Chesapeake Utilities Corporation · NYSE:CPK
Chesapeake Utilities — Investor Day (September 2018)
138 slides from Chesapeake Utilities's investor day presentation, Sep 21, 2018
Slide 1: 2018 Delmarva Investor Days
2018 Delmarva Investor Days Thursday, September 20, 2018 Energy Lane - Dover, DE energized … Exhibit 99.1
Slide 2: Introduction and Welcome
Introduction and Welcome 2
Slide 3: Forward Looking Statements and Other Disclosures
Forward Looking Statements and Other Disclosures Safe Harbor Statement: Some of the Statements in this document concerning future Company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking
Slide 4: Investor Day Presentation - Discussion Areas
Investor Day Presentation - Discussion Areas Welcome Strategy and Culture – The Keys to Our Success Supporting Our Culture and Growth Our Path Forward Mid-Atlantic and Midwest Energy Operations Florida Operations Regulatory Update Energy Marketing Financial Review and Outlook Closing Remarks Beth Co
Slide 5: Strategy and Culture: the Keys to Our Success
Strategy and Culture: the Keys to Our Success 5
Slide 6: Welcome and Thank You
Welcome and Thank You! - Mike McMasters, President and CEO Announcement on Monday (9/10) regarding my planned retirement in early 2019. I am looking forward to spending time with my family and enjoying my retirement. It has been an honor to lead Chesapeake Utilities for the past eight years and a pr
Slide 7: Building an Infrastructure for Sustainable Growth
Building an Infrastructure for Sustainable Growth Since 2010, the leadership team has been significantly expanded from 13 to 23 members to manage the demands of growth, position Chesapeake for future growth, and ensure continuity in the direction and culture of the Company. The result is a very tale
Slide 8: Strategic Platform for Sustainable Growth
Strategic Platform for Sustainable Growth Engaged Employees Unified Brand Strategy Engaging Customers Engaging with Communities Strategic Thinking Engagement Strategies Provide the Strategic Infrastructure for Sustainable Growth Developing New Business Opportunities and Executing Existing Business U
Slide 9: Measuring Employee Engagement
Measuring Employee Engagement Employee engagement is measured by: Loyalty, Motivation and Referral. Loyalty – Enjoyment around job and long-term commitment to Chesapeake Utilities Corporation. Motivation – Motivation to give the very best at work. Referral – Recommendation to others re: working at C
Slide 10: Energized Engagement
Energized Engagement Investing in our culture, employees, customers, communities and governments Engaged Employees Leadership & Strengthening Our Brand Engaging Our Communities & Governments Connecting with Our Customers Investing in our culture, employees, customers, communities, and governments. E
Slide 11: Energized Engagement - Awards & Recognition
Energized Engagement - Awards & Recognition 7 years - 2012, 2013, 2014, 2015, 2016, 2017, 2018 Outstanding Service by a Major Company American Heart Association Legacy Sponsor 10 Safety Achievement Awards & 8 Accident Prevention Certificates 2012-2018 Eight Flags CHP Plant CHP Project of the Year Go
Slide 12: Why is Engagement Important?
Total Return is for the periods ended August 31, 2018; all other figures are for the year ended 2017 Why is Engagement Important? Because It Underlies Our Financial Performance from 2011 to 2018 Our engaged employees have consistently produced distinctively higher levels of earnings and dividend gro
Slide 13: Chesapeake Utilities Corporation's Strategy
Chesapeake Utilities Corporation’s Strategy Our goal is to continue generating top quartile earnings per share growth by investing significant capital in opportunities that generate returns that equal or exceed our cost of capital. To accomplish this we will: maximize organic growth; expand in to ne
Slide 14: Strategic Plan Execution: Identifying and Cultivating Profitable Investment Opportunities
Strategic Plan Execution Identifying and Cultivating Profitable Investment Opportunities To support recent growth and position the Company for continued growth, we have: invested in additional business development resources to further enhance our ability to identify and cultivate growth expanded the
Slide 15: Strategic Plan Execution: Capital Discipline and Efficiency
Strategic Plan Execution Capital Discipline and Efficiency Peer ROE vs. Capital Expenditures (July 2015 – June 2018) Chesapeake CPK Performance Peer Group Electric & Combination Groups Cap Ex ROE CPK 23.14% 11.62% Median 12.78% 9.40% 75th Percentile 14.75% 10.98% Median 9.40% Our engaged employees h
Slide 16: Our Culture and Strategy Drive Record Results
Our Culture and Strategy Drive Record Results EPS and Return on Equity * Adjusted EPS and ROE 2017 GAAP Earnings per share of $3.55 and Return on Equity of 12.6% 2017 Adjusted Earnings per share of $2.89 and Return on Equity of 10.5% (after adjustment for revaluation of net deferred tax assets and l
Slide 17: Energized to Deliver Superior Shareholder Return
Energized to Deliver Superior Shareholder Return Comparisons to S&P 500 and Peer Group Source: Bloomberg – Total Shareholder Return includes Price Appreciation and Dividends Chesapeake has delivered compound annual return in excess of 15% over the long-term Total return relative to the S&P 500 has r
Slide 18: Supporting Our Culture and Growth
Supporting Our Culture and Growth 18
Slide 19: Corporate Depth
Corporate Depth Office of the General Counsel (including Legal, Regulatory and Security) – Jim Moriarty Customer Care – Nicole Carter Information Technology – Vikrant Gadgil Safety, Communications and Human Resources – Lou Anatrella Accounting, Finance and Investor Relations – Beth Cooper 19
Slide 20: The Path Forward
The Path Forward 5 CHESAPEAKE 20
Slide 21: Process to Oversee Growth Opportunities
Process to Oversee Growth Opportunities From Concept to Investment We continue to identify and develop growth opportunities inside and outside our existing footprint. As part of that process, our Growth Council oversees the evaluation and development of strategic growth projects within the Company.
