Q2 2021 Chesapeake Utilities Corp Earnings Call

Greetings and welcome to the Chesapeake, utilities Corporation second quarter Financial results during the presentation. All participants will be in a listen-only mode afterwards. We will conduct a question and answer session and at that time, if you have a question, you can press the 1 followed by the 4 on your telephone. If any time during the conference, you need to reach an operator, you can press star zero. And as a reminder, this conference is being recorded Thursday, August 5th 2021. Now like to turn it over to Beth, Cooper investment, Vice President, Chief Financial Officer and assistant secretary, please go ahead.

Thank you and good afternoon everyone. It is great to be with all of you today. We appreciate you joining us to review our second quarter and year to date performance through June 30th 2021. Yesterday, we announced our financial results which demonstrated how we continue growing and operating effectively serving our customers identifying and executing on new investment projects and keeping our employees as safe.

Is possible in this ever-changing.

I shown on slide 2 participating with me on the call today or Jeff householder, president and chief executive officer and Jim, Moriarty Executive, Vice President, general counsel, corporate secretary, and Chase policy and risk officer. We also have other members of our management team, joining us, virtually today's presentation can be accessed on our website under the investor section and events and webcast subsection.

After our prepared remarks, we will open the call up for questions. Moving to slide 3. I'd like to remind you that matters discussed in this conference. Call me include forward-looking statements that they 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 the company's 2020 annual report on form 10-K and our first and second quarter form.

Thank yous, provide further information on the factors that could cause such statements to differ from our actual results. Additionally, I'd like to mention that we've added some new disclosures in our quarterly reports to highlight some of our key environmental social and governance or ESG initiatives. Well, Jim typically talked about these initiatives during our earnings conference calls as he will later on. Today, we wanted to provide more disclosure in our

Filed documents. We would welcome your feedback on our enhanced reporting. Now I'll turn the call over to just to provide some opening remarks on the company second quarter and year to date results and the key drivers of our performance, deaf.

Thank you, Beth, have a good afternoon and thank you for joining our call today. Let's start as usual with an update on COVID-19 and our continuing efforts to manage through the ongoing pandemic. When we spoke during the first quarter earnings called, the trend was positive, in terms of reduced COVID-19 infections and serious illness. The vaccines along with continued preventive, measures were proving to be remarkably effective, the good news didn't last long.

You asked for lacks many of its pandemic precautions and vaccine levels Plateau. We've seen an uptick in COVID-19 cases, across the country, including in our core service, territories as has been widely reported in Florida, the case levels are now greater than any time over the entire course of the pandemic and hospitals are full however, Florida and all of the other states. We serve remain at this point, open for business, notwithstanding the late.

Covid. Surge we are not to date experiencing any significant COVID-19, related, reductions and usage or margin in any of our service areas are returned to the office plan has long included the possibility that we would see another surgeon COVID-19 cases this fall over the past few months, we've been watching the Delta variance in packs and India and the UK, even prior to the Delta variant spreading in the US are remote, work teams were not scheduled.

Until late fall after school, resumes. And after we had a better view of any additional surge. We've been operating effectively for well, over a year with a remote, administrative work force and there was really no need to risk returning to the office and the midst of another potential wave of cases. Of course, Chesapeake is in a Central Business, providing a Central Energy Services. Our operations field service teams remain fully deployed as they have been throughout the pandemic. We

If continuously followed CDC and OSHA guidelines establishing health and safety, protocols, including wearing masks and social distancing, we continue to encourage but not require vaccinations and are providing several incentives to assist employees. As they make their choice, I'm very proud of our team, our employees have embraced the challenges presented by this pandemic, we have continued to find ways to serve customers and keep our growth initiatives underway.

Our growth projects and ultimately Drive Chesapeake's financial performance. We had a very strong 2021 second quarter with continued profitable growth across many of our business units. Augmented by a successful regulatory outcomes as shown on slide for earnings per share from continuing operations with 78 cents an increase of 14 cents or twenty 1 point 9 percent compared to our second quarter 2020.

Gr earnings per share of 64 cents, gross margin increase more than 10 million dollars over the second quarter of 2020. Our results reflect increase consumer consumption returning, close to pre-pandemic conditions. We were also able to reduce COVID-19. Pandemic expenses for the second quarter, some of the key margin drivers, for the quarter included pipeline, expansion projects, the hurricane, Michael regulatory settlement organic, natural gas,

Customer growth contributions from recent acquisitions of Alton gas and Western Natural Gas and increase margin from Aspire. Energy are unregulated segment was down slightly as we experience the normal seasonal, Decline and propane volume. We also experience reduced margins from emergency response, deployments that Marlin gas services, that was expected as we continue to migrate Marlon toward longer term service agreements supporting pipeline mate,

Since system Purge or bow down capture and RNG transport your today..2021 earnings per share from continuing operations. Was $2.75 an increase of 34 cents or 14.1 percent compared to 2 dollars and forty 1 cents for the first 6 months of 2020. We continue to be fortunate to provide energy delivery services to communities that are experiencing significant growth.

These communities appreciate in value.

Energy. We deliver as 1 measure of growth, we connected an average of 15, new customers for business day, and are Delmarva, natural, gas, territory and over 2,500 new customers in Delaware. Maryland, and Florida combined over the past 6 months, we've invested more than a billion dollars over the past 5 years in support of regulated and non-regulated growth. In the areas, we serve are 2021 capital and

Vestment through the second quarter total just under a hundred and 8 million dollars. Putting in a putting us on track to achieve our annual projected capital investment range of a hundred and seventy 5 million, the 2 hundred million dollars. As I mentioned a moment ago, these growth Investments are driving our financial performance. I would point out that our net income for the first 6 months of 2021, which is forty 8 point 3 million dollars.

