UNITIL Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 UNICEF Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please press star and 1 on your telephone. Please be advised that today's conference is being recorded. If you're requiring further assistance, please press star 0. I now want to hand the conference over to your speaker today, Mr. Todd Diggins, you may begin, sir.

Good afternoon, and thank you for joining us to discuss Unitil Corporation's third quarter 2020 financial results. Speaking on the call today will be Tom Eisner, Chairman, President, and Chief Executive Officer, and Bob Hebert, Senior Vice President, Chief Financial Officer, and Treasurer. We will discuss financial and other information about our third quarter results on this call. As we mentioned in the press release announcing the call, we have posted that information, including a presentation, to the investor section of our website at www.unitil.com. We will refer to that information during this call. On slide two, the comments made today about future operating results or future events are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties, that could cause our actual results to differ materially from those predicted. Statements made on this call should be considered together with cautionary statements and other information contained in the most recent annual report on Form 10-K and other documents we have filed with or furnished to the Securities and Exchange Commission. Forward-looking statements speak only as of today, and we assume no duty to update them. This presentation contains non-GAAP measures. The accompanying supplemental information Moore fully describes these non-GAAP measures and includes a reconciliation to the nearest GAAP measure. The company believes these non-GAAP measures are useful in evaluating its performance. Turning to slide four, we provide an outline for topics to be covered in today's call. Tom will begin the business and strategy update, and Bob will cover a financial and regulatory update, and then Tom will wrap things up with a quick summary before we turn the call over to the operator for questions. And with that, I will now turn the call over to Chairman, President, and CEO, Tom Meisel.

Thank you, Todd. Good afternoon, everyone. Beginning on slide five, today we announced net income of $0.3 million, or two cents per share, for the third quarter of 2020. The company estimates that the ongoing COVID-19 pandemic unfavorably impacted third quarter net income by approximately one cent per share. Through the first three quarters of 2020, net income is $18.6 million, or $1.25 per share. For comparison purposes, recall that in the first quarter of 2019, the company recognized a one-time net gain of $9.8 million, or 66 cents per share, on the company's divestiture of its non-regulated business subsidiary, uSource. Adjusting for this one-time gain, net income is down about 4.4 million, or 29 cents per share, compared to 2019. The year-to-date decrease in earnings is primarily due to the warmer-than-normal winter weather in Q1, which unfavorably affected net income by approximately 3.1 million, or 20 cents per share. In addition to the warmer winter weather, we estimate that net income has been unfavorably impacted by approximately 4 cents per share, due to the COVID-19 pandemic. Turning to slide six, and similar to last quarter, I'd like to recap the company's response to the COVID-19 pandemic. Our highest priority continues to be the safety of our customers and of our employees. In response to the ongoing pandemic, we implemented our crisis response plan to help execute preventive and proactive measures during this unprecedented time and have also enacted a phased reopening plan. The company is currently in its limited reopening phase and is still requiring all office employees to work remotely wherever possible. The company also employs a large number of field workers to construct and maintain its energy infrastructure. These workers have adopted new policies and personal protective equipment to ensure the health and well-being of themselves and of our customers. Operationally, the company has continued to provide safe and reliable service throughout the pandemic. Employees entering customers' homes are being routinely tested to ensure the safety of both our customers and our employees. We are thankful that at this point there are no active COVID-19 cases among our employees. We quickly adapted to social distancing and other recommended guidelines while ensuring operational continuity and our workforce has seamlessly transitioned to work from home where appropriate. Our employees have risen to this extraordinary challenge while continuing to provide exceptional customer service. In fact, after Tropical Storm Isaias, we were able to restore power to all of our customers within a 24-hour period, an example of our best-in-class storm restoration system and our ability to adapt in order to serve our community safely and reliably. We've also been able to provide mutual aid to support other utilities in the region and their restoration efforts seven times this year. I would also briefly point out that the states where we operate are managing the pandemic relatively well in comparison to other regions of the country. The positive test rates in each of our states rank in the lowest 10 of all 50 states and less than half of the national average. On slide seven, we're pleased to announce that our 2020 Corporate