Slide 22: Growth Council: Composition and Functions
Growth Council: Composition and Functions Composition of Council Chair: Jim Moriarty, Senior Vice President and General Counsel Members: Corporate Senior Leadership Business Units’ Senior Leadership Regulatory Senior Leadership Strategic Development Analytic and Decision-making support Strategic Dev
Slide 23: Chesapeake Utilities Corporation Strategy
Chesapeake Utilities Corporation Strategy By Continuing to: Maximize Organic Growth Expand in to New Areas Serve New Customers Provide New Service Offerings We will create sufficient profitable opportunities to invest capital above our fundamental growth levels and, with disciplined execution, we wi
Slide 24: Initiatives to Continue our EPS Growth
Initiatives to Continue our EPS Growth To maintain or exceed our historical EPS growth rate, CPK will remain entrepreneurial. We will invest opportunistically, adapting to changing market fundamentals, while remaining financially disciplined Some new investment opportunities may have lower near term
Slide 25: Natural Gas Transportation Infrastructure Opportunities
Potential Opportunities Pipeline systems for Marcellus and Utica area natural gas production that serve downstream markets (like Aspire Energy) Aspire Energy footprint provides platform for pipeline expansion & pipeline acquisitions Acquire LDC/EDC/Municipals companies contiguous to existing CPK’s L
Slide 26: Clean Energy Generation – New Services & Customers
Clean Energy Generation – New Services & Customers Acquire or build power generation assets proximate to existing CPK infrastructure Preferred power generation asset would have long-term power and/or steam or other thermal requirements with customers Peak margin in the power market is the summer, th
Slide 27: Propane Expansions and Start-Ups
Propane Expansions and Start-Ups Acquisition of propane companies to provide access to new markets with significant growth potential or additional margin if converted to natural gas at prevailing values Build, own and operate distribution systems that provide propane service to new housing developme
Slide 28: Mid-Atlantic and Midwest Energy Operations
Mid-Atlantic and Midwest Energy Operations 28
Slide 29: Mid-Atlantic and Midwest Energy Operations
Mid-Atlantic and Midwest Energy Operations Components/ Entities Business Regulated or Unregulated Eastern Shore Natural Gas Natural gas transmission Regulated Delmarva Natural Gas Delaware Division Maryland Division Sandpiper Energy Natural gas distribution; propane gas systems being converted by Sa
Slide 30: Eastern Shore Natural Gas
Eastern Shore Natural Gas CHESAPEAKE” |
Slide 31: ESNG Overview
ESNG Overview Interstate Natural Gas Transmission Pipeline 31 Incorporated in Delaware in 1955 Initial construction consisted of 124 miles of pipe extending from Parkesburg, PA, through Delaware and ending in Salisbury, MD Eastern Shore began delivery of natural gas in 1959 Significant infrastructur
Slide 32: ESNG Overview: Transmission Pipeline Infrastructure
ESNG Overview Transmission Pipeline Infrastructure KEY FACTS Miles of Pipeline 457 Delivery Points 96 Delivery Points within 16 Delivery Point Areas Compression 17,745 hp at 3 sites Daleville, PA 4 units, totaling 6,880 hp Delaware City, DE 6 units totaling 7,890 hp Bridgeville, DE 3 units totaling
Slide 33: ESNG Customers & Service Offerings
ESNG Customers & Service Offerings Local Distribution Companies (LDC) Industrials (IND) Electric Power Generation (EPG) Marketers Eastern Shore currently serves a mix of Local Distribution Companies, Industrials and Electric Power Generation customers in southeastern PA, DE and the Eastern Shore of
Slide 34: ESNG Capacity Consistent Growth
ESNG Capacity Consistent Growth Natural Gas Availability on the ESNG System Since the pipeline went Open Access in 1997, ESNG has more than quadrupled pipeline capacity, adding over 180 miles of new pipeline facilities and extending natural gas service to existing and new territories. Pipeline Capac
Slide 35: ESNG Capital Expenditures
ESNG Capital Expenditures Over the last 10 years, ESNG has invested $265 million in its pipeline system and related infrastructure. The most significant expansion and reliability projects over the last decade include connecting ESNG to the TETCO pipeline system, White Oak Mainline, System Reliabilit
