NYSE:CPK Chesapeake Utilities Q1 2024 Earnings Report $132.59 -0.27 (-0.20%) Closing price 05/5/2025 03:59 PM EasternExtended Trading$132.40 -0.20 (-0.15%) As of 05:55 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Chesapeake Utilities EPS ResultsActual EPS$2.10Consensus EPS $2.14Beat/MissMissed by -$0.04One Year Ago EPS$2.04Chesapeake Utilities Revenue ResultsActual Revenue$245.70 millionExpected Revenue$260.16 millionBeat/MissMissed by -$14.46 millionYoY Revenue Growth+12.70%Chesapeake Utilities Announcement DetailsQuarterQ1 2024Date5/8/2024TimeAfter Market ClosesConference Call DateThursday, May 9, 2024Conference Call Time8:30AM ETUpcoming EarningsChesapeake Utilities' Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled on Thursday, May 8, 2025 at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Chesapeake Utilities Q1 2024 Earnings Call TranscriptProvided by QuartrMay 9, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Welcome to the Chesapeake Utilities Corporation's First Quarter 2024 Earnings Conference Call. I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations. Speaker 100:00:48Thank you, and good morning, everyone. My name is Lucia Dempsey, and I'm thrilled to have joined Chesapeake Utilities Corporation last month as the new Head of Investor Relations. I'm looking forward to meeting many of you at AGA next week or at other opportunities in the coming weeks months. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. Speaker 100:01:16With me today are Jeff Householder, Chair of the Board, President and Chief Executive Officer Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer. On Slide 3, we show our typical disclaimers, while I remind you that matters discussed in this conference call may include forward looking statements that involve risks and uncertainties. Forward looking statements and projections could differ materially from our actual results. The Safe Harbor for Forward Looking Statements section of our 2023 Annual Report on Form 10 ks provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on certain non GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the accompanying information includes the appropriate disclosures in accordance with the SEC's Regulation G. Speaker 100:02:20A reconciliation of these non GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our Q1 Form 10 Q. Now it is my distinct pleasure to turn the call over to Jeff. Speaker 200:02:36Thank you, Lucia. Good morning and thanks to all of you for joining our call today. I'll begin with Slide 4. This quarter, our team once again executed on our long standing strategic growth plan. Over the past several years, we've been focused on 3 fundamental drivers to support earnings growth. Speaker 200:02:54First, we work hard to identify and prudently deploy investment capital that meets the service demands created by significant customer growth. Our geographic footprint is an advantage here. Our service territories continue to experience a customer growth rate that is more than double the industry average. 2nd, we proactively manage our regulatory agenda to support the approval and cost recovery of our capital projects. You'll hear us describe in a moment several projects currently in front of state and federal regulators with total investment well over $200,000,000 And the third and perhaps most important of our strategic growth drivers is the continued business transformation of our company, which is focused on our people, processes, technology and organizational structure. Speaker 200:03:43Our continuous improvement initiatives enable us to manage an ever expanding business. Turning to Slide 5. This morning, you will hear us touch on service delivery to customers and other operational accomplishments, the FCG acquisition integration process, capital project execution, regulatory advances and a number of efficiency improvements. I'm happy to report that 2 of the more significant concerns facing our company and our industry, weather and interest rates have been, at least through the Q1, far less impactful to earnings than what we experienced in 2023. While the 2024 winter was warmer than normal in our service areas, we've been able to manage through it. Speaker 200:04:29Customer consumption increased in the Q1 compared to Q1 of 2023. And as we all know, interest rates appear to have at least stabilized with no increase so far this year. Our regulated natural gas transmission and distribution businesses continue to grow. We will mention today several system expansions, which are in various stages of approval, permitting or construction. In our non regulated businesses, realized contributions from increased propane consumption as well as increased propane margin and service fees. Speaker 200:05:03This served to offset much of the warmer than normal weather impact. Our Florida City Gas integration plan is on track and on schedule. And importantly, our FCG business delivered incremental margin in line with our expectations. This quarter, we immediately recognized a positive impact on our integration efforts and didn't miss a beat with our accelerated capital investment plans across our larger foot We're now even more confident about our opportunities to propel future earnings growth in Florida, including through 4 projects and an expansion of the SAFE program, which are all currently filed for approval with the Florida Public Service Commission. Across our enterprise, we are steadily advancing the capital investment projects, regulatory filings and business transformation initiatives that will support future growth and optimize our operations within our larger footprint. Speaker 200:06:00We are particularly pleased to have just received approval from the Florida Public Service Commission on Tuesday for 3 new transmission expansion projects that support increased customer demand. We remain confident in our ability to achieve our 2024 adjusted EPS guidance of $5.33 to $5.45 and our longer term outlook for 2025 'twenty eight as we continue to drive shareholder value by delivering on the attractive opportunities throughout our businesses. I will now turn to Slide 6, which covers results for the quarter. Adjusted earnings per share was $2.10 in the Q1 of this year. We also generated adjusted gross margin of $165,000,000 a $35,000,000 increase over the Q1 of last year. Speaker 200:06:56FCG represented $25,000,000 in adjusted gross margin in Q1. This was driven by an incremental contribution from the 2023 rate case, as well as continued customer growth. Our legacy businesses contributed another $10,000,000 of adjusted gross margin growth, driven by contributions from incremental transmission expansion projects and organic growth in our natural gas distribution businesses, contributions from our regulated infrastructure programs and Florida natural gas base rate proceeding, higher customer consumption, increases in Aspire energy gathering fees and higher propane consumption, margins per gallon and fees. Turning now to Slide 7. We remain intently focused on achieving synergies, optimizing operations across the enterprise and accelerating capital investment opportunities. Speaker 200:07:53We're taking a good look at our operations and processes, taking a best of both approach to things like customer care and project management. In places where our legacy business processes were stronger, we're bringing that strength to Florida City Gas and vice versa. Our work so far has been encouraging. There are a lot of commonalities to our approaches and cultures, and our teams have been really engaged to learn from each other. And while the integration work continues, we are now operating as one company and our efforts to leverage our greater footprint, optimize efficiencies and invest in growth are being applied across the whole enterprise. Speaker 200:08:35Slide 8 shows the major projects and initiatives that are driving approximately $16,000,000 of incremental adjusted gross margin growth. We have submitted 11 pipeline projects to the Florida Public Service Commission, representing approximately $152,000,000 of capital investment. 