Which is more than our annual net income total for the full year of 2016. That is remarkable growth over less than a five-year period.

David over the next several years. We see continued growth opportunities on Delmarva in Florida, and across the Mid-Atlantic and Southeast are Natural Gas, customer additions have been trending at a rate. That is well above the national average. We're seeing growth rates of 4.5% and Delmarva in 5.1 percent in Florida are propane. Business continues to expand through. Both organic additions and selected Acquisitions. You see opportunities for small scale, transmission pipelines growth, and our Marlins.

NG transport business are going for folio of renewable energy Investments. I'll add more about our continued growth initiatives and capital investment projects across our business units and just a few minutes. But let me turn the call back over to Beth for more details on our quarterly performance Beth.

For the second quarter was thirteen point 8 million dollars compared to 10 point 7 million dollars for the same quarter of last year. This represents gross and net income of 3.1 million dollars, earnings per share from continuing operations. For the second quarter compared to the second quarter last year through by 14.

To 78 cents per share, representing growth of just under 22 percent on a year-to-date basis. Net income from continuing operations with forty 8 point..3 million compared to thirty 9 point 7 million dollars for the same period last year. This represents a growth in net income of 8 point, 6 million dollars for approximately 22% EPS from continuing operations for

The same period compared to the first half.

20/20 grew by 34 cents to 2 dollars and seventy 5 cents. Per share representing growth of over 14 percent. The EPS growth rates compared to the net income growth rate for the quarter and year to date, reflect a large stock. And we achieved our Target

That are strong performance for the quarter was led by the regulated energy segment as the second. And third quarters are seasonally light for the unregulated energy segment as a whole 5.7 and 8 highlight. The key drivers of gross margin and expenses for both the quarter compared to last year as well as your today for the quarter. The key margin drivers generated 44 cents per share after tax

Higher earnings for the quarter, reflect increase, earnings across the business from the hurricane, Michael regulatory settlement, which was 13 cents per share, in terms of a gross margin impact or 7 cents per share after depreciation. And amortization of associated, regulatory assets are pipeline Expansion Project, including the impact from our Callahan Interstate pipeline are Delmar energy pathway

Western Palm Beach County, Florida expansion, added 9 cents, per share. Customer consumption returning to a more pre-pandemic condition, added about 8 cents per share contributions from recent acquisitions added 5 cents per share in terms of gross margin or a penny per share after the corresponding expenses, organic growth in our Natural Gas Distribution operations

From the Florida, gas, reliability, and infrastructure program. In addition to the increase in earnings of I would also like to point out that during the quarter, we advance our strategy to convert our propane-fueled community, gas systems to Natural Gas Service in connection with this program.

Delaware PSP approved. The valuation methodology for systems purchase from our sharp propane business, which transfers the assets that replacement cost for the CGS system, and allows for recovery and future rate, we've begun to initiate conversions along our natural gas expansion path. We continue to see growth opportunities across our system and we're fortunate to announced several new projects within our earnings.

NG release, Jeff will discuss these strategic growth initiatives in just a few moments.

The gross.

In increases, I highlighted where offset by increases in operating expenses and depreciations associated with growth and a return to pre-pandemic conditions. The key operating expense drivers represented, 25 cents, per share, which was net of a 6 cent per share reduction in expenses attributable. To incremental COVID-19 cough last year, EPS was also impacted 4 cents per share.

Given our opportunistic Equity issuance has over the past 12 months, to take advantage of our strong Equity Market position and to sustain our capital structure within our target range on slide 8. You can see that year-to-date the key gross margin drivers generated 1 dollar and 12 cents per share with operating expenses increasing 58 cents per share, unusual items, included the change in games on assets.

Also, 7 cents per share last year as well as the favorable tax impact of 10 cents per share from the cares act. Our results were 2021 also reflected a positive contribution of 4 cents per share related to our regulatory deferral of COVID-19 expenses for the PSC orders higher consumption of 7 cents per share as we migrated closer to pre-pandemic conditions and

Lower COVID-19 related expenses in 2021 of 8 cents per share our commitment to raise additional equity and alignment with our Target, capital structure, reduced, EPS 15 cents per share. Year-to-date

Moving to slide 9 the forecast for 2021 Capital expenditures remains that are previously announced guidance as just mentioned ranging between 175 and 200 million. Again, the investment is concentrated with Approximately 80% forecasted and new regulated energy assets with the largest projects, including Eastern Shores, Delmar energy pathway project are Delmarva.

Gas Distribution, Associated expansion, and Somerset County. Maryland are Florida, Western Palm Beach County expansion. The Florida grip program other natural, gas distribution system expansions to meet customer demand in our service areas, Natural Gas and Electric System, infrastructure Improvement activities. And the newly announced project the Winterhaven expansion, the Beachside pipeline expansion and the acquisition.

NG of the Escambia meter station from Florida. Power & Light year to date. We have invested approximately a hundred and 8 million dollars in new capital investment. We maintain a strong balance sheet with access to sufficient, competitively priced Capital, to support the growth. We have experience and ensure we have the capital capacity to fuel our future growth. As you can see on, slide 10 as of the end of June, our total capitalization

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Billion comprised of approximately 52% stockholders Equity equity, which is now..7 hundred, forty-two million, 36% long-term debt at an average rate of 3 point 6, 1 percent, and a hundred and sixty 9 million in short-term debt, under our revolver at an average interest rate of 1.7% are short-term Bank, facility. Matures in September 20, 21. So we're in the car.

