Q3 2025 RGC Resources Inc Earnings Call

Speaker #2: Good morning and thank you for joining us as we discuss RGC resources, 2025 third quarter results. I'm Kelsey Davenport, Director of Finance of RGC Resources Inc. I am joined today this morning by Paul Nester, our President and CEO, and Tim Mulvaney, our VP Treasurer and Chief Financial Officer.

Kelsey Davenport: Good morning, and thank you for joining us as we discuss RGC Resources' 2025 third quarter results. I am Kelsey Davenport, Director of Finance of RGC Resources, Inc. I am joined today this morning by Paul Nester, our President and CEO, and Tim Mulvaney, our VP Treasurer and Chief Financial Officer. Let us review a few administrative items before we start. We have muted all lines and ask that all participants remain muted. The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. At the conclusion of the presentation and our remarks, we will take questions. Turning to slide one, this presentation contains forecasts and projections. Slide one has information about risk and uncertainties, including forward-looking statements that should be understood in the context of our public filing. Slide two contains our agenda.

Speaker #2: Let's review a few administrative items before we start. We have muted all lines and ask that all participants remain muted. The link to today's presentation is available on the investor and financial information page of our website at www.rgcresources.com.

Speaker #2: At the conclusion of the presentation and our remarks, we will take questions. Turning to slide one, this presentation contains forecasts and projections. Slide one has information about risk and uncertainties, including forward-looking statements that should be understood in the context of our public filings.

Speaker #2: Slide two contains our agenda. We will discuss our operational and financial highlights for the third quarter and first nine months of our 2025 fiscal year.

Kelsey Davenport: We will discuss our operational and financial highlights for the third quarter and first nine months of our 2025 fiscal year. We will then review our outlook for the remainder of the 2025 fiscal year with time allotted for questions at the end. I will now turn the presentation over to Paul. Paul?

Speaker #2: We will then review our outlook for the remainder of the 2025 fiscal year, with time allotted for questions at the end. I will now turn the presentation over to Paul.

Speaker #2: Paul?

Speaker #3: Thank you, Kelsey, and good morning. Just to put everyone's mind at ease, Tommy is not with us today as he's spending some time with his recently arrived grandchild, so we're wishing Tommy and his family well.

Paul Nester: Thank you, Kelsey, and good morning. Just to put everyone's mind at ease, Tommy is not with us today as he is spending some time with his recently arrived grandchild. We are wishing Tommy and his family well. Let us begin on slide three. Main extensions were strong, and renewal activity was steady for the first nine months of fiscal 2025. Investing in our system safety and reliability remains a high priority for us. Through our SAFE program, we have renewed 3.1 miles of main and 228 services year to date. We continue to experience robust residential growth. We installed 3.9 new main miles, which is already 50% higher than the total main miles installed in all of fiscal 2024. We have connected 541 new services through June 30. Both of those are just outstanding numbers nine months into the year. Slide four shows delivered gas volumes for the quarter.

Speaker #3: Let's begin on slide three. Main extensions were strong and renewal activity was steady for the first nine months of fiscal 2025. Investing in our system safety and reliability remains a high priority for us.

Speaker #3: Through our SAFE program, we have renewed 3.1 miles of main and 228 services year to date. We continue to experience robust residential growth. We installed 3.9 new main miles, which is already 50% higher than the total main miles installed in all of fiscal 2024.

Speaker #3: And we've connected 541 new services through June 30. Both of those are just outstanding numbers, nine months into the year. Slide four shows delivered gas volumes for the quarter, total volumes increased 6% compared to the third quarter of 2024, as one industrial customer who has fuel switching capability continued their high natural gas consumption this year.

Paul Nester: Total volumes increased 6% compared to the third quarter of 2024, as one industrial customer who has fuel switching capability continued their high natural gas consumption this year. Residential and commercial volumes were slightly down when compared to the same quarter in the prior year. As most of you know, the April, May, June period is considered a shoulder period. Sometimes you have colder weather and warmer weather, and the mix of that can impact those volumes. On slide five, there is a different story in our delivered gas volumes for the year to date of fiscal 2025. We simply had a colder winter, as we have discussed on our first and second quarter calls. With heating degree days up 18%, total volumes moved up 15% compared to 2024 across all three categories shown on the slide.

Speaker #3: Residential and commercial volumes were slightly down compared to the same quarter in the prior year, as most of you know, the April, May, June period is considered a shoulder period.

