Chesapeake Utilities Corporation · NYSE:CPK
Chesapeake Utilities — Investor Day (August 2016)
157 slides from Chesapeake Utilities's investor day presentation, Aug 12, 2016
Slide 1: Investor Day, Amelia Island, FL, August 11, 2016
INVESTOR DAY Amelia Island, FL August 11, 2016
Slide 2: 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 3: Opening Remarks
Opening Remarks CHECARDE AE *
Slide 4: Investor Day Presentation Discussion Areas
Company Overview Strategic Overview Strategic Planning Strategic Business Development Delmarva Regulated Operations Eastern Shore Natural Gas Chesapeake Utilities Sandpiper Energy Aspire Energy and Sharp Energy Florida Operations Florida Public Utilities Flo-Gas Peninsula P
Slide 5: Performance Quadrant: Peer ROE vs. Capital Expenditures
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40% W ei gh te d A ve ra ge R O E Capital Expenditures/Total Capitalization High Returns/High Investment Low Returns/High InvestmentLow Returns/Low Investment High Returns/Low Investment April 1, 201
Slide 6: Business Mix: Average Investment
Business Mix Average Investment for the 13 months ended June 30, 2016 By Energy Served By Region * Aspire Energy of Ohio Natural Gas Operations are Unregulated By Value Chain Natural Gas 85% * Propane 5% Electric 10% By Segment 6 Delmarva Peninsula 43% Florida 48% Ohio 8% Other 1% Downstream 66% Mid
Slide 7: Business Mix: Operating Income Contribution
By Energy Served By Segment By Region * Aspire Energy of Ohio Natural Gas Operations are Unregulated By Value Chain 7 Business Mix Operating Income Contribution for the 12 months ended June 30, 2016 Natural Gas 84% * Propane 10% Electric 5% Non-energy 1% Delmarva Peninsula 56% Florida 37% Ohio 4% Ot
Slide 8: EPS and Return on Equity
5% 7% 9% 11% 13% 15% $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 $2.40 $2.60 $2.80 $3.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 R O E D ilu te d EP S EPS ROE Consistent Above Utility Regulated Returns Record EPS for 9th Consecutive Year Generating Record Results EPS and Return on Equity 8
Slide 9: Total Shareholder Return
Total Shareholder Return For 5 years ending 6/30/16 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% SJI NWN RGCO GAS NJR DGAS WGL SR PNY CPK ATO Peer Median: 15.4% 9
Slide 10: Shareholder Return Comparison to Broader Market
Chesapeake’s Total Shareholder Return is in the top quartile when compared to all companies listed on the New York Stock Exchange. Shareholder Return – Comparison to Broader Market – NYSE Companies * Source: BB&T Capital Markets 85.0% 94.1% 92.2% 93.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 Y
Slide 11: Strategic Overview
Strategic Overview CHES4PE4 Prd
Slide 12: Strategic Platform for Sustainable Growth
Strategic Platform for Sustainable Growth Engaged Employees Brand Strategy Engaging Customers Engaging with Communities Strategic Thinking Engagement Strategies Provide the Strategic Infrastructure for Sustainable Growth Developing New Business Lines and Executing Existing Business Unit Gr
Slide 13: Engagement Strategies
Engagement Strategies Investing in our brand, employees, customers, communities and governments 13 Investing in our brand, employees, customers, communities, and governments. Engagement Strategies Reinforcing our foundation for growth by strengthening our internal and external brand through employee
Slide 14: Why is Engagement Important?
Why is Engagement Important? Gallup studies report that when companies increase their number of talented managers and double the rate of engaged employees, they achieve, on average, 147 percent higher earnings per share than their competition. With the right employee engagement approach, companies c
Slide 15: Success of Our Engagement Strategies
Success of Our Engagement Strategies Living Our Brand in Our Communities The Delaware News Journal named Chesapeake a Top Workplace for the fourth consecutive year in 2015. The employee workplace survey reflects the quality of our efforts in the communities we serve and the quality of our employee
Slide 16: Strategic Thinking & Strategic Planning Process
Our Strategic Thinking & Strategic Planning Process 16 Strategy Vetting: We hold Strategic Planning meetings to promote collaboration with Management and Business Units. Strategy Tune-Up: We review the plan and make updates that keep the plan relevant and current. Discovery Strategic Thinking Collab
Slide 17: CPK – A Full Service Energy Provider
CPK – A Full Service Energy Provider Our goal is to continue to develop creative solutions to serve the customers’ needs through the diversified energy mix of the Company Collaboration across the Company is an important part of our customer centric model Building on our long-standing customer
Slide 18: Growth Across the Energy Value Chain
Growth Across the Energy Value Chain Expanding CPK Geography and Services Upstream Midstream Downstream Gathering / Processing Intrastate / Interstate Pipelines Power Generation Demand Projects Combined Heat & Power (CHP) CNG & Propane Fueling Propane Distribution Local Distribution Companies (LDCs)
Slide 19: Growing our Footprint and Services
Growing our Footprint and Services Maximizing Value Across the Energy Chain Strategic Growth Initiatives to Expand CPK’s Footprint and Services Leveraging our Capabilities to Maximize Value Across the Energy Value Chain Differentiate CPK as a full-service energy supplier/partner/provider through a c
