DOVER, Del., Nov. 3, 2021 /PRNewswire/ -- Chesapeake Utilities
Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company")
today announced its financial results for the third quarter of
2021. The Company's net income for the quarter ended
September 30, 2021 was $12.5
million, or $0.71 per share,
compared to $9.3 million, or
$0.56 per share, for the same quarter
of 2020. Net income for the nine months ended September 30,
2021 was $60.8 million, or
$3.45 per share, compared to
$49.1 million, or $2.97 per share, for the same period of 2020.
Higher earnings for the third quarter of 2021 reflected natural
gas growth in the Company's transmission and distribution
businesses, improved propane margins, contributions from the 2020
and 2021 acquisitions, as well as a return toward pre-pandemic
consumption levels as states of emergencies have been gradually
lifted in the Company's service territories.
On a year-to-date basis, earnings were impacted by the positive
factors noted above, as well as a return toward more normal
weather.
"Our team continued to deliver strong performance during the
third quarter which, when added to their efforts for the first half
of the year, positions us well for the final quarter of the
year. Our double digit earnings for both the quarter and
year-to-date was attributable to strong margin growth across the
Company, generated from higher consumption as volumes resumed
closer to pre-pandemic levels, new margin from pipeline expansion
projects, organic natural gas distribution customer growth,
contributions from Elkton Gas and Western Natural Gas, increased
propane margins per gallon and margins from Aspire Energy and
Marlin Gas Services. Not only is the third quarter typically
the lowest contributing quarter of the year, but third quarter 2020
included a cumulative margin adjustment for the Hurricane Michael
settlement. Even with this timing difference from 2020, our
third quarter 2021 EPS was 26.8 percent higher than third quarter
2020 EPS," commented Jeff
Householder, President and CEO. "We have
also achieved two significant milestones because of our team's
efforts, completing our first Renewable Natural Gas transportation
project and securing our first sustainability linked
financing. These projects are only a sample of the many
sustainable energy delivery projects being pursued across the
organization to drive increased shareholder value. Because of
these opportunities, we believe that Chesapeake Utilities is
uniquely positioned as we head into the final stretch of 2021 and
beyond," Householder added.
In March 2020, the U.S. Centers
for Disease Control and Prevention ("CDC") declared a national
emergency due to the rapidly growing outbreak of COVID-19. In
response to this declaration and the rapid spread of COVID-19
within the United States, federal,
state and local governments throughout the country imposed varying
degrees of restrictions on social and commercial activity to
promote social distancing in an effort to slow the spread of the
illness. These restrictions significantly impacted economic
conditions in the United States in
2020 which have continued throughout 2021. Chesapeake Utilities is
considered an "essential business," which has allowed the Company
to continue operational activities and construction projects while
adhering to the safety procedures intended to limit the spread of
the virus. At this time, restrictions continue to be lifted
as vaccines have become widely available in the United States. For example, the state of
emergency in Florida was
terminated in May 2021 followed by
Delaware and Maryland in July
2021, resulting in reduced restrictions. The expiration of
the states of emergency in the Company's service territories has
also concluded the ability to defer incremental pandemic related
costs for consideration through the applicable regulatory
process. Despite these positive state orders and in light of
the continued emergence and growing prevalence of new variants of
COVID-19, the Company continues to operate under its pandemic
response plan, monitor developments affecting employees, customers,
suppliers, stockholders and take all precautions warranted to
operate safely and to comply with the CDC, and the Occupational
Safety and Health Administration, in order to protect its
employees, customers and the communities it serves.
Capital Expenditures Forecast and Earnings Guidance
Update
In February 2021, the Company
updated and extended its capital expenditures and EPS forecasts
through 2025. The included initiating new five-year capital
expenditures guidance from 2021 through 2025, of $750 million to $1
billion and consequently amending and extending EPS guidance
to $6.05-$6.25 for 2025. The Company continues to review
its projections and remains supportive of this guidance.
Operating Results for the Quarters Ended September 30,
2021 and 2020
Consolidated Results
|
Three Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
79,971
|
|
|
$
|
79,508
|
|
|
$
|
463
|
|
|
0.6
|
%
|
Depreciation,
amortization and property taxes
|
21,165
|
|
|
22,976
|
|
|
(1,811)
|
|
|
(7.9)
|
%
|
Other operating
expenses
|
38,693
|
|
|
39,126
|
|
|
(433)
|
|
|
(1.1)
|
%
|
Operating
income
|
$
|
20,113
|
|
|
$
|
17,406
|
|
|
$
|
2,707
|
|
|
15.6
|
%
|
Operating income during the third quarter of 2021 was
$20.1 million, an increase of
$2.7 million, or 15.6 percent,
compared to the same period in 2020. During the third quarter of
2020, the Company settled the Hurricane Michael limited proceeding
which resulted in $1.9 million in
operating income being recognized which related to the first and
second quarters of 2020. Excluding the absence of this timing
difference, operating income increased $4.6
million compared to the third quarter of 2020. Higher
performance in the third quarter of 2021 was generated from
continued pipeline expansion projects, contributions from the 2020
acquisitions of Elkton Gas Company ("Elkton Gas") and Western
Natural Gas Company ("Western Natural Gas"), higher margins from
consumption returning toward pre-pandemic levels, natural gas
distribution growth, increased propane margins, and margin growth
from increased investment in the Florida Gas Reliability
Infrastructure Program ("GRIP"). The Company recorded higher
depreciation, amortization and property taxes related to recent
capital investments and operating expenses associated primarily
with growth initiatives, including payroll, benefits and other
employee-related expenses. These expense increases were largely
offset by $3.0 million of lower
pandemic related costs and the establishment of regulatory assets
for COVID-19 expenses.
Regulated Energy Segment
|
Three Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
65,102
|
|
|
$
|
66,491
|
|
|
$
|
(1,389)
|
|
|
(2.1)
|
%
|
Depreciation,
amortization and property taxes
|
17,215
|
|
|
19,617
|
|
|
(2,402)
|
|
|
(12.2)
|
%
|
Other operating
expenses
|
24,349
|
|
|
26,392
|
|
|
(2,043)
|
|
|
(7.7)
|
%
|
Operating
income
|
$
|
23,538
|
|
|
$
|
20,482
|
|
|
$
|
3,056
|
|
|
14.9
|
%
|
Operating income for the Regulated Energy segment for the third
quarter of 2021 was $23.5 million, an
increase of $3.1 million, or 14.9
percent, over the same period in 2020. During the third quarter of
2020, the Company settled the Hurricane Michael limited proceeding
which resulted in $1.9 million in
operating income being recognized which related to the first and
second quarters of 2020. Excluding this timing difference,
operating income increased $5.0
million compared to the third quarter of 2020. Higher
operating income reflects continued pipeline expansions by Eastern
Shore and Peninsula Pipeline, increased consumption from a return
toward pre-pandemic consumption levels, organic growth in the
Company's natural gas distribution businesses, and operating
results from the Elkton Gas and Escambia Meter Station acquisitions
completed in 2020 and 2021, as well as lower expenses. Operating
expenses decreased by $3.0 million
compared to the prior year quarter due to a lower level of overall
pandemic related costs compared to 2020 and the establishment of
regulatory assets for COVID-19 expenses as authorized by the
PSCs.