7 of these have now been approved and 4 are under review with decisions expected this summer. This is a record number of project filings and approvals for us. It demonstrates our ability to accelerate investment as a combined business. Speaker 200:09:08It also speaks to the magnitude of future growth opportunities in Florida, one of the key reasons the FCG acquisition was important to our strategy. This quarter, we added 2 new Peninsula Pipeline Company transmission projects to the table, Boynton Beach and New Smyrna Beach, representing a combined $5,000,000 in adjusted gross margin for 2025. These extension projects will support FPU's distribution systems in the Boynton and New Smyrna Beach communities. Those expansions are driven by the need for increased natural gas supply to coastal portions of the state that are experiencing significant population growth. On the infrastructure replacement side, we have a number of programs well underway, including the Guard, Safe and Storm Protection programs in Florida and the capital surcharge program on the Eastern Shore. Speaker 200:10:04These programs support our ability to maintain safe and reliable service for our customers and will contribute to margin growth over the next 10 years. As new projects are developed and receive approval, they will be added to this table. As shown on Slide 9, we have hit the ground running in 2024 with our capital investments. We've ramped up spending considerably to take advantage of both the magnitude of the growth opportunities before us and the scale benefits that bolster our ability to execute. I'd like to emphasize that with $70,000,000 of CapEx spent in the Q1, we're wasting no time executing on the opportunities to drive growth and margin that provide the basis for our Florida City Gas acquisition that are abundant throughout our larger organization. Speaker 200:10:52We're also delivering on business transformation projects that are bringing enterprise wide efficiencies. Our investment projects are laying important groundwork for our long term growth. We are bolstering the safety and reliability of our systems and investing in the pipelines and interconnects that are meeting customer demand, while also creating and reinforcing our pathways to market. I'll now turn the call to Beth. Speaker 300:11:17Thanks, Jeff, and good morning, everyone. It is great to catch up with you today. We had another successful quarter with adjusted EPS of $2.10 per share, dollars 0.06 higher than the Q1 of last $6 higher than the Q1 of last year, driven by solid performance across all our businesses. As you can see on Slide 10, our recent acquisitions, largely Florida City Gas, contributed $0.84 in adjusted EPS. Our Florida City Gas unit achieved solid customer growth and benefited from its 2023 rate case outcome. Speaker 300:11:56Our legacy businesses also generated strong earnings, delivering $0.26 of incremental EPS this year, and we had $0.06 of contribution from increased customer consumption due to colder weather. I want to point out that while temperatures were colder than last year, they were still about 10% to 12% warmer than the normal temperatures calculated using a 10 year average in both our Delmarva and Ohio service territories. As always, we are prudently managing expenses, especially our payroll and travel and entertainment expenses and optimizing our operations, which drove an depreciation, amortization and property tax, a $0.34 offset from acquisition related expenses and an approximate $0.73 offset related to the Florida City Gas financing costs. Turning now to Slide 11. Adjusted gross margin increased by 27% to approximately $165,000,000 Operating income increased by $25,000,000 or 45 percent to approximately $80,000,000 Excluding transaction and transition related expenses, operating income increased by $26,000,000 or 47%. Speaker 300:13:33We are proud of the strong gross margin improvement. And most importantly, almost all of this improvement fell to net income. As a result, our adjusted net income improved by 29% to $47,000,000 This is a significant accomplishment and demonstrates the diligence of our teams as we continue to optimize our operations, increase collaboration across our businesses, and drive efficiencies. Moving to Slide 12, our adjusted gross margin for our regulated energy segment improved by 36% over last year and operating income improved by 57%, excluding non recurring transaction and transition costs. This improvement was the result of Florida City Gas' earnings contribution, organic growth in our natural gas distribution expansions by our natural gas transmission entities, permanent rate changes associated with our Florida legacy natural gas base rate proceeding, and finally incremental margins from our regulated infrastructure programs. Speaker 300:14:55I want to point out that we achieved 4.2 0.2% Speaker 100:15:00and 3.6 Speaker 300:15:00percent organic natural gas distribution growth on Delmarva and in Florida, respectively. As shown on Slide 13, our unregulated energy segment delivered an 8% adjusted gross margin improvement and a 24% operating income improvement. The biggest driver was higher propane consumption driven by the colder weather. We also saw higher propane margins and service fees, including from our recent J. T. Speaker 300:15:32Lee and Sons acquisition. Finally, we benefited from an increase in rates, gathering margins and consumption from Aspire Energy. Turning to Slide 14. Our team is driven by our commitment to safety, accountability and dependability. This collaborative culture enables our tireless pursuit of top quartile earnings performance driven by prudent capital investment regulatory initiatives. Speaker 300:16:02With our earnings growth, we are able to reinvest 50% to 55% of our earnings back into the business to support our capital investments, while also generating top tier dividend growth. Are committed to this range through 2028. Given the strength of our performance and our confidence in our capital investment strategy, we are reiterating our 2024 adjusted EPS guidance of $5.33 to 5 $0.45 our 2025 guidance of $6.15 to $6.35 per share and our 20.28 guidance of $7.75 to $8 per share. Our top financing is to maintain a strong balance sheet to support our growth plan, and we continue to execute on a financing plan consistent with an investment grade ratings profile. In the Q1 of this year, stockholders' equity increased by $35,000,000 as a result of our retained earnings. Speaker 300:17:17At the end of the Q1 of 2024, we had an equity to total capitalization ratio of over 48% versus 47% at the end of 2023. We continue to target an equity to total capitalization ratio of 50% by 20.28 at the latest. Customarily, we dribble out smaller amounts of equity over time to manage to our target capital structure. We will continue to do this as we carry out our 5 year capital plan. On Slide 16, we show our strong history of consistent dividend growth. Speaker 300:17:58We are proud to have a 10 year dividend CAGR of approximately 9% through year end 2024. This quarter, we announced a significant 8.5 percent dividend increase of $0.05 per share Speaker 200:18:17to $0.64 per share Speaker 300:18:17per quarter. Our Board made this decision in line with our balanced capital allocation strategy to reflect the strength of our performance and our confidence in our future growth prospects, while also allowing for a high level of earnings reinvestment to fund future capital investment. This strategy continues to support top quartile earnings growth to facilitate top quartile dividend growth. Turning now to Slide 17. Our pathway to our 2024 EPS guidance is comprised of multiple important drivers. Speaker 300:18:561st, strong incremental contributions from our legacy businesses of approximately $0.40 to $0.50 per share. 2nd, a full year of Florida City Gas' results, including the interest costs associated with financing the acquisition, representing about $0.35 to $0.45 per share. And 3rd, incremental opportunities of approximately 0.20 dollars to $0.30 per share from our integration, business transformation and cost management activities across the enterprise. The impact of these factors is partially offset by dilution of about $1 per share due to the equity issuance completed to finance the Florida City Gas acquisition. Moving to Slide 18, I want to provide a few highlights from our integration accomplishments as well as some detail on our incremental opportunities to drive earnings growth. Speaker 300:19:57This quarter, we were focused on seamlessly welcoming and orienting our new team members to our organization and culture, which is very much aligned with Florida City Gas. We conducted an employee engagement survey so that we have a solid baseline of sentiment upon which we can build and grow. We also completed our rebranding, which helps to solidify our one team approach. We acted on additional margin opportunities with our service agreements, working to reduce our reliance on the transition service agreements with NextEra. We are in the process of leveraging the Florida City Gas after hours call center for our whole enterprise, which will standardize and enhance the customer experience. Speaker 300:20:44We're also integrating our cybersecurity protocols in order to maintain our consistent secure risk profile. Importantly, we're also making steady progress on our infrastructure projects in Florida, which Jim will touch on shortly, and we're ramping up our capital spend. We are moving forward with new projects, including 3 projects that will connect transformation projects, such as our technology improvement initiatives remains a high priority. We're also continuing to manage our costs prudently across the business. In summary, our initiatives remain on track and we are very excited about our progress and the opportunities ahead. Speaker 300:21:35Now, I'd like to turn the call over to Jim. Speaker 400:21:38Thank you, Beth, and good morning, everyone. I'll begin with slide 19, where we present our rate case initiatives and infrastructure programs. In Florida, we've been operating at our new effective rates for nearly a year in our Florida Public Utilities and Florida City Gas jurisdictions with allowed ROEs of 10.25% and between 8.5% 10.5% respectively. 