SS of renewing and extending the facility in the coming week, our recent Equity issuance moved us further within our Target, Equity to Total capitalization range and we have continued to utilize our traditional Equity plans, this year, to issue 9 point, 1 million dollars of stock and increase Equity beyond our earnings retained and reinvested in the business. Chesapeake utilities market capitalization has exceeded 2.2 billion this week as we

Hit some new all-time high stock prices, our Focus, no remains on increasing shareholder value, by making strategic Investments, that drive our earnings. While further increasing the sustainability of our local communities, I'll now turn the call back to Jeff to talk about our future, prospects for growth, and our expectations, in regards to Future performance, including as it relates to our earnings and capital guidance. Step back.

Back to you. Thanks as both noted, our Capital capacity and the strength of our balance sheet continues to support growth. We are very comfortable that our previously, updated Capital guidance remains On Target. Slide 11 highlights, what we call our 5 platforms for growth, which focuses our internal efforts around optimizing earnings from our historic assets as well as our external focus on additional project development and acquisitions.

Whatever the moment ago we continue to experience significant demand for the Energy Services provided by our existing business units. So I 12 highlights a few of the major initiatives underway. A significant portion of our projected capital investment is devoted to expanding our existing core businesses and capturing the growth in our service territories. As I previously noted, we also have several relatively small scale pipeline

It's under development that will likely increase our gas transmission investment, propane, business continues to grow. We'll keep looking for acquisition opportunities in the Mid-Atlantic and Southeast. And we see growth that Marlin, gas Services, both organically, and through Acquisitions along with increasing investment opportunities in the renewable natural gas market. When these major initiatives become viable projects, we capture them in our margin table.

Our latest margin table, highlighting key projects and initiatives as shown on slide 13, including pipeline, expansions CNG and RNG Transportation Acquisitions, and Regulatory initiatives on a year-to-date basis. Our total margin increases over 27 million, dollars of which 15 point 4 million is reflected. In this table, as we frequently remind you, this total does not include organic growth or growth in unregulated.

Weighted energy businesses outside of acquisitions.

They also does not include projects under development but have not matured to the point where we're prepared to discuss capital or margin projections, the key projects we have included in slide, 13 are expected to generate approximately sixty point, 8 million and sixty 9 point 5 million in gross margin for the years, 20.21 and 20.22 respectively.

Pipeline expansions are expected to generate 11 million and incremental margin in 2022. Compared to 2020 new projects and Florida include the Winterhaven expansion and the Beachside pipeline extension. As we've said before, we are a beneficiary of our geography as populations grow and consumer demand for natural gas remains High. We are particularly pleased with the full integration and margin estimates or 5.8 million and

Point 4 million for 20.21 and 20.22 respectively from the Acquisitions of elk and gas and Western Natural Gas. We also expect a 1 billion dollar margin gain from the recent acquisition of the Escambia meter station in the Florida. Panhandle narrow existing Peninsula pipeline project that serves the Pensacola area.

On the regulatory front. We also made significant advances during the quarter or shortly thereafter in July, our settlement with the Florida Office of Public counsel for Recovery of COVID-19, expenses was finalized and ultimately approved by the Florida Public Service Commission. Under the settlement, we will establish a 2.1 million dollar regulatory asset, which will be amortized over 2 years. Beginning January, 1.2022 and recovered through our existing purchase gas.

Scott and swing service recovery mechanisms for natural gas operations and through the fuel and purchase power cost recovery clause in our Electric Division. They'll be an increase in margin that offsets the amortization associated with the regulatory asset. We've also reached an agreement with the Maryland PSC staff and the Maryland Office of the people's Council related to health and gases. First generation plastic pipe line replacement program under this

Program. We are accelerating the replacement of the pipe and recovering cost in the form of a fixed charge Rider through a proposed. Five-year surcharge.

In terms of orangey Transportation, I realize that we have included a $1,000,000 placeholder for RNG on this slide for 2022 and have not yet disclosed the extent of anticipated RNG related Investments or the particular details of the projects. We have disclosed these projects take considerable time to develop, especially related to securing full project financing for developers and we will provide additional information as we complete Contracting.

Agreements. And as projects under Development begin construction and get closer to completion, I do believe are 1 million dollar margin estimate for 2022 from renewable projects remains an appropriate projection, giving the development stage of several Marlin orangey transport initiatives. The opportunity to provide RNG sourced, compressed natural. Gas at our Savannah, fueling station the scheduled completion of our gathering system pipeline to interconnect, the landfill orangey,

In Ohio, the installation. Currently underway.

These to support hydrogen blending. At our 8 Flags CHP, see facility on Amelia Island and other projects under development.

Slide 14 shows the investment of a hundred and fifty 3 million dollars in recent and plan pipeline expansion. Projects through 2023, gross margin contribution is estimated to be twenty 3 point 9 million. When these projects are fully in service. Peninsula pipeline, our interest rate gas transmission company

Is underway with the Winter Haven Expansion Project, highlighted on slide, 15, 3.5 million dollar pipeline project, glad 6800 deck appearance per day of term service and the Winter Haven Florida area. Once completed in the first quarter of 2022, the project will generate 4 hundred thousand dollars of incremental. Annual margin pipeline, will support a manufacturing facility and provide additional supply for growth and our Central Florida, Gas Distribution.