Speaker #3: Sometimes you have colder weather and warmer weather, and the mix of that can impact those volumes. On slide five, though, there's a different story, and our delivered gas volumes for the year-to-date of fiscal 2025.

Speaker #3: We simply had a colder winter, as we've discussed on our first and second quarter calls. With heating degree days up 18%, total volumes moved up 15%.

Speaker #3: Compared to 2024, across all three categories shown on the slide, the same large industrial customer continues to be up year over year. In fact, they have already established, through June 30th, a new annual delivery record of 1.5 BCF.

Paul Nester: The same large industrial customer continues to be up year over year and, in fact, has already established through June 30 a new annual delivery record of 1.5 BCF through June. Just an outstanding consumption there. I would like to provide a couple of quick updates on the regulatory front. As we discussed on our most recent call, we received the final order from the 2024 rate case in early April. We also filed our normal rider updates for SAFE and the renewable natural gas facility in May and June, respectively. We expect to receive those final orders prior to September 30, 2025. Slide six shows year-to-date CapEx. Total spending was $15.7 million in the current year, which is down approximately 5% from the same period a year ago.

Speaker #3: Through June, so just to outstanding consumption there. I would like to provide a couple of quick updates on the regulatory front as we discussed on our most recent call.

Speaker #3: We received the final order from the 2024 rate case in early April. We also filed our normal writer updates for SAFE and the renewable natural gas facility in May and June, respectively.

Speaker #3: And we expect to receive those final orders prior to September 30, 2025. Slide six shows year to date CapEx, total spending was 15.7 million in the current year, which is down approximately 5% from the same period a year ago.

Speaker #3: You may recall, as we were moving toward Mountain Valley in service on June 14, 2024, and the conclusion of the June 30 quarter, that we invested $3.2 million to complete our two Mountain Valley interconnects.

Paul Nester: You may recall, as we were moving toward Mountain Valley in-service on June 14, 2024, and the conclusion of June 30 quarter, that we invested $3.2 million to complete our two Mountain Valley interconnects and establish our first customer in Franklin County with the main and service installation there. We just haven't had that kind of one-time CapEx so far in 2025. We will provide more color on CapEx as we discuss the full-year outlook later in the presentation. I will now turn the microphone over to our Chief Financial Officer, Tim Mulvaney, to review our financial results and some outstanding developments related to our balance sheet. Tim?

Speaker #3: And. Our first customer in Franklin County with the main and service installation there. We just haven't had that kind of one-time capital expenditure so far in 2025.

Speaker #3: We will provide more color on CapEx as we discuss the full year outlook. Later in the presentation, I will now turn the microphone over to our Chief Financial Officer, Tim Mulvaney, to review our financial results.

Speaker #3: And some outstanding developments related to our balance sheet. Tim?

Speaker #4: Thank you, Paul. Moving to slide seven, we had another good quarter albeit with a different formulation than last quarter. Higher earnings in the current quarter from our share of MVP's normal operations along with lower interest expense overcame lower operating income.

Tim Mulvaney: Thank you, Paul. Moving to slide seven, we had another good quarter, albeit with a different formulation than last quarter. Higher earnings in the current quarter from our share of MVP's normal operations, along with lower interest expense, overcame lower operating income. In the prior year, our earnings from MVP related to AFUDC, which was trailing off as the pipeline went into service. Net income of $538,000 or $0.05 a share compared to net income in the same quarter a year ago of $157,000 or $0.02 a share. The year-to-date results are shown on slide seven as well. Performance for the nine months of the fiscal year compared to the same period last year are strong. Higher Roanoke Gas Company margins aided by higher base rates more than compensated for lower MVP earnings due to AFUDC in the prior year and higher interest expense.

Speaker #4: In the prior year, our earnings from MVP related to AFUDC, which was trailing off as the pipeline went into service. Net income of $538 thousand, or five cents a share, compared to net income in the same quarter a year ago of $157 thousand, or two cents a share.

Speaker #4: The year to date results are shown on slide seven as well. Performance for the nine months of the fiscal year compared to the same quarter to the same period last year are strong.

Speaker #4: Higher row note gas margins aided by higher base rates more than compensated for lower MVP earnings. Due to AFUDC in the prior year, and higher interest expense.

Speaker #4: Net income was up nicely to 13.5 million in the first nine months of fiscal 2025, or a dollar 31 per share compared to a dollar 15 per share in the first nine months of fiscal 2024.

