Q3 2023 RGC Resources Inc Earnings Call

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Right.

Lynn.

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Yes.

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Okay.

Good morning, Thank you for joining us as we discuss RTC resources 2023 third quarter results I am Tommy Oliver Senior Vice President regulatory and external affairs for RBC Resources, Inc.

I am joined this morning by Paul Nester, President and CEO of <unk> resources, and Kelsey Davenport, our director of finance.

Before we get started I wanted to review a few administrative items, we have muted all lines Nast at all participants remain muted.

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.

Lastly, the conclusion of the presentation in our remarks, we will take questions. So let's transition over to slide one.

And I'll note that this presentation contains forecasts and projections to slide one is a forward looking statement disclaimer.

On to slide two which contains our agenda. During the presentation. We will review our quarterly operational and financial results and discuss the outlook for the remainder of fiscal 2023 with time allotted for questions.

Over to slide three.

Our main extensions for the year totaled $3 1 million I'm, sorry, $3, one mile and we have added which is really reflective of the great construction weather we've experienced in the Reno area.

And we have added 464 customers through the first nine months of the fiscal year.

Our customer counts in the graph on the right side of the slide represents a steady increase in total customer since 2020, you got to be mindful that customer count for 2021 and 2022.

We're impacted by the state mandated service disconnection moratorium that occurred during parts of 2020 in 2021.

Overall, our collections have improved and we are experiencing collection activity, which is largely which largely resembles pre pandemic resolved our bad debt expense for the nine months to approximately 223000 less than this time last year.

So we're on slide four.

Which shows arent delivered gas volumes, which were lower than last year, largely due to warmer weather compared to the third quarter of 2022.

Adding degree days were 6% lower which resulted in 3% lower delivery of total volumes compared to third quarter of last year.

<unk> five for.

For the first nine months of the current fiscal year gas volumes are lower again, largely due to fewer heating degree days and commercial and industrial volumes were also 2% lower than year to date last year.

I'm now going to turn it over to Paul Nester, President and CEO of <unk> resources to discuss our financial results. Thank you Tommy and good morning, and thanks to everyone for joining US today, we are on slide six.

The third quarter operating income increased $158000 or nine 6%.

Two $1.798 million.

This is Howard.

We've seen an improvement over the third quarter of 2022. This increase was primarily driven by the interim base rates that we implemented on January one in addition to our investment in the R&D.

Jack.

Mountain Valley pipeline AF UDC, we won't talk about mountain Valley, a little bit later in the presentation. One thing to note on slide six our interest expense.

Is under pressure due to the rising interest rate environment, we still have.

Floating rate debt supporting our mountain Valley investment and it is subject to rising interest rates.

Our net income for the quarter was $687000 up approximately $94000 compared to the third quarter of 2022 and this did include $519000 of the noncash.

<unk> related to mountain Valley, returning to full construction in June 2023.

To aid in the comparison of our trailing 12 month results, which includes impairments recorded on our MVP investment in fiscal 2022, we have represented our financial results on an underlying basis on slide seven.

The 10% increase that we see on slide seven for trailing 12 results $955000 really reflects two things first it's execution on the Rhino gas organic growth strategy. Tommy just covered are our volume deliveries in our main miles and our customer additions. We just continue to have.

Excellent results in our operation on all those fronts, we're still investing in rate base Tommy is going to cover that in just a minute.

And customer growth and again, we had a nice strategic investment in a.

New technology, which is reducing emissions emissions in our R&D facility and then the second piece.

Of that earnings change is the noncash equity earnings from the Mountain Valley investment.

Tommy is now going to review run out of gas as year to date capital spending as well as our capital spending projection for the remainder of physical 2023. Thank you Paul and we are on slide eight we continue to execute our 2023 Roanoke gas capital investment plan with $19 4 million in utility property, which.

An increase of <unk> <unk>.

$1 9 million compared to 2022. The increase is primarily the result of the investment we made in the R&D facility is completed and to make it operational.

Turning to slide nine where we're going to we're going to review the outlook for the remainder of the fiscal year, including Roanoke gas with capital budget forecast.

And outlook for <unk> midstream and provide updated guidance for 2023. So one let's provide initial guidance for 2024 and so on to slide 10.

We anticipate we anticipate approximately $4 $5 million of additional spending on utility plant for the remainder of the fiscal year for a total of approximately $23 nine for the fiscal year. You may notice that amount is higher than the second quarter forecast in may due to anticipated spending in the fourth quarter for the Roanoke gas.

Interconnections to the mountain Valley pipeline I'm going to turn it over to Paul now, yes. Thank you Tommy due to the passage of the fiscal responsibility Act in early June .

And all of the permits that were completed and issued sub.

Subsequent to that.

Valley did resume full project construction at the end of the June for the first time in several years.

As you all know the fourth circuit issued a couple of stays in early July but the Supreme Court of the United States on July 27th Grand Mvp's application to vacate those days and forward construction resumed immediately we are grateful for the Supreme Court's Swift action and assistance in this matter.