The key components of the decrease in gross margin are shown
below:
(in
thousands)
|
|
Margin impact from
the Hurricane Michael regulatory proceeding settlement (includes
the
absence of first and second quarter 2020 impact recorded in the
third quarter of 2020)
|
$
|
(5,507)
|
|
Eastern Shore and
Peninsula Pipeline service expansions
|
795
|
|
Improved margin from
electric operations
|
653
|
|
Natural gas growth
(excluding service expansions)
|
620
|
|
Margin contribution
from 2020 and 2021 acquisitions
|
483
|
|
Florida
GRIP
|
475
|
|
Increased customer
consumption - primarily due to a return toward pre-pandemic
conditions
|
314
|
|
Eastern Shore capital
surcharge
|
304
|
|
Other
variances
|
474
|
|
Quarter-over-quarter decrease in gross
margin
|
$
|
(1,389)
|
|
The major components of the decrease in other operating expenses
are as follows:
(in
thousands)
|
|
Regulatory deferral
of COVID-19 expenses per PSCs orders
|
$
|
(2,437)
|
|
Net reduction in
expenses associated with the COVID-19 pandemic
|
(546)
|
|
Payroll, benefits and
other employee-related expenses due to growth
|
612
|
|
Operating expenses
from the Elkton Gas acquisition
|
204
|
|
Other
variances
|
124
|
|
Quarter-over-quarter decrease in other operating
expenses
|
$
|
(2,043)
|
|
Unregulated Energy Segment
|
Three Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
14,897
|
|
|
$
|
13,068
|
|
|
$
|
1,829
|
|
|
14.0
|
%
|
Depreciation,
amortization and property taxes
|
3,921
|
|
|
3,326
|
|
|
595
|
|
|
17.9
|
%
|
Other operating
expenses
|
13,859
|
|
|
12,834
|
|
|
1,025
|
|
|
8.0
|
%
|
Operating income
(loss)
|
$
|
(2,883)
|
|
|
$
|
(3,092)
|
|
|
$
|
209
|
|
|
6.8
|
%
|
Operating results for the Unregulated Energy segment for the
third quarter of 2021 increased by $0.2
million, compared to the same period in 2020. The operating
results for this segment typically exhibit seasonality with the
first and fourth quarters producing higher results due to colder
temperatures. The results for the third quarter are not
indicative of the results for the entire
year.
Higher operating results during the third quarter were driven
by increased propane margins, contributions from the Company's
acquisition of Western Natural Gas and margin improvement from
Aspire Energy of Ohio ("Aspire
Energy") as well as increased consumption in the propane businesses
as volumes continue returning toward pre-pandemic levels. Increased
operating results were partially offset by higher operating
expenses, depreciation, amortization and property taxes related to
recent capital investments, and expenses associated with Western
Natural Gas.
The major components contributing to the change in gross margin
are shown below:
(in
thousands)
|
|
|
Propane
Operations
|
|
|
Increased retail
propane margins and service fees
|
|
$
|
751
|
|
Western Natural Gas
acquisition (completed in October 2020)
|
|
372
|
|
Increased wholesale
propane margins
|
|
243
|
|
Increased customer
consumption - primarily due to a return toward pre-pandemic
conditions
|
|
222
|
|
Increased customer
consumption - primarily weather related
|
|
122
|
|
Aspire
Energy
|
|
|
Increased margin
including improvements from natural gas liquid
processing
|
|
320
|
|
Other
variances
|
|
(201)
|
|
Quarter-over-quarter increase in gross
margin
|
|
$
|
1,829
|
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Payroll, benefits and
other employee-related expenses due to growth
|
$
|
427
|
|
Operating expenses
from the Western Natural Gas acquisition
|
273
|
|
Net increase in
operating expenses associated with a return toward
pre-pandemic conditions
|
123
|
|
Other
variances
|
202
|
|
Quarter-over-quarter increase in other operating
expenses
|
$
|
1,025
|
|
Operating Results for the Nine Months
Ended September 30, 2021 and 2020
Consolidated Results
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
281,241
|
|
|
$
|
253,418
|
|
|
$
|
27,823
|
|
|
11.0
|
%
|
Depreciation,
amortization and property taxes
|
62,407
|
|
|
57,103
|
|
|
5,304
|
|
|
9.3
|
%
|
Other operating
expenses
|
124,546
|
|
|
118,797
|
|
|
5,749
|
|
|
4.8
|
%
|
Operating
income
|
$
|
94,288
|
|
|
$
|
77,518
|
|
|
$
|
16,770
|
|
|
21.6
|
%
|
Operating income during the first nine months of 2021 was
$94.3 million, an increase of
$16.8 million, or 21.6 percent,
compared to the same period in 2020. The growth in 2021 reflects
increased consumption driven primarily by colder weather compared
to the same period of 2020, expansion projects and acquisitions
completed in 2020 and 2021. Further contributing to the improved
performance in the first nine months of 2021 was organic growth,
consumption returning toward pre-pandemic levels, increased propane
margins, increased margins from investment in the Florida GRIP
program, and the impact of the Hurricane Michael regulatory
proceeding settlement. These margin increases were partially offset
by higher depreciation, amortization and property taxes related to
recent capital investments and operating expenses associated
primarily with growth initiatives and a return towards pre-pandemic
operating levels, including payroll, benefits and other
employee-related expenses and outside services costs. The operating
expense increases were partially offset by $2.3 million decrease in pandemic related costs
compared to 2020 and the establishment of regulatory assets for
COVID-19 expenses as approved by the PSCs.
Regulated Energy Segment
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
209,718
|
|
|
$
|
191,745
|
|
|
$
|
17,973
|
|
|
9.4
|
%
|
Depreciation,
amortization and property taxes
|
50,794
|
|
|
47,144
|
|
|
3,650
|
|
|
7.7
|
%
|
Other operating
expenses
|
79,714
|
|
|
78,225
|
|
|
1,489
|
|
|
1.9
|
%
|
Operating
income
|
$
|
79,210
|
|
|
$
|
66,376
|
|
|
$
|
12,834
|
|
|
19.3
|
%
|
Operating income for the Regulated Energy segment for the first
nine months of 2021 was $79.2
million, an increase of $12.8
million, or 19.3 percent, over the same period in 2020.
