Chesapeake Utilities Corporation

Welcome to Chesapeake Utilities Corp. 3rd Quarter 2020 Earnings Conference Call. During the presentation, all participants will be in a listening mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, November 5, 2020. I would now like to turn the conference over to Beth Cooper, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us today to review our third quarter and year-to-date results. We hope that you, your families, and coworkers are doing well and staying safe. We at Chesapeake Utilities continue to operate effectively in this new normal serving our customers, and keeping our employees as safe as possible. As shown on slide two, participating with me on the call today are Jeff Householder, President and Chief Executive Officer, and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Risk and Compliance Officer. We also have other members of our management team joining us virtually. Today's presentation can be accessed on our website under the Investors section and Events and Webcast subsection or via our IR app. After our prepared remarks, we will open the call up for questions. Our objective for the call today is to provide insight into our third quarter and year-to-date results, the estimated impact of COVID-19 on our business to date, as well as an update on our progress on numerous strategic initiatives and our outlook for the future. Moving to slide three, I would like to remind you that matters discussed in the conference call may include forward-looking statements that involve risks and uncertainty. Forward-looking statements and projections could differ materially from our actual results. The Safe Harbor for Forward-Looking Statements section of the company's 2019 annual report on Form 10-K and our 2020 quarterly reports on Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results. Now I'll turn the call over to Jeff to provide opening remarks on our third quarter performance, more details on our COVID-19 response, highlights on several strategic growth initiatives and some insights into our outlook going forward. Jeff?

Thank you, Beth. Good afternoon and thank you all for joining our third quarter call. As we prepared for this call, we reflected on the significant accomplishments that the company achieved during the third quarter. Let me start by highlighting some of our business development initiatives and several key accomplishments that occurred this quarter. I think this list exemplifies the Chesapeake entrepreneurial spirit along with the collaborative teamwork and drive for results that have long characterized our success. That's especially true as we continue to find ways in the middle of a viral pandemic to keep growing our business. As you well know, the investments and accomplishments we outlined today are the catalyst from which we generate future earnings growth. Slides four and five. include details on the execution of our growth strategy and feature several of our significant projects. The Del Mar Energy Pathway pipeline construction project in Maryland is underway. And we placed our Callahan pipeline in Nassau County, Florida in service in late June. So the third quarter was our first full quarter of operations for that pipeline. Our gas distribution systems continue to add customers at a rate that is significantly above the average growth rate for other utilities. We're partnering with several commercial agricultural and landfill waste bioenergy development firms on renewable natural gas projects in Delaware, Maryland, and Ohio. These projects will support local communities in mitigating the long-term challenge of agricultural waste disposal and landfill methane emissions. Most recently, we've partnered with Queen Bay Renewables in support of developing a renewable biogas plant in Westover, Maryland. The facility will produce pipeline-quality renewable natural gas, which we will take into our pipeline system for distribution, and organic fertilizer, both produced from chicken waste. We finalized agreements for the purchase of gas from the facility and for Marlin Gas Services to transport the RNG to our Eastern Shore natural gas pipeline interconnect. We're in the midst of evaluating negotiations for our potential broader participation in the Westover RNG facility. We're excited to support a project that not only contributes to a low-carbon energy future, but also the long-term environmental footprint of the Delmarva Peninsula. In Ohio, our Aspire Energy subsidiary partnered with Fourth Star and Rumpke Waste and Recycling for a landfill renewable natural gas project. Aspire will build a 17-mile pipeline to transport the RNG into our gathering system. During the third quarter, the Maryland Public Service Commission approved our acquisition of Elkton Gas. We closed on this transaction at the end of July and welcomed Elkton Gas and its talented team to the Chesapeake family. And we're well on the way to integrating Elkton Gas into our business and are already seeing increased growth in the Cecil County, Maryland area. We enhanced our strong balance sheet to support continued growth. We established an at-the-market equity program to provide access to new equity as the company continues to manage its capital structure. In late September, Chesapeake Utilities was honored to be included in the S&P Small Cap 