Slide 20: Process to Oversee Growth Opportunities
Process to Oversee Growth Opportunities from Concept to Investment 20 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 Compan
Slide 21: Expanding CPK Footprint and Services
Expanding CPK Footprint and Services Strategic Development Growth Opportunities The Strategic Business Development funnel has strong strategic alignment with: Development of new pipeline infrastructure projects that provide services and delivery to downstream markets and end users Expansion of
Slide 22: Growth Strategy
Growth Strategy Growing Footprint Expansion of natural gas and propane business to unserved and underserved territories Conversion opportunities Growing footprint through Start-ups Growing footprint through acquisitions Growing Our Services Development of Combined Heat & Power projects D
Slide 23: Performance Quadrant: Peer ROE vs. Capital Expenditures
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40% W ei gh te d A ve ra ge R O E Capital Expenditures/Total Capitalization High Returns/High Investment Low Returns/High InvestmentLow Returns/Low Investment High Returns/Low Investment April 1, 201
Slide 24: Eastern Shore Natural Gas Business Unit Overview
Eastern Shore Natural Gas Business Unit Overview
Slide 25: ESNG Overview
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 Numerous pipeline and compressor station projects have occurred during Eastern Shore’s
Slide 26: ESNG Transmission Pipeline Infrastructure
26 ESNG Overview Transmission Pipeline Infrastructure In addition, two projects received final approval from the FERC on July 21, 2016 that will add over 15 miles of new pipeline and 5,325 hp of compression. A third project was recently pre-filed with the FERC for 2017 construction with approximatel
Slide 27: ESNG Customer Profile
ESNG Customer Profile 27 Lo ca l D is tr ib ut io n C om pa ni es (L D C ) • Chesapeake Utilities – Delaware Division • Chesapeake Utilities – Maryland Division • Sandpiper Energy • Delmarva Power and Light • Easton Utilities (municipality) • Elkton Gas • PECO Energy E lec tr ic P ow er G en er at i
Slide 28: ESNG Transportation Service Offerings
28 ESNG Overview Transportation Service Offerings ESNG Natural Gas Transportation Service Offerings Firm Transportation Delivery Lateral Firm Transportation Off-Peak Firm Transportation Interruptible Transportation 94% of ESNG’s Gross Margin is generated from Firm Transportation Services
Slide 29: Annual Deliveries by Customer Class 2011–2015
Annual Deliveries by Customer Class 2011 – 2015 29 2011 2012 2013 2014 2015 EPG 788,846 945,593 1,571,277 2,569,214 6,774,320 LDC 12,565,911 12,379,286 13,939,811 15,956,414 16,016,443 IND 12,059,425 20,764,259 25,061,884 24,591,774 27,042,636 Total 25,414,182 34,089,138 40,572,972 43,117,402 49,833
Slide 30: Market Profile: Natural Gas Growth
Market Profile Natural Gas Growth 30 Natural Gas Availability on the Delmarva Peninsula Since the pipeline went Open Access in 1997, ESNG has quadrupled pipeline capacity, adding over 180 miles of new pipeline facilities and extending service toward Lewes, DE, west to Cecil County, MD and south acro
Slide 31: Investment Growth
Investment Growth Based upon Average Investment as of December 31 31 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dollars • Total investment has increased by 90% over the last 10 years. • Signifi
Slide 32: Regulatory Snapshot
32 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 12/30/
Slide 33: Regulatory
33 Regulatory Ra te C as e Upcoming Case - 2017 Settlement from last rate case requires rate filing approximately five years from the date of settlement approval of ESNG’s last rate case New rates will be proposed to be effective March 1, 2017 Ex pa ns io n Pr oj ec ts FERC Certificate for two p
Slide 34: Current Strategic Initiatives: Key Projects
34 Current Strategic Initiatives Key Projects Project Description Capacity Completed 1Q16: TETCO Capacity Expansion Capacity expansion at the existing TETCO interconnect. Providing customers the option of additional TETCO supply and access to that supply under an accelerated time frame, in advance o
Slide 35: White Oak Mainline Overview
Executing Current Strategic Initiatives White Oak Mainline – Overview 35 Purpose: To provide Calpine’s 309 MW electric generation plant in the Garrison Oak Technical Park with 45,000 dt/d of NG transportation served under ESNG’s rate schedule OPT≤90. FERC: CP application filed with FERC on November
Slide 36: System Reliability Overview
Executing Current Strategic Initiatives System Reliability - Overview 36 Purpose: After an assessment of the challenges encountered during the 2013-14 winter, ESNG has developed a project consisting of facilities that will significantly aid in handling lower receipt pressure at the Parkesburg interc
Slide 37: 2017 Expansion Project Overview
Executing Current Strategic Initiatives 2017 Expansion Project – Overview 37 Purpose: Eastern Shore rolled up several requests to develop the 2017 System Expansion Project, which will allow Eastern Shore to meet growing market demand for reliable energy with fewer emissions. FERC: On May 17, 2016, t
Slide 38: Chesapeake Utilities & Sandpiper Energy Inc.
Chesapeake Utilities & Sandpiper Energy Inc.
