Q1 2021 Chesapeake Utilities Corp Earnings Call
Okay.
Yeah.
Greetings and welcome to the Chesapeake Utilities Corporation first quarter results Conference call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please list the one followed by the Florida telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Wednesday may 15 2021.
I would now like to turn the conference over to Beth Cooper Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you and good afternoon, everyone. We appreciate you joining us today to review our first quarter 2021 result.
We announced our financial results for the quarter yesterday.
As you saw our strong financial results indicate we continue growing and operating effectively serving our customers identifying and finalizing new investment projects and keeping our employees as safe as possible.
As shown on slide two participating with me on the call today are Jeff householder President and Chief Executive Officer, and Jim Moriarty Executive Vice President General Counsel, corporate Secretary and Chief policy and risk Officer.
We also have other members of our management team joining us virtually.
Days presentation can be accessed on our website under the investors section and events and webcast subsection.
After our prepared remarks, we will open the call up for questions.
Turning to slide three I would like to remind you that matters discussed in this conference call May include forward looking statements that involve risks and uncertainties forward looking statements and projections could differ materially from our actual rethought.
Safe Harbor for forward looking statements section of the company's 2020 annual report on form 10-K provides further information on the factors that could cause such statements to differ from our actual results now I'll turn the call over to Jeff to provide opening remarks on the company's first quarter.
In 2021 performance and the key contributing drivers to our results Jeff. Thank you Beth good afternoon, and thank you all for joining our call today, we've got a very.
Strong start to 2021 with continued profitable growth initiatives across our business units.
On slide four earnings per share from continuing operations was $1.96 an increase of 19 cents or 10, 7% compared to our first quarter 2020 earnings per share of $1 77.
Gross margin increased more than $17 million over the first quarter of 2020.
Our results were driven by growth across the company. We also experienced increased consumer consumption, resulting from weather that more closely resembles normal temperatures.
Some of the key margin drivers included pipeline expansion projects, the hurricane Michael regulatory settlement organic and natural gas distribution customer growth contributions from elkton gas and western natural gas increased retail propane margins per gallon.
<unk> business of Marlin gas services.
As our general Counsel, Joe Moye already is fond of saying we are the beneficiaries of geography, we're fortunate to provide energy delivery services to communities that are experiencing significant growth.
First with legislative initiatives that signals support for continued expansion of our systems in Florida.
And all of our service areas the demand for natural gas propane and electricity has never been higher we continue to see customer additions at a rate that's more than twice the national average in the past year, our utility distribution and customer count increased by seven 4%.
Gross opportunities to serve new customers was the primary driver of our capital investment in the first quarter.
We've progressed to capital investments for 2021 at approximately $200 million.
We're on track to achieve that target.
Our fourth quarter capital investments totaled just under $49 million.
Earlier today, our board of directors approved an annualized dividend payment of $1 92 per share of <unk> 16 per share or nine 1% dividend increase to.
16 cents per share increase in the annualized dividend closely aligns our five year earnings growth rate of nine 4% through December 31, 2020, with our five year dividend growth rate of nine 5% and as shown on slide five.
Including this most recent inquiries.
The decision to raise the dividend reported to the company's ongoing commitment to dividend growth that is supported by earnings growth, while maintaining a payout ratio that enables a healthy reinvestment of earnings for growth.
It ensures liquidity to fund operations.
Chesapeake utilities has paid dividends to its shareholders without interruption for 60 years.
Increased its annualized dividend every year since 2004.
I'll add more about our continued growth initiatives and capital investment projects across our business units and just a few months.
Let me turn the call back over to Beth for further discussion of our first quarter results.
Thanks, Jeff turning to slide six net income from continuing operations for the quarter was $34 5 million compared to $29 million for the same quarter of last year.
This represents a growth in net income of five $5 million or approximately 19%.
As I am sure you all recall during the fourth quarter of 2019, we exited the natural gas marketing business and recognized gains on the sales associated with that exit.