600 Index, reflective of our increased market capitalization and steadying reliable earnings and dividend growth. Near the end of September, our stock was was added into this small cap index. At the same time that our stock went into the S&P 600, we were able to execute an at-the-market equity offering program, which ultimately resulted in the sale of over $75 million of Chesapeake shares at the end of the quarter. Year-to-date, through the end of October, Chesapeake has issued $88.6 million of new equity through its ATM and direct stock purchase plans. We also issued $90 million of new long-term debt with a 15-year maturity at an average rate of 2.98% and reduced our short-term borrowings. Lastly, at the end of September, we amended and renewed a $375 million syndicated facility with our bank lending group that provides access to short-term debt to meet our capital needs on an interim basis. The additional equity from this offering has rebalanced our equity debt ratio a year ahead of our expected timeframe. Our balance sheet is strong and we're well positioned for continued growth. Also in the third quarter, we announced a partnership with Atlantic Gas Light to build the CNG filling station at the Port of Savannah, Georgia. Our Marlin subsidiary will locate a logistics site at this facility. expanding our CNG mobile transport services in the new markets in Georgia and the Carolinas. For the ninth consecutive year, Chesapeake Utilities was named the top workplace in Delaware, representing only one of two companies that has earned this distinguished honor. We're very appreciative of this recognition from our employees. We reached a settlement agreement with the Office of Public Counsel in Florida for Hurricane Michael cost recovery proceeding, which was subsequently approved by the Florida Public Service Commission. The agreement generated $2.9 million in incremental year-to-date earnings. And earlier this week, our Sharp Energy propane subsidiary announced the acquisition of Western Natural Gas Company, a propane company based out of Jacksonville, Florida, that serves approximately 4,000 customers. And guess I said that right. It's Western Natural Gas is their name, but they are in fact a propane retailer. We're excited about this acquisition as it expands our propane presence in the growing markets in Duval and St. John's counties. Finally, earlier today, our board of directors declared our January 2021 dividend of 44 cents per share. It's a significant milestone for Chesapeake Utilities. We've now paid a dividend for 60 consecutive years. These are notable, perhaps even amazing accomplishments given the operational impact on our business as the COVID-19 pandemic continues. All of these initiatives enable us to generate strong third quarter performance and to reaffirm our commitment to our 2022 capital and EPS guidance. Later in the presentation, we'll discuss our major projects margin contributions table, which now forecasts a $50 million $50 million of margin in 2020 and $63 million of margin in 2021, given our announced projects and initiatives to date. I want to spend just a moment specifically on our third quarter and year-to-date results. Our third quarter gap earnings per share was 56 cents. That's 22 cents above our 2019 third quarter results. Year-to-date GAAP earnings per share increased to $2.97 from $2.59 as reported for the prior period. Our entire team has worked hard to not only keep meeting customer expectations for reliable service, but as I just indicated, we're also working hard to keep growing our energy delivery businesses. It's a testament to the dedication and drive of our employees, our contractors, and suppliers that in the face of the COVID-19 pandemic, our results are strong. and we continue executing on growth projects that will contribute to future earnings. Speaking for a moment of COVID-19, for the three and nine months ended September 30th, 2020, the estimated impacts that COVID-19 had on the company's net earnings was $700,000 and $1.9 million, respectively. Those impacts are primarily driven by reduced consumption of energy, largely in the commercial and industrial sectors, higher bad debt expense, incremental expenses associated with COVID-19, including personal protective equipment and premium pay for our frontline operations personnel. The additional operating expenses the company has incurred support the ongoing delivery of our essential services during these unprecedented times. The negative impact of these costs was partially offset by reduced operating expenses, related to remote work conditions, restricted travel, and other COVID-19-related cost reductions. Lower federal income tax expenses due to the CARES Act and lower financing costs as a result of the Fed's actions have simultaneously helped the bottom line. As the COVID-19 pandemic is still ongoing, the company has not established regulatory assets associated with incremental net expense impacts. We do, however, have the regulatory authority in Delaware, Maryland, and Florida to establish these regulatory assets. We will communicate on a timely basis updates on the deferral or recovery of our net COVID-19 expense impacts as we determine the timing and scope of any regulatory actions. I'll turn the call back to Beth to discuss in more detail our second quarter results. Beth?