Slide 39: Business Unit Overview: Chesapeake Utilities & Sandpiper Energy
Business Unit Overview Chesapeake Utilities & Sandpiper Energy Delaware Division Southern New Castle County, Kent County and Sussex County Over 47,000 retail customers Over 970 miles of natural gas main Delivers nearly 8 million Mcf of natural gas per year Maryland Division Cecil Count
Slide 40: Business Unit Overview – Staffing
Business Unit Overview – Staffing Chesapeake Utilities & Sandpiper Energy Business Unit Leadership Team • Business Unit leadership team has a combined 70 years of Company service • James Moore – Vice President (29 Years) • Shane Breakie – Director, Energy Services (23 Years) • Christopher Redd – Dir
Slide 41: Market Profile – Customers
Market Profile – Customers* Chesapeake Utilities Residential 90.5% Commercial 9.3% Industrial 0.2% Customers by Sector 41 Residential 30% Commercial 29% Industrial 41% Mcf Deliveries by Sector Residential 58% Commercial 23% Industrial 17% Other 2% Gross Margin by Sector * Results are from 2015
Slide 42: Market Profile – Customer Growth
• Highest growth rate during the period was in 2015, when customer growth was nearly 3.5% • Southern New Castle County, DE and eastern Sussex County, DE achieving higher than average growth rates • Majority of the customer growth is in the residential sector 42 Market Profile – Customers Chesapeake
Slide 43: Market Profile – Prospects for Growth
Market Profile - Prospects for Growth Chesapeake Utilities Natural Gas Propane Electricity Fuel Oil Other 0 5 10 15 20 25 30 Thousands of Houses Kent County, DE – House Heating Fuel Natural Gas Propane Electricity Fuel Oil Other 0 10 20 30 40 Thousands of Houses Natural Gas Propane Electricity Fuel
Slide 44: Market Profile – Target Areas
Market Profile – Target Areas Chesapeake Utilities 44
Slide 45: Strategic Initiatives: Chesapeake Utilities
Strategic Initiatives Chesapeake Utilities • Distribution System Expansion – Continued expansion of the distribution system throughout eastern Sussex County, Delaware – Focus on both new construction and conversion of existing homes and businesses – Focus on new service offerings – Follow propane di
Slide 46: Potential for Growth in Northeast Sussex County, DE
Strategic Initiatives Chesapeake Utilities Potential for Growth in Northeast Sussex County, DE 46 Source: State of Delaware Preliminary Land Use Service and Firstmap Potential New Construction Existing Developments – Potential Conversions Existing Gas Main
Slide 47: Potential for Growth in Southeast Sussex County, DE
Strategic Initiatives Chesapeake Utilities Potential for Growth in Southeast Sussex County, DE 47 Source: State of Delaware Preliminary Land Use Service and Firstmap Potential New Construction Existing Developments – Potential Conversions Existing Gas Main
Slide 48: Facilities and Investment: Chesapeake Utilities
Facilities and Investment Chesapeake Utilities Distribution System as of December 31, 2015 Over 1,200 miles of distribution main Nearly 61,000 service lines Less than 22 miles of bare steel Project to replace all bare steel within the next seven years Investments in mains and services ov
Slide 49: Natural Gas Supply
Natural Gas Supply* Chesapeake Utilities Gulf 18% Appalachia 16% Northeast 7%Mid Atlantic 8% Rockies/ Marcellus 41% Peak Shaving 9% Supply Source (Peak Day Capacity) Storage 20% Peak Shaving 9% Firm Transportation 71% Supply Mix (Peak Day Supply Mix) Upstream pipeline capacity agreements with Tran
Slide 50: Regulatory Snapshot: Chesapeake Utilities
50 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 Proceed
Slide 51: Unique Regulatory Provisions
Unique Regulatory Provisions Chesapeake Utilities Revenue Normalization (MD) – 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 a designated area to ena
Slide 52: Business Unit Overview – Timeline: Sandpiper Energy
Business Unit Overview - Timeline Sandpiper Energy • Application filed with the Maryland PSC for approval to acquire the assets of Eastern Shore Gas Company.SEPTEMBER 2012 • Maryland PSC approves acquisition of certain assets of Eastern Shore Gas Company. Required to file a base rate proceeding, inc
Slide 53: Market Profile – Customers: Sandpiper Energy
Market Profile – Customers* Sandpiper Energy Residential 89.99% Commercial 9.97% Industrial 0.04% Customers by Sector Residential 34% Commercial 57% Industrial 9% Consumption by Sector Residential 50% Commercial 49% Industrial/Other 1% Gross Margin by Sector Natural Gas 30% Propane 70% Deliveries by
Slide 54: Customer Conversions from Propane to Natural Gas
Customer Conversions from Propane to Natural Gas Sandpiper Energy • Approximately 3,000 customers have been converted (primarily in Berlin, West Ocean City and currently in Ocean Pines). • A bay crossing from West Ocean City to Ocean City expected to start in October 2016 and be completed late in th
Slide 55: Customer Conversion Process
