Chesapeake Utilities Corporation

Welcome to Chesapeake Utilities Corporation's third quarter 2024 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I'd like to turn the call over to Lucia Dempsey, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. 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 the call up for questions. On slide two, we show our typical disclaimers, while I remind you that matters discussed on 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-K 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 information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, in our earnings release, and in our third quarter Form 10-Q. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here, with a moment on motor vehicle safety, as highlighted on slide three. The time change and shift into cooler temperatures, though we haven't quite seen that yet, provides us an opportunity to check and update fluid levels, windshield wipers, roadside emergency supplies, and ensure oil changes are on schedule. Also be aware of how the time change affects morning and evening visibility, and exercise more caution around wet or slippery roads and increased traffic around holiday travel. I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on demand in our growing service areas, capital investment plan, and business transformation efforts, including an update on the Florida City Gas integration. Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary, will discuss our financial results, strong balance sheet, and dividend and earnings growth trajectory. And Jim Moriarty, Executive Vice President, General Counsel, and Corporate Secretary, and Chief Policy and Risk Officer, will review our regulatory strategy, government affairs efforts, and other company updates. With that, it's my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning, and thanks to all of you for joining our call today. I'll begin with slide five. Adjusted earnings per share this quarter was 80 cents, bringing our year-to-date 2024 earnings per share to $3.76. Our results are well aligned with our expectations, with strong contributions from both Florida City Gas and our core natural gas operations. Our year-to-date earnings performance combined with our growth expectations for the remainder of 2024 enable us to reaffirm our full year 2024 adjusted earnings per share guidance of $5.33 to $5.45. continued expectations of strong demand growth, along with our pipeline of capital projects and regulatory initiatives, drive customer value and enable us to reaffirm our 2025 and 2028 EPS guidance ranges. And as I'll discuss in more detail shortly, our 2024 capital growth plan remains on track, with $257 million invested in the first nine months of this year and $300 to $360 million expected for full year 2024. Turning to slide six, I'd like to start with a short update on hurricane season. Overall, our systems fared well through Hurricanes Debbie, Helene, and Milton, for which we are grateful. While we did have a number of electric customers lose power during Hurricane Helene, we were able to restore power for the majority of our impacted customers within the first 24 hours. I'm pleased with the work our teams have been doing to practice our emergency response procedures and improve the quality and resiliency of our infrastructure and systems, which enabled us to respond quickly and effectively in communicating with customers and restoring their power. Our integration of Florida City Gas also continues on track as we make additional progress on standardizing operations, engaging with teammates and exploring investment opportunities to serve a significant growth in our new service areas. Slide seven provides additional detail on this growth as we are fortunate to operate in some of the fastest growing areas of the country, enabling us to deploy sustainable capital investments to meet the needs of growing customer demand. We have another quarter of outstanding customer growth in both Delmarva and Florida, with each area again experiencing a 3.9% increase in residential customers in the third quarter of this year relative to the same period last year. We expect strong population growth to continue in our service areas as evidenced by a substantial number of new residential communities planned or in early stage development in both Delmarva and Florida over the next several years. Customers want natural gas service in their homes, so we expect these projects will continue to support strong customer growth. The opportunity to serve increasing customer demand is the basis for our overall growth strategy, which in turn drives sustainable earnings growth. To achieve this growth, we remain consistently focused on three fundamental drivers to support earnings growth, as shown on slide eight. First, we work hard to identify and prudently deploy investment capital in projects that align with customer demand and enable us to continue providing safe and reliable energy delivery services. Second, we proactively manage our regulatory agenda to support cost recovery of our capital projects. Third, and equally as important, given our recent and future overall enterprise growth, is business transformation. which prioritizes continuous improvement initiatives that enable us to ensure long-term success in an ever-changing environment. Capital deployment is our primary growth driver, and on slide 9, you can see that we've made significant progress toward identifying and initiating at least $1.3 billion of our five-year capital investment plan of $1.5 to $1.8 billion. A particular note, nearly $1 billion of this identified capital requires no additional regulatory approval or support. While we are fundamentally a regulated utility company, we look for opportunities to leverage our related businesses to work together to meet the needs of customers. Although our current slate of identified projects reflects significant regulated investment, we are moving forward on identifying additional regulated and complementary non-regulated investments in 2025 and beyond. Slide 10 shows we are making excellent progress toward our 2024 capital expenditure guidance of $300 to $360 million. with $257 million invested through September of this year, including approximately $100 million spent in the third quarter alone. Our team is focused on efficiently deploying the remaining capital through the balance of the year, including advancing multiple growth projects that were drivers of our FCG acquisition, undertaking capital projects previously approved, and implementing technology that supports our ongoing business transformation. Slide 11 provides additional detail on the major projects that are driving nearly $300 million of capital investment and over $36 million of additional adjusted gross margin in 2024 and 2025 across Delmarva and Florida. All in progress investments remain on track as we focus on managing these construction projects safely and effectively. I'd like to note one new project this quarter, number 18, the Miami Interloop. In September, our Peninsula Pipeline Company filed for Florida Public Service Commission approval of the Transportation Service Agreement with Florida City Gas for a series of projects to enhance infrastructure in the Miami area. Referred collectively as the Miami Interloop, this expansion will support growth in FCG's distribution system through new transportation projects and system connection points. Turning to slide 12, our third fundamental growth driver is continual business transformation to support long-term enterprise growth. In August, we successfully implemented a new company-wide SAP system, which has operated well over the last three months. This is a major step to support the operational transformation we've been working toward for the past few years, and we're already seeing a number of benefits and efficiencies with our new billing and field services system. We will also continue to implement additional technology upgrades across the enterprise, including transitioning FCG onto the SAP system next spring and assessing system upgrades to address additional process improvements across the organization. And with that, I'll turn to Beth to discuss our financial results in more detail.