Sustainability and Responsibility Report was recently issued on October 22nd. This report expands on the inaugural corporate responsibility report released last year and outlines our vision for sustainability and explains how our business strategies will align with the environmental, social, and economic expectations of our customers and communities. The reports to be published in the future will also define our objectives and strategies and report on key metrics to track our progress and illustrate the benefits to stakeholders. Sustainability is central to our mission and vision, and the interactive report can be found on our website at unitil.com. Turning to slide eight, our sustainability goals primarily fall under three categories. First, we are focused on advancing the grid. The need to reduce carbon emissions has driven a fundamental transformation within the energy sector. As customers adopt new technologies and as clean, renewable energy resources are increasingly distributed across the electricity delivery system, the fundamental architecture of the electric grid must advance. We are actively investing in five key areas that will support our objective of advancing the electric grid, in transforming the customer experience. This includes advanced metering, grid intelligence, distributed energy, customer services, and innovative rate design. These initiatives will provide customers with greater control and visibility into their energy use, and will enable distributed energy resources, access to the system, and advance the system's security, safety, and reliability. The company also believes that natural gas remains key to a sustainable future as a cleaner and more affordable option for our customers. We estimate that the impact over the last 10 years from our customers choosing natural gas rather than home heating oil has had the impact of taking roughly 60,000 cars off the road. Nearly two-thirds of Maine households still rely on fuel oil as their primary energy source for home heating, a larger proportion than in any other state in the United States. In New Hampshire, more than two-fifths of households rely on fuel oil, the second highest proportion in the nation behind Maine. This unusually high penetration of fuel oil presents significant opportunities to reduce emissions through continued customer conversions to natural gas. As we continue to expand the availability of natural gas to more customers, we also will continue to replace outdated infrastructure and modernize our gas system. As a result, we decreased our fugitive emissions from natural gas distribution by 47 metric tons over the last two years, lowering our total generation of fugitive greenhouse gas emissions by 9% in 2019 when compared to 2017. We also continue to look for opportunities to add renewable natural gas to our supply portfolio. In Q3 of this year, we issued a request for expressions of interest to several parties to identify sources of existing or planned RNG resources. We will continue to evaluate the viability of adding RNG into our supply. Another area central to sustainability is creating a sustainable future through our people. Finding and retaining quality, highly motivated employees is critical to our sustainability over the long term. We are also committed to providing a safe and healthy working environment to our employees and our contractors and the public. In fact, our safety metrics place us in the top one-third of our industry peers and have continued to improve over time. Not only is it important to keep employees safe in the field, but also to ensure that they are respected in the workplace. At Unitil, we strive to be an employer of choice for everyone, regardless of race, religion, color, gender, or sexual orientation, by maintaining an accepting, respectful, and non-discriminatory workplace where people are encouraged to bring their unique perspectives to the table. We believe the framework we've established for employee relations has been successful, as backed by a recent employee survey where 90% of our employees report being proud to work for Unitil. Our goal is to be the most technologically advanced utility in the region or the utility of the future. Our vision and mission have grounded us during this historically uncertain time and will guide us to a clean and sustainable energy future as we provide energy for life. Turning to slide nine, as I mentioned on last quarter's call, Our investment forecast still has not changed as a result of the COVID pandemic. In fact, compared to the prior year, we have increased our capital investment by more than 20%. We anticipate continuing to realize strong rate-based growth given our broad investment opportunities in advancing the grid and supporting and modernizing our gas distribution infrastructure. To provide one example, where we are facilitating the integration of distributed energy resources and overall system efficiency, we are installing a 2-megawatt utility-scale battery storage system in our Massachusetts service area. This energy storage system has the ability to serve over 1,300 homes for over two hours and is designed to reduce peak loading on the substation equipment. This project has a capacity representing over 2% of our system peak in Massachusetts, and offers a solution to advance grid operations, control cost variability, and aid in the overall system reliability as we support renewable energy solutions. With that, I'll now turn it over to Bob.