Customer Conversion Process Sandpiper Energy Preliminary Staging & Communications •Notification to Residents and Appliance Surveys •Disconnected from Propane Main and Temporary Propane Tanks Installed •Mains purged and Natural Gas Introduced •Leak Surveys Performed •Conversions Scheduled Day of Conv
Slide 56: Facilities and Investment: Sandpiper Energy
Facilities and Investment Sandpiper Energy Distribution System as of December 31, 2015 Over 300 miles of distribution main Nearly 12,000 service lines Less than 6 miles of bare steel Project to replace all bare steel by 2018 Investments in mains and services have exceeded $5.9 million si
Slide 57: Aspire Energy Business Overview
Aspire Energy Business Overview
Slide 58: Aspire Energy Overview
58 CPK acquired Gatherco on April 1, 2015 and began operations as Aspire Energy Gatherco was established in 1997 when they acquired Columbia Gas Transmission’s natural gas gathering assets in Ohio Operating 16 gathering systems and more than 2,550 miles of gathering and intrastate pipelines in the M
Slide 59: Organizational Growth & Restructuring
59 Organizational Growth & Restructuring Aspire Energy Organization Re-aligned organization with adjustments to reporting structure and responsibilities to: Build on and develop positive cultural and strategic fit Develop five-year strategic plan Identify and execute new growth opportunities
Slide 60: Business Unit Overview: Aspire Energy
Business Unit Overview Aspire Energy 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
Slide 61: Aspire Energy Value Chain System Overview
61 Aspire Energy Value Chain System Overview Own and Operate ~2,000 miles of pipeline Off-System Sales DELIVERIES: Approx. 2 BCF Gather wellhead natural gas production RECEIPTS: Approx. 5 BCF Own and Operate two (2) gas processing plants Serving more than 20,000 end-use customers, and delivering app
Slide 62: Value Chain: Gas Supply and Gathering
Aspire primarily sources gas from producers and provides gathering and processing services necessary to maintain quality and reliability to wholesale markets. By the numbers: 305 Producers 16 Gathering Systems 2,550 Miles of Gathering Pipelines 5.1MM Dts Delivered Through Gathering 62 As
Slide 63: Value Chain: Delivery to End Users & Down-Stream Markets
3.8 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 t
Slide 64: Value Chain: Compression, Processing & Transportation
Gas from Aspire Energy’s gathering system that is not distributed to an end user is transported to interstate pipelines. Before gas can be transported to an interstate pipeline, it must be compressed and if needed, processed to remove natural gas liquids (NGL). By the Numbers: 11 compressors
Slide 65: Customer Profile – Consumers Gas Cooperative
Customer Profile – Consumers Gas Cooperative Member Margin Contributors 2015 Sales Volumes by Sector (Annual dekatherms, in thousands) Aspire Energy has a twenty year contract to exclusively manage the Consumers Gas Cooperative billing, sales, daily operations, and natural gas deliveries. As of
Slide 66: Customer Profile – Consumers Gas Cooperative Customer Growth
0 1000 2000 3000 4000 5000 6000 7000 8000 2011 2012 2013 2014 2015 Historical Member Growth 66 Customer Profile – Consumers Gas Cooperative Customer Growth Growth rates have average around 8.64% the last 3 years, with 2015 being the best year for signing of new members. The residential sector co
Slide 67: Customer Profile – Columbia Gas of Ohio
Customer Profile – Columbia Gas of Ohio Aspire Energy has a seven year contract to provide natural gas to 81 Columbia Gas of Ohio meters. 67 2,202,003 2,120,552 2,389,655 2,777,474 2,508,299 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,5
Slide 68: Potential Growth Sectors: Aspire Energy
Potential Growth Sectors Aspire Energy Agricultural and Poultry Sector Focus on several areas across the state, 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. Commercial Sector Focus on commerci
Slide 69: Key Takeaways & Outlook: Aspire Energy
69 Key Takeaways & Outlook Aspire Energy Aspire Energy is well on track to meet or exceed financial budgetary earnings expectations for 2016 and beyond. Delivering gas to Consumers Gas Cooperative and Columbia Gas of Ohio represents almost 90% of Aspire Energy’s gross margin. The Aspire Energy
Slide 70: Sharp Energy Business Overview
Sharp Energy Business Overview
Slide 71: Sharp Energy Overview
71 Sharp Energy Overview Provides propane distribution service to approximately 38,000 customers Service territories include Delaware, Maryland, Virginia and Pennsylvania Serves a mix of residential, commercial, industrial, agricultural and AutoGas customers Propane storage capacity in excess of 3 m
Slide 72: Sharp Energy Growth Story
Business Unit Overview Sharp Energy Growth Story Continued growth of propane distribution service Service territories include Delaware, Maryland, Virginia and Pennsylvania with 9 locations throughout those regions Growth of residential, commercial, industrial, agricultural and AutoGas markets
Slide 73: Supply Infrastructure