Where some minor lingering impact associated with the sales of this business. Both in 2020 and also the first quarter of 2021.
As a result, I will focus our discussion today largely on continuing operations.
EPS from continuing operations for the first quarter compared to the first quarter last year grew by 19% to $1 96 per share from $1 77, representing growth of just under 11% growth initiatives and customer consumption drove the growth rate and net income by nine.
<unk> per cent, while the EPS growth rate of 11% is the result of the significant amount of equity we successfully issued in the third and fourth quarters of 2020 day.
<unk> ATM program and our various stock plans.
Higher income was the result of increased performance across the enterprise as Jeff mentioned earlier, coupled with continued expense management business efficiencies and standardization and collaboration across the company gross margin increased $17 one per cent compared to the fed.
First quarter last year, while operating income grew because of these impacts by 22, 5%.
As slide seven also highlights the growth in operating income was fairly split between the two segments regulated energy and unregulated energy for the quarter.
The key drivers of gross margin and expenses for quarter, one compared to quarter. One of last year are highlighted on slide eight.
Gross margin net of specific expense Acerbate grew 65 per share after tax.
Higher earnings for the quarter reflect increased earnings across the business from first customer consumption as Jeff mentioned, primarily weather focused was 26 cents per share pipeline expansion project. Another 11 cents per share higher retail propane margins per GAAP.
Increased margin by six cents per share organic growth in our natural gas distribution operations added <unk> <unk> per share contributions from recent acquisitions, including our syngas and western natural gas added four cents per share the hurricane Michael regulatory.
Settlement also added <unk> <unk> per share after associated depreciation and amortization of.
Out of associated regulatory assets and margin from Marlin increased by <unk> <unk> per share lastly, from our Florida grip reliability and infrastructure program, we added two cents per share base.
These increases were offset by the absence of property sales that occurred in the first quarter of last year, which represented 14 cents per share and the increased shares we added that I just referred to another 12 cents per.
Share given our opportunistic equity issuances over the past 12 months to take advantage of our strong equity market position finally, depreciation payroll and facilities expenses basically drove our earnings per share down by <unk> 20 per share because of the growth in.
Our business.
I would like to spend a few minutes highlighting our capital spending thus far in 2021.
You can see though first on slide nine the forecast for 2021 capital expenditures remains at our previously announced guidance of $175 million to $200 million again, the investment is concentrated with approximately 80% budgeted in new regulated <unk>.
G assets.
Year to date as Jeff mentioned, we've invested just under $49 million in new capital investment. So what are some of the key 2021 projects.
Include our Delmarva natural gas distribution expansion into Somerset County, Eastern stores del Mar Energy pathway project, which is well underway flow.
<unk> Western Palm Beach County, Florida expansion, our Florida grip program and other natural gas distribution and transmission system projects. In addition, we have expenditures for natural gas and electric system infrastructure improvement activities Marlin gas services.
<unk> of their CMG transport and also as our expansion into R&D in LNG and technology systems in support of our business transformation and other strategic initiatives and investments.
To support the growth we have experienced and ensure we have the capital capacity to fuel our future growth, we maintain a strong balance sheet with access to sufficient competitively price capital as you can see on slide 10 as of the end of March total capitalization was one.
<unk> $4 billion comprised of approximately 52 per cent stockholders' equity, which is now $726 million, we had 37% and long term debt at an average fixed rate of 362% and 156 million.
In short term debt under our revolver at an average interest rate of one 2%.
Our recent equity issuance moved us further along within our target equity to total capitalization range. We continue to loot utilize our traditional equity plans this year to issue stock and increased equity beyond our earnings retained and reinvested in the business Chesapeake utilities current market cap.
Ovation is approximately $2 billion.
I would now like to turn the call back to Jeff to talk about our future prospects for growth and our recent extension of guidance and conviction to investment earnings and dividend growth Jeff. Thanks Luke.
As noted our capital capacity and the strength of our balance sheet continues to support growth.