Efficient operation, turning to slide 16, the Beachside pipeline extension will provide 10,000.176 deck appearance of firm service per day. In Indian River, County Florida, in support of next Arrow, subsidiary for a city gases expansion to serve coastal areas in the vicinity of Bureau Beach. Peninsula pipeline will construct approximately eleven point 3 miles of transmission pipeline, eating a Florida sea, Gas Distribution expansion.

Company expects this expansion to generate 2 point, 5 million dollars of additional gross margin in 2023. And Beyond finally, on slide 17 is Beth mentioned earlier, the Escambia meter station interconnected with Florida, gas transmission provides up to 5 hundred and thirty thousand. Deca firms had a firm service to a pipeline serving, a Florida Power, and Light power plant, which is converting from coal to natural gas and Pensacola Florida by 2022 this <expletive>.

It will generate the 1 million dollars in annual Morgan mentioned earlier.

Eastern projects, while perhaps relatively small in the context of our total business are indicative of our continuing Business Development focus, our responsiveness to customers needs for service, and our ability to find and develop projects for continued growth, even during a global pandemic or so much of the development planning and communication is done remotely.

Although past several quarters, we've outlined a number of renewable natural gas and initiatives that were pursuing 3 of these projects are highlighted on slide, 18 are Aspire energy Noble Road. Landfill pipeline project will construct are 17 and a half mile pipeline to transport renewable. Natural gas from a forest are developed RNG processing facility at the rump E-Waste recycling, landfill in eastern, Ohio, Aspire energy will acquire the orangey and transport it to the

Randy has customers the pipeline.

Construction and schedule for in-service later. This year, once blowing, the RNG volume will represent nearly 10% of the Spire energy is total gas volumes on the Delmarva Peninsula. By are indeed of go and clean Bay Renewables or both undertaking projects that will produce renewable natural gas from different feed stocks of poultry, waste both facilities will produce pipeline quality orangey for transportation by Marv and gas services to Eastern Shore, natural gas, the gas commodity

Will ultimately be be distributed to see in CPK is natural. Gas utility customers, the projects are under development and the timing of orangey availability is dependent on the construction schedule of each project.

Savannah, Georgia, we're working with Southern Company gas under their CNG tariff, to construct a CNG filling station at the Port of Savannah. The station is designed to serve CNG truck, Fleet sport vehicles, and serve as a logistics Center for filling our Marlin CNG tankers are working to secure renewable natural gas sources for the station that will enable us to offer an orangey premium fueling option, CNG vehicles, produce lower emissions than gas.

Celine and diesel vehicles. Reducing carbon dioxide emissions by up to 30 percent and nitrogen oxide emissions by 75 to 95 percent. The station, is scheduled to go in service later this year.

We also commenced another exciting project in June as we began the conversion of the bay Forest propane Community gas system on the Delmarva, Peninsula to Natural Gas. They for us to residential development of 800 homes will be the largest single development cgas conversion. Today of course are Sandpiper. Conversion of over 10,000 propane, customers to natural gas and Ocean City, Maryland and surrounding areas with somewhat more expansive. And I know it's a little pain.

Propane folks to see the cgas conversions, but they're part of a long-term, Chesapeake strategy, dating back. Well, over a decade. We saw the significant development that was occurring toward the Delmarva Beach areas and wanted to ensure that gas was part of those developments are underground. Propane systems have held over 10,000. Customers on gas waiting until we reach the beach with natural gas, other propane companies in the area have additional cgas customers.

That may be interested in converting as well. We'll think of some more years to complete these conversions and that will allow us to appropriately plan for additional propane system growth both on Delmarva. And in other states, your place, the customers converted to Natural Gas. We've been successful in consummating Acquisitions that are immediately accretive as well as standing up, new startup propane operations and high growth markets. As the last note, we continue to pursue several opportunities to consider every

Using a hydrogen blend into our pipeline systems. I mentioned in our prior conference calls that we were supporting a hydrogen research project proposed to the Department of energy by solar turbines.

We've.

CHP turbine on Amelia Island as a test site, the equipment required to burn up to a 4 percent hydrogen. Mix of 8 Flags has been purchased and we're working with, so our turbine technical staff on the installation and testing. We've identified a source of non renewable hydrogen for test purposes. And the plan is to move to Green hydrogen produced from renewable electricity, when we're fully operational, our existing large gauge steel cylinder. Marlin tankers are able

To be retrofitted to transport hydrogen and work. On 3 tankers is underway. We plan to begin initial hydrogen testing at 8, Flags, over the next few months, will also working with several of our existing industrial customers to identify opportunities for hydrogen Blends at their facilities. We're at the beginning stages of gaining, fully on getting a full, understanding of the attributes of hydrogen, particularly in the areas of safety operations, impact measurement.

Availability, and the effects on Downstream customer equipment. Blue Mary testing is promising and as we learn more about this opportunity will share it at the appropriate time. Let me now turn the call over to Jim, Moriarty to discuss some of our more recent regulatory initiatives and our sustainability strategy and commitment to ESG is part of our corporate culture. Jim

thank you, Jeff and good afternoon, everyone. It's great to be with you. Today, I would like to begin by providing an update on legislative actions that we've been working on as shown on slide..19. The energy preemption bill in Florida, that promotes consumer choice and the unrestricted availability of natural gas as an affordable, reliable and resilient energy resource was signed by the governor.

A June. We along with many others in the state. Worked diligently to advance this new law.