Higher operating income reflects continued pipeline expansions by
Eastern Shore and Peninsula Pipeline, operating results from the
Elkton Gas and Escambia Meter Station acquisitions completed in
2020 and 2021, and increased consumption from a return toward
pre-pandemic consumption levels. Further contributing to the
operating income growth was margin from organic growth in the
Company's natural gas distribution businesses and increased
consumption driven primarily by colder weather compared to the same
period of 2020. These margin increases were offset by higher
depreciation, amortization and property taxes, including
amortization of the regulatory asset associated with the Hurricane
Michael regulatory proceeding settlement, expenses associated with
Elkton Gas, and higher other operating expenses. The operating
expense increases were partially offset by $2.5 million associated with a reduction in
pandemic related costs compared to 2020 and the establishment of
regulatory assets for COVID-19 expenses as approved by the
PSCs.
The key components of the increase in gross margin are shown
below:
(in
thousands)
|
|
Eastern Shore and
Peninsula Pipeline service expansions
|
$
|
6,037
|
|
Margin contribution
from 2020 and 2021 acquisitions
|
2,624
|
|
Natural gas growth
(excluding service expansions)
|
2,237
|
|
Increased customer
consumption - primarily due to a return toward pre-pandemic
conditions
|
2,112
|
|
Increased customer
consumption - primarily weather related
|
1,510
|
|
Florida
GRIP
|
1,408
|
|
Improved margin from
electric operations
|
931
|
|
Sandpiper Energy
infrastructure rider associated with conversions
|
624
|
|
Other
variances
|
490
|
|
Period-over-period
increase in gross margin
|
$
|
17,973
|
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Payroll, benefits and
other employee-related expenses due to growth
|
$
|
2,601
|
|
Operating expenses
from the Elkton Gas acquisition
|
1,238
|
|
Net increase in
operating expenses associated with a return toward pre-pandemic
conditions
|
853
|
|
Regulatory deferral
of COVID-19 expenses per PSCs orders
|
(3,312)
|
|
Other
variances
|
109
|
|
Period-over-period
increase in other operating expenses
|
$
|
1,489
|
|
Unregulated Energy Segment
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
(in
thousands)
|
2021
|
|
2020
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
71,625
|
|
|
$
|
61,883
|
|
|
$
|
9,742
|
|
|
15.7
|
%
|
Depreciation,
amortization and property taxes
|
11,552
|
|
|
9,869
|
|
|
1,683
|
|
|
17.1
|
%
|
Other operating
expenses
|
44,296
|
|
|
40,964
|
|
|
3,332
|
|
|
8.1
|
%
|
Operating
income
|
$
|
15,777
|
|
|
$
|
11,050
|
|
|
$
|
4,727
|
|
|
42.8
|
%
|
Operating income for the Unregulated Energy segment for the nine
months ended September 30, 2021 was
$15.8 million, an increase of
$4.7 million, or 42.8 percent, over
the same period in 2020. Higher operating income resulted from
increased consumption driven primarily by colder weather compared
to the same period in 2020, higher retail propane margins per
gallon, and contributions from the acquisition of the Western
Natural Gas propane assets. These margin increases were partially
offset by higher depreciation, amortization and property taxes
related to recent capital investments, increased payroll and
benefits costs, new expenses associated with Western Natural Gas
and higher other operating expenses.
The major components of the increase in gross margin are shown
below:
(in
thousands)
|
|
|
Propane
Operations
|
|
|
Increased customer
consumption - primarily weather related
|
|
$
|
3,823
|
|
Increased retail
propane margins and service fees
|
|
2,403
|
|
Western Natural Gas
acquisition (completed in October 2020)
|
|
1,312
|
|
Increased wholesale
propane margins per gallon
|
|
309
|
|
Marlin Gas
Services
|
|
|
Increased demand for
CNG services
|
|
337
|
|
Aspire
Energy
|
|
|
Increased customer
consumption - primarily weather related
|
|
1,152
|
|
Improved margin
including natural gas liquid processing
|
|
897
|
|
Other
variances
|
|
(491)
|
|
Period-over-period
increase in gross margin
|
|
$
|
9,742
|
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Payroll, benefits and
other employee-related expenses due to growth
|
$
|
1,170
|
|
Operating expenses
from the Western Natural Gas acquisition
|
880
|
|
Net increase in
operating expenses associated with a return toward pre-pandemic
conditions
|
406
|
|
Insurance expense
(non-health)
|
404
|
|
Other
variances
|
472
|
|
Period-over-period increase in other
operating expenses
|
$
|
3,332
|
|
*Unless otherwise noted, EPS information is presented on a
diluted basis.
**This press release includes references to non-Generally
Accepted Accounting Principles ("GAAP") financial measures,
including gross margin. A "non-GAAP financial measure" is generally
defined as a numerical measure of a company's historical or future
performance that includes or excludes amounts, or that is subject
to adjustments, so as to be different from the most directly
comparable measure calculated or presented in accordance with GAAP.
Our management believes certain non-GAAP financial measures, when
considered together with GAAP financial measures, provide
information that is useful to investors in understanding
period-over-period operating results separate and apart from items
that may, or could, have a disproportionately positive or negative
impact on results in any particular period.
The Company calculates "gross margin" by deducting the cost
of sales from operating revenue. Cost of sales includes the
purchased fuel cost for natural gas, electricity and propane, and
the cost of labor spent on direct revenue-producing activities and
excludes depreciation, amortization and accretion. Other companies
may calculate gross margin in a different manner. Gross margin
should not be considered an alternative to operating income or net
income, both of which are determined in accordance with GAAP. The
Company believes that gross margin, although a non-GAAP measure, is
useful and meaningful to investors as a basis for making investment
decisions. It provides investors with information that demonstrates
the profitability achieved by the Company under its allowed rates
for regulated operations and under its competitive pricing
structures for unregulated businesses. The Company's management
uses gross margin in measuring its business units'
performance.
Environmental, Social and Governance Initiatives
Environmental, Social and Governance ("ESG") initiatives are
embedded within Chesapeake Utilities culture and are an integral
part of our strategy. ESG is at the core of our well-established
culture and our informed business decisions. Over the years, we
have reduced our greenhouse gas emissions, while responsibly
growing our businesses. We have also helped to accelerate the
reduction of emissions by many of our customers. Our combined
efforts have enhanced the sustainability of our local
communities. We look forward to publishing our inaugural
Corporate Responsibility and Sustainability Report. Below we have
highlighted several of Chesapeake Utilities initiatives in each
area of ESG:
Advancing Environmental Initiatives
Our
three-part action plan continues to make progress. We are
pursuing a three-part action plan that supports decarbonization and
a lower carbon energy future. First, we are taking actions that
will continue to reduce our greenhouse gas emissions. For example,
we have largely completed our Florida GRIP to replace older
portions of our natural gas distribution system. The remaining
capital expenditures associated with this program will be invested
through 2022. Our Elkton Gas subsidiary also reached a settlement
agreement with the Maryland PSC to accelerate its Aldyl-A pipeline
replacement program and to recover the costs of the plan in the
form of a fixed charge rider through a 5-year
surcharge. Throughout our pipeline system, we have also
implemented improved emission detection technology at our pipeline
compressor stations.
