Q4 2021 RGC Resources Inc Earnings Call
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Okay.
Yeah.
Good morning.
Paul Nester, President and CEO of RG see resources. Thank you for taking time on this Friday.
So join us for our fourth quarter and 2021 fiscal year.
Earnings call, it's a beautiful day here in <unk>.
Bruno at Virginia, and I Hope you are enjoying the same wherever you are first a few administrative items, we have muted all lines and ask that all participants remain muted. After the presentation is completed we will take questions.
The link to today's presentation is available on the Investor and financial information page of our website at Www Dot RBC resources Dot Com alright lets get started slide one.
Our forward looking statements disclaimer of this presentation does have forecast and projections.
Our agenda for today's call is on slide two as we said, we're going to review, our operational and financial highlights.
I fail to mention that with me today are Tommy Oliver our CFO and David Garcia, Our director of Finance as you all know Tommy and David.
Joining us for each call we'll all.
Also go through our 2022 outlook and again, we will take questions.
At the very end.
Moving on to slide three our customer growth results in the rider gas utility were outstanding and physical 2021.
We added approximately 600 customers I think the actual number was $5 97.
In the fiscal year, which was 8% better than 2020, we.
We've been talking about our main extension miles in the previous calls.
We did another two five miles in the fourth quarter.
<unk> phase two of the Blue Ridge expansion and bringing the year to date total to seven miles now.
The outstanding result, 71% increase over 2020.
Moving on to slide four.
Fourth quarter volumes were really pretty good unit residential volume show a decline of 5% we did have a much warmer.
September 2021 in September 2020 in fact, there was a 77% decline in heating degree days in September but the absolute.
<unk> change on those residential volumes was only not.
So the 5%.
A little a little misleading it really wasn't too bad our overall industrial volumes continued to be down.
In this fourth quarter, primarily due to the large customer that fuel switched.
Natural gas in 2020 as we've discussed previously this customer switch back.
Coal in 2021.
Our year to date volumes are up and stronger and we've talked about that as we've gone through the fiscal year.
The large customer we just mentioned really has weighed on the year.
Year to date industrial volumes, but.
If you analyze our top 10 customers, which are primarily a mix of.
Both industrial and.
Commercial.
Eight out of those top 10 customers have increased their gas consumption in 2021.
Building suppliers auto parts manufacturing and consumer products manufacturing continue to add noticeable year over year increases.
Moving onto our capital spending on slide six.
We ended up about $3 million lower than 2020.
That is due to project timing as we've discussed in prior calls as well as our project mix, we will see in a few moments that this $3 million will roll into our 2022 capital projection or capital budget.
We talked a lot both last year and this year about our signature project in 2020 to Blue Ridge main extension.
We did get phase two of Blue Ridge kicked off.
In July that actually just wrapped up a couple of weeks ago in the middle of November which is outstanding.
Two of our key projects for 2021, the Carillion expansion support project, where we invested about $1 billion in our Mason station renewal.
This went through RSA rider at three quarters of a million dollars were completed in the fourth quarter.
We've already discussed our customer growth and main extensions.
The dollars related to those statistics, we saw just a moment ago five $9 million, which is a 70% increase from 2020.
$5 9 million does exclude.
The Blue Ridge projects.
Tommy will now take a few minutes and walk us through our fourth quarter and.
Physical 2021 income statement.
Well, thank you Paul and good morning, everybody. Our condensed consolidated statements of income are presented on slide seven.
And I am going to separately review the financial results from our two operating segments, a runner gas utility <unk> midstream and I wanted to start with the fourth quarter results for Roanoke gas.
Operating income for the fourth quarter of 2021 was approximately $1 $5 million higher compared to the prior year's quarterly results.
As we noted in prior earnings calls we had a number of large expenses recorded in the fourth quarter of 2020, those were namely bad debt and the accelerated recovery of certain regulatory asset.
We also noted that all utilities in Virginia, we're operating under a moratorium on disconnections of customers for nonpayment.
Pleased to report that the moratorium and the uncertainty it created ended in late August 2021.
Along with the end of the moratorium in October the company was awarded $858000 ARPA funds by the Virginia State Corporation Commission. These funds were specifically designated and I might add we're used to help our customers with their arrearage balances are.
Our fourth quarter 2021 results were favorably impacted by these ARPA funds. In fact, these funds lifted earnings by <unk> <unk> per share.
Absent the ARPA funds, we would've reported a loss in the fourth quarter of 2021, as we accelerated the recovery of our deferred COVID-19 related expenses and we incurred other sizable expenses related to outside professional services among others.
It's worth noting that with the write down of the Covid related deferrals.
No longer have regulatory assets on our book subject to the earnings test as of September 32021.
Now I'll turn to RBC midstream midstream continued with its significant quarterly year over year decline in equity and earnings from the Mountain Valley partnership equity and earnings declined by over $1 1 million.
