Chesapeake Utilities Corporation · NYSE:CPK
Chesapeake Utilities — 2023 AGA Financial Forum
39 slides from Chesapeake Utilities's conference presentation, May 21, 2023
Slide 1: 2023 AGA Financial Forum
CHESAPEAKE 2023 AGA Financial Forum For t Lauderdale, Florida UTILITIES C O R P O R AT I O N May 21, 2023 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 an
Slide 3: Forward Looking Statements and Other Statements
Forward Looking Statements and Other Statements 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 s
Slide 4: Financial Highlights
Financial Highlights • 160+ – Years providing energy • 1,034 – Employees at Dec. 31, 2022 • ~310,000 – Distribution customers • $2.2 billion – Total Assets at December 31, 2022 • 16th – Consecutive year of earnings growth • 7.6% - Growth in Net Income over 2021 • 2x – Doubled Net Income over last 6
Slide 5: Diversified Portfolio of Energy Delivery Solutions
Diversified Portfolio of Energy Delivery Solutions Total Assets Business Line States Served 77% 21% Regulated Energy Segment Natural Gas Transmission DE, FL, MD, PA, OH Natural Gas Distribution DE, MD, FL $2.2B 2% Electric Distribution FL as of Dec. 31, 2022 Unregulated Energy Segment Propane Distri
Slide 6: Chesapeake Utilities' Model for Financial Success
Chesapeake Utilities’ Model for Financial Success Disciplined Capital Investment Total Runway for Consistent Dividend Growth Shareholder Earnings Growth Return Peer-leading Return on Equity 6
Slide 7: Capital Investment Has Driven Our Earnings Growth
Capital Investment Has Driven Our Earnings Growth Long track record of prudent capital investments 2013 Last 10 Years: $1.8 Billion 2022 2009 Since FPU Acquisition: $2.1 Billion 2022 $283 $228 $195 $192 $199 $196 $169 $154 $141 $108 $98 $240 $200 to $78 $180 $174 $174 $193 $230 $169 $49 $44 $144 $13
Slide 8: Historical Earnings and Dividend Performance
Historical Earnings and Dividend Performance Long history of industry leading earnings and dividend growth Diluted Earnings Per Share from Annualized Dividends Continuing Operations Per Share $2.36 $5.04 $2.14 $4.73 $1.92 $1.76 $4.21 $1.62 $3.72 $3.47 2022 2023 +6.6% +10.3% Increase Increase 2018 20
Slide 9: Solid Track Record of Return on Equity
Solid Track Record of Return on Equity Consistently exceeding peer median and 75th percentile Return on Equity 14% 13% 12.7% 12.6% 12.2% 12.2% 12.1% 12.0% 11.8% 11.7% 11.7% 12% 11.3% 11.3% 11.6% 11.3% 11.2% 11.3% 11.1% 11.0% 11.0% 11% 10% * 10-Year Peer 75th Percentile – 9.4% 9% * 10-Year Peer Media
Slide 10: Financial Metrics Performance
Financial Metrics Performance Chesapeake Percentiles Compared to CPK Results Performance Peer Group Performance Metrics 1yr 3yr 5yr 10yr 1yr 3yr 5yr 10yr CapEx / Total Capitalization 9.0% 12.9% 15.9% 18.6% 17% 80% 99% 100% EPS Growth (CAGR) 6.6% 8.5% 7.3% 9.8% 52% 66% 89% 100% Return on Equity 11.1%
Slide 11: Capital Structure Overview – Strong Balance Sheet to Support Growth
Capital Structure Overview – Strong Balance Sheet to Support Growth 3/31/2023 12/31/2022 Stockholders‘ equity $ 858,588 $ 832,801 Long-Term Debt Long-term debt, net of current maturities 656,284 578,388 • Avg. Interest Rate: 3.89% Total permanent capitalization $ 1,514,872 $ 1,411,189 • $50M: 2.95%
Slide 12: 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
Slide 13: Our Sustainability Strategy
Our Sustainability Strategy GROW PROTECT TRANSFORM 13
Slide 14: GROW
CHESAPEAKE UTILITIES GROW C O R P O R AT I O N 14
Slide 15: Growth Platform Focus
Growth Platform Focus • 5.8% / 4.4% residential customer growth in Delmarva / Florida for Q1’23 Organic Growth: • Added more than 8,900 residential customers • Natural gas continues to be the preferred energy source for our customers • Completion of Beachside expansion project in Vero Beach, Florida
Slide 16: Major Projects and Initiatives
Major Projects and Initiatives Key Projects Driving Adjusted Gross Margin Adjusted Gross Margin Three Months Ended Year Ended Estimate for Project/Initiative March 31, December Fiscal in thousands 2023 2022 2022 2023 2024 Pipeline Expansions: Guernsey Power Station $ 365 $ 263 $ 1,377 $ 1,486 $ 1,48
Slide 17: Key Expansion Projects
Key Expansion Projects Significant activity in 2023 Fully Annual Adjusted Gross Margin Project Capital Investment In Service Estimate Guernsey Power Station $6.5 million Q4 2021 $1.5 million Winter Haven Expansion $3.5 million Q3 2022 $0.6 million North Ocean City Connector* $6.3 million Q2 2023 $0.
