Chesapeake Utilities Corporation · NYSE:CPK
Chesapeake Utilities — Q4 2023 Earnings Presentation
38 slides from Chesapeake Utilities's earnings presentation, Feb 22, 2024
Slide 1: Fourth Quarter and Full Year 2023 Earnings Conference Call
CHESAPEAKE Fourth Quarter and Full Year 2023 Ear nings Conference Call UTILITIES C O R P O R AT I O N Februar y 22, 2024 1
Slide 2: Today's Presenters
Today’s Presenters Jeff Householder Chairman of the Board, President, and Chief Executive Officer Beth Cooper Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary Jim Moriarty Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy
Slide 3: Safe Harbor for Forward-Looking Statements
Safe Harbor for Forward-Looking Statements Safe Harbor Statement Some of the statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable law. Such forward--looking statements may be identified by the
Slide 4: Year End 2023 Financial Highlights
Year End 2023 Financial Highlights EXTENDING our • Adjusted EPS of $5.311/, reflecting a greater than 5% growth rate over the prior year consecutive • 17th consecutive year with increased earnings2/ earnings and • 63rd consecutive year of paying dividends and 20th consecutive year annualized dividen
Slide 5: 2023 Financial Performance
2023 Financial Performance Key Adjusted Gross Margin Drivers Adjusted Diluted Earnings Per Share1/ $5.31 $15.6M $11.0M $8.8M $5.04 Regulated Pipeline Expansions Higher Propane Infrastructure and Natural Gas Margins per Gallon Programs Organic Growth and Fees and Recovery Mechanisms $1.64 $8.7M $1.1M
Slide 6: Significant Investment in Our Legacy Businesses
Significant Investment in Our Legacy Businesses In 2023, we invested $211 million in our legacy businesses, with 80% of that in our regulated operations 2023 Capital Investment in Legacy Businesses Regulated Capital by Type (in millions) 2% $42 8% $20 $40 $169M in the Regulated Businesses 32% 58% 80
Slide 7: Regulated Natural Gas Distribution Customer Growth
Regulated Natural Gas Distribution Customer Growth Our average annual residential customer growth rate for our legacy natural gas distribution businesses far outpaces the national average annual customer growth rate1/. Average Number of Customers2/ • Above average annual growth rate for residential
Slide 8: Major Projects and Initiatives Update
Major Projects and Initiatives Update Our projects and initiatives underway will continue to drive margin growth while new projects and regulatory initiatives will drive additional margin growth across our guidance period Project/Initiative Year Ended December Estimate for Fiscal (in thousands) 2021
Slide 9: Florida City Gas Acquisition and Integration Progress
Florida City Gas Acquisition and Integration Progress 178 Florida City Gas employees joined the Chesapeake Utilities Corporation team Largest acquisition in CPK history completed on November 30, 2023 Expands Platform in Florida • Financed with net proceeds of an equity offering of High growth utilit
Slide 10: Sharp Energy propane acquisition - JT Lee and Son's
Sharp Energy propane acquisition - JT Lee and Son’s Acquisition expands Sharp Energy’s footprint once again in North Carolina • Acquisition highlights: Our propane presence in the Carolinas continues to grow Sharp first Approximately Bulk plant with established a Approximately 800,000 gallons 60,000
Slide 11: Key Drivers of Performance – Year Ended December 31, 2023
Key Drivers of Performance – Year Ended December 31, 2023 Despite warmer weather and challenging interest rate and economic environments, our core businesses performed well, complemented by earnings related to the Florida City Gas acquisition on November 30, 2023 Adjusted Diluted Earnings Per Share1
Slide 12: Year-End 2023 Financial Summary
Year-End 2023 Financial Summary Solid performance, despite significantly warmer weather and continued inflationary environment Consolidated Fiscal Year Change (in thousands except per share data) 2023 2022 $ % Excluding transaction- 1 Total Adjusted Gross Margin $ 454,123 $ 420,198 $ 33,925 8.1% rel
Slide 13: Regulated Energy Segment – Financial Summary
Regulated Energy Segment – Financial Summary Our legacy business results reflect continued expansion efforts and customer growth; The Florida City Gas acquisition contributed one month of strong earnings Fiscal Year Change (in thousands) 2023 2022 $ % Adjusted Gross Margin 1 $ 333,587 $ 302,252 $ 31