2024 will be our 1st full year with these increased rates. As we discussed on our last call, we filed a joint application for a natural gas rate case with the Maryland PSC in January 2024. Speaker 400:22:27Our application seeks approval for tariff changes, including a new technology cost recovery rider, a proposed underserved area rate, which will enable expansions to meet demand as well as a program for evaluating extensions to multifamily projects. We also filed a separate depreciation study associated with our Maryland utilities. We are continuing to have a productive engagement our regulators and are optimistic about our continued path to a constructive outcome. As Jeff mentioned, we are making significant headway with our infrastructure programs in Florida, which are designed to continually improve the safety and reliability of service. April 2024, we filed a petition with the Florida PSC to more closely align the SAFE and GUARD programs. Speaker 400:23:26Specifically, we requested modifications that will enable us to accelerate remediation on the pipes that need it the most, as well as facilities that have obsolete or exposed pipe. We expect these modifications to add about $50,000,000 in CapEx associated with the SAES program. When combined with the GARD program, this represents approximately $460,000,000 of natural gas distribution infrastructure investments over the next 10 years. Turning to slide 20, which shows numerous Florida transmission projects driven by customer growth. I'll take a moment to highlight a few recent updates. Speaker 400:24:13First, we have 7 approved projects, which total about $106,000,000 in capital expenditures. In April 2024, the Florida PSC approved our Newberry expansion project, which secondarily included the acquisition and conversion of propane community gas systems in Newberry. This is expected to begin in the Q2 of this year. We have delivered service via the community gas system for many years and the timing is now appropriate to convert those systems over and bring natural gas service to the area to support future expansion. We have successfully executed conversions like this many times in the past, and we are excited to bring both the transmission and distribution infrastructure to this area. Speaker 400:25:09For our Wildlight pipeline expansion project, where we have now received Phase 1 and Phase 2 approvals, growth continues at a record pace. We are now ready to construct Phase 2, which involves the installation of 2 new steel pipeline segments. In March of 2024, the Florida PSC approved 2 new Peninsula Pipeline East Coast Transmission Projects. There, we are constructing natural gas transmission extensions to support our distribution system growth in Boynton Beach and New Smyrna Beach, which Jeff talked about earlier. On Tuesday, we received approval for $42,000,000 in additional expansion projects, which include extensions to support recent and expected population growth in the St. Speaker 400:26:03Cloud, Plant City and Lake Mattie communities in Florida. And finally, we have 4 projects under PSC review, including the Pioneer Supply Header Pipeline Project, which will enhance natural gas availability in Southeast Florida and our trio of RNG projects, representing $46,000,000 of CapEx, which will connect 3 landfill RNG projects to our will be an approximately $80,000,000 liquefied natural gas storage project in Maryland. This initiative, which will provide critical energy service to customers during the peak winter heating season, will help protect against weather related disruptions, keeping energy prices affordable. This is especially important as we are dealing with an increasing number of extreme weather events across the country. On April 26, FERC issued a positive environmental assessment report for this project, a major milestone that our entire team can be proud of. Speaker 400:27:25We remain optimistic about our continued progress as we proceed to our anticipated in service date in the Q3 of 2025. Turning now to Slide 22, I would like to cover some of our sustainability initiatives and other recent innovations and awards. In April, we were proud to publish our safety and reliability report, the first in our series of micro sustainability reports. In the coming months, we will release our second micro report covering our environmental stewardship efforts. We're also very proud to launch a first of its kind energy efficiency program in Delaware this year. Speaker 400:28:11The program includes 3 residential initiatives, which we anticipate will reduce consumption by the equivalent of 10 55 households annual energy usage. This innovative At Full Circle Dairy, we continue to progress towards completion of our first full scale RNG production facility, and we expect our first injection of RNG produced there in the first half of twenty twenty four. This project is anticipated to capture and redirect more than 1100 metric tons of methane per year, the equivalent of the emissions from powering 3,500 homes annually. I would also like to commend our employee resource groups, led by the Green ERG for coordinating our recent Earth Day and Arbor Day activities. As an example, we partnered with the Arbor Day Foundation on an energy saving trees program, where our team members could request a locally appropriate tree to plant on their property. Speaker 400:29:31The Arbor Day Foundation's resources then help them determine an optimal planting site for the greatest energy and money saving benefits. In January, we supported the Food Bank of Delaware with a $50,000 donation and donated as well a number of park benches made from recycled plastic pipe. We plan to donate similar benches to other nonprofit organizations, municipalities, parks and trails within our service areas. Later this month, we will celebrate receiving the Torch Award for ethics from the Delaware Better Business Bureau. This distinction is given to companies that put integrity into action, and we are incredibly honored to receive this award. Speaker 400:30:21As you can see, our team is excelling in all areas of the business and beyond. Making life better for our employees, customers and communities remains paramount in everything we do. With that, I will turn the call to Jeff for concluding remarks. Speaker 200:30:38Thank you. This year, we are off to a very strong start, marked by a steady execution of our Florida City Gas integration, strong investments in growth and technology, advancements in our regulatory initiatives and prudent expense management. Our newly combined team in Florida is working collaboratively and efficiently with none of the integration speed bumps that can sometimes occur with acquisitions. We're excited about what we will accomplish together. We're well positioned to deliver on the significant and attractive opportunities across our enterprise and to continue our track record of driving top quartile earnings performance. Speaker 200:31:18The projects in our plan will enable us to continually improve the customer experience, reach new customers and explore new pathways to safe, reliable energy delivery. And by leveraging our deep expertise and experience, we are executing our strategy in a way that is valuable to our team, our communities, our customers, and our shareholders. We remain intently focused on sustaining our history of superior performance, and we look forward to sharing our progress. With that, we'll take your questions. Operator? Operator00:31:55The floor is now open for questions. Our first question is coming from Tate Sullivan with Maxim Group. Speaker 500:32:24Hi, good morning. Thank you. First to follow-up the comments on the liquefied natural gas storage facility in Maryland. Is that not yet in your incremental gross margin table is my first question? Speaker 300:32:40That is correct, Kate. We're waiting for the final approval and then at that point in time, we will include a gross margin estimate. But as we indicated in the update, as you heard, we're really pleased we're on schedule most recently with the environmental assessment being issued. And has