Order over quarter.
Despite this decline earnings per share for the fourth quarter of 2021 were flat compared to a loss of <unk> <unk> per share for the fourth quarter of 2020.
For the 2021 fiscal year operating income increased by 18% year over year, largely attributable to <unk> revenues and customer growth.
Paul reviewed in an earlier slide related to our main extensions and new customer additions. In addition to the impact of the ARPA funds on earnings we recorded in the fourth quarter. The company also received $400000 of cares Act money earlier in the fiscal year, which also dramatically reduced our bad debt expense.
The strong runner gas fiscal year earnings were offset by a year over year of $3 $1 million decline in equity and earnings from the mid streams from investment in the MVP, resulting in a $1 22 earnings per share on a on a consolidated basis.
Thank you Tommy.
Really did have outstanding financial results in 2021.
Yeah.
Last year at this time there was just so much uncertainty still around the pandemic in particular in the vaccine of course was not.
Available as we all know until the until the early part of 2022, and so to end this fiscal year and that.
Earnings ranges, just speaks speaks well of our our employees and their dedication to our company and our customers.
We're really really happy with the $1 22 number.
Alright looking at.
Let's talk about 2022, a little bit and we've got four things, we really want to hit on here, we'll start with capital gain capital continues to be the.
Growth driver for our earnings will give you an MVP update.
It's appropriate Tommy is going to give us a little bit of information about our ESG initiatives and what we've been doing there. We think this is a good time to do apprise you of that and then we'll conclude with our earnings per share.
Forecast.
Alright.
$25 $4 million as you can see as our capital plan for 2022 is the largest capital budget in the company's history. The momentum on main extensions and new customer additions is continuing.
I think we just talked about phase two already wrapping up over in Blue Ridge, We've started phase III.
And we budgeted.
Almost $6 million in that category, that's the largest amount we've ever budgeted.
Main extensions and new customers.
We have one gas station left to renew and we hope to get that completed in 2022 that will be through our <unk>.
Plan, and it's really something again for the company and our customers and our shareholders to be.
Proud of beginning of 2014, we started the process of renewing our gate stations.
Through the same plan in.
This last one is called Brown <unk> that we're going to complete this year will be.
Just that our last one and we'll have all of our gas stations.
Renewed and modernize we're really happy about that.
We are proceeding with phase III, and Blue Ridge, thats going to be about $1 million.
Investment to run approximately another mile and a half to two miles of main.
Through that area.
And then finally, we have a large.
Special project that approximates about $5 million in this capital budget we.
We hope to make.
Public announcement on that in the coming weeks.
We think it's.
Just a wonderful wonderful opportunity and project its got on ESG angle to it and we look forward.
When the time is right to make an announcement on that but it's also included.
And this number.
Alright, let's talk about the mountain Valley pipeline for a few minutes.
Mountain Valley.
Has wrapped up there.
'twenty one construction they've demobilize.
From the field of course, they are still monitoring.
Environmental impacts and the right away as as required but they really had a good or great 2021.
Of construction in progress.
Executing their plan for the year were really happy with what they've done.
The overall project is really about 94% complete.
We use over 90 on the slide that is true too, but it's really in that 94% range. When you include the compressor stations all of the Interconnects.
And the actual pipe itself.
We look forward.
Mountain Valley getting wrapped up in 2022.
So close to being wrapped up we look forward to that and.
The gas that it will provide to the runner valley.
Tommy.
Tell us a little bit about ESG, Paul I'm going to go back a little bit in our history.
1992, we were the first utility in the state to have an infrastructure rider approved under which we recovered the cost to replacing bare steel and cast iron mains and services outside of a rate case.
This rider and the subsequent save rider is still in place in 2016, we completed the renewal of all our bare steel and cast iron mains and services. This has dramatically reduced our greenhouse gas emissions, while making our system much safer and more reliable.
During 2021 or the 2021 fiscal year, we continued our methane reduction in <unk>.
Efforts through our <unk> program, we renewed nearly eight miles of main over 600 services and another of our city Gate City Gate transfer stations as Paul mentioned it is worth noting that our solar facility recently reached its one year milestone of operation.
Since it was put in place are in service. The company has produced over 106 megawatt hours of electricity, which is eliminated 63 tonnes of cotwo emissions.
And we also recently joined one future those not familiar with one future. It's a group of 50 natural gas companies that are working together to reduce methane emissions across the natural gas value chain.
And you can see our website for more information on these and other ESG initiatives.
Thank you Tommy.
This company is Tommy started out I'm glad it went back in time, a little bit we've had a long history of doing the right things and.
Going the extra mile to make sure that we're limiting environmental impact or.
Again doing good things for the community.
We want to continue that of course, and I'm really happy with what we've done in the last 12 months and again, we've got some initiatives.
Working on over the next 12 to 24 months.