Tim Mulvaney: Net income was up nicely to $13.5 million in the first nine months of fiscal 2025, or $1.31 per share compared to $1.15 per share in the first nine months of fiscal 2024, a robust 16% increase. To provide a reminder for the fourth quarter, the rates that were in effect were finalized. The rates that were finalized went into effect July 1st of 2024. So there will be no corresponding lift in gas margins in the fourth quarter of this year. In fact, we anticipate a small loss for the quarter as more of the revenues were captured in volumes under the rate case. The MVP pipeline went into service in June 2024, and the shipper agreements became active July 1st of 2024. As a result, our share of MVP earnings should be comparable to the fourth quarter a year ago.

Speaker #4: A robust 16% increase. To provide a reminder for the fourth quarter, the rates that were in effect were finalized, excuse me, the rates that were finalized went into effect July 1st of 2024, so there'll be no corresponding lift in gas margins in the fourth quarter of this year.

Speaker #4: In fact, we anticipate a small loss for the quarter as more of the revenues were captured in volumes under the rate case. The MVP pipeline went into service in June 2024 and the shipper agreements became active July 1st of 2024.

Speaker #4: As a result, our share of MVP earnings should be comparable to the fourth quarter a year ago. Moving to slide eight, we ended the third quarter with a strong balance sheet.

Tim Mulvaney: Moving to slide eight, we ended the third quarter with a strong balance sheet. We continue to invest and grow our utility property. We renewed the Roanoke Gas Company line of credit for two years and raised our maximum availability to $30 million at the end of March. Last quarter, we indicated that we were having positive conversations regarding our RGC Midstream debt. Subsequent to this quarter end, we reached an agreement with two banks related to our debt at RGC Midstream, which will serve us well for years to come and results in classifying most of this debt as long-term. Moving to slide nine, before I turn the presentation back to Paul to talk about economic development, our forecast for capital, and our expectations for full-year earnings, let me provide a little more detail about the agreement we reached for RGC Midstream's debt.

Speaker #4: We continue to invest and grow our utility property. We renewed the row note gas line of credit for two years and raised our maximum availability to 30 million at the end of March.

Speaker #4: Last quarter, we indicated that we were having positive conversations regarding our midstream debt. Subsequent to this quarter end, we reached an agreement with two banks related to our debt.

Speaker #4: At midstream, which will serve us well for years to come, and results in classifying most of this debt as long term. Moving to slide nine, before I turn the presentation back to Paul to talk about economic development, our forecast for capital, and our expectations for full year earnings, let me provide a little more detail about the agreement we reached for midstream's debt.

Speaker #4: On slide 10, we received a commitment from two banks to provide us a new note to refinance all debt related to midstream. That's four separate facilities currently.

Tim Mulvaney: On slide 10, we received a commitment from two banks to provide us a new note to refinance all debt related to RGC Midstream. That is four separate facilities currently. This new note will be for seven years and carry interest at SOFR plus 155. We plan to swap that variable rate to fixed rate while keeping our two existing interest rate swaps, which have very favorable rates, until each of those swaps mature. We will begin to amortize the debt based on the remaining life of the MVP shipping contracts. This amounts to about $711,000 per quarter. Separately, we expect to enter into a new line of credit facility with one of the banks that will enable us to invest in projects at MVP to enhance future cash flows.

Speaker #4: This new note will be for seven years and carry interest at SOFR plus 155. We plan to swap that variable rate to fixed rate while keeping our two existing interest rate swaps which have very favorable rates until each of those swaps mature.

Speaker #4: We will begin to amortize the debt based on the remaining life of the MVP shipping contracts. This amounts to about $791,000 per quarter. Separately, we expect to enter into a new line of credit facility with one of the banks that will enable us to invest in projects at MVP to enhance future cash flows.

Speaker #4: These arrangements position us well as it provides us time and the means to enhance MVP cash flows with manageable amortization. Now let me turn the presentation back to Paul.

Tim Mulvaney: These arrangements position us well as it provides us time and the means to enhance MVP cash flows with manageable amortization. Now, let me turn the presentation back to Paul.

Speaker #3: Thank you so much, Tim, and thank you for reviewing that recent refinancing. It's just an outstanding, again, result there. It puts a large degree of certainty to what had been a little uncertain due to the floating nature of some of that debt.