FERC order Speaker 500:33:02and its construction timeline estimated FERC order and its construction timeline estimated based on a table about 9 months, it seems sort of fast, but is that a reasonable? Speaker 300:33:15That's correct. We have already begun preparing for the site by having some of the work done related to the tank manufacturing. So that is well underway. We've also basically contracted for the purchase of the land once we get the appropriate approval. So that's why once the final approval for the project is received, we can work pretty quickly to get everything constructed and be ready to go next year. Speaker 500:33:48Thank you. And last for me is for Florida City Gas' customer growth, is it still expected to be similar to your natural gas operations that you had before acquiring Florida City Gas? Speaker 300:34:01It is. It's a little bit more in metropolitan areas. So the growth relative to somewhere like in the Jacksonville area may not be quite as high, but still it's relatively Speaker 100:34:13in a good strong customer growth that Speaker 300:34:15we continue to experience there as well. Speaker 500:34:19Okay. Thank you very much. Speaker 300:34:21Thank you, Tate. Operator00:34:27Our next question comes from Paul Fremont with Ladenburg. Speaker 600:34:37You talk about sort of margin improvement in propane and gathering. Can you tell us where the margins are today and what they were previously? Speaker 300:34:52Sure. I mean, we don't typically disclose the actual margin level itself, but certainly as you're coming through Paul, the Q1 there's a lot of volume that happens primarily in that Q1 and some of the margin expansion that we saw was a result of weather still normal. And so we've provided a calculation, in where we talk about the weather impact to the tune of about $1,500,000 or $0.05 per share in terms of what our results would have been if weather had been normal. I can tell you in the protein business, we've had the benefit for the last several years, 5 years plus, where in periods where we have experienced warmer than normal temperatures, the rate increases, the margin increases have been somewhat of a natural hedge. I can also tell you that as we've come out of the Q1, margins have stayed a little higher than normal, but keep in mind, our volumes cut down significantly in the 2nd and third quarters because you're not in those heating seasons. Speaker 300:36:03On the Aspire side, we've worked really hard in terms of our rate design. And so you've seen us be able to adjust our rates to also compensate for some of the weather impact. And so that's what you're also seeing come through the numbers in the Q1. Speaker 600:36:23Great. And are you in a position yet to sort of indicate what type of cost savings you're expecting in Florida post acquisition? Speaker 300:36:36We are not at this point coming out with specific dollar amounts. I mean you can see that if you look in our results for the quarter and you actually we've talked about in the past our operating expenses exclusive of depreciation, amortization and property taxes as a percentage of gross margin. And relative to what we look like in 20 23, there is certainly an improvement in that metric. And we're going to continue to fully integrate the business, make sure that we're accomplishing everything that we set out to do. I think if you looked at us, we've evaluated ourselves in the past relative to our peers. Speaker 300:37:15We've had a real focus on cost management and that's going to continue. But the real story around Florida City Gas for us is not so much just cost management, but it's also the opportunity to capitalize on the growth opportunities and also some various regulatory strategies that we think we can deploy there. And so right out of the gate and hopefully this came through in the slides, we were pretty happy to report right that we've got 7 projects that we've gotten approval for, not all of those we have margin estimates out for because 3 just got approved this week in Florida. We've got another 4 in the pipeline that you'll hear more about in the future, 3 of which are projects for Florida City Gas. One is an asset also a project that's associated with them. Speaker 300:38:07So there's a lot going on, Paul. We've actually stepped up as we had anticipated and you see that ramp. And so that's really exciting to us and what we can do there and then again the regulatory strategy. So we're down a path on all of those. And again if you look at that metric I think that will give you some comfort that we are achieving synergies. Speaker 300:38:27We're just not coming out with a lot of specifics because again we're 1 quarter in, we're trying to accomplish a lot of different things on many fronts. But stay tuned. Hopefully, again, like you said, things continue as planned. It started out great again for the Q1. Speaker 600:38:46And then last question, you've given us sort of an equity total capitalization target of sort of 45% to 50% sort of near term. What does that equate to potentially in terms of FFO to debt? And can you give us any insight into planned equity issuance over the course of your forecast period? Speaker 300:39:13Sure. So let me start with the first part of it. So our target equity to total capitalization is actually 50% to 60%. And we're actually at about 48% as of the end of the first quarter, slightly ahead of where we actually thought we might be in some of our projections. But over the next 5 years, you're going to see us move back to our target capital structure of 50% to 60% equity. Speaker 300:39:43What you also heard us talk about was the fact that we are reinvesting back into the business somewhere between 50% to 55% of our earnings. Right now our dividend payout is in the upper 40s and so that enables us to put a strong amount of earnings back into the business and infuse equity that's very competitively priced. And so for the quarter you actually saw us inject about $35,000,000 into our equity from retained earnings. In regards to as we look out, certainly we're looking at FFO to debt. We don't put a lot of metrics out on that. Speaker 300:40:23But as we did the transaction, we wanted to make sure we stayed at an investment grade level. That was important to us. And so you're going to see us be well into the teens on our FFO to debt, mid teens to upper teens as we look at it. And then finally from a financing, we will access the capital markets as needed. We have historically dribbled out equity over time. Speaker 300:40:50I think with the strong cash flow that's coming from our larger enterprise and looking at the cash flows, cash flow certainly for the Q1 you can see it. We will need some small equity infusions, but there's a lot of cash that's going to be able to be reinvested back into the business. You'll see us doing some debt refinancings at the appropriate time, but you won't see any heavy, heavy equity lift certainly like you would have seen with the transaction or anything like that, small dribbling amounts over time. And if I missed anything, please let me know, Paul. Speaker 600:41:28No. Just does that equity issuance include this year or not? Speaker 300:41:33We'll see as the year progresses. Certainly, it could be some very small amounts, but nothing that would be deemed significant. Speaker 600:41:44Great. I think that's it. You covered everything. Thank you so much. Speaker 300:41:47Thank you. Operator00:42:10It appears we have no further questions at this time. I will now turn the program back over to Jeff Householder for closing remarks. Speaker 200:42:19Thank you again for joining today's call. We are very pleased with our first quarter performance, including the many capital projects that we've initiated. We look forward to seeing many of you at the AGA Financial Forum that's coming up. Goodbye. Operator00:42:38Thank you. This concludes Chesapeake Utilities Corporation's 1st quarter 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallChesapeake Utilities Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Chesapeake Utilities Earnings HeadlinesChesapeake Utilities (NYSE:CPK) Hits New 1-Year Low on Analyst DowngradeMay 2, 2025 | americanbankingnews.comChesapeake Utilities: Good Growth Prospects, But Very Richly ValuedApril 24, 2025 | seekingalpha.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. May 6, 2025 | Golden Portfolio (Ad)Barclays Sticks to Their Hold Rating for Chesapeake Utilities (CPK)April 23, 2025 | markets.businessinsider.comChesapeake Utilities price target raised to $125 from $120 at BarclaysApril 23, 2025 | markets.businessinsider.comChesapeake Utilities to Host its First Quarter 2025 Earnings Conference Call and Webcast on May 8, 2025April 22, 2025 | prnewswire.comSee More Chesapeake Utilities Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Chesapeake Utilities? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Chesapeake Utilities and other key companies, straight to your email. Email Address About Chesapeake UtilitiesChesapeake Utilities (NYSE:CPK) operates as an energy delivery company. The company operates through two segments, Regulated Energy and Unregulated Energy. The Regulated Energy segment natural gas distribution operations in central and southern Delaware, Maryland's eastern shore, and Florida; regulated natural gas transmission in the Delmarva Peninsula, Ohio, and Florida; and regulated electric distribution in northeast and northwest Florida. The Unregulated Energy segment engages in the propane operations in the Mid-Atlantic region, North Carolina, South Carolina, and Florida; unregulated natural gas transmission/supply operation in central and eastern Ohio; generation of electricity and steam; provision of compressed natural gas, liquefied natural gas, and renewable natural gas transportation and pipeline solutions primarily to utilities and pipelines in the United States; and sustainable energy investments. This segment is also involved in the provision of other unregulated services, such as energy-related merchandise sale and heating, ventilation and air conditioning, and plumbing and electrical services. Chesapeake Utilities Corporation was founded in 1859 and is headquartered in Dover, Delaware.View Chesapeake Utilities ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings Fortinet (5/7/2025)ARM (5/7/2025)DoorDash (5/7/2025)AppLovin (5/7/2025)MercadoLibre (5/7/2025)Lloyds Banking Group (5/7/2025)Manulife Financial (5/7/2025)Novo Nordisk A/S (5/7/2025)Uber Technologies (5/7/2025)Johnson Controls International (5/7/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 7 speakers on the call. Operator00:00:00Welcome to the Chesapeake Utilities Corporation's First Quarter 2024 Earnings Conference Call. I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations. Speaker 100:00:48Thank you, and good morning, everyone. My name is Lucia Dempsey, and I'm thrilled to have joined Chesapeake Utilities Corporation last month as the new Head of Investor Relations. I'm looking forward to meeting many of you at AGA next week or at other opportunities in the coming weeks months. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. Speaker 100:01:16With me today are Jeff Householder, Chair of the Board, President and Chief Executive Officer Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer. On Slide 3, we show our typical disclaimers, while I remind you that matters discussed in this conference call may include forward looking statements that involve risks and uncertainties. Forward looking statements and projections could differ materially from our actual results. The Safe Harbor for Forward Looking Statements section of our 2023 Annual Report on Form 10 ks provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on certain non GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the accompanying information includes the appropriate disclosures in accordance with the SEC's Regulation G. Speaker 100:02:20A reconciliation of these non GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our Q1 Form 10 Q. Now it is my distinct pleasure to turn the call over to Jeff. Speaker 200:02:36Thank you, Lucia. Good morning and thanks to all of you for joining our call today. I'll begin with Slide 4. This quarter, our team once again executed on our long standing strategic growth plan. Over the past several years, we've been focused on 3 fundamental drivers to support earnings growth. Speaker 200:02:54First, we work hard to identify and prudently deploy investment capital that meets the service demands created by significant customer growth. Our geographic footprint is an advantage here. Our service territories continue to experience a customer growth rate that is more than double the industry average. 2nd, we proactively manage our regulatory agenda to support the approval and cost recovery of our capital projects. You'll hear us describe in a moment several projects currently in front of state and federal regulators with total investment well over $200,000,000 And the third and perhaps most important of our strategic growth drivers is the continued business transformation of our company, which is focused on our people, processes, technology and organizational structure. Speaker 200:03:43Our continuous improvement initiatives enable us to manage an ever expanding business. Turning to Slide 5. This morning, you will hear us touch on service delivery to customers and other operational accomplishments, the FCG acquisition integration process, capital project execution, regulatory advances and a number of efficiency improvements. I'm happy to report that 2 of the more significant concerns facing our company and our industry, weather and interest rates have been, at least through the Q1, far less impactful to earnings than what we experienced in 2023. While the 2024 winter was warmer than normal in our service areas, we've been able to manage through it. Speaker 200:04:29Customer consumption increased in the Q1 compared to Q1 of 2023. And as we all know, interest rates appear to have at least stabilized with no increase so far this year. Our regulated natural gas transmission and distribution businesses continue to grow. We will mention today several system expansions, which are in various stages of approval, permitting or construction. In our non regulated businesses, realized contributions from increased propane consumption as well as increased propane margin and service fees. Speaker 200:05:03This served to offset much of the warmer than normal weather impact. Our Florida City Gas integration plan is on track and on schedule. And importantly, our FCG business delivered incremental margin in line with our expectations. This quarter, we immediately recognized a positive impact on our integration efforts and didn't miss a beat with our accelerated capital investment plans across our larger foot We're now even more confident about our opportunities to propel future earnings growth in Florida, including through 4 projects and an expansion of the SAFE program, which are all currently filed for approval with the Florida Public Service Commission. Across our enterprise, we are steadily advancing the capital investment projects, regulatory filings and business transformation initiatives that will support future growth and optimize our operations within our larger footprint. Speaker 200:06:00We are particularly pleased to have just received approval from the Florida Public Service Commission on Tuesday for 3 new transmission expansion projects that support increased customer demand. We remain confident in our ability to achieve our 2024 adjusted EPS guidance of $5.33 to $5.45 and our longer term outlook for 2025 'twenty eight as we continue to drive shareholder value by delivering on the attractive opportunities throughout our businesses. I will now turn to Slide 6, which covers results for the quarter. Adjusted earnings per share was $2.10 in the Q1 of this year. We also generated adjusted gross margin of $165,000,000 a $35,000,000 increase over the Q1 of last year. Speaker 200:06:56FCG represented $25,000,000 in adjusted gross margin in Q1. This was driven by an incremental contribution from the 2023 rate case, as well as continued customer growth. Our legacy businesses contributed another $10,000,000 of adjusted gross margin growth, driven by contributions from incremental transmission expansion projects and organic growth in our natural gas distribution businesses, contributions from our regulated infrastructure programs and Florida natural gas base rate proceeding, higher customer consumption, increases in Aspire energy gathering fees and higher propane consumption, margins per gallon and fees. Turning now to Slide 7. We remain intently focused on achieving synergies, optimizing operations across the enterprise and accelerating capital investment opportunities. Speaker 200:07:53We're taking a good look at our operations and processes, taking a best of both approach to things like customer care and project management. In places where our legacy business processes were stronger, we're bringing that strength to Florida City Gas and vice versa. Our work so far has been encouraging. There are a lot of commonalities to our approaches and cultures, and our teams have been really engaged to learn from each other. And while the integration work continues, we are now operating as one company and our efforts to leverage our greater footprint, optimize efficiencies and invest in growth are being applied across the whole enterprise. Speaker 200:08:35Slide 8 shows the major projects and initiatives that are driving approximately $16,000,000 of incremental adjusted gross margin growth. We have submitted 11 pipeline projects to the Florida Public Service Commission, representing approximately $152,000,000 of capital investment. 