Transformative acquisition more than doubles
operations in
high-growth Florida service
areas
Positions CPK to execute on additional growth
opportunities in regulated
and unregulated businesses
Supports long-term earnings and dividend
growth; increases capital investment plan; financing plan maintains
strong balance sheet
DOVER, Del.,
Sept. 26,
2023 /PRNewswire/ -- Chesapeake Utilities Corporation
(NYSE: CPK) ("Chesapeake Utilities" or "the Company") today
announced it has entered into a definitive agreement to acquire
Florida City Gas ("FCG") from NextEra Energy, Inc. (NYSE: NEE) for
$923 million in cash. Upon closing of
the transaction, which is expected to occur by the end of the
fourth quarter of 2023, FCG will become a wholly owned subsidiary
of Chesapeake Utilities. The Company has increased its capital
investment plan and extended its earnings guidance through 2028 to
reflect the increased scale and investment opportunities related to
the transaction, with an implied earnings per share growth rate of
approximately 8% through 2028.
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FCG serves approximately 120,000 residential and commercial
natural gas customers across eight counties in Florida, including Miami-Dade, Broward, Brevard, Palm
Beach, Hendry, Martin, St.
Lucie and Indian River. Its
natural gas system includes approximately 3,800 miles of
distribution main and 80 miles of transmission pipe.
"This acquisition will more than double our natural gas business
in Florida, one of the fastest
growing states in the nation. For several years, gas distribution
customer growth in Florida has
significantly exceeded national averages. Demand for natural gas
continues to increase as Florida
consumers seek reliable, domestic and affordable energy for their
homes and businesses," said Jeff
Householder, chairman, president and chief executive officer
of Chesapeake Utilities. "We have generated meaningful earnings
growth by acquiring businesses in states where we already operate
and subsequently developing and executing additional growth
opportunities. We see similar opportunities with FCG, and believe
we are well positioned to capture additional growth including gas
distribution expansion to serve new residential development, as
well as infrastructure investments across our other platforms, such
as gas transmission. We expect these opportunities, which are a
large driver of our increased capital investment plan, to enable us
to continue to pursue long-term upper quartile earnings
growth."
"Chesapeake Utilities has a proven track record of deploying its
regulatory, operations, supply and business development expertise
to drive transformative growth in Florida, as exemplified by our acquisition of
Florida Public Utilities in 2009. We are taking the same
disciplined approach with this transaction, which is directly
aligned with our strategic and financial acquisition criteria, and
we anticipate a similar success story with FCG," said Beth Cooper, executive vice president, chief
financial officer, treasurer and assistant corporate secretary of
Chesapeake Utilities. "We intend to finance the transaction through
a combination of long-term debt and equity, ensuring we maintain a
strong balance sheet while supporting our long-term earnings and
dividend growth."
Strategic Rationale: Acquisition of operations in high growth
Florida service areas provides
enhanced platform for growth, as well as scale and financial
benefits
- Expands platform in Florida: Post-acquisition, Chesapeake
Utilities' footprint will expand significantly in Florida. The Company's Florida portfolio following the acquisition is
expected to comprise approximately 60% of its total utility net
plant and operating income, versus 45% for the standalone business
at the end of 2022. This acquisition provides expansion
opportunities into unserved and underserved communities throughout
a widened service territory. Additionally, the transaction
introduces growth opportunities across the Company's portfolio,
from organic growth of the regulated LDC assets to new
opportunities for the Company's natural gas pipeline and virtual
pipeline businesses to other sustainable investments such as
renewable natural gas, alternative fueling stations and fleet
conversions.
- Enhanced scale and efficiency: As a result of this
transaction, the Company's regulated utility customers and net
plant will increase by 50% and 30%, respectively, which will bring
enhanced scale and efficiency benefits. This acquisition is
expected to benefit from Chesapeake Utilities' core experience and
expertise in all facets of natural gas operations, regulatory,
supply, business development and project execution. The Company's
expertise in navigating Florida's
regulatory and political environment as well as expected
efficiencies related to the complementary nature of the combined
operations will allow the Company to optimize this transaction,
further supporting our earnings and dividend growth.
- Financial benefits: The transaction supports and extends
the Company's long-term EPS guidance and provides approximately
$500 million in investment
opportunities associated with FCG over the next five years. The
financing plan includes a balanced mix of equity and long-term
debt, which supports long-term dividend growth and maintains the
Company's strong balance sheet.
Transaction Significantly Expands Chesapeake Utilities'
Presence in Florida
Chesapeake Utilities has had a natural gas distribution presence
in Florida for 40 years,
significantly building on that initial presence to include multiple
business entities across the energy value chain. The acquisition
more than doubles the Company's Florida natural gas operations, expanding
Chesapeake Utilities' service territory coverage to include five
additional counties in Florida and
increasing the Company's presence in five of the top 10 most
populous counties in the state.
- With the addition of FCG, Chesapeake Utilities' overall natural
gas distribution presence in Florida will include an approved regulated
rate base of $941 million, serving
more than 211,000 customers through nearly 7,000 miles of natural
gas distribution company pipeline.
- After transaction close, the Company's consolidated
Florida operations are expected to
contribute approximately 60% of Chesapeake Utilities' operating
income, total utility net plant and future capital investment plan
(5 years).
- The transaction is projected to increase Chesapeake Utilities'
regulated natural gas utility customers and net plant by 50% and
30%, respectively, with the regulated business mix reaching 87% (up
from 81%).