The second component of our action plan is providing services
and support to our customers who are reducing their greenhouse gas
emissions. Our extension from Eastern Shore's Del-Mar Energy
Pathway Project, which was recently completed, brings natural gas
to our distribution system in Somerset
County, Maryland for the first time. As part of this
project, our services will support the conversion by two
significant industrial customers in Somerset County from less environmentally
friendly fuel sources, including in one case, wood chips.
Similarly, several of our commercial customers continue to convert
their vehicle fleet to compressed natural gas or propane, further
reducing their greenhouse gas emissions and positively impacting
the environment.
We continue to see significant demand for new natural gas
service in both our Delmarva and Florida territories, with our
growth rates more than double the industry's growth rates. In many
of our local markets, natural gas is a cleaner fuel option than
alternative energy sources. Natural gas is an important component
of the country's energy transition and we are committed to
responsibly expanding the infrastructure in our growing service
areas.
These same markets are also presenting renewable natural gas
("RNG") opportunities with ongoing projects to transform landfill,
food, dairy and poultry waste into usable energy. The development
of several RNG projects is the third component of our action plan.
Our participation in these projects extends from transporting the
RNG to market by pipeline or our Marlin Gas Services compressed
natural gas trailers, to potential investments in biogas plants
and, in some cases, the solar energy facilities to provide
electricity to the plants and significantly improve the RNG carbon
intensity score. In October 2021, we
completed construction of the Noble Road Landfill Renewable Natural
Gas pipeline project. This is our first RNG transportation project
and when combined with our previously announced projects will
expand our ability to utilize RNG in our services territories. We
are continuing to actively consider other renewable projects and
the potential of increasing the number of RNG projects in our
diversified energy portfolio. We are committed to remaining
disciplined in our approach by pursuing projects that meet our
return thresholds and strategic goals.
We also have several other initiatives underway, including plans
to add additional small solar facilities along our system, and our
participation in a pilot program to blend hydrogen into the natural
gas distribution system that serves our Eight Flags combined heat
and power plant. We are optimistic about this pilot program and
believe that hydrogen will continue to gain in efficiency and
become more price competitive over time.
To finance these projects, we are working with many of our key
banking partners to utilize sustainable financing capacity at
attractive pricing. Just recently, we secured $9.6 million in sustainability linked financing
from Bank of America to fund capital investments in energy delivery
solutions provided by our subsidiary, Marlin Gas Services.
Advancing Social Initiatives
Promoting
equity, diversity and inclusion ("EDI"). Our
success is the direct result of our employees and our strong
culture that fully engages our team and promotes equity, diversity,
inclusion, integrity, accountability and reliability. During the
third quarter, we were recognized as a Top Workplace in
Delaware for the 10th
consecutive year. This follows recognition as a Top Workplace
nationally earlier in the year. These recognitions are a
testament to our employees' commitment to excellence.
We believe that a combination of diverse team members and an
inclusive culture contributes to the success of our Company and to
enhanced societal advancement. During the third quarter, we were
very excited to hire William
Hughston as Vice President and Chief Human Resources
Officer. Mr. Hughston brings tremendous EDI experience to the
team, including drawing from his previous experiences and prior
role as Chief Diversity Officer. Additionally, in October 2021, we announced the addition of our
third female Director to our Board of Directors, Lisa Bisaccia. Ms. Bisaccia's addition continues
our steady progress of gender and ethnic diversity that represents
the communities we serve. Our Board of Directors includes, three
female directors, an African American Director and a Director who
is of Middle Eastern descent.
We established an EDI Council in 2020, complementing and
broadening the work of the Women in Energy group started years ago.
The Council oversees our efforts to improve diversity in
recruitment, employee development and advancement, cultural
awareness and related policies. These efforts are expanded through
the broad reach of our six Employee Resource Groups and other
partnerships we have in the community. Employees have access to
communications and on-demand learning sessions on an array of
topics, including equity, diversity and inclusion, through our "EDI
Wise" webinars. We have also expanded our supplier diversity
program to gather information that will enable us to further
expand, measure and report on the diversity of our suppliers and
associated spend.
Safety at the center of Chesapeake Utilities culture and the
way we do business. There is nothing
more important than the safety of our team, our customers and our
communities. The importance of safety is exhibited throughout our
organization, with the direction and tone set by the Board of
Directors and our President and Chief Executive Officer. Employees
are required to attend monthly safety meetings and incorporate
safety moments at operational and other meetings. Thus far in 2021,
four of our business units have been recognized with awards from
the American Gas Association for their commitment to safety.
The achievement of superior safety performance is both an
important short and long-term strategic initiative in managing our
operations. Our new state-of-the-art training center, named 'Safety
Town,' provides employees hands-on training and simulated
on-the-job field experiences, further developing our team and
enhancing the reliability and integrity of our systems. Safety Town
has also expanded our community outreach by offering safety
training to many regional first responders. Our second Safety Town
facility will be located in Florida and is in the final stages of
planning.
Advancing Governance Initiatives
Commitment
to sound governance practices. Consistent with our culture
of teamwork, the broad responsibility of ESG stewardship is
supported across our organization by the dedication and efforts of
the Board and its Committees, as well as the entrepreneurship and
dedication of our team. As stewards of long-term enterprise value,
the Board is committed to overseeing the sustainability of the
Company. The Board and Corporate Governance Committee annually
review our corporate governance documents and practices to ensure
that they provide the appropriate framework under which we operate.
In recent years, we have received national recognition as the
Governance Team of the Year, and just this year were also
recognized as Best for Corporate Governance Among North American
Utilities by Ethical Boardroom magazine. To learn more about our
corporate governance practices and transparency, stakeholder
engagement, the experience and diversity of our Board members, and
our Business Code of Ethics and Conduct, which highlights our
commitment to the highest ethical standards and the importance of
engaging in sustainable practices, please view our Proxy Statement
filed with the Securities and Exchange Commission on March 22, 2021. Additionally, please view
Chesapeake Utilities' news releases and historical quarterly
earnings conference calls for additional discussions on ESG and our
sustainability practices.
Forward-Looking Statements
Matters included in this release may include forward-looking
statements that involve risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements.