Comfortable with our previously updated capital guidance remains on target.
All of them as a reminder from earlier earnings calls of the key strategic initiatives that focus on our project development and transaction interest.
I noted a moment ago, we continue to experience significant demand for the energy services.
One of our existing business units, we highlight a few of our major initiatives on slide 12.
A significant portion of projected capital last month is devoted to expanding our existing core businesses.
We also have several relatively small scale transmission pipeline projects under development.
So we increase investment in this area for our propane business continues to grow and we will keep looking for acquisition opportunities in the mid Atlantic and southeast.
We see growth at Marlin gas services and the rapidly developing renewable natural gas market that I'll discuss in greater detail in a few moments.
I'm wondering it's margin table, showing key projects and initiatives as shown on slides 13, including pipeline expansion CMG RMG transportation acquisitions and regulatory initiatives.
<unk> are expected to generate approximately 60 million and $67 million and gross margin for the year of 2021 and 2022, respectively.
Expansions are expected to generate $6 7 million net incremental margin in 2021 Hurricane Michael preceding settlement will again generate 11 million in gross margin in 2021 and remains at that level in 2022.
We're particularly pleased with the full integration of margin estimates of $5 8 million and $6 1 million for 2021, and 2022, respectively from the acquisitions of Elkton gas and western natural gas.
Total net incremental margin growth from these key projects and initiatives represents approximately $14 1 million for 2021, and seven 5 million for 2022.
As a reminder, we only include definitive projects in this table once they reach maturity and do not include organic margin growth from our traditional distribution customer additions rate adjustments in our unregulated businesses et cetera.
Accordingly, the R&D transportation margin for example will be adjusted as new projects are definitive and announced.
I realize that we've included a $1 million placeholder for RMG transportation on this floor for a couple of quarters.
Not yet disclose the extent of anticipated orangey production related investments.
These projects take considerable time to develop especially related to securing full project financing.
It reminds me of the early days of solar and wind project financing.
However, there is positive movement on our LNG project financing is interest increases among both financial and strategic participants and we're hopeful of more details of our projects were involved in can be made public over the next several weeks.
As a phone mother's day holiday pipeline $679000 in Bolton acquisitions, $3 $9 million became fully in service in 2020. So these ongoing mature projects have been removed from this table.
Over the past several quarters, we've outlined a number of renewable natural gas initiatives.
Slide 14 outlines the types of projects and ownership structures that we're actively assessing.
Let me provide an update on our progress for several of these initiatives.
We continue to work with clean by renewables, two utility scale poultry waste RMG and organic fertilizer production facilities on the Delmarva Peninsula.
As previously described our existing agreement with clean day to own the gas processing equipment at the west over Maryland facility.
The option to convert the equipment investment to equity of a total plan.
Last month, our board investment Committee authorized management to negotiate economic governance terms was clean but for Chesapeake as equity participation in the project we.
We hope to finalize an agreement with clean day, and other equity providers over the coming weeks and ensure that the anticipated project in service date of Q4 2023 remains viable.
<unk> for the west over R&D facility, we're in discussions with clean Bay and other potential investors on a second Delmarva R&D facility, which is under development in Sussex County, Delaware.
Similar to the west over plant the Sussex facility will produce RMG, a utilities scale along with organic fertilizer.
The property for the Sussex plant has been required and most land use permits have been approved upon completion of the west over in Sussex plants will be among the largest R&D facilities in the country.
As you May recall, we have several additional investments either under contract or in final negotiations associated with the west over plant.
Memorial and gas transport agreement is in place and interconnect agreement with our eastern shore natural gas transmission pipeline has been finalized and the interconnect is scheduled for construction in conjunction with the in service date of the west over plant.
Our Delmarva distribution business has finalized an agreement for offtake, the blue gas or LNG from west over to purchase non frac non fossil RMG molecules for distributions to our distribution excuse me to our customers.
In addition to purchasing RMG from west hours production.