7 of these have now been approved and 4 are under review with decisions expected this summer. This is a record number of project filings and approvals for us. It demonstrates our ability to accelerate investment as a combined business. Speaker 200:09:08It also speaks to the magnitude of future growth opportunities in Florida, one of the key reasons the FCG acquisition was important to our strategy. This quarter, we added 2 new Peninsula Pipeline Company transmission projects to the table, Boynton Beach and New Smyrna Beach, representing a combined $5,000,000 in adjusted gross margin for 2025. These extension projects will support FPU's distribution systems in the Boynton and New Smyrna Beach communities. Those expansions are driven by the need for increased natural gas supply to coastal portions of the state that are experiencing significant population growth. On the infrastructure replacement side, we have a number of programs well underway, including the Guard, Safe and Storm Protection programs in Florida and the capital surcharge program on the Eastern Shore. Speaker 200:10:04These programs support our ability to maintain safe and reliable service for our customers and will contribute to margin growth over the next 10 years. As new projects are developed and receive approval, they will be added to this table. As shown on Slide 9, we have hit the ground running in 2024 with our capital investments. We've ramped up spending considerably to take advantage of both the magnitude of the growth opportunities before us and the scale benefits that bolster our ability to execute. I'd like to emphasize that with $70,000,000 of CapEx spent in the Q1, we're wasting no time executing on the opportunities to drive growth and margin that provide the basis for our Florida City Gas acquisition that are abundant throughout our larger organization. Speaker 200:10:52We're also delivering on business transformation projects that are bringing enterprise wide efficiencies. Our investment projects are laying important groundwork for our long term growth. We are bolstering the safety and reliability of our systems and investing in the pipelines and interconnects that are meeting customer demand, while also creating and reinforcing our pathways to market. I'll now turn the call to Beth. Speaker 300:11:17Thanks, Jeff, and good morning, everyone. It is great to catch up with you today. We had another successful quarter with adjusted EPS of $2.10 per share, dollars 0.06 higher than the Q1 of last $6 higher than the Q1 of last year, driven by solid performance across all our businesses. As you can see on Slide 10, our recent acquisitions, largely Florida City Gas, contributed $0.84 in adjusted EPS. Our Florida City Gas unit achieved solid customer growth and benefited from its 2023 rate case outcome. Speaker 300:11:56Our legacy businesses also generated strong earnings, delivering $0.26 of incremental EPS this year, and we had $0.06 of contribution from increased customer consumption due to colder weather. I want to point out that while temperatures were colder than last year, they were still about 10% to 12% warmer than the normal temperatures calculated using a 10 year average in both our Delmarva and Ohio service territories. As always, we are prudently managing expenses, especially our payroll and travel and entertainment expenses and optimizing our operations, which drove an depreciation, amortization and property tax, a $0.34 offset from acquisition related expenses and an approximate $0.73 offset related to the Florida City Gas financing costs. Turning now to Slide 11. Adjusted gross margin increased by 27% to approximately $165,000,000 Operating income increased by $25,000,000 or 45 percent to approximately $80,000,000 Excluding transaction and transition related expenses, operating income increased by $26,000,000 or 47%. Speaker 300:13:33We are proud of the strong gross margin improvement. And most importantly, almost all of this improvement fell to net income. As a result, our adjusted net income improved by 29% to $47,000,000 This is a significant accomplishment and demonstrates the diligence of our teams as we continue to optimize our operations, increase collaboration across our businesses, and drive efficiencies. Moving to Slide 12, our adjusted gross margin for our regulated energy segment improved by 36% over last year and operating income improved by 57%, excluding non recurring transaction and transition costs. This improvement was the result of Florida City Gas' earnings contribution, organic growth in our natural gas distribution expansions by our natural gas transmission entities, permanent rate changes associated with our Florida legacy natural gas base rate proceeding, and finally incremental margins from our regulated infrastructure programs. Speaker 300:14:55I want to point out that we achieved 4.2 0.2% Speaker 100:15:00and 3.6 Speaker 300:15:00percent organic natural gas distribution growth on Delmarva and in Florida, respectively. As shown on Slide 13, our unregulated energy segment delivered an 8% adjusted gross margin improvement and a 24% operating income improvement. The biggest driver was higher propane consumption driven by the colder weather. We also saw higher propane margins and service fees, including from our recent J. T. Speaker 300:15:32Lee and Sons acquisition. Finally, we benefited from an increase in rates, gathering margins and consumption from Aspire Energy. Turning to Slide 14. Our team is driven by our commitment to safety, accountability and dependability. This collaborative culture enables our tireless pursuit of top quartile earnings performance driven by prudent capital investment regulatory initiatives. Speaker 300:16:02With our earnings growth, we are able to reinvest 50% to 55% of our earnings back into the business to support our capital investments, while also generating top tier dividend growth. Are committed to this range through 2028. Given the strength of our performance and our confidence in our capital investment strategy, we are reiterating our 2024 adjusted EPS guidance of $5.33 to 5 $0.45 our 2025 guidance of $6.15 to $6.35 per share and our 20.28 guidance of $7.75 to $8 per share. Our top financing is to maintain a strong balance sheet to support our growth plan, and we continue to execute on a financing plan consistent with an investment grade ratings profile. In the Q1 of this year, stockholders' equity increased by $35,000,000 as a result of our retained earnings. Speaker 300:17:17At the end of the Q1 of 2024, we had an equity to total capitalization ratio of over 48% versus 47% at the end of 2023. We continue to target an equity to total capitalization ratio of 50% by 20.28 at the latest. Customarily, we dribble out smaller amounts of equity over time to manage to our target capital structure. We will continue to do this as we carry out our 5 year capital plan. On Slide 16, we show our strong history of consistent dividend growth. Speaker 300:17:58We are proud to have a 10 year dividend CAGR of approximately 9% through year end 2024. This quarter, we announced a significant 8.5 percent dividend increase of $0.05 per share Speaker 200:18:17to $0.64 per share Speaker 300:18:17per quarter. Our Board made this decision in line with our balanced capital allocation strategy to reflect the strength of our performance and our confidence in our future growth prospects, while also allowing for a high level of earnings reinvestment to fund future capital investment. This strategy continues to support top quartile earnings growth to facilitate top quartile dividend growth. Turning now to Slide 17. Our pathway to our 2024 EPS guidance is comprised of multiple important drivers. Speaker 300:18:561st, strong incremental contributions from our legacy businesses of approximately $0.40 to $0.50 per share. 