UNITIL Corporation

Good day and welcome to the Q2 2022 Unitil's Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Todd Diggins, Director of Finance. Please go ahead, sir.

Good morning, and thank you for joining us to discuss Unitil Corporation's second quarter 2022 financial results. Speaking on the call today will be Tom Meissner, Chairman, President, and Chief Executive Officer, and Bob Hebert, Senior Vice President, Chief Financial Officer, and Treasurer. We will discuss financial and other information on this call. As we mentioned in the press release announcing this call, we have posted information, including a presentation, to the investor section of our website at unitil.com. We will refer to that information during this call. Moving to slide two, the comments made today about future operating results or 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 can cause 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 our 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 obligation to update them. This presentation contains non-GAAP financial measures. The accompanying supplemental information more fully describes these non-GAAP financial measures and also includes a reconciliation to the nearest GAAP financial measures. The company believes these non-GAAP financial measures are useful in evaluating its performance. With that, I will now turn the call over to Chairman, President, and CEO, Tom Meisner.

Great. Thanks, Todd. Good morning, everyone, and thank you for joining us. Beginning on slide four, today we announced net income of $4.9 million, or 30 cents per share, for the second quarter of 2022. Through the first half of the year, net income was $26.4 million, or $1.65 per share. This represents an increase of 21 cents per share over the same six-month period of 2021, supported by higher adjusted gross margins and successful rate case outcomes. Both our electric and gas operating companies in New Hampshire received orders from the Public Utilities Commission bringing a successful conclusion to the rate case process. These rate cases were an important part of our overall regulatory strategy and achieved favorable results for all stakeholders. The comprehensive settlements that were reached demonstrate the productive relationships we have with all parties involved. With the completion of these rate cases, the majority of our distribution revenues are now decoupled, helping stabilize future results. With that, we once again reaffirm our guidance that EPS growth will be above the upper end of our long-term guidance of 5 to 7 percent, both this year and again in 2023. Moving on, sustainability is a guiding principle for us, and I'd like to note that our company-wide initiatives are progressing well. In New Hampshire, I mean, in addition, in New Hampshire, we recently helped pass legislation that allows up to 5% of our gas supply to be sourced with renewable natural gas, along with the recovery of and return on any associated investment. I'd also like to remind everyone that New Hampshire passed legislation in 2021 that prohibits towns and municipalities from restricting a consumer's choice in how they power and heat their homes, including the use of natural gas and other fuels. This illustrates that legislators in New Hampshire understand that natural gas has an important role to play for many years to come. We're pleased with this progress and look forward to sharing further details as we investigate RNG opportunities. Moving now to slide five, I'd like to provide additional information regarding the rate case outcomes in New Hampshire, which we view as very positive. We introduced these rate case filings and our regulatory objectives over a year ago, and now we believe we've delivered as promised. Despite the significant attention on higher commodity prices and the impact high supply costs might have on utilities' ability to recover costs, We believe that we've successfully navigated those waters and secured awards that will contribute to our success in the coming years. Beginning with UNITO energy systems, a distribution revenue increase of $5.9 million became effective on June 1st with fully decoupled rates. Time of use rate structures were also approved that support our vision for electric vehicle adoption and electrification efforts. Lastly, the first of two step adjustments for recovery of non-growth investments was recently approved in a separate docket. At Northern, a distribution revenue increase of $6.1 million became effective on August 1st with fully decoupled rates. In this case, a return on equity of 9.3% with an equity layer of 52% was agreed to in settlement and approved by the Commission. Similar to Unitil energy systems, recovery of non-growth investments is pending and will be approved in a separate docket. We expect approval of that rate increase shortly. With the completion of these two cases, effectively 100% of our electric customers and 60% of our gas customers are now decoupled. This represents a significant increase in both customer groups and brings the total number of customers under decoupling up to about 82%. We see this increase in decoupling as stabilizing our top line revenues, which will lead to more stable cash flows. This will also benefit our customers who should see less volatility in their bills regardless of changes in use. Turning now to slide six is outlined in last quarter's call we continue to see impressive growth in the Maine and New Hampshire Seacoast regions. That growth is illustrated by New Hampshire's record low unemployment rate of 2%. Billions in construction is currently planned or underway, and this investment is expected to add new jobs, customers, and to spur further economic development. The bulk of this development is occurring in our main service areas with over $5.3 billion in planned investments. This growth is reflected in both construction employment and the number of building permits being issued. Portland, Maine, which is the largest city north of Boston, has about $1.4 billion of planned housing, commercial, and mixed-use development. This development will continue to enhance the area's appeal to both residents and business owners. Two major projects known as Rock Row and The Downs, each sizable project spanning hundreds of acres, are currently underway and will feature community-themed residential and commercial elements that are designed to harmonize and support each other. These projects, which are already under construction, will provide the company with considerable long-term growth opportunities. Similar development is occurring in New Hampshire with a large campus-style project under construction in Salem that will continue to drive customer growth. While these projects are among the largest currently underway, they represent a relatively small portion of long-term growth opportunities we see in our service areas. We are looking forward to supporting that growth for years to come. Turning to slide seven, in addition to economic development, other opportunities continue to play out for our natural gas division as well. As I've discussed in the past, Maine and New Hampshire, the predominant heating fuel is oil, which is both less clean and less affordable than natural gas. With a penetration rate of approximately 60% on our gas mains, we expect the price and environmental advantages of natural gas to drive low-cost customer conversions for years to come. While electric heat pumps provide a great solution in many parts of the country, they are not sufficient to heat most homes during the coldest New England winter days, when their maximum output is dramatically reduced. Natural gas, whether as the sole heating source or in combination with electric air source heat pumps, continues to be the most economical heating source. Another way to think about the importance of our natural gas system is the amount of energy delivered relative to our electric system. Despite having almost 25 percent more electric customers, we deliver about four times more energy through our gas infrastructure than our electric systems on an annual basis, and up to seven times more energy during the winter months. The gas system is fully capable of delivering this amount of energy while maintaining both reliability and affordability. For the electric system to deliver the energy needed for heat pumps or electric vehicles, it is likely that significant investments will be required. With that, I'll now pass it over to Bob, who will provide greater detail on the quarterly and year-to-date results.