Our Delmarva distribution operation will provide conventional gas supply service to west over to support driving the organic fertilizer produced by the plant.
It's a lot of fertilizer and a lot of natural gas leftover will likely become our largest maryland gas distribution customer.
Eastern shore natural gas del Mar energy pathway expansion project currently under construction and our related distribution system expansion will bring our pipeline to within one half mile of the west over plant and we will extend the distribution system to provide service.
We anticipate providing some of our marlin and conventional gas distribution services to the Queen's Day Sussex side.
Chesapeake is exploring opportunities to develop renewable electric micro grids at both the west over in Sussex R&D sites.
We're working with a third party to potentially develop solar photovoltaic generation systems to serve the electric needs of the RMG facilities.
Property suitable for solar PV installation is owned respectively by the third party and close approximately to proximity to the west oversight and so are we by Chesapeake close to the Suffolk site.
Also because engaged southern company energy services and southern its power secure company to assist in preliminary design and engineering of the solar PV systems battery storage protection protocols for the plants and related facilities to support their renewable electric micro grid at each facility.
On Delmarva, we continue to work with the Bioenergy Dev co company as they also move forward on development of our poultry waste RMG facility in Sussex County, Delaware.
The County Commission has recently approved the bioenergy does go conditional land use permit jessa.
Chesapeake will own and operate the gas processing equipment at the plant site. We've learned the process are familiar with key retained an EPC contractor and are in the process of finalizing design on various other components our investment in the project is estimated at approximately $12 million within service anticipated.
In late 2022.
Construction of our Savannah public compressed natural gas vehicle fueling and Marlin staging facility continues to proceed on schedule four in October of 2021 in service.
The station will be the largest <unk> fueling facility on the east coast with capacity to fuel approximately 195 semi trucks per day.
We recently held a meeting with representatives of several Georgia based trucking firms where interest in C. N. G was hot and interest in the potential of providing renewable C. N G. At the facility was even higher.
We're working with several orangey marketers, along with exploring opportunities to develop regional CMG production to serve the somehow station.
Speaking of Marlin, we're just wrapping up in eight months deployment to serve the city of Miami Transit bus fleet.
At peak, we were feeling 160 C. N G buses a day before the permanent pipeline and CMG fueling facilities were put in place.
Marlin CMV service enabled early delivery of the buses and an earlier than anticipated significant reduction in diesel emissions.
Marlin has also taken delivery of this new ANSI force stage compressor unit.
Compressor enables marlin to offer a methane capture service to pipelines and utilities that need to remove our pipelines segment from service to provide maintenance or system integrity work.
Rather than releasing the methane the atmosphere Marlin can receive the gas at almost any line pressure compressor CMG pressures and transfer it to a tanker the gas can then be reintroduced in another point on the pipeline system.
<unk> also taken delivery of its first four LNG tankers. The increased capacity of LNG transport provides an expanded array of services to customers requiring larger gas quantities.
And finally, we're continuing our fleet conversion at Marlins on diesel fuel to compressed natural gas eight new C. N V tractor cabs will be delivered in July.
As a last note before I turn the call to Jim Moriarty, we continued to pursue several opportunities to consider introducing hydrogen blends into our pipeline systems I mentioned on our fourth quarter call that we were supporting a hydrogen research project proposed to the department of energy by Solar turbines, we've offered our eight flags CHP turbines.
One on Amelia Island as a test site and we're also working with several of our existing industrial customers to identify opportunities for hydrogen loans at their facilities. We're just at the beginning stages of gaining a better understanding of hydrogen used from a safety operations impact measurement availability and the effects on.
Downstream customer equivalents.
Let me turn the call over to Jim Moriarty to further discuss our sustainability strategy and commitment to environmental social and governance as part of our corporate culture.
Thank you Jeff.
Good afternoon, everyone. It is great to be with you today.
Would like to begin by providing an update on certain legislative actions in Florida.