Supply Infrastructure Sharp Energy 28 bulk storage locations throughout DE, MD, PA and VA Over 3M gallons on-site storage 4 rail facilities - Dover, DE - Princess Anne, MD - LeCato, VA - Belle Haven, VA Dedicated supply department Long-term contracts/hedging capabilities 73
Slide 74: Georgetown Headquarters
Georgetown Headquarters Sharp Energy Grand opening held in June 2016 Houses 50 employees from various departments 120,000 gallon bulk storage capacity AutoGas fueling station 74
Slide 75: Market Profile – Sales Gallons
Market Profile - Sales Gallons Sharp Energy 0 1,000 2,000 3,000 4,000 5,000 6,000 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 50,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Historical Gallons Sold Gallons Sold HDD G al lo ns
Slide 76: Market Profile – Sales Volumes
Market Profile - Sales Volumes Sharp Energy Annual Gallons Sold by Category 2015 Gallons Sold by Category Western Shore expansion expected to add 1.1M gallons over the next 3 years New CGS systems expected to add 1M gallons once fully completed AutoGas growth will add approximately 1.2M gallon
Slide 77: Margin Components
Margin Components Sharp Energy 93% 7% % Contribution to 2015 Gross Margin Retail (Residential & Commercial) Wholesale 77
Slide 78: Strategic Initiatives: Sharp Energy
Strategic Initiatives Sharp Energy Retail Growth Oil to Propane Conversions Business Unit Leadership Team Initial conversion of oil customers to propane Developing start-up operation to focus on AutoGas growth along the I-95 corridor Start-up operation in Anne Arundel County, Maryland New sy
Slide 79: Strategic Initiatives: AutoGas
Strategic Initiatives Sharp Energy AutoGas Propane AutoGas is the most popular alternative fuel worldwide 3rd most widely used vehicle fuel in the world with 18 million vehicles (behind gasoline and diesel) Attractive option for school bus fleets, transit agencies and law enforcement Sharp E
Slide 80: Converting Fleet Vehicles to Propane AutoGas
CONVERTING FLEET VEHICLES TO PROPANE AUTOGAS? ECONOMICAL Less expensive than gasoline Cleaner burning = fewer oil changes CLEAN 12% less carbon dioxide 30% less carbon monoxide 35% less hydrocarbons 60% less NOx DOMESTIC Almost 98% of Alliance AutoGas’ propane vehicle fuel is produced
Slide 81: Less Expensive, Lower Entry Costs
Less Expensive, Lower Entry Costs Significant Savings Lower Fuel Costs – historically, AutoGas is significantly less than gasoline or diesel, averaging $1.00 less per gallon than regular unleaded gasoline. Reduced Maintenance – vehicles operating on AutoGas require less frequent maintenance, few
Slide 82: AutoGas DART – Converting Delaware's Buses to Propane
82 AutoGas DART – Converting Delaware’s Buses to Propane Economic benefits First five AutoGas-fueled buses Traveled 450,000 miles with no fuel system-related failures Produced significant fuel cost savings for customer Environmental benefits Each bus reduces more than 91,000 pounds of CO
Slide 83: Community Gas Systems
Community Gas Systems Sharp Energy 83
Slide 84: Benefits of a CGS Propane Distribution System
Community Gas Systems Sharp Energy 84 Safe and cost effective for the customer Central fuel storage for more attractive neighborhoods One-on-one personal on-site builder services from the CGS™ Propane Distribution Systems team of experts Reduction of gas delivery traffic Expert installation and main
Slide 85: Florida Business Overview
Florida Business Overview 5 FLORIDA PUBLIC’
Slide 86: 86
86
Slide 87: Florida Market Environment
Florida Market Environment Economic recovery continues 4th largest economy in the US 18th largest global economy Population growing 1,000 per day 20 million current population (3rd most populous state) 26 million projected population by 2030 Tourism continues to climb 100 million ann
Slide 88: Florida Market Environment: Population and Employment
Florida Market Environment Population and Employment Population growth drives the Florida economy Florida growth exceeds all states except Texas Continued significant in-migration from Central and South America – along with increased foreign investment Primary employment increases in constru
Slide 89: Florida Market Environment: Residential Construction
Florida Market Environment Residential Construction 89 Population growth drives the home construction market Foreclosure rates have returned to “normal” levels – clearing the market for new construction Low mortgage rates – although forecasted mortgage rate increases slow development in 2017
Slide 90: Minto Development - Palm Beach Co
Minto Development - Palm Beach Co 90
Slide 91: Minto Development
Minto Development y Ray Cotleur& Hearing FLORIDA pupiic> %
Slide 92: Wildlight Development - Nassau County
Wildlight Development - Nassau County 92
Slide 93: Wildlight Development
Wildlight Development 93
Slide 94: Florida Market Environment: Non-Residential Construction
Florida Market Environment Non-Residential Construction 94 Non-residential construction activity continues to increase Led by government and public institutional projects, warehousing and office space development Significant gains in hotels, medical, retail and industrial Non-residential for
