30, 2025, our $1,000,000 unsecured revolving credit facility, which expires in December 2027, had $834,433 available for borrowing (net of $153,000 of capacity designated for outstanding principal borrowings under our commercial paper program and $12,567 letter of credit usage). Additionally, at September 30, 2025, we had short-term lines of credit of $400,000, primarily used for working capital, of which $303,635 was available for borrowing. Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be.

As of September 30, 2025, our credit ratings remained at investment grade levels. During the nine months ended September 30, 2025, S&P Global Ratings (“S&P”) reaffirmed the Company, Aqua Pennsylvania, and Peoples Natural Gas Companies’ A- long-term issuer credit rating with a stable outlook. As can be noted in their report, S&P continues to assess our business risk profile as excellent, considering our low-risk and rate-regulated water and gas distribution operations in credit-supportive regulatory environments, our geographic and regulatory diversity, our large and stable residential and commercial customer base, and our solid and reliable operations. On August 27, 2025, Moody's Investors Service ("Moody's") reaffirmed the Company's senior secured notes and Peoples Natural Gas companies’ senior unsecured notes’ Baa2 credit rating with negative outlook. The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, its ability to fund capital expenditures in a balanced manner using both debt and equity, and its ability to generate cash flow. A material downgrade of our credit rating may result in the imposition of additional financial and/or other covenants, impact the market prices of equity and debt securities, increase our borrowing costs, and adversely affect our liquidity, among other things. Management continues to enhance our regulatory practices to address regulatory lag and recover capital project costs and increases in operating costs efficiently and timely through various rate-making mechanisms.