Please refer to the Safe Harbor for Forward-Looking Statements in
the Company's 2020 Annual Report on Form 10-K and Quarterly Report
on Form 10-Q for the third quarter of 2021, for further information
on the risks and uncertainties related to the Company's
forward-looking statements.
Conference Call
Chesapeake Utilities will host a conference call on Thursday,
November 4, 2021 at 4:00 p.m. Eastern
Time to discuss the Company's financial results for the
three and nine ended September 30, 2021. To participate
in this call, dial 877.224.1468 and reference Chesapeake Utilities'
2021 Third Quarter Results Conference Call. To access the
replay recording of this call, the accompanying transcript, and
other pertinent quarterly information, use the link CPK -
Conference Call Audio Replay, or visit the Investors/Events and
Presentations section of the Company's website at
www.chpk.com.
About Chesapeake Utilities Corporation
Chesapeake Utilities is a diversified energy company engaged in
natural gas transmission and distribution; electricity generation
and distribution; propane gas distribution; mobile compressed
natural gas services; and other businesses. Information about
Chesapeake Utilities and its family of businesses is available at
https://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.
For more information, contact:
Beth W. Cooper
Executive Vice President, Chief Financial Officer and Assistant
Corporate Secretary
302.734.6799
Financial
Summary
|
(in thousands,
except per share data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gross
Margin
|
|
|
|
|
|
|
|
Regulated
Energy segment
|
$
|
65,102
|
|
|
$
|
66,491
|
|
|
$
|
209,718
|
|
|
$
|
191,745
|
|
Unregulated
Energy segment
|
14,897
|
|
|
13,068
|
|
|
71,625
|
|
|
61,883
|
|
Other
businesses and eliminations
|
(28)
|
|
|
(51)
|
|
|
(102)
|
|
|
(210)
|
|
Total Gross
Margin
|
$
|
79,971
|
|
|
$
|
79,508
|
|
|
$
|
281,241
|
|
|
$
|
253,418
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
|
|
|
|
|
Regulated Energy segment
|
$
|
23,538
|
|
|
$
|
20,482
|
|
|
$
|
79,210
|
|
|
$
|
66,376
|
|
Unregulated Energy segment
|
(2,883)
|
|
|
(3,092)
|
|
|
15,777
|
|
|
11,050
|
|
Other
businesses and eliminations
|
(542)
|
|
|
16
|
|
|
(699)
|
|
|
92
|
|
Total Operating
Income
|
20,113
|
|
|
17,406
|
|
|
94,288
|
|
|
77,518
|
|
Other income
(expense), net
|
339
|
|
|
(40)
|
|
|
2,180
|
|
|
2,997
|
|
Interest
Charges
|
4,975
|
|
|
4,584
|
|
|
15,134
|
|
|
15,452
|
|
Income from
Continuing Operations Before Income Taxes
|
15,477
|
|
|
12,782
|
|
|
81,334
|
|
|
65,063
|
|
Income Taxes on
Continuing Operations
|
2,993
|
|
|
3,502
|
|
|
20,563
|
|
|
16,082
|
|
Income from
Continuing Operations
|
12,484
|
|
|
9,280
|
|
|
60,771
|
|
|
48,981
|
|
Income (Loss) from
Discontinued Operations, Net of Tax
|
(9)
|
|
|
(19)
|
|
|
(17)
|
|
|
165
|
|
Net
Income
|
$
|
12,475
|
|
|
$
|
9,261
|
|
|
$
|
60,754
|
|
|
$
|
49,146
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share of Common Stock
|
|
|
|
|
|
|
|
Earnings from
Continuing Operations
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.46
|
|
|
$
|
2.97
|
|
Earnings from
Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Basic Earnings Per
Share of Common Stock
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.46
|
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share of Common Stock
|
|
|
|
|
|
|
|
Earnings from
Continuing Operations
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.45
|
|
|
$
|
2.96
|
|
Earnings from
Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Diluted Earnings Per
Share of Common Stock
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.45
|
|
|
$
|
2.97
|
|
Financial Summary
Highlights
|
|
Key variances in
continuing operations, between the third quarter of 2021 and the
third quarter of 2020, included:
|
|
(in thousands,
except per share data)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
Third Quarter of
2020 Reported Results from Continuing
Operations
|
|
$
|
12,782
|
|
|
$
|
9,280
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
Adjusting for
Unusual Items:
|
|
|
|
|
|
|
Absence of timing of
Hurricane Michael Settlement (first and second quarter
2020 impacts recorded in the third quarter of
2020)
|
|
(1,933)
|
|
|
(1,444)
|
|
|
(0.08)
|
|
Regulatory deferral of
COVID-19 expenses per PSCs orders
|
|
2,437
|
|
|
1,821
|
|
|
0.10
|
|
Favorable income tax
impact associated the CARES Act recognized during the
third quarter of 2021
|
|
—
|
|
|
922
|
|
|
0.05
|
|
|
|
504
|
|
|
1,299
|
|
|
0.07
|
|
|
|
|
|
|
|
|
Increased
(Decreased) Gross Margins:
|
|
|
|
|
|
|
Increased retail
propane margins and fees
|
|
994
|
|
|
743
|
|
|
0.04
|
|
Margin contributions
from 2020 and 2021 acquisitions*
|
|
855
|
|
|
638
|
|
|
0.04
|
|
Eastern Shore and
Peninsula Pipeline service expansions*
|
|
795
|
|
|
594
|
|
|
0.03
|
|
Improved margin from
electric operations
|
|
653
|
|
|
488
|
|
|
0.03
|
|
Natural gas growth
(excluding service expansions)
|
|
620
|
|
|
463
|
|
|
0.03
|
|
Increased customer
consumption - primarily due to a return toward pre-
pandemic conditions
|
|
536
|
|
|
400
|
|
|
0.02
|
|
Florida
GRIP*
|
|
475
|
|
|
355
|
|
|
0.02
|
|
|
|
4,928
|
|
|
3,681
|
|
|
0.21
|
|
|
|
|
|
|
|
|
(Increased)
Decreased Operating Expenses (Excluding Cost of
Sales):
|
|
|
|
|
|
|
Depreciation,
amortization and property tax costs due to new capital
investments
|
|
(1,715)
|
|
|
(1,281)
|
|
|
(0.07)
|
|
Payroll, benefits and
other employee-related expenses
|
|
(1,317)
|
|
|
(984)
|
|
|
(0.06)
|
|
Operating expenses for
Elkton Gas and Western Natural Gas acquisitions
|
|
(531)
|
|
|
(397)
|
|
|
(0.02)
|
|
Net reduction in
expenses associated with the COVID-19 pandemic
|
|
608
|
|
|
454
|
|
|
0.03
|
|
|
|
(2,955)
|
|
|
(2,208)
|
|
|
(0.12)
|
|
|
|
|
|
|
|
|
Other income tax
effects
|
|
—
|
|
|
269
|
|
|
0.02
|
|
Net other
changes
|
|
218
|
|
|
163
|
|
|
—
|
|
Change in shares
outstanding due to 2020 and 2021 equity offerings
|
|
—
|
|
|
—
|
|
|
(0.03)
|
|
|
|
218
|
|
|
432
|
|
|
(0.01)
|
|
Third Quarter of
2021 Reported Results from Continuing Operations
|
|
$
|
15,477
|
|
|
$
|
12,484
|
|
|
$
|
0.71
|
|
|
*See the Major
Projects and Initiatives table.