As shown on slide 15, the energy Preemption Bill is key legislation.
That maintains consumer choice and ensures the ongoing availability and use of natural gas as an affordable reliable and resilient energy resource NAV.
Natural gas will be available to meet increasing customer demand.
In addition, we sponsored a renewable energy bill.
[noise] has cleared both chambers of the Florida legislature and as before the governor for signature.
This build defines biogas and renewable natural gas.
It supports <unk> use in transportation electric generation and injection into gas distribution systems.
The Bill also authorizes the PSC to approve cost recovery for RMG contracts that exceed market rates under certain conditions.
When signed by the Governor, Florida will join a dozen other states that have endorsed the vibrant role of natural gas and meeting the growing energy needs of this nation.
We are proud of our governmental affairs team for driving and supporting such important legislation within the state of Florida to insured natural gas is available to meet customer demand customer demand first and foremost.
And to provide a mechanism for renewable natural gas to be a viable part of the natural gas portfolio throughout the state.
We are also at various stages in regards to working on similar legislation and our other jurisdictions and well keep you apprised of future activities.
As shown on slide 16, Chesapeake utilities continues to build on our bedrock commitment to ESG.
Our focus on environmental stewardship.
Dedication to social Justice and sound governance principles.
Our recognition as a top workplace for the ninth consecutive year in the areas, we serve as well as our recognition in the top workplace at normal awards speaks volumes about our diverse and inclusive culture.
Which continues to promote the growth and development of our employees and the active engagement of our communities.
Strong corporate governance has been essential to creating long term value and safeguarding our commitments to all stakeholders.
Our board and its committees have adopted guidelines and other policies that I've provided a framework for ongoing effective governance.
Active and informed engagement, which is embedded in our people beginning with our board of directors and expanding throughout the company.
Could not be more important as we continue together to chart. The road ahead.
Strong corporate governance also includes listening to our stockholders and monitoring the vote results annually.
Based on this year's results over 90% of the shares voted were in favor of the proposal presented before them.
This demonstrates our stockholders continuing strong support of the performance of the company and our future strategy.
Our responsibility to operate in a safe and environmentally friendly manner furthers, our stewardship and facilitate sustainable practices across our organization.
Our team with input from the board of Directors discusses key risks and mitigating factors identified as part of our comprehensive enterprise risk management program.
Embedded within our E. R. M E. R. M program, our ESG related focus areas and emerging risks.
Turning to slide 17 in regards to safety, we are committed to providing a safe workplace for employees and to making safety a priority and our interactions with each other our customers and the communities we serve.
The achievement of Superior safety performance is an important strategic initiative.
Both in the short term and the long term.
Safety is not only our top priority and our first strategic objective is at the center of who we are.
One of our latest accomplishments in this regard is the completion of our safety town facility in Dover Delaware.
Provide both hands on and classroom training for our operations technicians.
We are also diligently working on our inaugural corporate responsibility and sustainability report.
Which will be made available during 2021, there we will be providing additional information and insights on our longstanding ESG stewardship.
We are committed to providing a work environment that values diversity and background experiences and skill sets of all our employees as highlighted on slide 18.
And continuing our bedrock commitment to equity diversity and inclusion are.
Equity diversity and inclusion or Adi Council supports all of our employees embracing and sharing their diverse experiences and backgrounds with submission to help improve the communities, we serve and to make us a better company.
The Adi counsel is central to who we are and who we want to be and will further enhance the collaboration around our workplace culture that is the engine driving our business day.
<unk> Council was extremely busy in 2020, fostering the rollout of five employee resource groups throughout the company as shown on slide 18.
We are excited about what these teams have done in just a short amount of time and look forward to their increasing role as well as the creation of other <unk>.
The talent skills and ideas that these crudes have brought to the forefront had been inspiring and provide channels for our employees to feel inclusive and supported by the company.
We work hard every day to also ensure that the communities. We serve continue receiving the value and benefits of clean plentiful affordable and resilient energy delivery services. So that no one is left behind.