Similar legislation has also been adopted in the state of Ohio. Another 1 of our service territories in addition, we are excited about a bill that we authored and sponsored in the State of Florida. This renewable energy bill, cleared, both Chambers and was signed by the governor. In late June, this new law defines bio gas and renewable, natural gas and promotes their use and transportation, electric generation, and injection into Gas Distribution.

the law, also authorizes, the PSC to approve cost recovery for RNG contracts that may exceed Market rates under circumstances certain conditions

With these new laws Florida and Ohio join..17 other states, which have firmly ensured that natural. Gas Remains the clean affordable, reliable and resilient energy resource that is readily available to meet the demands of our residential commercial and Industrial customers. I am proud of our government Affairs, team for driving and supporting such important legislation within the states.

And foremost to ensure that natural gas is available to meet customer demand and also to provide a mechanism for renewable natural gas to be a viable Port. Part of energy portfolios throughout the states.

Slides 20 and 21 list. Some of our recent regulatory initiatives where we have proactively worked with our various public service, commission's, to secure recovery of key investments in our business, while further supporting the delivery of safe, reliable and affordable energy to our customers. As shown on slide 20 are Florida. Public Utilities business unit continues to invest in our Florida, gas reliability.

Infrastructure program or grip. We have upgraded 333 miles of pipeline at a cost of 1 hundred and seventy 8 million dollars. We expect to complete this program by no later than the end of 2023.

3. The spu hurricane, Michael settlement allows for Recovery of the investment. We made to restore our electric distribution system in the Florida Panhandle. The settlement provides for gross margin return on investment of 11 million dollars in 2021 and 2022.

Our Eastern Shore natural gas Interstate. Transmission unit has Authority from the Federal Energy Regulatory Commission to recover Capital costs associated with mandated highway or railroad relocation projects. Gross margin is expected to be 1.2 million dollars in twenty twenty 1 and 2 million dollars in 2020 to associated with these relocation projects.

Moving to slide 21 the company. And the Maryland. TSC agreed to a stride program settlement to accelerate our plans pipeline replacement program for Elkton natural gas. A regulated natural gas, utility servicing Cecil County in Maryland.

Its five-year acceleration enables us to complete this replacement faster while earning an appropriate return on the investment required.

Finally, 1 of our most recent regulatory initiatives relates to the Florida PSC approval for our Florida utilities to establish a regulatory on set of 2.1 million dollars. The amount includes COVID-19 related incremental expenses for bad debts personal protective equipment and business Information Services to enable remote work. The company's regulated business units will recover the regulatory asset

For a two-year period beginning in 2022.

As shown on slide..22, Chesapeake. Utilities continues to build on our Bedrock commitment to ESG. A 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. Inaugural Awards speaks volumes about our diverse and inclusive culture 1, which continues to promote the growth and development of our employees and the active engagement in our communities.

Strong core.

Governance has been essential to creating long-term value and safeguarding our commitments to all stakeholders are bored and it's committees have adopted guidelines and other policies that have provided a framework for ongoing effective governance active and informed engagement which is embedded in our people, beginning with our board of directors and extending throughout the company could not be more important as we continue together to church.

Art 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 ninety percent of the shares voted. We're in favor of the proposals presented, this demonstrates our stockholders support of the performance of the company and our future strategy.

Turning to slide 23 our responsibility to operate in a safe and environmentally friendly manner. Furthers our stewardship and facility, facilitate sustainable practices across our organization. Our team with guidance from the board of directors, evaluates key risks, and mitigating factors that are identified as part of our vibrant, Enterprise risk management program,

Embedded within our ERM program are ESG related, Focus areas and emerging risk in early June, we announce the 3 of our regulated. Gas businesses were recognized by the American Gas Association for their ongoing commitment to safety, Chesapeake, utilities, Florida, Public, Utilities Company Eastern Shore natural gas each. We're presented with an industry leader accident, prevention award for working safely in 2020.

Each company achieved a total incident rate below the industry. Average, these recognitions further demonstrate our unwavering commitment to safety each, and every day,

We are committed to providing a safe workplace for our employees and to making safety a priority in 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 long-term safety is not only our top priority and our first strategic objective. It is at the center of who we are. Our Safety Town facility in Dover Delaware.

And our second plan, Safety Town facility in Florida, provide both hands on and classroom training for operations colleagues.

We are also diligently working on on, on our inaugural corporate responsibility and sustainability report, which will be made available later this year, there we will be providing additional information and insights on our long-standing, DSG stewardship.

We are committed to providing a work environment that values diversity and background experiences and skill sets of our employees. As highlighted on slide 23, our Equity, diversity and inclusion Council supports all of our employees, embracing and sharing their diverse experiences and backgrounds to help Propel our mission to improve the communities we serve, and to make us a better company.

D date, eat.

Council 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. Our 5 employee resource groups or ER G's that are for stirred by the EDI Council, have made remarkable strides and valuable contributions contributions. In just a short amount of time. We are excited about the creation of other. ER jeez.

Ari DIYs webinars are opportunities for our diverse employee base to share knowledge, insights and talents across our larger employee Community, the talent skills and ideas that the ER geez have brought to the Forefront have been inspiring and provide channels for our employees to know that they are valued and supported by their company.

Finally, as part of Chesapeake's, commitment to building a brighter future, we were honored to award 12 scholarships to the children of our employees..1 of the questions, our scholarship winners answered was how to make the world a better place as we Embrace diversity. In all that we do. Their responses were a testament to the inspiring nature of our next generation.

Community service is key to Chesapeake utilities culture and identity. As we work hard every day to provide clean plentiful, affordable and resilient energy delivery services. So that no 1 is left behind this service is reflected to and our ongoing efforts to reduce greenhouse gas emissions, including completion of our pipeline replacement program and improve detection technology at Arkham.