|
Key variances in continuing operations, between the nine months
ended September 30, 2021 and the nine months ended
September 30, 2020, included:
(in thousands,
except per share data)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
Nine Months Ended
September 30, 2020 Reported Results from Continuing
Operations
|
|
$
|
65,063
|
|
|
$
|
48,981
|
|
|
$
|
2.96
|
|
|
|
|
|
|
|
|
Adjusting for
Unusual Items:
|
|
|
|
|
|
|
Regulatory deferral of
COVID-19 expenses per PSCs orders
|
|
3,312
|
|
|
2,437
|
|
|
0.14
|
|
Gains from sales of
assets
|
|
(1,563)
|
|
|
(1,150)
|
|
|
(0.07)
|
|
Net impact of CARES
Act items recognized during the second quarter of 2020
and third quarter of 2021
|
|
—
|
|
|
(748)
|
|
|
(0.06)
|
|
|
|
1,749
|
|
|
539
|
|
|
0.01
|
|
Increased
(Decreased) Gross Margins:
|
|
|
|
|
|
|
Increased customer
consumption - primarily weather related
|
|
6,485
|
|
|
4,772
|
|
|
0.27
|
|
Eastern Shore and
Peninsula Pipeline service expansions*
|
|
6,037
|
|
|
4,442
|
|
|
0.25
|
|
Margin contributions
from 2020 and 2021 acquisitions*
|
|
3,936
|
|
|
2,896
|
|
|
0.16
|
|
Increased propane
margins and fees
|
|
2,712
|
|
|
1,995
|
|
|
0.11
|
|
Increased customer
consumption - primarily due to a return toward pre-
pandemic conditions
|
|
2,280
|
|
|
1,677
|
|
|
0.10
|
|
Natural gas growth
(excluding service expansions)
|
|
2,237
|
|
|
1,646
|
|
|
0.09
|
|
Florida
GRIP*
|
|
1,408
|
|
|
1,036
|
|
|
0.06
|
|
Improved margin from
electric operations
|
|
931
|
|
|
685
|
|
|
0.04
|
|
Aspire Energy improved
margin including natural gas liquid processing
|
|
897
|
|
|
660
|
|
|
0.04
|
|
Sandpiper
infrastructure rider associated with conversions
|
|
624
|
|
|
459
|
|
|
0.04
|
|
|
|
27,547
|
|
|
20,268
|
|
|
1.16
|
|
|
|
|
|
|
|
|
(Increased)
Decreased Operating Expenses (Excluding Cost of
Sales):
|
|
|
|
|
|
|
Depreciation,
amortization and property tax costs due to new capital
investments
|
|
(5,802)
|
|
|
(4,269)
|
|
|
(0.24)
|
|
Payroll, benefits and
other employee-related expenses due to growth
|
|
(4,679)
|
|
|
(3,443)
|
|
|
(0.20)
|
|
Operating expenses for
Elkton Gas and Western Natural Gas acquisitions
|
|
(2,499)
|
|
|
(1,839)
|
|
|
(0.10)
|
|
Net increase in
operating expenses associated with a return toward pre-
pandemic conditions
|
|
(969)
|
|
|
(713)
|
|
|
(0.04)
|
|
Insurance expense
(non-health)
|
|
(420)
|
|
|
(309)
|
|
|
(0.02)
|
|
|
|
(14,369)
|
|
|
(10,573)
|
|
|
(0.60)
|
|
|
|
|
|
|
|
|
Other income tax
effects
|
|
—
|
|
|
554
|
|
|
0.03
|
|
Net other
changes
|
|
1,344
|
|
|
1,002
|
|
|
0.07
|
|
Change in shares
outstanding due to 2020 and 2021 equity offerings
|
|
—
|
|
|
—
|
|
|
(0.18)
|
|
|
|
1,344
|
|
|
1,556
|
|
|
(0.08)
|
|
Nine Months Ended
September 30, 2021 Reported Results from Continuing
Operations
|
|
$
|
81,334
|
|
|
$
|
60,771
|
|
|
$
|
3.45
|
|
|
*See the Major
Projects and Initiatives table.
|
Recently Completed and Ongoing Major Projects and
Initiatives
The Company constantly pursues and develops additional projects
and initiatives to serve existing and new customers, and to further
grow its businesses and earnings, with the intention to increase
shareholder value. The following table includes the major
projects/initiatives recently completed and currently underway.
Major projects and initiatives that have generated consistent
year-over-year margin contributions are removed from the table. In
the future, the Company will add new projects and initiatives to
this table once negotiations are substantially final and the
associated earnings can be estimated.