Slide 18: Beachside Pipeline Expansion
Beachside Pipeline Expansion Peninsula Pipeline recently completed construction of the Beachside Pipeline Expansion project in Vero Beach, Florida • 11-mile expansion that brings natural gas capacity to customers in the following communities: • Wabasso • Wabasso Beach • Indian River Shores • North H
Slide 19: Sustainable Investments in Our Service Territories
Sustainable Investments in Our Service Territories Noble Road Landfill RNG Pipeline • 33-mile pipeline transporting RNG to Aspire Energy of Ohio’s gathering system Planet Found Biogas Facility • First poultry waste-to-energy project on the Delmarva Peninsula, currently generating electricity and cap
Slide 20: Regulatory Initiatives - Florida Natural Gas Base Rate Case
Regulatory Initiatives - Florida Natural Gas Base Rate Case • Florida Public Utilities’ natural gas base rate case was approved in February, with an effective date beginning on March 1, 2023 • The rate case included the following: • Consolidation of four natural gas distribution entities in Florida
Slide 21: Regulatory Initiatives
Regulatory Initiatives Florida GUARD Program • In February 2023, Florida Public Utilities filed for petition of the GUARD program (Gas Utility Access and Replacement Directive) • 10-year program to enhance safety, reliability and accessibility of portions of FPU’s natural gas distribution system by:
Slide 22: PROTECT
CHESAPEAKE UTILITIES PROTECT C O R P O R AT I O N 22
Slide 23: 2022 Sustainability Report
2022 Sustainability Report Our 2022 Sustainability Report: • Details our sustainability strategy and renewable energy portfolio • Reports emissions decrease of 16% as compared to 2019 • Broadens our disclosure on human capital management and diversity initiatives • Outlines our new Companywide Givin
Slide 24: Chesapeake Utilities' Company Culture
Chesapeake Utilities' Company Culture Employee Resource Groups Top Workplaces in USA 24
Slide 25: TRANSFORM
CHESAPEAKE UTILITIES TRANSFORM C O R P O R AT I O N 25
Slide 26: Business Transformation
Business Transformation People • Safety, EDI, learning and skill development through new learning management system (LMS)/”Grove”, new Gratitude employee recognition program, Gallup assisted employee engagement, wellness programs, strong ties to community engagement Processes • Simplify, standardize
Slide 27: Guidance Update
Guidance Update Diluted Earnings Per Share from Continuing Operations Capital Expenditures Guidance through 2025 Guidance through 2025 and for 2023 $6.35 $900 million $6.15 to $1.1 billion $5.04 $4.73 $4.21 CPK Guidance – High Range CPK Guidance – Low Range $3.72 $3.47 $200 million to $411 million $
Slide 28: Investment Proposition – Committed to Superior Performance
Investment Proposition – Committed to Superior Performance Sustainability Strategy Track Record Energized Team Strong Foundation for Growth GROW Financial Discipline Platforms for Growth Responsibly grow the Company to achieve long-term, sustainable success for our stakeholders. Financial Objectives
Slide 29: Appendix
CHESAPEAKE UTILITIES Appendix C O R P O R AT I O N 29
Slide 30: First Quarter 2023 Financial Performance
First Quarter 2023 Financial Performance Diluted Earnings Per Share Key Adjusted Gross Margin Drivers $4.9M $3.1M $2.0M $2.08 $2.04 Regulated Higher Fees and Pipeline Expansion Infrastructure Propane Margins and Natural Gas Programs per Gallon Organic Growth and Recovery Mechanisms $1.3M -$6.9M -$0.