Okay, let's wrap up by again reviewing our earnings per share again, the 2021 number was outstanding and you can see in particular.
The change in the Blue bars, there, which really was driven by their own a gas utility and as Tommy talked about.
We did have pretty significant one time impact from the pandemic stimulus money, we do not expect to have that.
Relief or impact in 2022, so we have lowered in particular, the rona a gas utility earnings just slightly year over year.
If you remove the onetime impact of the stimulus bonds were still growing run out of gas of course.
And in a conservative fashion.
John the earnings from our midstream investments at essentially.
Breakeven so again, we're expecting a fantastic 2022.
And the boards happy with that earnings projection.
That concludes our.
Prepared remarks.
Happy to entertain any questions if you'd like to ask a question.
Please dial pounds sixth on mute your line.
<unk> six.
Okay.
Okay.
Good morning, everyone.
Hey, Mike Good morning, how are you.
So on slide share yourselves.
We're doing wonderful it feels like Florida and run out today, it's already 60 degrees and we want to be clear.
The 70.
Yes.
Well, that's not good for gas volumes, though.
Yeah.
Traction, but not good for <unk>.
Throughput that's right.
Just one question guys.
We had an article in S&P global.
MVP Southgate was having some permitting issues in the Carolinas.
Maybe you could add a little color to that.
The thoughts are.
Among the partners on that topic.
Yes. Thank you for the question, Mike and just for reminder, for the other folks on the call Southgate is the <unk>.
Extension from station 165.
Also the MVP mainline.
Reversing the Virginia, North Carolina border, and essentially making a dog leg back to the greater.
Greensborough area, it's approximately a 70 mile.
Project the pipes a little smaller.
24% and 16 inches.
Versus the 42 inches of the mainline but it's.
Really a great project and if he wants familiar with that part of.
North Carolina in particular, it's a high growth area from an economic development standpoint, though.
I think the may.
The simple answer to your question Mike is that obviously as the MVP mainline has has experienced some delay, particularly over the last 24 months the southgate.
Delays have been commensurate with that.
I think the project is still working through the permitting on on Southgate I don't think there is.
Anything thats.
<unk> great alarm at this point.
I think what we've all seen over the last five years in terms of.
Pipeline projects that it's challenging to.
Across the permitting hurdles, but I think they're going to ultimately be successful there.
Okay.
Good news also needed projects.
Hi, gentlemen.
Thank you Mike.
Anyone else have a question.
And use pounds six ton mute your line, if you'd like to ask a question.
Hello, Paul.
Hey, good morning.
Hey, Jack.
Hey, Jack how are you.
Okay.
Two questions one what is the what.
With that level, what's the debt level occurred.
MBP.
Yeah, that's a good question Jack.
Right now if you look back at the slide where we show our MVP investment we have.
Yes.
Bonded that investment entirely with.
That at this point in time so.
I think David's got their back on slide slide.
Slide number 10 at the end of 2021, our cash investment capital call. We've made to the project.
Just over $50 million.
Presently all of those capital calls have been made with <unk>.
Debt.
Okay and can you comment on I guess, the regulatory challenges for the MVP overall.
Yes, I'd be glad to give a little little color to that on where we sit today.
December 3rd.
The next.
Scheduled event or the Virginia State water control Board hearings.
On December 14th where theyre going to consider.
The.
Application for water crossing permits in the state of.
Danielle.
Tom Eni as well as two or three others from our company. We we participated in the public hearings.
All of those permits actually in the fourth quarter of 2021.
Conveyed.
Our thoughts and facts I would add on.
The necessity of the mountain Valley for the Roanoke region.
And in fact for running a gas company.
Yes, Jack to your good question there the customer growth that we're having here in the economic development that we're having here in the <unk>.
Right around at Valley is meaningful and we're so.
We're happy to support that but we really do need to mountain valley to continue.
To support that we think we will add another.
600 customers and it could be higher than that in 2022 again, there's so much momentum coming out of 2021.
The need for the mountain Valley is more critical than ever but.
I think as publicly disclosed not only by us, but the other project members the water crossing permits.
Or the.
A significant hurdle right now again, we should.
<unk>.
Find out more about those over the next.
60 days, as Virginia, and West Virginia.
Do their scheduled work honest the Army Corps.
Is right behind Virginia, and West Virginia.
In terms of further approval and then ultimately the FERC.
As to also.
Tissue approvals.
Related to the water crossings.
<unk>.
Hope that answered your question.
Okay. Thank you.
Youre welcome.
Any other.
Questions. At this time, you can use pound sixth on mute your line.
Well again, thank you so much for taking time this morning to be on the call and.
From all of US here at the company and on behalf of our employees and customers all want to wish you a happy holiday season, and a very Merry Christmas and.
We look forward to being with you again to review our first quarter results.
Near the end of January or in early February.
Everyone has a safe and pleasant weekend. Thank you.
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