Global Water Resources Inc

17. COMMITMENTS AND CONTINGENCIES

Commitments

The Company has operating and finance leases for vehicles, office equipment, and office space. Refer to Note 12 – “Leases” for additional information.

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona. Under the terms of the purchase agreement, the Company is obligated to pay the seller a growth premium for each new account established within the specified growth premium areas. As of December 31, 2024, the obligation period of the growth premium has not yet started. The estimated fair value of the remaining liability was $1.2 million and $1.3 million as of December 31, 2024 and 2023, respectively, and is included in Other noncurrent liabilities on the consolidated balance sheets. Refer to Note 2 — “Acquisitions” for additional information about the Farmers growth premium obligation.

As part of the Global Water -Red Rock Water Company, Inc. (now part of GW-Saguaro) acquisition, the Company is obligated to pay to the seller a growth premium for each new account established within specified growth premium areas. During the year ended December 31, 2024, the Company revised the fair value of the estimated liability of the contingent consideration based on modified building plans from the landowners in the growth premium areas, which resulted in a net $0.1 million gain on remeasurement, which is included in Other, net on the consolidated statements of operations for the years ended December 31, 2024. As of December 31, 2024, no meters have been installed andno accounts have been established in any of the specified growth premium areas. The carrying value of the remaining liability was $0.7 million and $0.8 million as of December 31, 2024 and 2023, respectively, and is included in Other noncurrent liabilities on the consolidated balance sheets.

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Refer to Note 13 — “Fair Value” for additional information about contingent consideration.

The Company has previously received certain ICFA advances related to its CP Water utility, which the Company is obligated to repay in the form of specified future ICFA fee reductions when those ICFA fees are due. The liability was $0.9 million as of both December 31, 2024 and 2023 and is included in Accrued Expenses and Other Current Liabilities on the consolidated balance sheets.

The Company has certain contractual obligations requiring payments at specified periods. The obligations include AIAC refunds, long-term debt, lease obligations and The following table summarizes the Company’s contractual cash obligations as of December 31, 2024 (in thousands):

(1)The Company pays annual refunds on AIAC over a specific period of time based on operating revenue generated from developer-installed infrastructure. The refund amounts are considered an investment in infrastructure and eligible for inclusion in future rate base. The refund amounts and timing are dependent upon several variables, including new customer connections, customer consumption levels and future rate increases, which are difficult to accurately estimate. Portions of these refund amounts are payable annually over the next two decades, and amounts not paid by the contract expiration dates become nonrefundable and are transferred to CIAC.

(2)Interest on the long-term debt is based on the fixed rates of the Company’s Series A Notes, Series B Notes and 6.91% Senior Secured Notes.

(3)Finance lease payments are inclusive of interest payments totaling $0.1 million.

(4)Operating lease payments are inclusive of interest payments totaling less than $0.1 million.

The Company has entered into various purchase and service agreements whereby it is contractually obligated to make certain minimum payments in future periods. This includes purchase obligations for plant equipment, typically for water and wastewater treatment, with long lead times that require payments made over time.

Contingencies

From time to time, in the ordinary course of business, the Company may be subject to pending or threatened lawsuits in which claims for monetary damages are asserted. Management is not aware of any legal proceeding of which the ultimate resolution could materially affect the Company’s financial position, results of operations, or cash flows.