Your stations. We are also working with our suppliers and contractors to encourage their environmental efforts. We are excited about the RNG and sustainability, projects underway by our diverse and engage teams to reduce. The carbon footprint of the communities, we serve, as well as our conservation. Programs, that promote high efficiency appliances and technical assistance for large volume customers to identify an issue.

NG reduction opportunities. Our commitment remains steadfast to take the steps necessary to deliver energy. Where and when it is needed, while conducting continuing to advance our environmental stewardship, I appreciate being with you all today and will now turn the call back to Jeff for some closing comments, Jeff.

Thanks Jen. You know, we tend for good reason to emphasize earnings per share on these goals. But I want to take a moment to focus on return on Equity as another key measure of our overall financial performance. Are we is an important performance metric for us slide..24 charts are historical return on Equity results. We've exceeded 11% roee for the past 15 years, we consistently exceed, our authorized regulated return limits.

He's been prudently.

Regulated businesses to optimize returns but are non-regulated businesses are major contributors to the higher than regulated returns. We've produced over a long period of time, our strategy of adding selected non-regulated assets, capable of producing returns above. Those of our foundational regulated businesses, that's consistently benefited. Our shareholders, as you can see, on slide, 25 and 26. We continue to reaffirm our five-year Capital guidance for the pier.

..2021 to 2025 I've 750 million to a billion dollars. 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. We also continue to support our 2025 Epi GPS, guidance range, and 6 dollars and 5 cents to 6 dollars and twenty 5 cents. Per share, representing an average EPS growth of approximately 10%,

Initiation of guidance, the end of 2017 natural gas remains. A key component of the country's long-term energy strategy. We believe that the markets, we serve value, the Energy Services we deliver whether that's natural gas propane, or electricity. Our customers have spoken loudly in this regard. At the same time, we have opportunities given our business mix expertise and strategic approach the capitalize on new renewable energy opportunities.

Provide the bridge from the here. And now, to a more sustainable future, we're committed to our growth strategy focused on delivering top quartile performance, including shareholder return, which by the way, has exceeded 16, percent compound annual growth for each period..1 3, 5.10 and 20 years through July 31st 2021. Our investment proposition is based upon a commitment to Performance. We outline on slide 27, our strategy

Engagement initiatives, our financial objectives and our discipline operating philosophy are all in support of sustaining. A level of performance achieved a few in our industry. I want to thank all of our dedicated, Chesapeake utilities employees. Our team takes great pride in our success and the work we do every day to deliver clean. Reliable and safe. Energy to our customers. Thank you for joining us this evening. We would be happy to address any questions. You may have.

And if you'd like to register for a question, you can press the 1 followed by the 4 on your telephone and you'll hear a three-tone prompt to acknowledge your request. If your question gets answered, you'd like to withdraw, you can press 1.3 again that is 140 Q up 1 moment for the first question, please.

Rider First questions, blind of Tate Sullivan from Maximum group, please. Go ahead. All right, I thank you. Good afternoon, Jeff. I thought I'd start with the Florida, all the new detail on the Florida related projects and I think the Dynamics of projects and providing customers is a bit different than Delmarva. I mean, can you refresh mean how kids and some of the projects seem to be serving other service territories as well? Can you just give a broad overview and how it's different and seems like there's some urgency that

Capacity. Florida to it's 1 of my 2 boys.

Well, I'll tell you it's it's it's a little bit of both, right? We have for a number of years as you well know been expanding our transmission that work on Delmarva, through Eastern Shore, natural gas projects and and we continue that today as we move down to Somerset County in Maryland and other places on the peninsula, we have been duplicating that kind of activity in Florida for a number of years with our Peninsula pipeline interest.

The transmission business. And so those 2 pipelines are providing transmission transportation service to primarily to distribution companies that are serving in use customers although certainly both of those systems provide direct service to a variety of industrial customers along the way. And so we're seeing that the same kinds of things happen on both Delmarva and in Florida, where

Where there is significant growth significant demand substantial home building activity followed by the usual commercial. Infill variety of industrial customers in both Delmarva and Florida. And we are building pipelines both transmission and distribution to service customers. So I don't know if it sounded like we were focusing on the transmission business more info

Delmarva, we just happened to have you know 2 or 3 new projects in Florida and are continuing to look for additional opportunities on Delmarva. But I would say both of the areas are are right for growth. We're seeing as I mentioned, many, many, many housing starts and both service territories, that we and other Gas Utilities, frankly they are providing service to and our transmission expansions are providing

NG service to those distribution facilities. In large measure that are providing services to me and he's customers.

Yeah. I mean the growth continues in both service territories and and why I also will follow up on Escambia meter station to. I just well, I mean what can you give us like more background on? Why would Florida? Power & Light want to get sell 1 of their Distribution Systems within their territory. I think, or how, how did that happen - include providing service into an FPS help?

It's delivering gas to the crisp our facility which was was cold and is now converting over to primarily Natural Gas Service. It was part of a negotiated agreement between us and and FPL that we hope at some point in the future. We have a nail this down yet, but we hope that at some point in the future will provide an opportunity for us to have access to additional quantities in that area. So it's

Step 1.

What may be a multi-step process to expand our opportunities to deliver more gas in the Pensacola area. We'll see if that happens, if it has not been finalized at this point. And and last for me, you mentioned, I think earlier in your remarks, 15 new customers a day in in Delmarva and is it that about the same in Florida?