Slide 95: Florida Regulatory/Political Climate
Florida Regulatory/Political Climate 95 Governors race in 2018 Current Governor Rick Scott - pro business Adam Putnam - current Agriculture Commissioner is likely front runner Impact on PSC - could see a slight shift toward consumer focus Florida Public Service Commission (FPSC) structure
Slide 96: Florida Regulatory Snapshot
Florida Regulatory Snapshot Recent rate filings Business Unit Effective Date Amount ROE* FPU Electric 11/1/2014 $3,750,000 10.25% FPU Natural Gas 1/14/2010 $7,969,000 10.85% CFG Natural Gas 1/14/2010 $2,546,300 10.80% *100 Basis point range in Florida Cost recovery mechanisms Gas Reliability I
Slide 97: Florida Energy Industry
Florida Energy Industry 97 Industry evolution TECO/Emera, AGL/Southern, Piedmont/Duke Southern Company 50% acquisition of SONAT pipeline Spectra/FPL Sabal Trail pipeline permitting underway at FERC - late 2017 in-service projected FPL developing a transmission pipeline business CPK, FGT,
Slide 98: Natural Gas Transmission Pipelines in Florida
Natural Gas Transmission Pipelines in Florida 98
Slide 99: Florida Business Unit Profile: Operating Units
Florida Business Unit Profile Operating Units 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
Slide 100: Florida Business Unit Profile Service Territories Map
100 Florida Business Unit Profile Service Territories Map
Slide 101: Florida Business Unit Profile: Customers
Natural Gas, 75,030 , 61% Electric, 31,524 , 26% Propane, 16,559 , 13% Florida Business Unit Profile Customers* 101 * Average Customers as of May, 2016
Slide 102: Florida Business Unit Profile: Top Customers
102 Florida Business Unit Profile Top 25 Customers Account Name Business Unit Margin 1 FPU ELECTRIC (2017 Projection) EIGHT FLAGS 2 FPU - NASSAU COUNTY PPC 3 RAYONIER STEAM (2017 Projection) EIGHT FLAGS 4 FPU - HAINES CITY GAS SYSTEM PPC 5 EIGHT FLAGS PPC 6 SOFIDEL CFG 7 AGL INDIAN RIVER CO. PPC 8 A
Slide 103: Florida Business Unit Profile: Average Capital Investment
Regulated Energy, 89% Unregulated Energy, 11% Natural Gas Distribution, 69% Natural Gas Trasmission, 7% Electric, 13% Propane, 3% CHP, 7% Unregulated Energy, 1% By Operating Unit By Segment Florida Business Unit Profile Average Capital Investment* 103 * Average Capital Investment as of June, 2016
Slide 104: Florida Business Unit Profile: Gross Margin Contribution
Florida Business Unit Profile Gross Margin Contribution* Natural Gas Distribution, 58% Natural Gas Trasmission, 5% Electric Distribution, 18% Propane, 11% CHP, 7% Unregulated Energy, 1% Regulated Energy, 81% Unregulated Energy, 19% By Operating Unit By Segment 104 * Estimated 2017 Gross Margin
Slide 105: Florida Business Unit Profile: Key Facts
Florida Business Unit Profile Key Facts 325 employees 7 unions 10 office locations 2,819 miles of natural gas mains 55 city gate stations/transmission interconnects 796,000 gallons of bulk propane storage Electric wholesale/PPA agreements JEA (expires 12/31/2017) Southern/Gulf Powe
Slide 106: Florida Performance Results: Capital Expenditures
Florida Performance Results Capital Expenditures 106 $11 $17 $35 $46 $52 $92 $76 $- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2010 2011 2012 2013 2014 2015 2016B $ in M ill io ns Year
Slide 107: Florida Performance Results: Average Capitalization
107 $159 $155 $167 $202 $240 $290 $357 $100 $150 $200 $250 $300 $350 $400 2010 2011 2012 2013 2014 2015 2016F $ in M ill io ns Year Florida Performance Results Average Capitalization
Slide 108: Florida Performance Results: Consolidated Margin
108 $79 $79 $83 $85 $94 $103 $115 $70 $75 $80 $85 $90 $95 $100 $105 $110 $115 $120 2010 2011 2012 2013 2014 2015 2016F $ in M ill io ns Year Florida Performance Results Florida Consolidated Margin
Slide 109: Florida Strategic Evolution
Florida Strategic Evolution 1. Post merger integration Consolidate systems, process, procedures Foster a culture of safety and growth Achieve synergies to enable recovery of acquisition premium 2. Leverage existing customer growth opportunities GRIP pipeline replacement (recovery mechanism)
Slide 110: Natural Gas Growth Strategy
Natural Gas Growth Strategy $2.9 $19.7 $44.0 $76.4 $102.7 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 2012 2013 2014 2015 2016 Forecast $ M IL LI O N S Total Investment 110 Complete GRIP/Bare Steel Replacement Investments - 50 100 150 200 FPUC CFG 118 69 80 81 Miles of Mains Replaced Remaining
Slide 111: Natural Gas Growth Strategy
Natural Gas Growth Strategy Recover non-revenue investments w/o rate case Additional reliability investments Expansion of GRIP program Smart meter deployment Cost recovery from third party shippers South Florida operations center construction Seek environmental cost recovery Continue
Slide 112: Rate Impacts 2016: Natural Gas Residential Bill Comparison