We continue to undertake various internal actions to reduce greenhouse gas emissions <unk>.
Including completion of our pipeline replacement program and improve detection technology at our compressor stations.
We are also working with our suppliers and contractors to encourage their environmental efforts.
We are also excited about the projects underway by our diverse and engaged teams to reduce the carbon footprint of the communities, we serve including conservation programs that promote high efficiency appliances.
And technical assistance for large volume customers to identify emission reduction opportunities.
Our commitment remains steadfast to <unk>.
Take the steps necessary to deliver energy, where and when it is needed while continuing to advance our environmental stewardship.
Our announced projects in RMG are just the beginning they are a very clear example of the lowering of the carbon footprint and also ensuring we do our best to ensure a more sustainable future for our local communities communities.
I appreciate being with you all today and we'll now turn the call back to Jeff for some closing comments.
Jim while we're beginning fiscal year, 2020, one with very positive financial performance as indicated by our earnings per share growth capital investment key projects and initiatives and our dividend growth as you can see on slides 19, and 20, we are affirming our five year capital guidance.
For the period of 2021 to 2025 $750 million to $1 billion.
I'm excited that our latest strategic plan update gives us a high degree of confidence that we have significant investment opportunities ahead of us.
So I have confidence in our growth opportunities. So it has enabled us to extend and expand our capital guidance. Our 2025 EPS guidance range of $6 five to $6 25 per share represents an average EPS growth of approximately 10% from our initiation of.
Guidance at the end of 2017.
We believe that for gas is a key component to the country's long term energy strategy. We also believe that the markets. We serve value of the energy services, we deliver or natural gas or propane or electricity or customers have spoken loudly in this regard at the same time, we have opportunities given our business mix expertise.
Our strategic approach to capitalize on new renewable energy opportunities that advance us towards a more sustainable future.
We're committed to our growth strategy focused on delivering top quartile performance, including shareholder return, which is exceeded 16% compound annual growth for each period 135, 10, and 20 years through April 32021.
Our investment proposition is based upon our commitment to superior performance and we outlined that on slide 21.
Our foundation, our financial objectives and targets as well as the initiatives and strategies. We pursue are in support of achieving this level of performance.
In closing I want to take a moment to thank all of our dedicated Chesapeake utilities employees, who take great pride in the work done on the front lines and their ongoing commitment to identifying and delivering innovative solutions to the delivery of clean reliable and safe energy to our customers. Thank.
Thank you and we can now address any questions you may have.
Okay.
Thank you if you'd like to register your question. So this is Don.
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One moment please for the first question.
It comes from the line of <unk> <unk>.
Sullivan with Maxim Group. Please go ahead.
Hi, Thank you starting on clean day. Please you mentioned the option to convert to an equity participation that is this equity type of equity investments something new in the history of Chesapeake or if you've done that type of equity participation in other unregulated projects before.
Thank you and good afternoon, Kate no. This is going to be something new from from Chesapeake standpoint. It is not something that we've historically done in the past.
Okay. Thank you and Jeff you mentioned is that a potential or is that already in place. It's occurred area, but it was just approved by the board to convert that to equity well, we usually when we got the day was approval to basically pursue and negotiation with clean day to see if we can structure.
Economic and governance firms that would enable us to feel comfortable making an equity infusion into the project. We have the ability to do the gas processor. The equity that we're looking at would be of a similar size.
<unk> is what we assume we would put into the processing unit.
Okay. Thank you.
Sticking with unregulated unregulated energy I mean, the operating margin I know I can look at it on the gross margin side as well its down just slightly year over year and you noted some impacts from capital investments in the sector was that partly the LNG tankers or would you call out something else with that with that margin.
Would you mind just repeating your question because when you look at the margin.
Unregulated businesses.
For the quarter were actually up both from an operating income as well as a margin. So could you would you mind just repeating your question there.
