Chesapeake Utilities Corporation

Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Welcome to Chesapeake Utilities Corporation's first quarter 2025 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 one 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 0. I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

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 up the call 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 2024 annual report on Form 10-K and on our first quarter Form 10-Q provides 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, our earnings release, and our first quarter form 10Q. 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 bicycle safety, as highlighted on slide three. Increasingly warmer temperatures bring more cyclists on the road, whether for commuting or for fun. Fasting is great for physical and mental health, but we must increase our awareness to ensure safety for all on the road. Cyclists should always wear a helmet, remain highly visible during the day and at night, and stay aware of traffic patterns. Drivers also need to remain alert and watch for cyclists, particularly at intersections and when turning or parking. Sharing the road will ensure we all get to our destination safely. I'll now introduce our presenters. Jeff Householder, Chair of the Board, President, and Chief Executive Officer, will provide an update on our quarterly performance, our growing service areas, and our capital investment plan. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer, will review our active regulatory agenda, business transformation initiatives, and stakeholder engagement efforts. And 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. With that, it is my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning, and thank you for joining our call today. I'll begin with slide five. Following our strong performance in 2024, we are pleased to announce continued growth in the first quarter of 2025. With adjusted earnings per share of $2.22, up 6% from the first quarter of 2024. This performance is in line with our expectations, enabling us to reaffirm our full year 2025 adjusted earnings per share guidance of $6.15 to $6.35. And as I'll discuss in more detail shortly, our 2025 capital growth plan of $325 to $375 million is off to an excellent start. with $113 million already invested in the first three months of this year. As shown on slide six, for the first quarter of 2025, we continued to see strong growth and increasing demand for natural gas across our service areas. We operated in some of the fastest-growing regions of the country and recorded another quarter of above-average customer growth. Delmarva customer growth was up nearly 4%, and Florida increased by 3%. relative to the same period last year. This growth is driven by a number of factors, including population and migration to our service areas, construction of new residential communities, and system expansions to serve growing commercial and industrial demand. Customers continue to seek natural gas service to fuel their lives and businesses, and we'll continue to provide them the safe, reliable, and cost-effective service they expect. The opportunity to serve increasing customer demand is the basis for our overall growth strategy, which in turn drives sustainable earnings. To deliver consistent returns, we remain focused on the three pillars of our growth strategy as shown on slide seven. First, we work hard to identify and prudently deploy capital for projects that meet our increasing customer demand. Second, we proactively manage our regulatory agenda to support cost recovery of our capital projects and growing operations. And third, we continually transform our business operations, which includes technology and organizational improvements that enable us to maintain operational excellence as we become a larger organization. Slide 8 highlights our fortunate position of having multiple channels of capital investment to drive overall long-term earnings growth. The first is reliability infrastructure, which includes upgrades and replacements to improve system resiliency and safety. These infrastructure growth investments are supported by regulatory programs, such as the Florida Guard and SAFE programs, that provide effective and timely recovery of our capital investments. Reliability infrastructure investments generated $5.8 million of gross margin in the first quarter of 2025 and are expected to generate a total of $27 million of gross margin throughout the full year. The second category of significant growth is occurring in our gas transmission businesses in Delaware and Florida. Many of our major capital projects are designed to extend transmission service in support of distribution expansion that serves new customers. In the first quarter of this year, these projects generated $2.5 million of gross margin and are expected to contribute $22 million of gross margin for the full year, primarily in the third and fourth quarters of 2025. Slide 9 provides additional detail on these transmission projects. The Eastern Shore Natural Gas Warwick Extension in Maryland and the Peninsula Pipeline Company Plant City Project in Florida were placed in service in the fourth quarter of 2024, and have driven over $3 million of gross margin in 2025. In addition, our Peninsula Pipeline Boynton Beach project was placed in service in the first quarter of this year, driving an additional $3 million of 2025 gross margin. Construction continues for our remaining capital projects, many of which are expected to be in service in the second half of this year. The majority of our 2025 margins resulting from these projects will occur in the third and fourth quarters of 2025. I'll now provide an update on our Worcester Resiliency Upgrade, or WRU project, as shown on slide 10. In January of this year, we received FERC approval for WRU, a liquefied natural gas storage facility critical to support seasonal peaking services for interconnected gas distribution systems. The LNG Peaking Service provides reliable and affordable system peaking capacity service that ensures that we can meet the growing demand for natural gas in our Delaware and Maryland distribution systems. Following FERC approval, we received final updated general contractor bids for site-related construction work. The bids were significantly higher than the indicative pricing and the timing of construction was longer than the indicative project timing we had received from contractors at the end of last year. Two factors are principally contributing to the cost increases in the project timing. Reviews of the bids and discussions with the participating contractors indicated availability constraints for certain skilled and licensed labor, and that cost estimates were also being impacted by uncertainty around the current economic climate. These factors have led to a $20 million increase in capital investment, resulting in a total expected project cost of approximately $100 million. We will be making the necessary filings to ensure rate recovery of this additional capital. The expected in-service date of the project has shifted from October of 2025 to the second quarter of 2026. which means that the WRU margin that was originally expected in the fourth quarter will begin in 2026. This project remains critical to support increasing demand in this area, and it's still the lowest-cost project to address peak weather loads and protect against weather-related disruption. We're executing contracts this week and anticipate starting full site construction upon receiving the notice to proceed from Perth. WRU is just one of many projects that supports our five-year capital investment plan as shown on slide 11. We've made significant progress to date with $356 million invested in 2024 and $113 million already invested through the first quarter of 2025. Cumulatively, we've also already identified and initiated at least $1.4 billion of our five-year capital investment plan of $1.5 to $1.8 billion, of which approximately 70% requires no additional regulatory approval or support. With that, I'll turn to Jim to discuss our regulatory strategy and business transformation initiative.