Rate Impacts 112 2016 * Based on 21 Therms Rate Charge Rate Charge Rate Charge Rate Charge Customer Charge $ per bill 11.00 11.00$ 19.00 19.00$ 8.00 8.00$ 15.00 15.00$ Base Energy Charge $ per therm 0.49828 10.46$ 0.46310 9.73$ 0.56213 11.80$ 0.26782 5.62$ PGA/Cost of Gas $ per therm 0.65000 13.65$
Slide 113: Propane Growth Strategy
Propane Growth Strategy Aggressive margin management Enhanced sales effort Replace gallons converted to natural gas Introduction of new products and services Agricultural market AutoGas market Territorial expansion Acquisition Expand existing service areas Start-up areas close to
Slide 114: Electric Growth Strategy
Electric Growth Strategy Reduce fuel costs Contract renegotiation Access to a broader wholesale power market Operate Eight Flags below avoided cost rate Invest in generation Return on investment and lower power costs Invest in the regulated utility Reliability Energy efficiency (LE
Slide 115: Rate Impacts 2016: Electric
Rate Impacts 115 2016 * Based on 1000 KWH Rate Charge Rate Charge Rate Charge Customer Charge $ per bill 14.00 14.00$ 7.57 7.57$ 15.00 15.00$ Base Energy Charge $ per KWH 0.01960 19.60$ 0.04729 47.29$ 0.04694 46.94$ Fuel $ per KWH 0.10188 101.88$ 0.02580 25.80$ 0.03361 33.61$ Conservation $ per KWH
Slide 116: Electric Power Supply Costs
Electric Power Supply Costs 116 COST ACTUAL ACTUAL PROJECTED PROJECTED Average kWh $ kWh $ per kWh 2015 2015 2018 2018 JEA 0.08731$ 331,748,000 28,966,000$ Gulf Power 0.10312$ 314,547,000 32,436,000$ 314,547,000 32,436,000$ West Rock 0.04426$ 10,749,000 476,000$ 10,749,000 476,000$ Rayonier 0.05621$
Slide 117: Florida Business Unit Summary
Florida Business Unit Summary 117 Rebounding Florida economy Positive political/regulatory environment Large opportunities in under/unserved areas Florida: “Open for Business” Gov. Rick Scott
Slide 118: Eight Flags Energy
Eight Flags Energy CHECADEA Pm Pa
Slide 119: Isle of Eight Flags
Isle of Eight Flags Timucuan Indians – no flag French (1562 – 1565) Spain (1565 – 1702) England (1702 – 1783) Named the island after King George II’s daughter. Spain (1783 – 1812) Patriot Flag (1812 – 1813) United States (1813) Spain (1813 – 1816) Green Cross of Florida (1817) Me
Slide 120: Project Background
Project Background 2010 FPU electric rates are close to the highest in Florida. Base rate are among the lowest. Fuel rates are the highest. FPU is a non-generating utility. FPU Wholesale Purchase Power Agreements. Jacksonville Electric Authority (expires 12/2017) Gulf Power Company (ex
Slide 121: Combined Heat and Power (CHP)
CHP A suite of technologies that enable the concurrent production of electricity and useful thermal energy. Topping Cycle Fuel is used first to generate electricity and the waste heat is recovered for process, heating or cooling uses. Bottoming Cycle Fuel is used first to produce heat fo
Slide 122: Topping Cycle CHP
Topping Cycle CHP —s" —-Ea>—_—— Cooling/Heati Hot cnn | Gases Engine Electricity or Turbine Building ir ° Facility
Slide 123: Topping Cycle CHP with Gas Turbine
Topping Cycle CHP with Gas Turbine 123
Slide 124: Key Questions for Project Feasibility
1. Would Rayonier agree to be the steam host? Could we design a CHP that would balance RYN’s steam quantity and pressure needs with FPU’s power requirements? 2. Could a CHP plant be sited at the Rayonier mill? Air permits; construction codes; land suitability, land cost. 3. Would the CHP power b
Slide 125: Siting Challenges: Rayonier Amelia Island Paper Mill
Siting Challenges Rayonier Amelia Island Paper Mill 125
Slide 126: Regulatory Overview
FERC Qualifying Facility (QF) Certification Efficiency Test. Fundamental Use Test. No ownership limitations – CPK could own 100%. FERC QF pre-empts state certification. FERC QF pre-empts JEA contract restrictions. Florida Public Service Commission Jurisdiction over an affiliate trans
Slide 127: Project Description
Construct a CHP at the Rayonier paper mill. 20MW natural gas combustion turbine. 75,000 lbs/h, 150 psi Heat Recovery Steam Generator (HRSG) Own and operate the unit as an unregulated CPK subsidiary; Eight Flags Energy, LLC. Eight Flags sells 100% of the power to FPU. Eight Flags sells 10
Slide 128: Eight Flags CHP - Structure of the Deal
Eight Flags CHP - Structure of the Deal 128
Slide 129: Key Agreements
Purchase Power Agreement: Eight Flags and FPU Electric 20 year term - projected in-service Q2 2016. Establish an initial indicative non-fuel price range with a “not to exceed” cap for in-service date. Fuel costs adjust monthly based on actual costs. O&M cost escalator adjusts every 5-years
Slide 130: Primary Suppliers and Contractors
Solar Turbines, Inc. - a Caterpillar sub - San Diego, CA. Titan 250 gas turbine. (14,500 total turbines installed; 2 billion operating hours) Service and Maintenance Agreement (includes periodic turbine replacements). Rentech Boiler Systems, Inc. - Abilene, TX HRSG. (Industry leader in HRS
Slide 131: Project Investment
Eight Flags Energy CHP ‒ Turbine, HRSG, Duct Burner, Steam Distribution, Engineering, Construction. FPU Natural Gas ‒ 12” 1.3 mile pipeline; M&R station. Peninsula Pipeline Co. ‒ Gate station; Compressor Platform; Pressure Regulation. FPU Electric ‒ Substation, T&D. Project Investment Operat