Paul Nester: Thank you so much, Tim. Thank you for reviewing that recent refinancing. It is just an outstanding, again, result there and puts a large degree of certainty to what had been a little uncertain due to the floating nature of some of that debt and the short-term nature. Great job to you and our finance team on that. We are on slide 11 now. Last quarter, we talked to you about some regional wins in the economic development arena while knowing, yet not disclosing, that Botetourt County and the Roanoke region were working vigorously to finalize a deal with Google. As many of you know, that deal was announced in late June, and it is likely to be the single largest investment ever made in this region. There continues to be a buzz around that announcement.

Speaker #3: And the short-term nature. So great job to you and our finance team on that. We're on slide 11 now. Last quarter, we talked to you about some regional wins in the economic development arena.

Speaker #3: While knowing you had not disclosed that Bottetot County and the Roanoke region were working vigorously to finalize a deal with Google. As many of you know, that deal was announced in late June and it's likely to be the single largest investment ever made in this region.

Speaker #3: And there continues to be a buzz around that announcement. As we have long done, as a company, we continue to work with our localities, and the Roanoke Regional Partnership, which is our economic development leader here on a myriad of additional opportunities that are in various stages of development.

Paul Nester: As we have long done as a company, we continue to work with our localities and the Roanoke Regional Partnership, which is our economic development leader here, on a myriad of additional opportunities that are in various stages of development. Some of these present more direct opportunities for Roanoke Gas Company, and some of them may be more indirect, which would be analogous to the recent Google announcement. With MVP operational, the energy availability that is presented there continues to generate a lot of conversation and interest across many industries, and we participate there as we can. Roanoke continues to strengthen its position as the hub for the wider region's healthcare needs. We talked about this last quarter, but the new $400 million expansion of the hospital is phasing into opening as we speak, and it has just been a huge success.

Speaker #3: Some of these present more direct opportunities for Roanoke Gas and some of them may be more indirect, which would be analogous to the recent Google announcement.

Speaker #3: With MVP operational, the energy availability that is presented there continues to generate a lot of conversation and interest across many industries and we participate there as we can.

Speaker #3: Roanoke continues to strengthen its position as the hub for the wider region's healthcare needs. We talked about this last quarter, but the new $400 million expansion of the hospital is phasing into opening as we speak and has just been a huge success.

Speaker #3: The cancer center, I believe we mentioned that last time as well, is coming out, literally coming out of the ground right now. There's incredible construction there and we're thrilled about that.

Paul Nester: The cancer center, I believe we mentioned that last time as well, is coming out, literally coming out of the ground right now. There is incredible construction there, and we are thrilled about that. On a broader note, other healthcare providers and businesses continue to locate or expand their presence in the region around that hub. Many of these customers do, in fact, benefit from the reliability and economics that natural gas provides. One item that has taken a little bit longer to develop this year than we had anticipated is the Franklin County expansion. We are in regular conversations with both the county and some of the localities therein, as well as others around that expansion. We fully intend to serve more and greater customers in the days ahead, and we are making plans and ready to make the appropriate investments to facilitate that.

Speaker #3: But on a broader note, other healthcare providers and businesses continue to locate or expand their presence in the region around that hub. Many of these customers do, in fact, benefit from the reliability and economics that natural gas provides.

Speaker #3: One item that's taken a little bit longer to develop this year than we had anticipated is the Franklin County expansion. We are in regular conversations with both the county and some of the localities therein, as well as others around that expansion.

Speaker #3: We fully intend to serve more and greater customers in the days ahead and we're making plans and ready to make the appropriate investments to facilitate that.

Speaker #3: But we're moving from a financial and a planning perspective, moving that capital investment allocation until or into fiscal 2026. So turning to slide 12 and looking at our capital forecast for this full year, again, we've got nine months.

Paul Nester: We are moving from a financial and a planning perspective, moving that capital investment allocation into fiscal 2026. Turning to slide 12 and looking at our capital forecast for this full year, we have nine months in the books. We are still around that upper $21 million range, just shy of $22 million, which is what we showed last quarter. We have reallocated by category how we plan to allocate that money, based on the opportunities that are in front of us. Assuming we have some cooperative weather, the month of July, in fact, in this region was one of the wettest Julys on record. That hampered some construction activity. Moving to slide 13, we are still keeping the range of earnings per share in the $1.22 to $1.27 range.