Slide 36: ESNG Gross Margin Consistent Growth
ESNG Gross Margin Consistent Growth 145% Growth in Gross Margin 36
Slide 37: ESNG Recent Projects
ESNG Recent Projects Continuing to Increase NG Infrastructure Completed In Progress Approval Pending $41MM Capital $38MM $117MM $37MM 37 White Oak Mainline In-service March 2017 Pipeline looping and compressor upgrades to provide transportation services for Calpine's electric generating plant in Dov
Slide 38: 2017 Expansion Project – Overview
Executing ESNG Strategic Initiatives 2017 Expansion Project – Overview Miles of Pipeline/Compression ~33 miles of pipeline looping in Pennsylvania, Maryland and Delaware ~17 miles of new mainline extension and two pressure control stations in Sussex County, Delaware Other Facilities Upgrades to the
Slide 39: Del-Mar Energy Pathway Project – Overview
Executing ESNG Strategic Initiatives Del-Mar Energy Pathway Project – Overview Miles of Pipeline/Compression ~6 miles of pipeline looping in Delaware ~13 miles of new mainline extension in Sussex County, DE and Somerset County, MD Other Facilities New pressure control station and new delivery statio
Slide 40: Potential Future Expansion Project – Overview
Executing ESNG Strategic Initiatives Potential Future Expansion Project – Overview Pipeline Expansion Multi-year phased in pipeline expansion providing firm transportation service capacity additions to southeastern PA and areas of the Delmarva Peninsula, including areas currently not served with pip
Slide 41: Delmarva Natural Gas Distribution
Delmarva Natural Gas Distribution 41
Slide 42: Chesapeake Utilities & Sandpiper Energy – Overview
Chesapeake Utilities & Sandpiper Energy – Overview Delaware Division Southern New Castle County, Kent County and Sussex County Over 52,000 retail customers Over 1,027 miles of natural gas main Delivers nearly 8 million Mcf of natural gas per year Maryland Division Cecil County, Caroline County, Dorc
Slide 43: Chesapeake Utilities & Sandpiper Energy – Staffing
Chesapeake Utilities & Sandpiper Energy –Staffing 43 Business Unit Leadership Team Business Unit leadership team has a combined 54 years of Company service Business Unit Team 135 Personnel located in Delaware and Maryland Focused on Safety, Business Development, Business Operations, Business Plannin
Slide 44: Chesapeake Utilities & Sandpiper Energy – Past Performance
Chesapeake Utilities & Sandpiper Energy – Past Performance 44
Slide 45: Distribution System Expansion
Chesapeake Utilities & Sandpiper Energy – Distribution System Expansion Past Organic growth focused on Kent/New Castle Counties, DE Present Growth into eastern Sussex County, DE and Cecil County, MD Conversion of existing propane customers in Worcester County, MD Future Continued expansion in growth
Slide 46: Sandpiper Energy – Customer Conversions from Propane to Natural Gas
Sandpiper Energy – Customer Conversions from Propane to Natural Gas Approximately 6,800 customers have been converted (Berlin, West Ocean City, Ocean Pines, and Ocean City). A bay crossing from West Ocean City to Ocean City completed in 2017 Conversions in Ocean City continue during the months of Se
Slide 47: Sharp Energy Propane Operations
Sharp Energy Propane Operations 47
Slide 48: Sharp Energy – Overview
Sharp Energy – Overview 48 Servicing customers’ propane needs for over 35 years 1981: Acquired Clarence E. Sharp Company in Georgetown, DE. Sharpgas, Inc. DBA Sharp Energy was formed to consolidate CPK’s propane distribution operations 2011: Initiated start-up operation in the Poconos, PA 1988: Acqu
Slide 49: Sharp Energy Growth Story
Sharp Energy Growth Story Sharp continues to grow organically within existing territories as well as expand geographically, with a focus on markets on the western shore of MD (Anne Arundel County and Baltimore County) and Wilmington, DE (Autogas and commercial focus) Expanding into Carroll County to
Slide 50: Market Profile – Gallon Sales & Customer Count
Market Profile – Gallon Sales & Customer Count Sharp Energy 50
Slide 51: Sharp Energy – Growth Initiatives
Sharp Energy – Growth Initiatives Community Gas Systems Business Unit Leadership Team Timely execution and communication has set Sharp Energy apart from the competition Maintain and develop builder relationships via dedicated staff to ensure seamless implementation of the gas system within the devel