Slide 14: Unregulated Energy Segment – Financial Summary
Unregulated Energy Segment – Financial Summary Higher propane margins and fees as well as increased margins for the other unregulated energy businesses significantly offset warmer weather Fiscal Year Change (in thousands) 2023 2022 $ % Adjusted Gross Margin1 $120,656 $118,067 $ 2,589 2.2% Dep., amor
Slide 15: Three Decades of Dividend Growth Drive Shareholder Return
Three Decades of Dividend Growth Drive Shareholder Return Annualized Dividend per Share 12%+ Compound Annual Shareholder Return over 10 years 63 Consecutive Years of Dividend Payments – Since 1960 20 Consecutive Years of Dividend Increases – Since 2004 Dividend Increases 28 of the last 30 Years – Si
Slide 16: Earnings Outlook
Earnings Outlook Guidance expected to drive increased shareholder value Earnings Per Share - Diluted Earnings Growth • 2023 Earnings Per Share of $5.311 Driven by Capital • ~9% CAGR over last 10 years Investment • 17 yrs of consecutive Adjusted EPS growth • 2024 EPS Guidance of $5.33 to $5.45 • 2028
Slide 17: Pathway to 2024 EPS Guidance
Pathway to 2024 EPS1/ Guidance Our 2024 target is based on continued growth from our legacy businesses, a full year of contribution from the acquisition of FCG, and additional opportunities we have identified2/ Adjusted Diluted Earnings Per Share1/ Identified Additional Opportunities Range: $0.20 -
Slide 18: Executing on the Identified 2024 Pathway
Executing on the Identified 2024 Pathway Our team has already begun to execute on additional opportunities to propel earnings growth in 2024 and will continue to evaluate and execute opportunities Regulatory strategies & Post acquisition synergies financing Payroll savings due to multiple leadership
Slide 19: Long Track Record of Growing Capital Expenditures
Long Track Record of Growing Capital Expenditures We reaffirm our previous capital investment plan guidance of $1.5B-$1.8B by 2028. ~$300-$360M/yr. run rate ($1.5B-$1.8B 5-yr plan) $927 ~$150-$250M/yr. avg. $283 ~$75-$100M/yr. avg. $228 $195 $192 $199 $196 $169 ~$50M/ $141 yr. avg. $108 $98 $240 $78
Slide 20: 5-year Projected Capital Expenditures Breakdown
5-year Projected Capital Expenditures Breakdown 89% of our 5-year capital expenditure plan is projected to be invested into our regulated businesses. Key Drivers of Investment Plan Regulated / Unregulated Forecast • Investment in natural gas distribution systems to serve growing customer base and en
Slide 21: Capital Structure Overview – Strong Balance Sheet to Support Growth
Capital Structure Overview – Strong Balance Sheet to Support Growth (in thousands) 12/31/2023 12/31/2022 FCG Acquisition Permanent Financing Stockholders' equity $ 1,246,104 $ 832,801 Strong Balance Sheet Pre-FCG Long-term debt, net of current maturities 1,187,075 578,388 53% Equity to Capitalizatio
Slide 22: Long-Term Debt Profile – Positioned to Execute Growth Plan
Long-Term Debt Profile – Positioned to Execute Growth Plan (In Millions) Minimal maturities over next 2 yrs enables CPK the flexibility to: • Execute on a robust growing organic capital plan • Fully integrate Florida City Gas and capitalize on commercial synergies & opportunities • Navigate through
Slide 23: Financing Capacity and Requirements
Financing Capacity and Requirements Strong balance sheet supports high quality capital plan Growth Capital Expenditures Strong Balance (in Millions) • 47% Equity to Capitalization at year-end 2023 Sheet & Sufficient • Liquidity: Liquidity Supports • $255M Capacity on Shelf Agreements Investments • $
Slide 24: Regulatory Strategy Drives Earnings
Regulatory Strategy Drives Earnings Florida Public Utilities Florida Public Utilities and Florida City Gas • Rates became effective March 1, 2023 • GUARD and SAFE programs – combined projected capital investment of $410 million over a 10-year period • $17.2 million rate increase; allowed ROE of 10.2
Slide 25: Rate Case: Maryland Natural Gas Distribution
Rate Case: Maryland Natural Gas Distribution Maryland rate case seeking to consolidate our three Maryland distribution entities and obtain a rate increase for the first time in 16 years1/ Rate case filed on January 30, 2024 • Required come-back filing • Proposing a $6.9M rate increase • Seeking to c
Slide 26: Federal Certificate Proceeding: Worcester Resiliency Upgrade