What we saw on Delmarva but we really been growing significantly on the Delmarva Peninsula. Just amazing to see the whole building activity on the peninsula, over the last year and a half or so. So yeah, it's it. We have I think more customers now. But the growth rates are relatively similar, both of them.

5 percent per year range.

And I include some of that information on the customer growth and and so you can see in there that the trend that we're running is very similar to what we've been doing for several years now and a little bit higher in some cases lately higher. So year-to-date, you know, we've got margin incrementally from this neuco.

Justin Rose is about 1.7 million. So strong customer growth continues from time to time. It will go back and forth between the growth rates on Delmarva and Florida, Which is higher. But they're both running at significantly above, you know, the industry growth rate and that appears like it's going to continue into the foreseeable future.

Thank you best. Thank you, Joe.

The next question is from line of Brian Russo from sidoti. Please go ahead.

Good afternoon.

It's just on. Do you sense that you know the constructive backdrop for natural gas in Florida and now with the legislation you just discussed is that accelerating projects you know in Florida and enabled you to advance some of the projects you've announced you know and or can we expect you know projects that might been further out?

In your pipeline can now be accelerated with the legislative support.

There's probably a little of that, but I will tell you that, that in Florida and, you know, Jim's up in here and help me with this of a second. But, you know, it's a very constructive business environment. The regulatory structure here is supportive of expansion, and has been for many, many years, throughout a number of different, you know, Governor's and a number of different legislatures.

And so I don't know that it's it.

Accelerating anything that we would have already been able to do here, but it certainly is a, is a nice feeling to know that you're not going to have to fight your way through, you know, a number of different, local gas bands and and the, you know, make sure that we continue to provide customers. The fuel choice that we think is, you know, is Central to what we do and what other energy providers are doing.

Okay. And if I'm recalling on the last conference called you were discussing possibly investing in orangey processing facilities up in, I think Maryland maybe was with a bioenergy devco, any update there.

We are currently in the process of working with a number of different RNG facilities and the bioenergy death go facility that you mentioned happens to be in Delaware. The cleaned a Renewables facility has a project under development down in Westover Maryland Our intention is to be engaged and actively involved in both of those projects. We have an investment underway right now.

Developing a gas processing facility that we are purchasing from Lockheed that is scheduled to go to the bioenergy devco facility and we are working with bioenergy devco to develop the final contractual Arrangements that we will you know, a deal with, you know how that facility is operated and who operates it and how all that works. And so it's 1 of those evolving.

Contract and and deal structure issues that I spoke of earlier. It's, it's interesting to see these renewable projects, kind of emerge and as people like us and others are interested in investing in them. There are a variety of different potential options that people are looking at to structure those Investments. And so we're right along with others in that path, but I think you will see us being very actively involved and what bioenergy death goes.

Clean by Renewables is doing on the Delmarva Peninsula as well as a number of other projects in and close to your existing service territory.

Okay great and then he is a capital cost search program. I believe it's 2 million margin in 2022. The wind down 2022 or you know this is that program extend past you know that year

That that is basically what's been included there Brian is the, the annualized margin so to speak from the investment that's been made at that point in time. If there are additional Investments that at some point in the future get added, then we would go back in for an additional Rider associated with those.

Okay, got it and then just lastly on the Elkton. Straat if I recall in the larger human, you were with doubt and you agreed for to a stay out in terms of raising rates or filing. Ray cases, I suppose that that's still in place and then this dried program is treated separately from, you know, from all other Regulatory and rate matters, is that the way to look at

At it.

But that is the way to look at it. We have certain requirements as it relates to our various Maryland jurisdictions in regards to you know, when we have to come back in. And so, you know, 1 of the things that were looking at is given that we have several small difference. You know, several different entities. We may be approaching that more from a Consolidated standpoint so that timing may change and regards to Brian. When we go back in after consultation,

Then and working with the PSD and looking at that. But right now there is a plan time frame for when we can go back in in regards to Elton, but this writer was established outside of that yet.

Okay, great. And then just lastly, if if I heard correctly, you mentioned that Marlin has might be pursuing Acquisitions. I was just curious, if you could elaborate on that a little bit.

Probably not much. I can tell you that, you know, we're pretty opportunistic looking at possibilities that come along, there have then, and we think they're likely will be some opportunities to acquire businesses, or to at least look at the opportunity to acquire businesses that are similarly constructed as Marlon. And so we'll see how that goes. I think they'll be a little bit of

And that market over the next couple of years. Especially as the opportunities continue to to show up in the renewable natural gas transport markets and in some of the gas capture markets that I mentioned earlier, you know ensuring that gas doesn't escape the atmosphere when a segment of pipe but needs to be taken out of service for maintenance. So we think there are opportunities to organically grow more and we're doing that.

At making some substantial Investments and adding equipment and facilities and Personnel Resources. But I think there may also be some opportunities much as we see on the propane side for acquisition.

Alright, thank you very much.

Next questions, from line of Roger, Goodell with clear Harbor Asset Management. He's got

Good afternoon Jeff, the best I want to focus on slide 24, the return on Equity performance. It's it's quite extraordinary to State the obvious. And so the generic issue on pursuing here is the

Of our oh he's such as you have put up and what I mean by durability. I think the company has had an extraordinary process ability to create to generate share.

Good savings opportunities. And as a sidebar, comment question, perhaps that uptick in our oh he's starting roughly in 2010. May have been the consequence of your arrangement in Florida and I think that that whole opportunity was created by how you structured it as a win-win and shared say

But there's a lot that's happened politically and Regulatory Ali over. The last decade is there, I would like your perspective on the political and Regulatory climate attitude stance toward shared savings and can you

Can you tell us that you have an ability to create the same kinds of shared saving opportunities that have characterized this extraordinary period of roh?