Slide 52: Sharp Energy – Community Gas Systems
Sharp Energy – Community Gas Systems 52 Leveraging builder/developer relationships beyond our existing territories Newly developed relationships with national builders As of May 2018, the combined storage capacity for all active CGS communities exceeded 790,000 gallons of propane, and served 67 CGS
Slide 53: Sharp Energy – Autogas
Sharp Energy – Autogas To date, Sharp has displaced over 4.8M gallons of gasoline/diesel fuel (internal use and external sales combined) Benefits of Autogas: Economical On average, 30-40% less expensive than gasoline and about 50% less than diesel Cleaner burning = reduced maintenance costs Clean Up
Slide 54: Sharp Energy – Autogas
Sharp Energy – Autogas # of Multi-Fleet Fueling Stations= 15 # of Private Fueling Stations= 31 54
Slide 55: Sharp Energy – Start-ups
Sharp Energy – Start-ups Start-ups: 2005: Allentown, PA 2010: Cecil County, MD 2011: Poconos, PA 2016: Anne Arundel, MD Anne Arundel Growth drivers include autogas and large commercial accounts Trending to deliver 1M gallons by YE 2018 Fastest grass roots start-up to 1M gallons in Sharp history 55
Slide 56: Sharp Energy – Poultry
Sharp Energy – Poultry Added 495,000 gallons of tank capacity since March 2017 Total poultry growers tank capacity is currently 2.28M gallons 56
Slide 57: Aspire Energy of Ohio
Aspire Energy of Ohio 57
Slide 58: Aspire Energy Overview
Aspire Energy Overview Natural Gas Gathering System 58 Unregulated natural gas business operating gathering and intrastate pipelines in Ohio Provides natural gas supplies to various local gas cooperatives and local distribution companies Expertise in areas such as Operations, Business Development &
Slide 59: Aspire Energy Overview
Aspire Energy Overview Aspire Energy operates in 40 of the 88 counties in Ohio, providing natural gas supplies to various local gas cooperatives and local distribution companies, including Consumers Gas Cooperative and Ohio’s largest local distribution company, Columbia Gas of Ohio Aspire Energy is
Slide 60: Aspire Energy Value Chain
Aspire Energy Value Chain System Overview Own and Operate ~2,600 miles of pipeline, 16 Gathering systems Off-System Sales DELIVERIES: Approx. 2 MM Dth Gather wellhead natural gas production RECEIPTS: Approx. 5.0 MM Dth Own and Operate two (2) gas processing plants Serving more than 20,000 end-use cu
Slide 61: 4.0 Million Dts Delivered Annually to CGC and COH
4.0 Million Dts Delivered Annual to CGC and COH Nearly 90% of Aspire Energy’s margin is generated from unregulated long-term supply agreements with Columbia Gas of Ohio (COH) and Consumers Gas Cooperative (CGC), which serve more than 20,000 end use customers. Aspire Energy Value Chain Delivery to En
Slide 62: Customer Profile – Consumers Gas Cooperative
3-Yr Avg. Growth Rate – 8.77% Customer Profile – Consumers Gas Cooperative Customer Growth Growth rates have averaged 8.77% the last three years. The residential sector continues to be the driving force for customer growth, accounting for 82% of new members over the past five years. 62
Slide 63: Customer Profile – Consumers Gas Cooperative
Customer Profile – Consumers Gas Cooperative Aspire Energy has a long term contract to provide natural gas to all Consumers Gas Cooperative members. 63
Slide 64: Customer Profile – Columbia Gas of Ohio
Customer Profile – Columbia Gas of Ohio Aspire Energy has a seven year contract to provide natural gas to 80 Columbia Gas of Ohio meters. 64
Slide 65: Aspire Energy Performance Results
Aspire Energy Performance Results Gross Margin Excludes Q1 4/1/15 – Date of Acquisition 65
Slide 66: Aspire Energy – Potential Growth Sectors
Aspire Energy – Potential Growth Sectors Consumers Gas Cooperative Focus on agricultural sector primarily in Western Ohio which is home to the largest corn production in the state. Areas also have large poultry facilities with year-round usage. Pursue commercial loads and other large volume industri
Slide 67: Regulatory Overview and Update
Regulatory Overview and Update 67
Slide 68: Regulatory Strategy is a Key Component of our Corporate Strategy
Regulatory Strategy is a Key Component of our Corporate Strategy Regulatory Strategy is a Key Component of Corporate Strategy with a goal of Maximizing Shareholder Value This is accomplished through a variety of Regulatory actions Attaining a positive and influential position with Stakeholders Partn