Slide 31: Weather During the First Quarter of 2023
Weather During the First Quarter of 2023 Three Months Ended Variance Delmarva March 31, Year-over-Year Exceptionally Warm Weather Across 2023 2022 # % Actual HDD 1,774 2,181 (407) -19% All Service Areas 10-yr Avg HDD (“Normal”) 2,285 2,255 30 Variance from # (511) (74) •Significantly warmer temperat
Slide 32: Key Drivers of Performance – Quarter Ended March 31, 2023
Key Drivers of Performance – Quarter Ended March 31, 2023 Q1 2022 Diluted Earnings Per Share $2.08 A Reduction in State Tax Rate $0.07 B Core business growth (not impacted by weather) $0.45 Lower Customer Consumption Related to C -$0.29 Warmer Weather D Operating expenses -$0.10 Depreciation, amorti
Slide 33: Regulated Energy Segment – Financial Summary
Regulated Energy Segment – Financial Summary Solid growth, offsetting warmer weather Regulated Energy Segment First Quarter Change (in thousands except per share data) 1 2023 2022 $ % Year-to-Date Highlights Adjusted Gross Margin $ 86,982 $ 82,449 $ 4,533 5.5% •Operating income up 8.5% driven by: De
Slide 34: Unregulated Energy Segment – Financial Summary
Unregulated Energy Segment – Financial Summary Warmer weather partially offset by continued demand for CNG/RNG/LNG services Unregulated Energy Segment First Quarter Change (in thousands except per share data) 1 2023 2022 $ % Year-to-Date Highlights Adjusted Gross Margin $ 42,594 $ 43,284 $ (690) -1.
Slide 35: First Quarter 2023 Financial Summary
First Quarter 2023 Financial Summary Solid performance, despite significantly warmer weather and continued inflationary environment Consolidated First Quarter Change (in thousands except per share data) 2023 2022 $ % 1 Total Adjusted Gross Margin $ 129,540 $ 125,700 $ 3,840 3.1% Operating Income 54,
Slide 36: GAAP to Non-GAAP Reconciliation – Consolidated Results
GAAP to Non-GAAP Reconciliation – Consolidated Results Consolidated Results First Quarter Change (in thousands except per share data) 2023 2022 $ % Operating Revenues $ 218,129 $ 222,880 $ (4,751) -2.1% Cost of Sales: Natural gas, propane and electric costs (88,589) (97,180) 8,591 -8.8% Depreciation
Slide 37: GAAP to Non-GAAP Reconciliation – Regulated Energy Segment
GAAP to Non-GAAP Reconciliation – Regulated Energy Segment Regulated Energy Segment First Quarter Change (in thousands except per share data) 2023 2022 $ % Operating Revenues $ 142,270 $ 127,891 $ 14,379 11.2% Cost of Sales: Natural gas and electric costs (55,288) (45,442) (9,846) 21.7% Depreciation
Slide 38: GAAP to Non-GAAP Reconciliation – Unregulated Energy Segment
GAAP to Non-GAAP Reconciliation – Unregulated Energy Segment Unregulated Energy Segment First Quarter Change (in thousands except per share data) 2023 2022 $ % Operating Revenues $ 83,165 $ 101,292 $ (18,127) -17.9% Cost of Sales: Natural gas and propane costs (40,571) (58,008) 17,437 -30.1% Depreci
Slide 39: Quarterly Earnings Cadence
Quarterly Earnings Cadence Year Q1 EPS Q2 EPS Q3 EPS Q4 EPS FY EPS 2023 $2.04 2022 $2.08 $0.96 $0.54 $1.46 $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% 2019 $1.75 $0.54 $0.38 $1.04 $3.72* % of FY 4