RGC Resources Inc.

Good morning from a cold and blustery Roanoke, Virginia. I want to thank you for joining us as we discuss RGC Resources 2024 fourth quarter and full year results. I am Tommy Oliver, Senior Vice President, Regulatory and External Affairs for RGC Resources, Inc. I am joined this morning by Paul Nestor, President and CEO of RGC Resources, and Tim Mulvaney, our Vice President, Treasurer, and Chief Financial Officer. Before we get started, I want to review a few administrative items. We have muted all lines and ask that all participants remain muted. The link to today's presentation is available on the investor and financial information page of our website at www.rgcresources.com. At the conclusion of the presentation and our remarks, we will take questions. So let's turn to slide one. This presentation contains forecasts and projections Slide one has information about risks and uncertainty, including forward-looking statements that should be understood in the context of our public violence. Slide two contains our agenda. We will discuss our operational and financial highlights, including an update of our rate case and other regulatory activities, how we finished fiscal 2024, and then discuss the outlook for full year fiscal 2025 with time allotted for questions at the end. So moving to slide three, we had a busy fiscal year on the regulatory front. We received favorable commission decisions on a number of routine regulatory matters in the fourth quarter. In addition, we reached the settlement in our general rate case with the SEC staff just after year end. This enabled us to reflect the estimated effect of this settlement in our year end results. The settlement to staff, which is subject to final approval by the Commission, allows for an increase of $4.08 million in annual revenue and is reflective of a ROE of 9.9%. We believe this is a fair outcome and we are pleased to reach agreement in advance of the hearing before the Commission, which took place in early November of this year. We expect to receive final approval and remit a small refund to customers in our second fiscal quarter. Early in the fourth quarter, we reached agreement with the commission staff on new depreciation rates, which are updated every five years. Additionally, in September, we received approval on both our annual save and R&G riders. The revenues associated with these riders began October 1, 2024. Turning now to operations on slide four, main extensions and renewals for the 2024 fiscal year totaled nearly eight miles. and we connected 631 new services, an increase of 79 new services over the prior period. In addition, we renewed 412 services during that same period. As we will discuss later, we continue to invest in rate-based to ensure a safe and reliable distribution system for our customers. Slide five shows our delivered gas volumes for the quarter. Volumes overall were 5 percent lower compared to the fourth quarter of 2023 with the decline attributable to warm fall weather and lower commercial volumes, including a temporary shutdown at a large commercial customer in September. Slide six shows delivered gas volumes for the full fiscal year in 2024. As shown, total volumes have remained steady compared to last year's period. I will now turn it over to Tim to talk about our 2024 CapEx and results. Tim?

Thank you, Tommy. Moving on to slide seven, our capital spending totaled $22.1 million for fiscal 2024 compared to $25.3 million in the full prior fiscal year. The decrease is attributable to the more than $3 million we spent in 2023 related to the RNG facility. In addition to our typical work expanding and renewing our system, We made meaningful investments and finished two interconnects with the MVP, completed a significant expansion for one of our top 10 customers, and initiated service to our first customer in Franklin County. Paul will provide some additional color on our movement to Franklin County as he discusses 2025. Moving to slide eight. We released earnings in mid-November. As we noted, a lower level of earnings from our investment in MVP, along with higher interest costs, resulted in lower net income compared to the same quarter in 2023. Fourth quarter net income was 141,000, or one penny per share, compared to a million dollars, or 10 cents per share, in the fourth quarter of 2023. Equity in earnings of unconsolidated affiliates was 872,000 pre-tax, which reflects our share of MVPs results, including the favorable amortization of the basis difference that we discussed in detail in our September investor report, which can be found on our website. This was down $689,000 compared to a year ago, driven by the AFU DC during the construction phase. Interest expense increased $305,000 compared to the same quarter a year ago due to the higher interest rate environment which is impacting our floating rate debt that supports our investment in the mountain valley pipeline and on the Roanoke gas line of credit. The year to date numbers are also on slide 10. In fiscal 2024, we grew net income by 462,000 to 11.8 million or $1.16 per share compared to 11.3 million or $1.14 per share in fiscal 2023. The company experienced inflationary cost pressures and higher interest rates, but was able to overcome those headwinds with strong earnings from the equity affiliate and growth in other income. The year was also marked with the completion of the MVP and settlement of the rate case as discussed by Tommy earlier in the presentation. Turning to slide nine, Paul is going to take us through our expectations for 2025, including growth, capital, what we expect the drivers for the year to be, and how all of that settles to the bottom line and into EPS. I will now pass the presentation to Paul Nestor. Paul?

Thank you, Tim. Good morning. We are on slide 10, and let's take a moment just to discuss, we believe, some of the opportunities to accelerate our growth now that Mountain Valley Pipeline is operational. Mountain Valley has the capability of transporting up to 2 billion deca-therms a day. And that's a tremendous amount of energy that's literally passing right through our service territory. And we're excited about that as we've spoken now for many years about that transportation capacity and that energy availability. That's the big picture. So let's maybe drill down from that into our service territory and our distribution system where we continue to see strong housing growth. We've got several new residential neighborhoods either breaking ground or moving from the planning to construction stage. Tommy reviewed our customer additions just a few moments ago. And for 2025, we see a similar number of new service connections in particular. So we're excited about that. There continues to be steady build out in the medical complex, which is primarily in the downtown or just adjacent to downtown Roanoke vicinity. The large Carilion expansion that we've been talking about for several years is nearing completion, and we expect increased gas usage for what is already a top three customer, that being Carilion. You may recall that we implemented a $1 million system betterment to support this expansion, and based on future plans at the medical complex, we have another million-dollar system betterment planned for this year. As Tim mentioned, we did serve or are now serving gas to our first customer in the Summit View Business Park and we're actively in business development, economic development discussions with the county and the Roanoke Regional Partnership about opportunities in Franklin County now that Mountain Valley Pipeline Gas is available there. We are undergoing plans right now to expand from Summit View Business Park to nearby commercial and residential And we're also in conversation with the county seat of Franklin County, the town of Rocky Mount, to serve that area with a new Mountain Valley Pipeline interconnect and distribution system. So very excited. As we've talked about in past calls and investor meetings, Franklin County has not had the opportunity for natural gas to this point in time. We're thrilled to be working with them and having the opportunity to serve that community. Just a note, though, some of that work does require action at a local government level, and we've had conversations and planning with the key decision makers, and we've accelerated those conversations following Mountain Valley Go Live in June. And our company is positioned to move forward as these opportunities are approved or available, but just a little caution here, they are not completely within our control and may take some time. Moving on to slide 11, our capital spending plan of $21.6 million for fiscal 2025 is in line with what Tim reviewed for 2024. We continue to expect to continue to invest in our existing distribution system here in the Greater Roanoke Valley. As we just talked about, there are opportunities in Franklin County with which we've allocated some capital shown in the purple the purple part of the pie there, labeled MVP growth. Moving to slide 12, the drivers that we think are going to influence this fiscal year are noted, at least the primary drivers. We've been addressing inflation, as Tim mentioned, with our rate making, and Tommy also covered that with the outstanding regulatory performance in fiscal 2024. and we're going to continue to be mindful and prudent of our expense side of the income statement, and we still believe there's some inflation in the economy, and we're seeing that. We're hopeful that that tempers a little bit, tempers down, of course, particularly in the area of professional services and IT expenses and labor costs. Interest rates as we all are seeing in the popular press, is an item that is moving around, if you will, very much in flux now, certainly since the November election. Tim, what are you hearing from our lenders and other folks about the interest rate environment?