Slide 69: Regulatory Contributions to Corporate Success
Regulatory Contributions to Corporate Success In the last 2 years, the Regulatory group has successfully settled 3 rate cases 2 of which resulted in the largest base rate increase in the respective BU’s history and the group successfully filed and received approval to construct and implement several
Slide 70: Unique Regulatory Provisions
Unique Regulatory Provisions - Chesapeake Utilities & Sandpiper Energy Revenue Normalization (MD, SE) – Delivery service revenue is either increased or decreased to equate to a set amount per customer as approved in the last base rate proceeding Expansion Area Rates (DE) – Higher customer charges in
Slide 71: Status of Tax Rate Reserves for Refunds to Customers
Status of Tax Rate Reserves for Refunds to Customers FERC (ESNG) Delaware (DE - DNG) Maryland (DNG- Sandpiper) Florida (FPU) YTD thru 6/30/2018 Refunds and Reserves $1.7 MM $641K $910K $2.2MM Status 6/30/2018 Refunded $902K YTD Filed PSC Reviewing Rates $783K Refunded in July 2018 Natural Gas and El
Slide 72: Florida Business Unit Investor Day 2018
Florida Business Unit Investor Day 2018 72
Slide 73: Agenda
Agenda Performance Results Projects and Initiatives Florida Market Business Unit Profile 3 73
Slide 74: Florida Market
Florida Market 74
Slide 75: Florida Key Growth Metrics
Florida Key Growth Metrics November 2017 Fishkind & Associates, Inc.© Housing Starts Commercial Sq. Ft. City sized developments underway again. Forecast downturn tied to interest rates. Significant construction activity in medical, industrial, and service markets. Florida 3rd largest state - 21.3 mi
Slide 76: Florida Energy Industry
Florida Energy Industry Natural Gas Sabal Trail; Next Era Florida Southeast Connection pipelines in-service. Next Era Indiantown to Riviera Beach Power Plant 24” pipeline moved to FSC. Companies are looking to develop a new transmission pipeline to South Florida. EMERA TECO/Peoples Gas and NextEra F
Slide 77: Florida Business Unit Profile
Florida Business Unit Profile 77
Slide 78: Florida Business Unit Profile
Florida Business Unit Profile Florida Public Utilities Company Natural gas distribution Electric distribution Central Florida Gas Natural gas distribution Peninsula Pipeline Company Intrastate gas transmission Flo-gas Corporation Wholesale and retail propane Eight Flags Energy, LLC Unregulated Energ
Slide 79: Florida Strategy
Florida Strategy Consistent with the overall Chesapeake strategy. Aggressive, but disciplined, market search for investment opportunities. Territory Expansion; GRIP; CHP; Electric Reliability Create an organization capable of executing and supporting project development. Engineering; Finance; Regula
Slide 80: Florida Capital Expenditures
Florida Capital Expenditures $467M in capital expenditures 2010-2018F 80
Slide 81: 2010-2018F Florida Growth Average Capitalization
2010-2018F Florida Growth Average Capitalization 81
Slide 82: Florida Margin Growth
Florida Margin Growth Margin 2018F Margins does not include an adjustment for a $3.8M reserve for tax rate refund Year over Year 82
Slide 83: Projects and Initiatives
Projects and Initiatives 83
Slide 84: Gas Reliability Infrastructure Program (GRIP)
Gas Reliability Infrastructure Program (GRIP) Remaining GRIP Investment $35M through 2021 84
Slide 85: Florida Natural Gas Developments
Florida Natural Gas Developments Westlake – Palm Beach County 4,500 homes Avenir – Palm Beach County 3,250 homes Wildlight – Nassau County 3,000 homes 6,000+ total homes under contract $9M capital investment 2018 Florida Res Dev Signings – 2,428 homes $3.6M capital investment 85
Slide 86: Florida Natural Gas Development: Deseret Ranch
Florida Natural Gas Development Deseret Ranch Property Ownership Land acquired in 1950 by the Mormon Church. 295,000 acres, 250 square miles. Location: Osceola, Orange and Brevard Counties Current use: cattle, citrus, timber. Project Scope City the size of Miami. 2080 expected population: 493,000. S
Slide 87: PPC and CFG Northwest Expansion
PPC and CFG Northwest Expansion PPC 12” transmission project to serve CFG Escambia County, Florida expansion. Anchor loads: City of Pensacola and Ascend Performance Materials. 115,500 dt/day capacity.; 105,500 dt/day under contract. $44.3M total capital. $6.6M annual margin. 16% IRR. In-service. 87