Speaker #3: In the books, we're still around that upper 21 million range, just shy of 22 million, which is what we showed last quarter. And again, we've reallocated by category how we plan to allocate that money.

Speaker #3: Again, based on the opportunities that are in front of us and assuming we have some cooperative weather, the month of July in fact in this region was one of the wettest Julys on record.

Speaker #3: So hampered some construction activity. Moving to slide 13, we're still keeping the range of earnings per share in the 122 to 127 range. We do anticipate a modest net loss in the fourth quarter.

Paul Nester: We do anticipate a modest net loss in the fourth quarter as more of our revenue and earnings are tied to the weather-sensitive volumes of the first and second quarters. Similar to others, we continue to monitor inflation and interest rates while being prudent about our expenses. Tim Mulvaney and I talk about this regularly. The renewals on contracts and other services that are necessary to run the business continue to be higher than some of the national 2% to 3% numbers. We are very aware of that and doing everything we can as a company to manage expense. I would like to conclude my remarks before we take questions. I want to thank our employees for everything that they have done so far to lead to this outstanding $1.31 year-to-date earnings per share number. The system has performed magnificently. I think we talked about that last quarter.

Speaker #3: As more of our revenue and earnings are tied to the weather-sensitive volumes of the first and second quarters. Similar to others, we continue to monitor inflation and interest rates while being prudent about our expenses.

Speaker #3: Tim and I talked about this regularly. The renewals are on contract, and other services that are necessary to run the business continue to be higher than some of the national 2% to 3% numbers.

Speaker #3: So again, we're very aware of that. And again, doing everything we can as a company to manage expense. I would like to conclude my remarks before we take questions.

Speaker #3: I want to take a moment to thank our employees for everything they have done so far to lead to this outstanding $1.31 year-to-date earnings per share number.

Speaker #3: The system is performing magnificently. I think we talked about that last quarter. Again, the refinancing that we just were able to broker is a significant win.

Paul Nester: The refinancing that we just were able to broker is a significant win. The economic development activity continues to be strong. The Google announcement is truly a once-in-a-lifetime type announcement for this region. We are thrilled about that. We also want to thank you, the shareholders, for staying with us and sticking with us, especially through some of the thinner times with the Mountain Valley Pipeline investment. With that, we would love to take questions. If you have a question, please dial pound, pound one to unmute your line. Pound, pound one to unmute your line.

Speaker #3: The economic development activity continues to be strong. Again, the Google announcement is truly a once in a, I think it feels like a once in a lifetime type announcement for this region.

Speaker #3: We're thrilled about that. So we also want to thank you, the shareholders, for staying with us and sticking with us. Especially through some of the thinner times with the Mountain Valley pipeline investment.

Speaker #3: With that, we would love to take questions. If you have a question, please dial pound pound one to unmute your line. Pound pound one to unmute your line.

Speaker #3: Hey, good morning everyone. Mike, good morning. How are you today?

Mike: Good morning, everyone.

Paul Nester: Mike, good morning. How are you today?

Speaker #5: Doing well, sir. Yourself?

Mike: Doing well, sir. Yourself?

Speaker #3: We're doing great. Thank you for joining us.

Paul Nester: are doing great. Thank you for joining us.

Speaker #5: Probably just one area of questions. Looking at slide 12, 25 capital forecast and looking at how that breaks out. And I'm not looking for specific guidance for 2026, but as you look at 2026, you know, very minimal MVP growth this year.

Mike: Probably just one area of questions. Looking at slide 12, 25 capital forecast, and looking at how that breaks out. I am not looking for specific guidance for 2026, but as you look at 2026, very minimal MVP growth this year. Now you were talking earlier about refinancing, and maybe that lets you pursue some things with MVP as well. Then you have Google in the background. As you think about 2026, would you expect MVP growth to be more? On, let us just say, Google-related investments, does customer growth and system expansion probably go up as well?

Speaker #5: And now, you know, you were talking earlier about refinancing and maybe that lets you pursue some things with MVP as well. And then you've got Google in the background.

Speaker #5: So as you think about 2026, would you expect MVP growth to increase, particularly in terms of Google-related investments? You know, does customer growth and system expansion probably go up as well?

Speaker #3: Yeah, thank you for the question. And I may start and Tim is welcome to chime in. We are presently working on our 2026 budgets and hence we'll hopefully have a, you know, a forecast on 2026 earnings in the September, early September timeframe.