|
|
Gross Margin for
the Period
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Year
Ended
|
|
Estimate
for
|
Project/Initiative
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
|
Fiscal
|
in
thousands
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2020
|
|
2021
|
|
2022
|
Pipeline
Expansions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Palm Beach
County,
Florida Expansion (1)
|
|
$
|
1,175
|
|
|
$
|
1,020
|
|
|
$
|
3,515
|
|
|
$
|
2,988
|
|
|
$
|
4,167
|
|
|
$
|
4,811
|
|
|
$
|
5,227
|
|
Del-Mar Energy Pathway
(1) (2)
|
|
1,049
|
|
|
924
|
|
|
2,854
|
|
|
1,565
|
|
|
2,462
|
|
|
4,578
|
|
|
6,708
|
|
Callahan Intrastate
Pipeline (2) (3)
|
|
1,893
|
|
|
1,378
|
|
|
5,673
|
|
|
1,452
|
|
|
2,926
|
|
|
7,564
|
|
|
7,564
|
|
Guernsey Power
Station
|
|
47
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
404
|
|
|
1,486
|
|
Winter Haven
Expansion
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
658
|
|
Beachside Pipeline Extension
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Pipeline
Expansions
|
|
4,164
|
|
|
3,322
|
|
|
12,183
|
|
|
6,005
|
|
|
9,555
|
|
|
17,357
|
|
|
21,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNG
Transportation
|
|
1,598
|
|
|
1,592
|
|
|
5,383
|
|
|
5,047
|
|
|
7,231
|
|
|
7,300
|
|
|
8,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNG
Transportation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elkton Gas
|
|
590
|
|
|
357
|
|
|
2,648
|
|
|
357
|
|
|
1,344
|
|
|
3,900
|
|
|
4,113
|
|
Western Natural
Gas
|
|
372
|
|
|
—
|
|
|
1,312
|
|
|
—
|
|
|
389
|
|
|
2,066
|
|
|
2,251
|
|
Escambia Meter
Station
|
|
250
|
|
|
—
|
|
|
333
|
|
|
—
|
|
|
—
|
|
|
583
|
|
|
1,000
|
|
Total
Acquisitions
|
|
1,212
|
|
|
357
|
|
|
4,293
|
|
|
357
|
|
|
1,733
|
|
|
6,549
|
|
|
7,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
Initiatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
GRIP
|
|
4,306
|
|
|
3,831
|
|
|
12,543
|
|
|
11,135
|
|
|
15,178
|
|
|
16,950
|
|
|
18,797
|
|
Hurricane Michael
regulatory
proceeding
|
|
3,264
|
|
|
8,261
|
|
|
8,984
|
|
|
8,261
|
|
|
10,864
|
|
|
11,014
|
|
|
11,014
|
|
Capital Cost Surcharge
Programs
|
|
433
|
|
|
129
|
|
|
690
|
|
|
389
|
|
|
523
|
|
|
1,186
|
|
|
1,985
|
|
Elkton Gas STRIDE
Plan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
299
|
|
Total Regulatory
Initiatives
|
|
8,003
|
|
|
12,221
|
|
|
22,217
|
|
|
19,785
|
|
|
26,565
|
|
|
29,195
|
|
|
32,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,977
|
|
|
$
|
17,492
|
|
|
$
|
44,076
|
|
|
$
|
31,194
|
|
|
$
|
45,084
|
|
|
$
|
60,487
|
|
|
$
|
70,602
|
|
|
(1)
|
Includes gross margin
generated from interim services.
|
(2)
|
Includes gross margin
from natural gas distribution services.
|
(3)
|
Prior quarter amounts
have been revised to conform to the current period
presentation.
|
Detailed Discussion of Major Projects and
Initiatives
Pipeline Expansions
West Palm Beach County,
Florida Expansion
Peninsula Pipeline is
constructing four transmission lines to bring additional natural
gas to the Company's distribution system in West Palm Beach, Florida. The first phase of
this project was placed into service in December 2018 and generated $0.2 million and $0.5
million, in additional gross margin for the three and
nine months ended September 30, 2021,
respectively, compared to the prior year periods. The Company
expects to complete the remainder of the project in phases through
the fourth quarter of 2021, and estimates that the project will
generate gross margin of $4.8 million
in 2021 and $5.2 million annually
thereafter.
Del-Mar Energy Pathway
In December 2019, the Federal Energy Regulatory
Commission ("FERC") issued an order approving the construction of
the Del-Mar Energy Pathway project. Eastern Shore recently
completed this project. The new facilities will: (i) ensure an
additional 14,300 Dekatherms per day ("Dts/d") of firm service to
four customers, (ii) provide additional natural gas transmission
pipeline infrastructure in eastern Sussex
County, Delaware, and (iii) represent the first extension of
Eastern Shore's pipeline system into Somerset County, Maryland. Construction of the
project began in January 2020, and
interim services in advance of this project generated additional
gross margin of $0.1 million
and $1.3 million for the three and nine months ended
September 30, 2021, respectively. The
estimated annual gross margin from this project, including initial
natural gas distribution service in Somerset County, Maryland, is approximately
$4.6 million in 2021 and $6.7 million annually thereafter.
Callahan Intrastate Pipeline
Peninsula
Pipeline completed the construction of a jointly owned intrastate
transmission pipeline with Seacoast Gas Transmission in
Nassau County, Florida in June
2020. The 26-mile pipeline serves growing demand for energy in
both Nassau and Duval Counties. For the three and nine months
ended September 30, 2021, the project
generated $0.5 million and
$4.2 million, respectively, in
additional gross margin, which includes margin from natural gas
distribution service. The estimated annual gross margin from this
project, including natural gas distribution service, is
approximately $7.6 million in 2021
and beyond.
Guernsey Power Station
Guernsey Power Station,
LLC ("Guernsey Power Station") and the Company's affiliate, Aspire
Energy Express, LLC ("Aspire Energy Express"), entered into a
precedent firm transportation capacity agreement whereby Guernsey
Power Station will construct a power generation facility and Aspire
Energy Express will provide firm natural gas transportation service
to this facility. Guernsey Power Station commenced construction of
the project in October 2019. In the
second quarter of 2021, Aspire Energy Express commenced
construction of the gas transmission facilities to provide the firm
transportation service to the power generation facility. For the
nine months ended September 30, 2021, the Company recognized
approximately $0.1 million, slightly
lower than originally estimated as a result of a construction delay
in the project. The project is expected to be in service in the
fourth quarter of 2021, and produce gross margin of approximately
$0.4 million in 2021 and $1.5 million in 2022 and beyond.
Winter Haven Expansion
In May 2021, Peninsula Pipeline filed a petition
with the Florida PSC for approval of its Transportation Service
Agreement with Central Florida Gas ("CFG") for an incremental 6,800
Dts/d of firm service in the Winter
Haven, Florida, area. As part of this agreement, Peninsula
Pipeline will construct a new interconnect with Florida Gas
Transmission Company and a new regulator station for CFG. CFG will
use the additional firm service to support new incremental load due
to growth in the area, including providing service, most
immediately, to a new can manufacturing facility, as well as
reliability and operational benefits to CFG's existing distribution
system in the area. In connection with Peninsula Pipeline's new
regulator station, CFG is also extending its distribution system to
connect to the new station. The Company expects this expansion to
generate additional gross margin of $0.7
million beginning in 2022 and beyond.
Beachside Pipeline Extension
In June 2021, Peninsula Pipeline and Florida City
Gas entered into a Transportation Service Agreement for an
incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support
Florida City Gas' growth along the Indian River's barrier island.
As part of this agreement, Peninsula Pipeline will construct
approximately 11.3 miles of pipeline from its existing pipeline in
the Sebastian, Florida, area east
under the Intercoastal Waterway and southward on the barrier
island. The Company expects this expansion to generate additional
annual gross margin of $2.5 million
in 2023 and beyond.