Slide 88: PPC New Smyrna Beach Pipeline
PPC New Smyrna Beach Pipeline PPC project serves FPU. Increased pressure and volume for FPU growing distribution system. Resolves a pipeline integrity issue with former FGT lateral acquired by FPU in 2011. $9M investment. $1.4M annual margin. In-service. 88
Slide 89: PPC Western Palm Beach County Expansion
PPC Western Palm Beach County Expansion Four PPC projects to serve FPU distribution expansions in PBC. Resolves a pipeline integrity issue with former FGT lateral acquired by FPU in 2011. $20M total investment. $3.4M annual margin. Mid-2019 in-service. 89
Slide 90: Proposed Combined Heat and Power #2
Proposed Combined Heat and Power #2 Potential 2nd CHP project on Amelia Island. Both Rayonier and West Rock paper mills are evaluating Chesapeake term sheets. FPL Interconnect is complete enabling FPU to wheel power to its NW Division. Similar capacity unit as 8 Flags – nominal 20MW; high pressure s
Slide 91: Proposed PPC Nassau County Pipeline
PPC interconnect with SONAT and the existing PPC pipeline jointly-owned with EMERA Peoples Gas. Supports FPU load growth for additional CHP, Lignotech, Rayonier recovery boiler and other res and C&I growth. $25M total investment (est.) Proposed PPC Nassau County Pipeline 91
Slide 92: Natural Gas Marketing - PESCO
Natural Gas Marketing - PESCO 92
Slide 93: Strategic Business Unit Objectives
Strategic Business Unit Objectives Create Incremental Value Aggregate Supply Optimize Asset Portfolio Originate Demand 93
Slide 94: Strategic Fit - Generating Margins With Other CPK Business Units
Strategic Fit - Generating Margins With Other CPK Business Units Upstream Midstream Downstream Gathering / Processing Intrastate / Interstate Pipelines Demand Projects Combined Heat & Power (CHP) CNG & Propane Fueling Propane Distribution Local Distribution Companies (LDCs) and Cooperatives Energy M
Slide 95: Strategic Insights
Strategic Insights Our growth strategy continues to be impacted by significant fundamental changes in shale supply, demand, and new build infrastructure These changing market dynamics are supportive to our strategy: Aggregate Supply, Originate Demand, and Optimize Asset Portfolio In order to achieve
Slide 96: Margin History
Margin History Gross Margin (Sin thousands) $9,000 $7,977 $8,000 $7,000 $6,000 $5,000 $4,630 “= $3,505 $3,311 $3,587 $3,000 $2,000 $1,000 . 2013 2018 2015, 2016 2017 Excl. TM CHESAPEAK| > |
Slide 97: Beachhead Project Locations of Interest
Beachhead Project Locations of Interest - Nexus Points 5 4 2 3 1 6 7 8 Anchor Markets DE, MD, Eastern PA Florida Midwest Adjacent Markets 4.Marcellus Adjacent to TCO FT Cheapest gas Most production 5.D.C. Metro / Transco Z5 Adjacent to DE Non-Coincidental, Peak Demand (NCPD) Attractive retail changi
Slide 98: Financial Review and Outlook
Financial Review and Outlook 98
Slide 99: Regulated Energy Operations
Regulated Energy Operations 99
Slide 100: Unregulated Energy Operations
Unregulated Energy Operations* *Xeron’s results have been excluded. 2017 Gross Margin 2017 EBIT Total Assets (12/31/17) Operations Areas Served (000’s) (000’s) 000’s) Propane Distribution Delaware, Maryland, Pennsylvania, Virginia and Florida $47,726 $9,182 $55,079 Natural Gas Transmission Ohio 14,5
Slide 101: 2017 Consolidated Results By Segment
2017 Consolidated Results By Segment 2017 Gross Margin 2017 EBIT Total Assets (12/31/17) Segment Areas Served (000’s) (000’s) 000’s) Total Regulated Energy Delmarva and Florida $207,602 $73,160 $767,680 Total Unregulated Energy Delmarva, Florida and Ohio 72,459 13,199 176,062 Other Xeron, Other, etc
Slide 102: Strong Results over the Last Ten Years
Strong Results over the Last Ten Years Financial Metrics for 2007 and 2017* * Except as Otherwise Noted. 102
Slide 103: Earnings per Share: Eleven Years of Consistent Growth
Earnings per Share Eleven Years of Consistent Growth Affirm previous year end guidance for forecasted earnings per share growth of 17% plus in 2018 including tax reform and key projects (based upon 2017 Adjusted EPS of $2.89) Reported Earnings 5-year Growth Rate 8.4% 10-year Growth Rate 9.9% Long-te
Slide 104: Historical ROE
Historical ROE Our ROE from Unregulated Energy Segment increased Consolidated ROE by 120 basis points for the period 2007 through 2017. (11.7% Consolidated ROE versus 10.5% Regulated ROE). 104
Slide 105: Gross Margin History