So as a result, we have revised our midstream forecast for 2023 and 2024 as shown on slide 11. These numbers do reflect.

<unk> related to project construction, which we expect to see each month beginning.

In July and concluding within service <unk> managing partner is still projecting.

That the pipe will be completed and in service by the end of calendar 2023.

I do want to follow up on Tommy's comment about the.

Right no gas interconnections those have also been on hold with the various permitting and construction delays, but now that the project. We believe is going to be completed in the next four months, we are resuming our.

Construction of those Interconnects.

Really look forward to having those in service and delivering gas into the Reno Valley.

Before we conclude with our earnings per share guidance, Tommy would you mind, giving us.

A few updates on what's been happening in the radar gas regulatory environment, certainly Paul loan.

You may remember, we've been fairly active on the regulatory front, we have three formal proceedings going on and I'll start with the say save plan you may recall, we discontinued billing the save rider effective January one 2023, we rolled in the investments we were making.

Through the same plan into base rates and we're recovering those investments or the return on those investments to the interim rates that went into effect January one and the first quarter second quarter I'm sorry of this fiscal year, we filed a new save plan with the commission and.

And on July seven.

<unk> filed its report in which it did recommend approval of our five year plan, which includes about $49 million in capital spend we expect a final order in that case in September of this year and we'll start billing that October one 2023.

The RMG.

Proceeding we began billing our initial rate on March one 2023 at the same months. It went operational but we had to file for an update.

All of the rate and we did that believe it was may of 2023.

For a rate that the game will become effective 10, 102023, and that's to align it with our fiscal year. This past Friday August four staff recommended approval of that rider update. So we expect a final order in that as well in September and the rate case, we followed that December of 2020.

Two and Thats still progressing through the audit phase.

So that's been very thorough and diligent and asking a lot of good questions. We are expecting their testimony August 23rd and we'll address it either with Rabato.

Or a settlement perhaps and.

Well have a final order or I'm sorry, the hearing is scheduled for October 4th and a final over some time after that.

Yes. Thank you Tommy just really outstanding results coming out of the regulatory.

Area.

This year and again, we think that's again a reflection of just the way. The utility has conducted itself and does business over a long period of time.

And so we're pleased with please.

Pleased with those outcomes.

Our earnings guidance on Slide 12 does reflect the change in the mountain Valley status certainly in 2023 as well as again, assuming essentially a January one 2024 in service. So the 2024 forecast as <unk>.

<unk> for the physical first quarter October November December and then operating income from the joint venture January through.

September the range is a little wider than maybe you've seen in the past, but we think that's appropriate again based on.

The outcome of the rate case in particular.

On track, particularly in the utility of utility as we've discussed at length. Today is doing wonderful. So we're on track to have another.

Solid if not not great year.

With that that concludes our prepared remarks do you have any questions. Please dial.

And our hashtag hashtag to on mute your line.

Pound pound on mute your line.

Okay, we'll wait just a few more seconds to see if anyone has any questions.

Yeah.

Good morning, everyone.

Okay. It sounds like we've got one coming through go ahead.

Okay.

Hey, Paul I mean, my God bless them.

Hi, Good morning, how are you. Thank you for joining us.

I'm doing well Sir.

Just how youre doing but I think I already know.

[laughter].

Just one question and I would look I realize it's early days and I'll probably ask this question next quarter.

But with all the positive developments on gas supply now.

Wondering.

Are you getting any inbounds from.

Either real estate developers or potential new industrial and commercial customers.

Just in general about locating the Roanoke now.

The good news is out.

Yes, Mike. Thank you for the question Yeah, I would broadly characterize Youre question is economic development.

Right.

I would say they're in a general sense, there is slightly more inbound and mobile mean, but we've actually had good inbound historically for the last.

Six months to 18 months.

One of the limitations on those inbound has been the lack of certainty around mountain Valley completion. So.

With the.

Recent bipartisan support in Congress and the signature Bob President Biden on the SRA and in the Supreme Court.

Very quick and decisive action, we do feel like we have certainty now on the completion and that is giving a boost to our economic development. Both in terms of their ability to pinpoint when we believe the gas.

Now he will in fact arrive so.

It's a great question I think I think there is going to be more inbound.

Particularly.

With the certainty of the supply.

Pricing is it loads the cheapest gas certainly in the United States and maybe even the world.

And again.

Again, it's going to be plentiful coming through the 42 inch by delivering 2 billion cubic feet. A day. So we are very excited about.

The future economic development front here in the greater on a Valeant Franklin County.

Alright, well, that's all I had congrats on the anthem decisions.

Well. Thank you. Thank you very much.

Do we have any other questions. Please.

<unk> has tag hash tag to on mute your line.

Okay.

Okay hearing none.

This concludes our third quarter earnings call. We again really appreciate you taking the time to join us.

We really look forward to.

Being with you again.

Early December to talk about our full physical 2023 results and hopefully the.

Very very precise on when the mountain I was going to be flowing gas at that point in time, we hope everyone has a great day, and a great week and safe.

Safe and to their summer. Thank you.