Federal Certificate Proceeding: Worcester Resiliency Upgrade Eastern Shore Natural Gas project designed to meet critical energy service to customers during the peak winter heating season • $80 million planned liquefied natural gas storage facility in Bishopville, MD • Project consists of five low-pr
Slide 27: Chesapeake Utilities' Hydrogen Focus and Near-term Initiatives
Chesapeake Utilities’ Hydrogen Focus and Near-term Initiatives Hydrogen has the potential to become a more common fuel source in the lower-carbon energy future CPK has a two-part strategy to help educate and Developing the foundation for the long-term: further hydrogen’s potential as a common fuel s
Slide 28: A Culture of Safety and Innovation
Chesapeake Utilities – A Culture of Safety and Innovation First and foremost, we are focused on the safety of our Our special culture nurtures an entrepreneurial, people, the communities we serve and the reliability of innovative and competitive market mindset across the our systems organization • O
Slide 29: Investment Proposition – Committed to Superior Performance
Investment Proposition – Committed to Superior Performance We continually increase shareholder value Our foundation for growth remains strong through our: Over and over, we have proven we get it done; we have a long history of top-tier earnings and dividend growth TRACK RECORD • Consistently beating
Slide 30: Appendix
CHESAPEAKE UTILITIES Appendix C O R P O R AT I O N 30
Slide 31: GAAP to Non-GAAP Reconciliation – Consolidated Results
GAAP to Non-GAAP Reconciliation – Consolidated Results Fourth Quarter Change Fiscal Year Change (in thousands) 2023 2022 $ % 2023 2022 $ % Operating Revenues $ 185,335 $ 187,300 $ (1,965) -1.0% $ 670,604 $ 680,704 $(10,100) -1.5% Cost of Sales: Natural gas, propane and electric costs (55,004) (72,00
Slide 32: GAAP to Non-GAAP Reconciliation – Regulated Energy Segment
GAAP to Non-GAAP Reconciliation – Regulated Energy Segment Fourth Quarter Change Fiscal Year Change (in thousands) 2023 2022 $ % 2023 2022 $ % Operating Revenues $ 127,774 $ 118,360 $ 9,414 8.0% $ 473,595 $ 429,424 $ 44,171 10.3% Cost of Sales: Natural gas, propane and electric costs (34,316) (38,90
Slide 33: GAAP to Non-GAAP Reconciliation – Unregulated Energy Segment
GAAP to Non-GAAP Reconciliation – Unregulated Energy Segment Fourth Quarter Change Fiscal Year Change (in thousands) 2023 2022 $ % 2023 2022 $ % Operating Revenues $ 64,262 $ 78,081 $(13,819) -17.7% $ 223,148 $ 280,750 $(57,602) -20.5% Cost of Sales: Natural gas, propane and electric costs (27,424)
Slide 34: GAAP to Non-GAAP Reconciliation – Adjusted Net Income and EPS
GAAP to Non-GAAP Reconciliation – Adjusted Net Income and EPS Fourth Quarter Fiscal Year (in thousands, except shares and per share data) 2023 2022 2023 2022 Net Income (GAAP) $ 25,328 $ 26,150 $ 87,212 $ 89,796 Transaction-related expenses, net1 7,727 - 10,625 - Adjusted Net Income (Non-GAAP) $ 33,
Slide 35: Weather Impacted Customer Consumption During 2023
Weather Impacted Customer Consumption During 2023 Year Ended Variance Delmarva December 31, Year-over-Year 2023 2022 # % Exceptionally Warm Weather Across Actual HDD 3,416 4,088 (672) -16% All Service Areas 10-yr Avg HDD (“Normal”) 4,161 4,147 14 Variance from # (745) (59) Normal % -18% • Warmer tem
Slide 36: Key Drivers of Performance – Quarter Ended December 31, 2023
Key Drivers of Performance – Quarter Ended December 31, 2023 Lower customer Reduced demand Depreciation, consumption Core for Operating amortization related to Reduction business CNG/LNG/ expenses and property Florida City warmer Absence growth (not RNG (excluding tax costs due Interest Gas in state
Slide 37: Quarterly Earnings Cadence
Quarterly Earnings Cadence* Adjusted EPS Year Q1 Q2 Q3 Q4 FY 2023 $2.04 $0.90 $0.69* $1.64 $5.31 % of FY 38% 17% 13% 31% 2022 $2.08 $0.96 $0.54 $1.47 $5.04 % of FY 41% 19% 11% 29% 2021 $1.96 $0.78 $0.71 $1.28 $4.73 % of FY 41% 16% 15% 27% 2020 $1.77 $0.64 $0.56 $1.24 $4.21 % of FY 42% 15% 13% 29% 20
Slide 38: Mission, Vision and Values
Mission, Vision and Values OUR Mission We deliver energy that makes life better for the people and communities we serve. OUR Vision We will be a leader in delivering energy that contributes to a sustainable future. OUR Values Care Integrity Excellence We put people first. We tell the truth. We achie