Paul Nester: Yeah, thank you for the question. I may start, and Tim is welcome to chime in. We are presently working on our 2026 budgets, and hence, we will hopefully have a forecast on 2026 earnings in the early September timeframe. The quick answer on MVP growth is yes. Again, tied back to Franklin County expansion, we essentially pushed some of the plans and the thoughts we had, Mike, in the summer of 2025, this time into 2026. So we do expect that category to be significantly higher next year. Our SAFE rider spending, we think, will be pretty consistent, as it has really been over the history of the SAFE program going back to 2013. We think it will be consistent into next year. We still have the manpower and the capital ready to deploy there.

Speaker #3: But the quick answer on MVP growth is yes, again, tied back to Franklin County expansion. We essentially pushed some of the plans and the thoughts we had, Mike, in the summer of 2025 this time into 2026.

Speaker #3: So we do expect that category to be significantly higher next year. Our SAFE writer spending, we think, will be pretty consistent as it's really been over the history of the SAFE program going back to 2013.

Speaker #3: We think it'll be consistent into next year. We still have the manpower and the capital ready to deploy there. And certainly the customer growth piece, how much of that will be tied to Google, we don't really know.

Paul Nester: Certainly, the customer growth piece, how much of that will be tied to Google, we do not really know. Mike, Google has not really made public yet their exact plans for construction. As more of that becomes known, we hope to have an opportunity to support that, even if it is in an ancillary way. I will talk a little more about customer growth. This year, again, is remarkably higher than last year, and a lot of that was due to timing of the way some of the housing developments have landed. We knew those developments were in the works and getting their permitting last year, and now they have essentially broken ground this year, and we are laying main in those. Hence, the strong main extension number that we discussed. Right now, it appears that that trend continues. There are rumblings nationwide about some housing slowdown.

Speaker #3: Mike, Google has not really made public yet their exact plans for construction and as more of that becomes known, we hope to have an opportunity to support that even if it's in an ancillary way.

Speaker #3: I'll talk a little more about customer growth. This year, again, is remarkably higher than last year. And a lot of that was due to timing of the way some of the housing developments have landed.

Speaker #3: We knew those developments were in the works and getting their permitting last year. And now they've essentially broken ground this year and we're laying main in those.

Speaker #3: So hence the strong main extension number that we discussed. Right now, it appears that that trend continues. You know, there's rumbling nationwide about some housing slowdown.

Speaker #3: There's also discussion about housing shortage. We're still short here in the Roanoke region and the development communities doing what they can to address that shortage.

Paul Nester: There is also discussion about housing shortage. We are still short here in the Roanoke region, and the development communities are doing what they can to address that shortage. So we are optimistic that the customer growth system expansion categories at least equal next year to this year, if not a little bit better. Tim, I do not know if you want to add anything to that.

Speaker #3: So we're optimistic that the customer growth system expansion categories at least equal next year to this year, if not a little bit better. Tim, I don't know if you want to add anything to that.

Speaker #4: No, I think that was a good summary. The one thing that I might supplement with is there is some minor constraint with just having crews to do all things at one time.

Tim Mulvaney: No, I think that was a good summary. The one thing that I might supplement with is there is some minor constraint with just having crews to do all things at one time. So, there could be some movement. For example, we do a little less SAFE and do more MVP growth or something like that. So, overall, the total will probably end up somewhere in the same neighborhood.

Speaker #4: So there could be some movement, for example, we do a little less SAFE and do more MVP growth or something like that. So overall, the total probably ends up somewhere in the same neighborhood.

Speaker #3: Yeah.

Mike: Yeah. Okay. One other thing that came to mind I would like to touch on. Your customer penetration along your existing mains, is there a lot of growth opportunity in that category? The reason I am asking is we have seen multiple news stories out of some big outlets. Last year's PJM auction pricing has hit the July electric bills in the North in the Mid-Atlantic here. We have seen stories in Pennsylvania, New Jersey, and Maryland about, in some cases, exorbitant electricity rates. I am just wondering if that, if you are seeing a feed-through from higher electricity rates in your region, you know, driving more customer growth along the mains, and is there a lot to get along those mains?

Speaker #5: Okay. One other thing I just came to mind. I'd like to touch on your customer penetration along your existing mains. Is there a lot of growth opportunity in that category and the reason I'm asking is we've seen multiple news stories out of some big outlets in the last year's PJM auction pricing has hit the July electric bills in the Mid-Atlantic here.