Gross Margin History Gross Margin Increased $128 Million since 2010 In the last 5 years, gross margin has increased approx. $20M annually GM CAGR of 7.8% from 2010-2017 (7 years) $5M $8M $18M $22M $19M $14M 105
Slide 106: Continuing to Build for the Future: Capital Expenditures
Continuing to Build for the Future Capital Expenditures Capital Expenditures have averaged 25% of Total Capitalization over six years. The investments we have made more than doubled our Total Capitalization over this period. $ thousands 2018 Forecasted Capital Expenditures $110,813 Natural Gas Trans
Slide 107: Investing in Growth
Investing in Growth Capital Expenditures as Percentage of Total Capitalization We are aggressively seeking opportunities to invest capital to generate value for our customers and shareholders. *Named Peer Group includes the following companies: Atmos Energy Corporation; Spire Energy, Inc.; New Jerse
Slide 108: Chesapeake Utilities – Capital Spending
Chesapeake Utilities – Capital Spending Fundamental Growth Formula - $600M We expect to invest $600M-$1B over the 5 yrs. 108
Slide 109: Major Projects and Initiatives Expected to Produce Incremental Margin
Major Projects and Initiatives Expected to Produce $33.6 Million in Incremental Margin (2017 vs. 2019) 10,033 $20,730 $5,104 $12,820 Gross margin amounts included in this table have not been adjusted to reflect the impact of TCJA. Any refunds and/or rate reductions implemented in the Company's regul
Slide 110: Strong Balance Sheet to Support Future Growth
Strong Balance Sheet to Support Future Growth Total Capitalization has Nearly Doubled in Five Years Equity/Permanent Capitalization 70.3% 65.5% 70.6% 76.5% 71.1% 67.8% Equity/Total Capitalization 54.3% 54.0% 51.9% 55.4% 51.5% 51.1% * Short-Term Debt includes Current Portion of Long-Term Debt $994,84
Slide 111: Long-term Debt Maturity Schedule
Long-term Debt Maturity Schedule Annual Principal Payments and Cost of Remaining Debt 2022 amortization includes $8.0 million FPU 9.08% legacy note. Total long-term debt with new issues $407 MM Committed $340 MM new long-term debt since 2013 at an average rate of 3.72% and average life of 12.9 years
Slide 112: Anticipated Financing Plans Through 2022
Anticipated Financing Plans Through 2022 A significant portion of our capital spending will be funded internally given our high earnings retention rate Current plan does call for additional long-term permanent financing through 2022 We will issue permanent financing to support achieving our target e
Slide 113: Dividend Growth Continues
Dividend Growth Continues Dividend and Dividend Payout Ratio – With Room to Grow 5 Year Average Dividend Payout = 43% 10 Year Average Dividend Payout = 46% 6.2% 6.5% 4.9% 6.1% 6.6% 13.8% $1.03 $1.08 $1.15 $1.22 $1.30 $1.48 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% $0.00 $0.20 $0.40 $0.60 $0.80 $1.00
Slide 114: Chesapeake Utilities Corporation - Execution
Chesapeake Utilities Corporation - Execution Consistently exceeds targets for total return, EPS and DPS growth and payout Superior return compared to industry; average rank of 3.5 out of 44 for total return Earnings growth 40 to 290 percent higher than the industry average Dividend growth 14 to 250
Slide 115: Chesapeake Utilities - EPS Outlook
Chesapeake Utilities - EPS Outlook *Based on 2017 Adjusted Earnings per Share Key Assumptions: Capital Expenditures approximately $600M-$1B Normal weather conditions Maintain target capitalization range of 50% to 60% Equity Dividend Payout Ratio approximates 45% Dividend per share growth supported b
Slide 116: A High Growth Energy Delivery Investment Proposition
$1.4 Billion in assets: 84% regulated and 16% in unregulated complementary businesses Strong balance sheet and high retention rate for reinvestment CAGR in EPS of 8.4% (5 years) and 9.9% (10 years) Opportunity for continued growth at this level going forward Total return of 22% (5 years) and 19% (10
Slide 117: Closing Remarks
Closing Remarks 5 CHESAPEAKE
Slide 118: Well positioned for 2019 and beyond
Well positioned for 2019 and beyond! Strong Company culture driven by energized employees Successful implementation of growth strategy led by a deep management bench Strategic platform for growth supports our strategy and execution Opportunities exist for continued growth Disciplined execution of gr
Slide 119: Thank You!