2nd, a full year of Florida City Gas' results, including the interest costs associated with financing the acquisition, representing about $0.35 to $0.45 per share. And 3rd, incremental opportunities of approximately 0.20 dollars to $0.30 per share from our integration, business transformation and cost management activities across the enterprise. The impact of these factors is partially offset by dilution of about $1 per share due to the equity issuance completed to finance the Florida City Gas acquisition. Moving to Slide 18, I want to provide a few highlights from our integration accomplishments as well as some detail on our incremental opportunities to drive earnings growth. Speaker 300:19:57This quarter, we were focused on seamlessly welcoming and orienting our new team members to our organization and culture, which is very much aligned with Florida City Gas. We conducted an employee engagement survey so that we have a solid baseline of sentiment upon which we can build and grow. We also completed our rebranding, which helps to solidify our one team approach. We acted on additional margin opportunities with our service agreements, working to reduce our reliance on the transition service agreements with NextEra. We are in the process of leveraging the Florida City Gas after hours call center for our whole enterprise, which will standardize and enhance the customer experience. Speaker 300:20:44We're also integrating our cybersecurity protocols in order to maintain our consistent secure risk profile. Importantly, we're also making steady progress on our infrastructure projects in Florida, which Jim will touch on shortly, and we're ramping up our capital spend. We are moving forward with new projects, including 3 projects that will connect transformation projects, such as our technology improvement initiatives remains a high priority. We're also continuing to manage our costs prudently across the business. In summary, our initiatives remain on track and we are very excited about our progress and the opportunities ahead. Speaker 300:21:35Now, I'd like to turn the call over to Jim. Speaker 400:21:38Thank you, Beth, and good morning, everyone. I'll begin with slide 19, where we present our rate case initiatives and infrastructure programs. In Florida, we've been operating at our new effective rates for nearly a year in our Florida Public Utilities and Florida City Gas jurisdictions with allowed ROEs of 10.25% and between 8.5% 10.5% respectively. 2024 will be our 1st full year with these increased rates. As we discussed on our last call, we filed a joint application for a natural gas rate case with the Maryland PSC in January 2024. Speaker 400:22:27Our application seeks approval for tariff changes, including a new technology cost recovery rider, a proposed underserved area rate, which will enable expansions to meet demand as well as a program for evaluating extensions to multifamily projects. We also filed a separate depreciation study associated with our Maryland utilities. We are continuing to have a productive engagement our regulators and are optimistic about our continued path to a constructive outcome. As Jeff mentioned, we are making significant headway with our infrastructure programs in Florida, which are designed to continually improve the safety and reliability of service. April 2024, we filed a petition with the Florida PSC to more closely align the SAFE and GUARD programs. Speaker 400:23:26Specifically, we requested modifications that will enable us to accelerate remediation on the pipes that need it the most, as well as facilities that have obsolete or exposed pipe. We expect these modifications to add about $50,000,000 in CapEx associated with the SAES program. When combined with the GARD program, this represents approximately $460,000,000 of natural gas distribution infrastructure investments over the next 10 years. Turning to slide 20, which shows numerous Florida transmission projects driven by customer growth. I'll take a moment to highlight a few recent updates. Speaker 400:24:13First, we have 7 approved projects, which total about $106,000,000 in capital expenditures. In April 2024, the Florida PSC approved our Newberry expansion project, which secondarily included the acquisition and conversion of propane community gas systems in Newberry. This is expected to begin in the Q2 of this year. We have delivered service via the community gas system for many years and the timing is now appropriate to convert those systems over and bring natural gas service to the area to support future expansion. We have successfully executed conversions like this many times in the past, and we are excited to bring both the transmission and distribution infrastructure to this area. Speaker 400:25:09For our Wildlight pipeline expansion project, where we have now received Phase 1 and Phase 2 approvals, growth continues at a record pace. We are now ready to construct Phase 2, which involves the installation of 2 new steel pipeline segments. In March of 2024, the Florida PSC approved 2 new Peninsula Pipeline East Coast Transmission Projects. There, we are constructing natural gas transmission extensions to support our distribution system growth in Boynton Beach and New Smyrna Beach, which Jeff talked about earlier. On Tuesday, we received approval for $42,000,000 in additional expansion projects, which include extensions to support recent and expected population growth in the St. Speaker 400:26:03Cloud, Plant City and Lake Mattie communities in Florida. And finally, we have 4 projects under PSC review, including the Pioneer Supply Header Pipeline Project, which will enhance natural gas availability in Southeast Florida and our trio of RNG projects, representing $46,000,000 of CapEx, which will connect 3 landfill RNG projects to our will be an approximately $80,000,000 liquefied natural gas storage project in Maryland. This initiative, which will provide critical energy service to customers during the peak winter heating season, will help protect against weather related disruptions, keeping energy prices affordable. This is especially important as we are dealing with an increasing number of extreme weather events across the country. On April 26, FERC issued a positive environmental assessment report for this project, a major milestone that our entire team can be proud of. Speaker 400:27:25We remain optimistic about our continued progress as we proceed to our anticipated in service date in the Q3 of 2025. Turning now to Slide 22, I would like to cover some of our sustainability initiatives and other recent innovations and awards. In April, we were proud to publish our safety and reliability report, the first in our series of micro sustainability reports. In the coming months, we will release our second micro report covering our environmental stewardship efforts. We're also very proud to launch a first of its kind energy efficiency program in Delaware this year. Speaker 400:28:11The program includes 3 residential initiatives, which we anticipate will reduce consumption by the equivalent of 10 55 households annual energy usage. This innovative At Full Circle Dairy, we continue to progress towards completion of our first full scale RNG production facility, and we expect our first injection of RNG produced there in the first half of twenty twenty four. This project is anticipated to capture and redirect more than 1100 metric tons of methane per year, the equivalent of the emissions from powering 3,500 homes annually. I would also like to commend our employee resource groups, led by the Green ERG for coordinating our recent Earth Day and Arbor Day activities. As an example, we partnered with the Arbor Day Foundation on an energy saving trees program, where our team members could request a locally appropriate tree to plant on their property. Speaker 400:29:31The Arbor Day Foundation's resources then help them determine an optimal planting site for the greatest energy and money saving benefits. In January, we supported the Food Bank of Delaware with a $50,000 donation and donated as well a number of park benches made from recycled plastic pipe. We plan to donate similar benches to other nonprofit organizations, municipalities, parks and trails within our service areas. Later this month, we will celebrate receiving the Torch Award for ethics from the Delaware Better Business Bureau. This distinction is given to companies that put integrity into action, and we are incredibly honored to receive this award. Speaker 400:30:21As you can see, our team is excelling in all areas of the business and beyond. Making life better for our employees, customers and communities remains paramount in everything we do. With that, I will turn the call to Jeff for concluding remarks. Speaker 200:30:38Thank you. This year, we are off to a very strong start, marked by a steady execution of our Florida City Gas integration, strong investments in growth and technology, advancements in our regulatory initiatives and prudent expense management. Our newly combined team in Florida is working collaboratively and efficiently with none of the integration speed bumps that can sometimes occur with acquisitions. We're excited about what we will accomplish together. We're well positioned to deliver on the significant and attractive opportunities across our enterprise and to continue our track record of driving top quartile earnings performance. Speaker 200:31:18The projects in our plan will enable us to continually improve the customer experience, reach new customers and explore new pathways to safe, reliable energy delivery. And by leveraging our deep expertise and experience, we are executing our strategy in a way that is valuable to our team, our communities, our