Speaker #5: And we've seen stories in Pennsylvania, New Jersey, and Maryland about, in some cases, exorbitant electricity rates. I’m just wondering if you’re seeing a feed-through from higher electricity rates in your region driving more customer growth along the mains, and is there a lot to get along those mains?

Speaker #3: Yeah, that's actually a great question. And some people in the industry refer to that as saturation. And you do saturation studies to see where you have existing mains and the number of customers you do not have or potential customers you do not have off those existing mains a week.

Paul Nester: Yeah, that is actually a great question. Some people in the industry refer to that as saturation. You do saturation studies to see where you have existing mains and the number of customers you do not have or potential customers you do not have off those existing mains. We are active in our saturation studies and our penetration analysis. In fact, that area is under Tommy. They do a great job of contacting those folks who do not presently have natural gas and encouraging them or doing what we can under our tariff to aid them in having natural gas service. I do not have an exact statistic on the inflation in electricity cost to the average consumer.

Speaker #3: We are active in our saturation studies and our penetration analysis. And in fact, that area is under Tommy. And they do a great job of contacting those folks who do not presently have natural gas and encouraging them or doing what we can under our tariff to aid them in having natural gas service.

Speaker #3: I don't have an exact statistic on the inflation and electricity cost to the average consumer. We are also in the PJM territory, as you know.

Paul Nester: We are also in the PJM territory, as you know, so that phenomenon is real, in addition to the requirements of the Virginia Clean Economy Act, which have greatly increased electricity bills in this region and our state. We do experience, I think, Mike, what we call a conversion. Those are conversion customers. They are new customers, but they are conversions from a non-natural gas fuel source. That has been steady to strong. It is a great question. We will do a little more analysis on that and try to put a finer point to that. It feels like, to your good question, that trend is going to continue. I do not think the electricity rates are going to abate or recede any in our region.

Speaker #3: And so that phenomenon is real. In addition to the requirements of the Virginia Clean Economy Act, which have greatly increased electricity bills in this region and our state.

Speaker #3: So we do experience, I think, Mike, what we call a conversion. Those are conversion customers. They are new customers, but they're conversions from a non-natural gas fuel source.

Speaker #3: And that has been steady to strong. It's a great question. We'll do a little more analysis on that and try to put a finer point to that.

Speaker #3: But it feels like to your good question, that trend's going to continue. I don't think the electricity rates are going to abate or recede any in our region.

Speaker #4: Yeah, we don't see significant

Mike: We do not see significant generation coming on that would be available to non-hyperscaler customers until probably 2031. So it looks like we are going to have several years of these high prices in PJM. I would think that would be a pretty good driver of future growth for all the gas utilities within the PJM network because pretty much the only way you can get costs down.

Speaker #5: generation coming on. That would be available to non-hyperscaler customers till probably 2031. So it looks like we're going to have several years of these high prices in PJM.

Speaker #5: So I would think that would be a pretty good driver of future growth for all the gas utilities within the PJM network because pretty much the only way you can cost down.

Speaker #3: Yeah, the one part of your question I failed to answer. Our saturation is pretty strong and some of that's just due to the concentration of our customer base.

Paul Nester: The one part of your question I failed to answer, our saturation is pretty strong, and some of that is just due to the concentration of our customer base. As you know, you have been to Roanoke and the Roanoke Valley. We are very concentrated, and that does aid in a strong saturation. But again, we are still always seeking to add more.

Speaker #3: As you know, you've been to Roanoke and the Roanoke Valley. We are very concentrated and that does aid in a strong saturation. But again, we're still always seeking to add more.

Speaker #5: All right, I will leave it there. I appreciate the time.

Mike: All right. I will leave it there. I appreciate the time.

Speaker #3: Oh, thank you so much. If anyone else has a question, pound one to unmute your line, we'd be delighted to entertain it. Pound pound one.

Paul Nester: Oh, thank you so much. If anyone else has a question, pound, pound one to unmute your line. We would be delighted to entertain it. Pound, pound one. Hearing none, this concludes our 2025 third quarter earnings call. We again thank you for joining us, and thank you for your support. We look forward to hosting you again in early December to discuss the full-year 2025 results. Thank you and have a great day.

Speaker #3: Okay, well, hearing none, this concludes our 2025 third quarter earnings call. We again, thank you for joining us and thank you for your support.