Thank You! 5 CHESAPEAKE
Slide 120: Appendix
Appendix 5 CHESAPEAKE
Slide 121: Corporate Depth
Corporate Depth Office of the General Counsel (including Legal, Regulatory and Security) – Jim Moriarty Customer Care – Nicole Carter Information Technology – Vikrant Gadgil Safety, Communications and Human Resources – Lou Anatrella Accounting, Finance and Investor Relations – Beth Cooper 121
Slide 122: Office of the General Counsel - Overview
Office of the General Counsel - Overview The office was established in March of 2015 and is responsible for all legal, government relations, corporate governance, regulatory, and security matters Our General Counsel chairs the Company’s Growth Council, Risk Management Committee and Security Council,
Slide 123: Office of the General Counsel - What We Do
Office of the General Counsel - What We Do We develop strong and positive relationships with the members of the senior management team, as well as with business unit leaders and other employees across the enterprise We continue to foster and develop strong and positive relationships with legislators
Slide 124: Living our Culture: Corporate Governance Accolades
Living our Culture Corporate Governance Accolades 2018 Best North American Utility for Corporate Governance Ethical Boardroom magazine named us the Best North American Utility for Corporate Governance Our commitment to a culture that promotes integrity and accountability, along with hard work and de
Slide 125: Safety, Communications, and Human Resources
Safety, Communications, and Human Resources Chief Human Resources Officer established in 2017. Combined Human Resources, Safety, and Communications teams in May of 2018. Together, we are responsible for all corporate health and safety programs; Company brand management; internal and external communi
Slide 126: Promoting Our Brand Values
Promoting Our Brand Values Leadership Development Compensation and Benefits Succession Management Performance Management Our Strategic Priorities 126
Slide 127: Information Technology Creating Scale & Supporting Growth
Information Technology Creating Scale & Supporting Growth Highlights : Build People, Process and Systems infrastructure to support growth Utilize technology to create scale and achieve efficiencies. Realize efficiencies and speed through a balance of capabilities between corporate functions and Busi
Slide 128: Information Technology Creating Scale & Supporting Growth
Information Technology Creating Scale & Supporting Growth Enterprise Project Management Office : Enterprise Project Management Office was created to support large capital and enterprise projects. The team is staffed with Project Management professionals and are tasked with establishing strong projec
Slide 129: Customer Care
Customer Care Chesapeake's customer strategy is guided by our Service Excellence Model: Safety, WOW, Presentation, and Delivering Results The Voice of the Customer (VOC) program allows us to gain insight on customer sentiment, identify areas of strength, areas customers would like to see improved, a
Slide 130: Finance Team Key Services
Finance Team Key Services Treasury Services Cash management Credit management (evaluation and monitoring) Financing (debt and equity) Risk management and insurance Investor relations Internal Audit Enterprise Risk Management Operational audit Internal control environment (evaluate effectiveness and
Slide 131: Finance Team Supporting the Business
Finance Team Supporting the Business Accounting Business Unit Accounting (Delmarva regulated, Florida regulated, unregulated) General ledger and plant accounting Analytics and reconciliation Revenue, sales, franchise and property taxes Regulatory annual reports (FERC forms) Shared Services Accounts
Slide 132: Regulatory Information
Regulatory Information CHESAPEAKE» 132
Slide 133: ESNG Regulatory Snapshot
ESNG Regulatory Snapshot Commission Structure: 5 commissioners Full-Time Presidential Appointment Regulatory Jurisdiction: FERC Base Rate Proceeding: Delay in collection of rates subsequent to filing application Up to 180 days Application date associated with the most recent permanent rates 1/27/201
Slide 134: Regulatory Snapshot - Chesapeake Utilities
Regulatory Snapshot - Chesapeake Utilities Chesapeake - Delaware Division Chesapeake - Maryland Division Commission Structure: 5 commissioners 5 commissioners Part-Time Full-Time Gubernatorial Appointment Gubernatorial Appointment Regulatory Jurisdiction: Delaware PSC Maryland PSC Base Rate Proceedi
Slide 135: Regulatory Snapshot - Sandpiper Energy
Regulatory Snapshot - Sandpiper Energy Sandpiper Energy Commission Structure: 5 commissioners Full-Time Gubernatorial Appointment Regulatory Jurisdiction: Maryland PSC Base Rate Proceeding: Delay in collection of rates subsequent to filing application 180 days Application date associated with the mo
Slide 136: Regulatory Snapshot – Florida Public Utilities Natural Gas
Regulatory Snapshot – Florida Public Utilities Florida Public Utilities – Natural Gas Units Commission Structure: 5 commissioners Full-Time Gubernatorial Appointment Regulatory Jurisdiction: Florida PSC Base Rate Proceeding: Delay in collection of rates subsequent to filing application FPUC 13 month
Slide 137: Regulatory Snapshot – Florida Public Utilities Electric
Regulatory Snapshot – Florida Public Utilities Florida Public Utilities – Electric Unit Commission Structure: 5 commissioners Full-Time Gubernatorial Appointment Regulatory Jurisdiction: Florida PSC Base Rate Proceeding: Delay in collection of rates subsequent to filing application 6 months Applicat
Slide 138: Regulatory Snapshot
Regulatory Snapshot Chesapeake Utes Chesapeake Utes - Chesapeake Uiites- DekwareDivson __FhridaDivon ___FPUNaturalGas FoUBectic __MarlandDivison __Esstrn Shore Sandpiper Regulatory Agency: DekwarePSC Fhrida PSC Phrida PSC Farida 9C Marland PSC FERC Marland PSC Commision Structure: Scommisionss —Sevm