customers, and our shareholders. We remain intently focused on sustaining our history of superior performance, and we look forward to sharing our progress. With that, we'll take your questions. Operator? Operator00:31:55The floor is now open for questions. Our first question is coming from Tate Sullivan with Maxim Group. Speaker 500:32:24Hi, good morning. Thank you. First to follow-up the comments on the liquefied natural gas storage facility in Maryland. Is that not yet in your incremental gross margin table is my first question? Speaker 300:32:40That is correct, Kate. We're waiting for the final approval and then at that point in time, we will include a gross margin estimate. But as we indicated in the update, as you heard, we're really pleased we're on schedule most recently with the environmental assessment being issued. And has FERC order Speaker 500:33:02and its construction timeline estimated FERC order and its construction timeline estimated based on a table about 9 months, it seems sort of fast, but is that a reasonable? Speaker 300:33:15That's correct. We have already begun preparing for the site by having some of the work done related to the tank manufacturing. So that is well underway. We've also basically contracted for the purchase of the land once we get the appropriate approval. So that's why once the final approval for the project is received, we can work pretty quickly to get everything constructed and be ready to go next year. Speaker 500:33:48Thank you. And last for me is for Florida City Gas' customer growth, is it still expected to be similar to your natural gas operations that you had before acquiring Florida City Gas? Speaker 300:34:01It is. It's a little bit more in metropolitan areas. So the growth relative to somewhere like in the Jacksonville area may not be quite as high, but still it's relatively Speaker 100:34:13in a good strong customer growth that Speaker 300:34:15we continue to experience there as well. Speaker 500:34:19Okay. Thank you very much. Speaker 300:34:21Thank you, Tate. Operator00:34:27Our next question comes from Paul Fremont with Ladenburg. Speaker 600:34:37You talk about sort of margin improvement in propane and gathering. Can you tell us where the margins are today and what they were previously? Speaker 300:34:52Sure. I mean, we don't typically disclose the actual margin level itself, but certainly as you're coming through Paul, the Q1 there's a lot of volume that happens primarily in that Q1 and some of the margin expansion that we saw was a result of weather still normal. And so we've provided a calculation, in where we talk about the weather impact to the tune of about $1,500,000 or $0.05 per share in terms of what our results would have been if weather had been normal. I can tell you in the protein business, we've had the benefit for the last several years, 5 years plus, where in periods where we have experienced warmer than normal temperatures, the rate increases, the margin increases have been somewhat of a natural hedge. I can also tell you that as we've come out of the Q1, margins have stayed a little higher than normal, but keep in mind, our volumes cut down significantly in the 2nd and third quarters because you're not in those heating seasons. Speaker 300:36:03On the Aspire side, we've worked really hard in terms of our rate design. And so you've seen us be able to adjust our rates to also compensate for some of the weather impact. And so that's what you're also seeing come through the numbers in the Q1. Speaker 600:36:23Great. And are you in a position yet to sort of indicate what type of cost savings you're expecting in Florida post acquisition? Speaker 300:36:36We are not at this point coming out with specific dollar amounts. I mean you can see that if you look in our results for the quarter and you actually we've talked about in the past our operating expenses exclusive of depreciation, amortization and property taxes as a percentage of gross margin. And relative to what we look like in 20 23, there is certainly an improvement in that metric. And we're going to continue to fully integrate the business, make sure that we're accomplishing everything that we set out to do. I think if you looked at us, we've evaluated ourselves in the past relative to our peers. Speaker 300:37:15We've had a real focus on cost management and that's going to continue. But the real story around Florida City Gas for us is not so much just cost management, but it's also the opportunity to capitalize on the growth opportunities and also some various regulatory strategies that we think we can deploy there. And so right out of the gate and hopefully this came through in the slides, we were pretty happy to report right that we've got 7 projects that we've gotten approval for, not all of those we have margin estimates out for because 3 just got approved this week in Florida. We've got another 4 in the pipeline that you'll hear more about in the future, 3 of which are projects for Florida City Gas. One is an asset also a project that's associated with them. Speaker 300:38:07So there's a lot going on, Paul. We've actually stepped up as we had anticipated and you see that ramp. And so that's really exciting to us and what we can do there and then again the regulatory strategy. So we're down a path on all of those. And again if you look at that metric I think that will give you some comfort that we are achieving synergies. Speaker 300:38:27We're just not coming out with a lot of specifics because again we're 1 quarter in, we're trying to accomplish a lot of different things on many fronts. But stay tuned. Hopefully, again, like you said, things continue as planned. It started out great again for the Q1. Speaker 600:38:46And then last question, you've given us sort of an equity total capitalization target of sort of 45% to 50% sort of near term. What does that equate to potentially in terms of FFO to debt? And can you give us any insight into planned equity issuance over the course of your forecast period? Speaker 300:39:13Sure. So let me start with the first part of it. So our target equity to total capitalization is actually 50% to 60%. And we're actually at about 48% as of the end of the first quarter, slightly ahead of where we actually thought we might be in some of our projections. But over the next 5 years, you're going to see us move back to our target capital structure of 50% to 60% equity. Speaker 300:39:43What you also heard us talk about was the fact that we are reinvesting back into the business somewhere between 50% to 55% of our earnings. Right now our dividend payout is in the upper 40s and so that enables us to put a strong amount of earnings back into the business and infuse equity that's very competitively priced. And so for the quarter you actually saw us inject about $35,000,000 into our equity from retained earnings. In regards to as we look out, certainly we're looking at FFO to debt. We don't put a lot of metrics out on that. Speaker 300:40:23But as we did the transaction, we wanted to make sure we stayed at an investment grade level. That was important to us. And so you're going to see us be well into the teens on our FFO to debt, mid teens to upper teens as we look at it. And then finally from a financing, we will access the capital markets as needed. We have historically dribbled out equity over time. Speaker 300:40:50I think with the strong cash flow that's coming from our larger enterprise and looking at the cash flows, cash flow certainly for the Q1 you can see it. We will need some small equity infusions, but there's a lot of cash that's going to be able to be reinvested back into the business. You'll see us doing some debt refinancings at the appropriate time, but you won't see any heavy, heavy equity lift certainly like you would have seen with the transaction or anything like that, small dribbling amounts over time. And if I missed anything, please let me know, Paul. Speaker 600:41:28No. Just does that equity issuance include this year or not? Speaker 300:41:33We'll see as the year progresses. Certainly, it could be some very small amounts, but nothing that would be deemed significant. Speaker 600:41:44Great. I think that's it. You covered everything. Thank you so much. Speaker 300:41:47Thank you. Operator00:42:10It appears we have no further questions at this time. I will now turn the program back over to Jeff Householder for closing remarks. Speaker 200:42:19Thank you again for joining today's call. We are very pleased with our first quarter performance, including the many capital projects that we've initiated. We look forward to seeing many of you at the AGA Financial Forum that's coming up. Goodbye. Operator00:42:38Thank you. This concludes Chesapeake Utilities Corporation's 1st quarter 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.Read morePowered by