Okay now I'll check my Kelly I thought the operating margin was 27% down slightly from the prior year.
Okay, I'll recheck that.
And then.
Organic customer growth sorry, if I missed it in the slides and Delmarva, excluding alstom is it.
Did you put that in there can you just comment on organic growth, excluding alstom that you've seen resort.
So the organic for US continues to be very strong on a run rate relative to a quarter over quarter in total.
Close to what it was for the for the first quarter of last year, we did see a little bit of movement, among the customer classes, wherein Florida lead actually how to pick up in terms of the residential margin relative to the the total margin that's coming from there, but both still very strong still significantly.
Double more than what the industry averages and in growth remains very strong and looks and and appears to be the same for the foreseeable future, we're not seeing any slowing in.
In our service territory.
Great. Okay. That's it for me thank you for the detail.
Thank you Jay.
Okay.
Yeah.
The next question comes from the line of Brian Russo with Sidoti. Please go ahead.
Yes, hi, good afternoon.
Good afternoon, how are you.
Good. Thank you so just to follow up on the to.
Clean day.
Equity investment is that something that you expect to be finalized.
In the near term and you'll be able to.
Quantify that and.
If I recall correctly, you mentioned a fourth quarter 2023.
Contribution to Chesapeake from that investment.
Accurate.
It's accurate to the extent that we can complete the negotiations and come to some conclusion about what that looks like and that's really what we're in the middle of right now trying to figure out exactly what the economics and governance provisions will be.
And decide then if those support and actual equity infusion into the whole project as opposed to ownership of just one piece of it and the gas processing facility.
Okay understood.
And then just on the first quarter 'twenty, one unregulated drivers.
It looks like the propane operations.
Sure.
Probably just a gross margin driver.
And I see.
You have the split up but is there.
Where is the.
Propane gross win.
And those three free.
<unk> box.
And then my next question would be what.
Driving these increased channel propane margin.
You guys tend to sell.
Kind of a quarter as a nice driver to the unregulated margins.
So a couple of things in terms of your questions. There Brian. So you know there there continues to be customer growth in our propane operations you know that.
We've done several different startups and so as those start ups continue to build out and they continue to expand over time for example in Virginia. We've done several in the Pennsylvania area and then also you know with what we've been able to do.
With the acquisition of bolder than that continuing to grow so there is ongoing.
<unk> gross and those operations as well, you'll see a little bit.
It comes and it can be somewhat difficult to break out the consumption piece that whether theres no. Its an art rather than a science in the propane business. When you try to look at the amount that's attributable to whether its not as defined.
That's what it is in the regulated business, but you know there can be a little bit of the consumption piece that may be sitting in that $3 $8 million and then there can also be.
Gross that may be netted in with those other variances there can be some negatives and some positives we don't tend to break that out specifically on the protein side.
But there is some growth in there as well.
Yeah.
Okay great.
Thank you.
You mentioned on the last quarter.
<unk> got a strategy to grow the propane businesses I think maybe.
Maybe near the Western natural gas.
Service territory in Florida or elsewhere I was just.
Curious if there was any.
The update there.
Well, we're always interested in.
Growing the propylene business are in the mid Atlantic and southeast and so we're always looking for potential acquisition opportunities, but we're also interested in just organically growing the business much in the way that Beth was describing a second ago and so whether that is R. O.
You know customer growth opportunities or the auto gas opportunities, we see all of that continuing to move forward.
And if we can enhance that with an acquisition here or there then we're certainly interested in doing that.
Okay, and then lastly, it seems like you have a lot of exciting orange <unk> prospects in the pipeline it was exist.
Partners, like say et cetera, but maybe even some <unk>.
Some new.
Partnerships.
Should we just assume that any incremental investment is captured net.
Fix for cash.
Through 'twenty five.
We have you know typically.
Typically what we will do as we've talked about in the past is we will try to include in our <unk> and <unk>.
In our estimates.