I'll take a first stab at that Beth and then jump down any minute, we are in the process. And we talked about this a little bit in some of the previous earnings calls, looking at a, a business transformation, across all of our units, and that involves organizational restructuring, it involves a simplification and standardization process within and among business units.

It's driving us to look at the company more as 1 company than a collection of individual business units and the intention to be perfectly blunt. And we say this internally all the time was to allow us or enable us to double the size of the company. Again, over the next several years. As we've done 3 times, since the 2010. That you just pointed out on the chart.

And so, you know, It's tricky to continue to drive earnings and returns at the same time. But we are very careful in managing our costs and we are on the hunt for additional efficiencies across the company and we're finding those we are fairly deliberate and looking at technology improvements over the course of the next several years and our ability to recover the major cost of those technology.

With a series of rate files, we are looking at ways to continue to drive margin. As you've seen us do over the last many years or Business Development, focus is pretty sharp. We do not make investments and we do not look at Acquisitions. That would not be a creative pretty quickly and that would ultimately damage.

These returns. And so we've been very disciplined in our approach to Growing this business. We're not just out there adding things because it's interesting to add things or trying to get bigger just because we are fairly consistent. I think you're running, you're out in Pooley managing the assets that we have. And in making sure that we add, only those assets that are linked to things that we already do and that will

Justin only allow us to continue to hit these targets and so I think it's a combination of managing the assets. You have them looking for opportunities for efficiency improvements and to not get out too far over your skis in the growth Acquisitions that that were pursuing Beth. I'm sure you have a lot to say

Jeff, what you just went through in terms of the shared savings that you've driven through technology through integrated operation scale, but what I should have asked is shared savings for the communities that you serve.

And through the ability to identify reductions in costs currently being borne by resi and Industrial markets through a solution delivered by Chesapeake, there are savings enjoyed in the communities you serve and therefore those savings can drive.

A higher R, OE. In fact, you have executed as promised and the benefit is in the community. Now, is that may be Beth's and cheer up at bat. Did my clarification on my question is that useful to you?

Sure. I think 1 of the things that Roger is, as you look back over history, I think, you know, if you look at our track record in terms of rate and rate increases, 1 of the things that we have been really successful at as an organization, is, you know, being able to grow and not bearing, you know, that not bearing and and causing increases for our customers. If you look in

All of ours.

Sections across the board. There has been limited activity from a rate standpoint and so, you know, we've been able to grow. We've been able to not burden existing customers. And so it is a little different situation that we've experienced relative to a lot of utilities that are frequently going in for rate increases to cover their investment. So in Delaware, I can tell you over the

The last, I think 20 years we've been in maybe once or twice and that's, you know, that period of time. Similarly, it's been a very long period of time in Maryland, where we've been in, for any regulatory action in our Maryland jurisdiction. Also, in Florida, if you will get RFP, you natural gas and our Central Florida gas division. Again, it's been a long period of time. So we are continuing

To grow and we are managing successfully any implications to existing rate payers by ultimately keeping their rate. You know, at without having to constantly increase them as we're growing. And we want to continue to do that. I think that's also as Jim likes to say, 1 of the great things that we have, right? We have areas that are have lots of opportunity to continue to expand. So in answer to

Where you started. I think Roger, you're going to see mirror what we've done. Historically, we're going to pursue growth in Florida because there is a desire and demand for natural gas. You're going to see us do it on Delmarva, right? We have counties that want to see natural gas and wanted to expand to displace left clean fuels, and at the same time, you're going to see us pursue Alternatives and options like orangey and other

That bringing, you know, competitive Alternative, Energy Solutions to our markets. And so, you know, I would answer I think our strategic plan every year we come back. You know we've been able to say we support our guidance as Jeff did today so I think our future is bright. I think we've got a lot of opportunities before us but you're going to see us execute on with the same discipline that we've done, you know? For the last

15 plus years that this roh art shows.

Yeah, Roger that's a much better question than the 1. I answered that. I appreciate the opportunity to the best to the chat about the little bit and I would add a couple of things to it. Obviously, the just the the Shale gas Revolution that has provided Untold, millions and billions of dollars. Frankly in Energy, savings have been passed through to customers on our

Teams as well as other systems around the country and we continue to see a long Runway. I had of a pretty stable pricing there and will continue to again to pass those savings along. We're also seeing some interesting things happen on the renewable gas front. And while many of the green attributes, of many of these projects are being moved into markets like California and Oregon even even Canada.

Looking.

For, you know, a vehicle home through the lcfs program, for example, in California. And the economics, supporting the development of the RNG facility, or largely supported by the economics of the green attributes, moving to these other markets, the commodity itself, the actual molecules of gas are all moving into distribution system someplace and they are generally speaking moving at pricing that is a tour.

In some cases lower than what we see. Traditional show gas pricing and so it's a it's an interesting opportunity to continue to provide low price fuel in our distribution systems that are supported by renewable gas.

Excellent. Thank you for expanding the answer. Very helpful.

and as a reminder, ladies and gentlemen, if you'd like to ask a question, you can press 1 for

Looks like there are no other questions at this time. I'll turn it back to Jeff householder for any closing remarks.

Well, thank you. I appreciate all of you. Staying with us this late into the evening. As always, if you have additional follow-up questions, or need additional information, feel free to contact any of us bath myself. Jim and we'd be delighted to help you. Thank you very much and good evening.

Thank you.