Chesapeake Utilities Corporation

Welcome to Chesapeake Utilities Corporation's second 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 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 0. I would now like to turn the call over to Lucy Ademsi, 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 2, 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 second quarter Form 10-Q provide 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-GAP measures, including adjusted gross margin, adjusted net income, and adjusted earnings per share. And the information today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAP measures to the related GAP measures has been provided in the appendix of this presentation, our earnings release, and our second 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 digging safely, as highlighted on slide 3. Monday, August 11th is National 811 Day, when utilities across the nation remind customers to call before they dig to prevent dangerous and costly damage to underground infrastructure, including natural gas pipelines, electric distribution lines, and water pipes, among others. Whether installing a small mailbox or excavating a large stump, dial 811 before breaking ground to request local utilities to mark all underground lines, ensuring you can safely dig and complete your project. I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President, and Chief Executive Officer will provide an update on our key accomplishments and highlights since our last earnings call, our quarterly and -to-date performance, our full year guidance metrics, and our capital growth program. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer will summarize our progress on multiple regulatory initiatives, our ongoing business transformation efforts, and our stakeholder engagement. And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary, will discuss our financial results, financing updates, and investment highlights. With that, it is my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning. We appreciate you joining our discussion today. The highlights on slide five demonstrate how we've continued to deliver with purpose of the last few months. Our growth trajectory continues as we've expanded our capital investment program, achieved regulatory success, and maintained a strong balance sheet while financing future growth. As shown on slide six, we reported adjusted earnings per share of $1.04 for the second quarter of 2025, up 21 percent from the second quarter of 2024. This marks the fourth consecutive quarterly increase in earnings relative to the prior year period following the Florida City Gas Acquisition driven by continued growth in our service areas, successful integration of FCG, and consistent focus on operational excellence. Our second quarter performance, coupled with a strong start to the year, is driving double-digit growth and adjusted gross margin, operating income, and adjusted net income for the first half of 2025 relative to the same period last year. These results are in line with our expectations, so we continue to reaffirm our full year 2025 EPS guidance of $6.15 to $6.35 per share, as shown on slide seven. This range does assume a successful outcome in 2025 on the Florida City Gas Depreciation Study, which was filed with the Florida Public Service Commission at the start of this year, and Jim will provide an update on this filing later on the call. On the capital investment side, growing demand for natural gas from residential, commercial, and industrial customers continues to drive our robust capital program with $213 million already invested in the first six months of this year. Given this pace of investment and our expectations for the second half of the year, we are increasing our 2025 full-year capital guidance to $375 million to $425 million, a $50 million increase over our prior range. A significant amount of our total capital spend this year will drive margin growth in 2026 and beyond, supporting our EPS guidance through 2028. I'll now shift to slide eight to discuss the increasing demand for natural gas as we strategically invest in some of the fastest growing regions of country. Both of our core service areas generated another quarter of above average customer growth, leading to -to-date residential customer growth of 4.2 percent in Delmarva and 3 percent in Florida compared with the first half of last year. We're seeing a number of multifamily developments opt to add natural gas instead of the typical all-electric build-outs, and a number of small business partners in Delaware are leveraging state funding to install natural gas infrastructure, which attracts additional small business and manufacturing customers. We also continue to expand natural gas service to new developments across Florida. One recent example is Newfield in Palm City, a new -to-table community that combines housing, sustainable farming, and a vibrant town center where we're installing natural gas infrastructure to homes, schools, businesses, and agricultural work. The opportunities we have to serve in increasing customer demand and improved system reliability are the basis for our overall growth strategy, which in turn drives sustainable earnings. We remain committed to increasing shareholder value by focusing on the three pillars of our growth strategy as shown on slide nine, which I'm certain you have memorized by now. In short, we are consistently focused on identifying and prudently deploying capital, proactively managing our regulatory agenda, and continually transforming our business operations. We believe that successful execution of these three pillars will enable us to maintain top quartile growth and total shareholder return. Slide 10 provides some highlights of our 2025 capital program. We were pleased to bring six major capital projects online within the first half of the year, supported in some cases by interim service from our Marlin virtual pipeline operations. Boynton Beach came online in the first quarter, and New Smyrna Beach, the St. Cloud expansion projects, and the three RNG transportation projects were brought online in the second quarter of this year. Altogether, projects placed in service thus far in the year generated $2.5 million in the second quarter and are expected to generate $9.8 million for full year 2025. All other construction projects remain on track and on budget. We also have a number of incremental investments that are driving the $50 million increase in our full year capital expenditure guidance. We expect to spend approximately $20 million on additional infrastructure replacement and reliability projects through our Guard and SAFE programs. About half or $10 million of the incremental capital investment for the Worcester resiliency upgrade, or WRU, will be spent this year, as well as an additional $10 million to meet increased demand for our Marlin virtual pipeline services and $10 million as we build out infrastructure to support the rapid growth in our Port St. Lucie, Florida area. We were particularly excited to announce our first data center-related project, Duncan Plains, outside of Columbus, Ohio. We've entered into an agreement with American Electric Power to construct and operate an infrastructure natural gas pipeline to power our new AEP fuel cell facility that will serve a data center. This $10 million capital project is expected to be online in the first half of 2027. I'll now provide additional details on WRU, our LNG storage facility in Bishopville, Maryland, as shown on slide 11. Last quarter, we shared that cost increases drove the total capital investment for the project to approximately $100 million and shifted the in-service date to the first half of 2026. We subsequently requested updated rates and at the end of last month received FERC approval to recover this incremental capital investment, which results in an additional $3.9 million of full-year margin contribution upon project completion. In June, we took delivery of the storage tanks and are pleased to report that we formally mobilized our contractor and received an initial notice to proceed from FERC, enabling us to begin site preparation and construction. This project remains the lowest cost project to support affordable energy and protect against weather-related disruptions for growing populations in Southern Delaware and Maryland. We look forward to having the project fully in service in the first half of 2026. As shown in detail on slide 12, all of our major capital projects are advancing as expected, with more than half now in service. We forecast these projects to contribute approximately $23 million of gross margin in 2025 and $45 million in 2026. To summarize on slide 13, our regulated capital program benefits from multiple sources of investment, not just the new transmission system, but also infrastructure projects that support reliability and resiliency. Our capital investment under our four regulated infrastructure programs are expected to generate gross margin of $27 million in 2025 and approximately $38 million in 2026. Shifting to slide 14, all of these projects are expected to support our five-year capital investment plan of $1.5 to $1.8 billion, of which we've already identified and initiated at least $1.4 billion. Most importantly, approximately 70% of that investment requires no additional regulatory approval or support. Not yet included in this forecast are a number of projects still under exploration and development, some of which are on slide 15. We have a number of potential expansion opportunities ahead of us, including serving the space industries in Virginia and Florida, expanding our systems in the southern part of Delmarva and Florida, and meeting incremental demand for our Marlin virtual pipeline services to transport RNG, CNG, and LNG. As we determine the likelihood, size, and timing of these potential projects alongside our upcoming strategic planning process, we will evaluate updates to our five-year capital expenditure guidance. With that, I'll turn to Jim to discuss our regulatory strategy and business transformation initiatives.