Slide 132: Project Related Investment
FPU Electric ‒ Chip Mill Substation, T&D, SCADA, Mobile Generator, Control Building Project Related Investment Operating Unit $4,420,000 Investment Amount 132
Slide 133: Annual Margin Projection
Eight Flags Energy CHP FPU Natural Gas Peninsula Pipeline Cc, FPU Electric *Estimated 2018 margin subsequent to planned rate case/ERIP. Project Margin Operating Unit $ 7,300,000 463,000 993,000 1,000,000* $ 9,756,000 Annual Margin Projection 133
Slide 134: Eight Flags – Initial Site Prep
Eight Flags – Initial Site Prep 134
Slide 135: Eight Flags – Over Pilings
Eight Flags – Over 700 Pilings 135
Slide 136: Eight Flags – 10' Platform Elevation
Eight Flags – 10’ Platform Elevation 136
Slide 137: Solar Turbines Titan
Solar Turbines Titan 250 137
Slide 138: Eight Flags CHP
Eight Flags CHP 138
Slide 139: Electric Utility Substation
Electric Utility Substation 139
Slide 140: Electric Transmission System Extension
Electric Transmission System Extension 140
Slide 141: Electric Utility Control Building
Electric Utility Control Building 141
Slide 142: Black Start Mobile Generator
Black Start Mobile Generator 142
Slide 143: FPU Natural Gas and PPC Facilities
FPU Natural Gas and PPC Facilities 143
Slide 144: Eight Flags CHP
Eight Flags CHP 144
Slide 145: Financial Overview
Financial Overview CHES4PE4 Prd
Slide 146: Strong Results over the Last Nine Years
Strong Results over the Last Nine Years Financial Metrics for 2007 and 2015 * $82 $239 2007 2015 Annual Gross Margin ($ in millions) $1.29 $2.72 2007 2015 Diluted Earnings Per Share $11.76 $23.45 2007 2015 Year-end Book Value Per Share $217 $979 2007 2015 Market Capitalization at 12/31/2015 ($ in mi
Slide 147: Consolidated Financial Results Six Months Ended June 30, 2016
Consolidated Financial Results For the Six Months Ended June 30, 2016 compared to 2015 For the periods ended June 30, (in thousands except per share amounts) YTD16 YTD15 Change Operating Income Regulated Energy segment 39,545$ 35,788$ 3,757$ Unregulated Energy segment 12,347 14,689 (2,342) Other bus
Slide 148: Reconciliation of 2016 Results Year-to-Date
Reconciliation of 2016 Results Year-to-Date Key variances for the six months ended June 30, 2016 vs. 2015 included: • Earnings per share increased $0.02 compared to 2015 despite significantly warmer winter in the first quarter of 2016 which had a negative $0.26 per share impact on our earnings. • In
Slide 149: Continuing to Build for the Future: Capital Expenditures
$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 $220,000 2012 2013 2014 2015 2016 Forecast In th ou sa nd s Natural Gas Distribution Natural Gas Transmission Electric Unregulated Energy Corporate and Other Acquisitions $78,334 $128,240 Cumulative Expenditures
Slide 150: Total Capitalization and Debt Capacity
Equity/Permanent Capitalization 71.6% 70.3% 65.5% 70.6% 72.5% Equity/Total Capitalization 60.0% 54.3% 54.0% 51.9% 53.0% $256,598 $278,773 $300,322 $358,138 $379,554 $101,907 $117,592 $158,486 $149,306 $143,865 $69,395 $117,019 $97,340 $182,548 $192,117 $0 $50,000 $100,000 $150,000 $200,000 $250,000
Slide 151: Long-term Debt Maturity Schedule
Long-term Debt Maturity Schedule Annual Principal Payments and Rate on Payments Debt Amortization: Pro forma long-term debt outstanding of $228 million includes $70 million committed at 3.25% under the private placement shelf facility Chesapeake's private placement debt amortization is typically
Slide 152: Continuous Dividend Growth With Future Growth Potential
$0.92 $0.97 $1.03 $1.08 $1.15 $1.22 $0.75 $0.85 $0.95 $1.05 $1.15 $1.25 2011 2012 2013 2014 2015 2016 Annualized Dividend Continuous Dividend Growth With Future Growth Potential We are committed to providing dividend growth that is supported by earnings growth 6.1% dividend growth in 2016 while
Slide 153: Investment Highlights
Investment Highlights A High Growth Energy Delivery Investment Proposition Utility foundation with upside from complementary unregulated energy platform Natural gas and electric distribution businesses serving over 165,000 customers 84% of investment in regulated energy and 16% of investment i
Slide 154: Closing Remarks
Closing Remarks CHECARDE AE *
Slide 155: Strategic Platform for Sustainable Growth
Strategic Platform for Sustainable Growth Engaged Employees Brand Strategy Engaging Customers Engaging with Communities Strategic Thinking Engagement Strategies Provide the Strategic Infrastructure for Sustainable Growth Developing New Business Lines and Executing Existing Business Unit Gr
Slide 156: Key Themes
Key Themes Successful implementation of growth strategy Strategic platform for growth continues to support our path forward Opportunities exist across the midstream and downstream energy value chain in Chesapeake’s current and contiguous markets that provide opportunities for continued growth
Slide 157: Thank You!!
Thank You!! CHESAPEAKE