Guidance Update
As a result of the increased scale and investment opportunities
related to the transaction, Chesapeake Utilities is expected to
exceed its current capital expenditure guidance ($900 million to $1.1
billion for the five years ended 2025) two years early. The
Company is excited to introduce its new guidance: capital
expenditure guidance in the range of $1.5
billion to $1.8 billion for
the five years ended 2028 and EPS in the range of $7.75 to $8.00 per
share for 2028, implying an EPS growth rate of approximately 8%
from the current 2025 EPS guidance range, or since 2018, an 8.5%
growth rate.
Financing
Chesapeake Utilities plans to finance the transaction with a
balanced mix of equity and long-term debt to maintain its strong
balance sheet, and has also obtained committed financing from
Barclays to fund the purchase price.
Timing and Approvals
The transaction is expected to close by the end of the fourth
quarter of 2023, subject to expiration of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, securing financing orders from the Delaware and Maryland Public Service
Commissions and other customary closing conditions.
Advisors
Barclays is serving as exclusive financial advisor to Chesapeake
Utilities. Shearman & Sterling and Baker Hostetler are serving
as legal advisors to Chesapeake Utilities.
Conference Call and Webcast
Chesapeake Utilities Corporation (NYSE: CPK) will host a
conference call on Wednesday, September 27,
2023, at 8:30 a.m. ET to
discuss details of the FCG acquisition.
To listen to the Company's conference call via live webcast,
register here or visit the Company's website at
www.chpk.com then proceed to Investors/Events &
Presentations and select the Florida City Gas Acquisition tab for
additional information.
For investors and analysts that wish to participate by phone for
the question and answer portion of the call, please use the
following dial-in information below. A replay of the presentation
will be made available on the previously noted website following
the conclusion of the call.
Toll-free: 800.343.5172
International: 203.518.9848
Conference ID: CPK0927
About Chesapeake Utilities Corporation
Chesapeake Utilities Corporation is a diversified energy
delivery company, listed on the New York Stock Exchange. Chesapeake
Utilities Corporation offers sustainable energy solutions through
its natural gas transmission and distribution, electricity
generation and distribution, propane gas distribution, mobile
compressed natural gas utility services and solutions and other
businesses. For more information, visit www.chpk.com.
Please note that Chesapeake Utilities Corporation is not
affiliated with Chesapeake Energy, an oil and natural gas
exploration company headquartered in Oklahoma City, Oklahoma.
Contacts:
Investors
Beth W.
Cooper, Chesapeake Utilities Corporation
Executive Vice President, Chief Financial Officer, Treasurer and
Assistant Corporate Secretary
302.734.6022
Michael Galtman, Chesapeake
Utilities Corporation
Senior Vice President and Chief Accounting Officer
302.217.7036
Media
Brianna
Patterson, Chesapeake Utilities Corporation
Manager, Public Relations and Strategic Communications
419.314.1233
bpatterson@chpk.com
Hugh Burns/Delia Cannan/Pamela
Greene
Reevemark
212.433.4600
CPK-Team@reevemark.com
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995. One can typically identify
forward-looking statements by the use of forward-looking words,
such as "project," "believe," "expect," "anticipate," "intend,"
"plan," "estimate," "continue," "potential," "forecast" or other
similar words, or future or conditional verbs such as "may,"
"will," "should," "would" or "could." These include statements
regarding the benefits of the proposed acquisition and associated
growth opportunities, anticipated future operating and financial
performance and results, including estimates of earnings growth,
EPS and EPS growth rate and capital expenditures, dividend growth,
financing plans, the expected timing of the closing of the proposed
acquisition, among others. These statements are based on our
current intentions, plans, expectations, assumptions and beliefs.
Forward-looking statements speak only as of the date they are made
or as of the date indicated. These statements are subject to many
risks and uncertainties, including, but not limited to: the
occurrence of any event, change or other circumstance that could
give rise to the right of either or both parties to terminate the
acquisition agreement; the failure to obtain applicable regulatory
approval, including financing orders, in a timely manner or
otherwise; the risk that the acquisition may not close in the
anticipated timeframe or at all due to one or more of the other
closing conditions to the transaction not being satisfied or
waived; the risk that there may be unexpected costs, charges or
expenses resulting from the proposed acquisition; risks related to
the ability of the Company to successfully integrate the business
and achieve the expected operating efficiencies within the expected
timeframes or at all and the possibility that such integration may
be more difficult, time consuming or costly than expected; risks
that the proposed transaction disrupts the Company's current plans
and operations; risks related to disruption of each company's
management's time and attention from ongoing business operations
due to the proposed transaction; continued availability of capital
and financing; the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price
of the Company's common stock or credit ratings; the risk that the
proposed transaction and its announcement could have an adverse
effect on the ability of the Company and FCG to continue to hire,
train and retain appropriately qualified personnel, to retain
customers and to maintain relationships with each of their
respective business partners, suppliers and customers; risks
related to unpredictable and severe or catastrophic events on their
impact on the each company's business, financial condition and
results of operations; and other business effects, including the
effects of industry, market, economic, political or regulatory
conditions. Additional risk factors that may cause actual results
or events to differ materially from those expressed in the
forward-looking statements are described under "Safe Harbor for
Forward-Looking Statements" and Item 1A, "Risk Factors" in our
Annual Report on Form 10-K and in other reports that we have or may
file with the Securities and Exchange Commission.
In light of these risks, uncertainties, and assumptions, the
events described in the forward-looking statements might not occur
or might occur to a different extent or at a different time than we
have described. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. You are cautioned not to
place undue reliance on any forward-looking statements.
This press release is for informational purposes only and not
intended to and does not constitute an offer to sell securities. No
offer of securities shall be made except in accordance with
applicable law.
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SOURCE Chesapeake Utilities Corporation