We feel you know has a very strong probability of occurring and that's typically going to be about 80% or higher there is a small amount of capital that may be below that amount, but the significant amount of capital. That's in that estimate relates to projects that we can see and feel pretty concrete.
Leave it theyre going to happen. So you know the potential to undertake some of these opportunities that Jeff has talked about it will be whether or not at the time from a profitability perspective. They were high enough. If they were they a portion of them could it be included but then there could be a portion Brian.
That are sitting outside of that and so you know.
There is an opportunity for that range to continue to murder.
But there's a base level that's been factored in from that the investments that we feel very strongly about.
I would add to that.
The capital guidance that we've provided the $750 million to a busy and.
We were we're quite comfortable that we had the preponderance of that investment forecast.
Associated with the existing businesses that we currently own and so we were not depending.
Especially to get to the.
Bottom of that range was not heavily dependent on any of the incremental R&D facilities that were pursuing.
Okay understood. Thank you very much.
Thank you.
Your next question comes from the line of Michael Glick.
<unk> with Janney Montgomery Scott. Please go ahead.
Good afternoon, everyone.
Good afternoon.
Two questions.
First R&D on slide 14.
Virginia and Georgia.
And as targeted areas for investment.
Would you be using.
In support to your distribution.
It works from those states.
Well, what we would probably be doing is transporting either by Marlin, a truck or barge pipeline. If we found an economically advantageous to build a pipeline.
Into a nearby transmission system potentially even distribution system in it.
We wanted to move that gas into one of our distribution facilities, we would probably do it by displacement.
Much the same way that the California collects the green attributes of our and Judy are developed in Delaware are developed in New York or wherever and getting that that green attribute into the California market.
So I think we can I think we can do that.
That matter, if we chose to.
Okay.
And then.
Taking into account the energy preemption Bill in Florida.
It seems like Florida is a very friendly place for pipelines. These days.
Should we assume that that's more of a focus.
For future pipeline opportunities.
Well I think yeah, I think you can assume that we are actively engaged in and trying to expand our pipeline and presence in Florida and Youre right. Michael I mean, there is a friendly environment.
And we are looking for opportunities to build pipe down there all the time.
And as you know we've found a number of those over over the years, especially as our peninsula pipeline operation.
Yes, the reason.
Reason for the question is I know, you've got a lot of pipeline assets up in Delmarva.
And you've put a lot of capital to work.
Through the years, but just trying to get a kind of a feel for the changing landscape of things and.
And thinking that perhaps a florida might present greener pastures at the moment, let's say the mid Atlantic or the northeast.
I think that's fair to say, it's not just day.
Favorable business environment issue as you say, we've put a lot of money to work on the Delmarva Peninsula and so there's an inherent.
Demand pool on those projects without looking at significant demand increases we're in a pretty good position relative to capacity on the pipeline on the Delmarva now we're continuing to grow as Beth said.
And as I mentioned earlier and certainly to the extent the yeah.
One came in with an industrial facility or a new electric generation or whatever it might be we would we would be interested in pursuing that opportunity with our from our transmission business, but absent that what's the typical residential commercial growth. Although it's it's substantial those volumes are relatively small we've got some growth.
Fortuitous remaining and the price at this point.
The only thing I would add Mike is that we've had a very strong supporting environment in both Maryland, and Delaware and that's you know from the governor and others.
Most recent example of that is our summer set.
Project, where we expanded service into Somerset County for the first time in Maryland.
And over some opposition.
Well you got got that done unanimously and that was the communities. It was the political it was the economic.
So when we have very strong support on the Delmarva as well.
Sure.
And we're not finished expanding the pipe I mean, I think there will be significant opportunities are yet to come on the Delmarva Peninsula.
It remains to be seen as growth continues.
Yeah, you seem to have a lot of growth there.
I see it.
Uh huh.
I appreciate your time. Thank you. Thank you for an iPhone.
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There are no further questions at this time I will now turn the call back to you. Please continue with the presentation <unk> closing remarks.
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