CNG Transportation
Marlin Gas Services provides CNG temporary hold services,
contracted pipeline integrity services, emergency services for
damaged pipelines and specialized gas services for customers who
have unique requirements. Marlin Gas Services generated
additional gross margin of $0.3
million for the nine months ended September 30, 2021 as
compared to the same period in 2020. The Company estimates that
Marlin Gas Services will generate annual gross margin of
approximately $7.3 million in 2021
and $8.5 million in 2022, with the
potential for additional growth in future years. Marlin Gas
Services continues to actively expand the territories it serves, as
well as leverage its patented technology to serve other markets,
including pursuing liquefied natural gas transportation
opportunities and RNG transportation opportunities from diverse
supply sources to various pipeline interconnection points, as
further outlined below.
RNG Transportation
Noble Road Landfill RNG Project
In September 2020, Fortistar and Rumpke Waste &
Recycling announced commencement of construction of the Noble Road
Landfill RNG Project in Shiloh,
Ohio. The project includes the construction of a new
state-of-the-art facility that will utilize advanced, patented
technology to treat landfill gas by removing carbon dioxide and
other components to purify the gas and produce pipeline quality
RNG. In October 2021, the Company
announced that Aspire Energy had completed construction of its
Noble Road Landfill RNG pipeline project, a 33.1-mile pipeline,
which will transport RNG generated from the landfill to Aspire
Energy's pipeline system, displacing conventionally produced
natural gas. In conjunction with this expansion, Aspire Energy also
upgraded an existing compressor station and installed two new
metering and regulation sites. Once flowing, the RNG
volume will represent nearly 10 percent of Aspire Energy's gas
gathering volumes.
Bioenergy DevCo
In June
2020, the Company and Bioenergy DevCo ("BDC"), a developer
of anaerobic digestion facilities that create renewable energy and
healthy soil products from organic material, entered into an
agreement related to a project to extract RNG from poultry
production waste. BDC and the Company are collaborating on this
project in addition to several other project sites where organic
waste can be converted into a carbon-negative energy source.
Marlin Gas Services will transport the RNG source created from
the organic waste from the BDC facility to an Eastern Shore
interconnection, where the sustainable fuel will be introduced into
the Company's transmission system and ultimately distributed to its
natural gas customers.
CleanBay Project
In July 2020, the Company and CleanBay Renewables
Inc. ("CleanBay") announced a new partnership to bring RNG to the
Company's Delmarva natural gas operations. As part of this
partnership, the Company will transport the RNG produced at
CleanBay's planned Westover,
Maryland bio-refinery, to the Company's natural gas
infrastructure in the Delmarva Peninsula region. Eastern Shore and
Marlin Gas Services, will transport the RNG from CleanBay to the
Company's Delmarva natural gas distribution system where it is
ultimately delivered to the Delmarva natural gas distribution end
use customers.
At the present time, the Company expects to generate
$0.1 million in 2021 in
incremental margin from these RNG transportation projects beginning
in 2021. Timing of incremental margin from RNG transportation
projects is dependent upon the construction schedules of each
project. As the Company continues to finalize contract terms and
completes the necessary permitting associated with each of these
projects, additional information will be provided regarding
incremental margin. In addition to these projects, the Company is
continuing to pursue other RNG projects that provide opportunities
for the Company across the entire value chain.
Acquisitions
Elkton Gas
In July
2020, the Company closed on the acquisition of Elkton Gas,
which provides natural gas distribution service to approximately
7,000 residential and commercial customers within a franchised area
of Cecil County, Maryland. The
purchase price was approximately $15.6
million, which included $0.6
million of working capital. Elkton Gas' territory is
contiguous to the Company's franchised service territory in
Cecil County, Maryland. For the
three and nine months ended September 30,
2021, the Company generated $0.2
million and $2.3 million,
respectively, in additional gross margin from Elkton Gas and
estimates that this acquisition will generate gross margin of
approximately $3.9 million in 2021
and $4.1 million thereafter.
Western Natural Gas
In October 2020, Sharp acquired certain propane
operating assets of Western Natural Gas, which provides propane
distribution service throughout Jacksonville, Florida and the surrounding
communities, for approximately $6.7
million, net of cash acquired. The acquisition was accounted
for as a business combination within the Unregulated Energy segment
in the fourth quarter of 2020. This acquisition generated
$0.4 million and $1.3 million in additional gross margin for the
three and nine months ended September 30,
2021, respectively, and Sharp estimates that this
acquisition will generate gross margin of approximately
$2.1 million in 2021 and grow to
$2.3 million of gross margin in 2022,
with additional opportunities for growth in the future.
Escambia Meter Station
In June 2021, Peninsula Pipeline purchased the
Escambia Meter Station from Florida
Power and Light and entered into a Transportation
Service Agreement with Gulf Power Company to provide up to 530,000
Dts/d of firm service from an interconnect with Florida Gas
Transmission to Florida Power &
Light's Crist Lateral pipeline. Florida
Power & Light's Crist Lateral provides gas supply to
their natural gas fired power facility in Pensacola, Florida. The Company generated
$0.3 million in additional gross
margin in the third quarter of 2021 and estimates that this
acquisition will generate gross margin of approximately
$0.6 million in 2021 and growing to
$1.0 million in 2022.
Regulatory Initiatives
Florida GRIP
Florida GRIP is a natural gas pipe
replacement program approved by the Florida PSC that allows
automatic recovery, through rates, of costs associated with the
replacement of mains and services. Since the program's inception in
August 2012, the Company has invested
$183.6 million of capital
expenditures to replace 337 miles of qualifying distribution mains,
including $17.7 million of new pipes
during the first nine months of 2021. The Company expects to
generate annual gross margin of approximately $17.0 million in 2021, and $18.8 million in 2022.
Hurricane Michael
In August 2019, FPU filed a limited proceeding
requesting recovery of storm-related costs associated with
Hurricane Michael (capital and expenses) through a change in base
rates. In March 2020, FPU filed an
update to the original filing to account for actual charges
incurred through December 2019,
revised the amortization period of the storm-related costs, and
included costs related to Hurricane Dorian.
In September 2019, FPU filed a
petition, with the Florida PSC, for approval of its consolidated
electric depreciation rates. The petition was joined to the
Hurricane Michael docket. The approved rates, which were part of
the settlement agreement in September
2020 that is described below, were retroactively applied
effective January 1, 2020.
In September 2020, the Florida PSC
approved a settlement agreement between FPU and the Office of the
Public Counsel regarding final cost recovery and rates associated
with Hurricane Michael. Previously, the Florida PSC approved an
interim rate increase, subject to refund, effective January 1, 2020, associated with the restoration
effort following Hurricane Michael. FPU fully reserved these
interim rates, pending a final resolution and settlement of the
limited proceeding. The settlement agreement allowed FPU to: (a)
refund the over-collection of interim rates through the fuel
clause; (b) record regulatory assets for storm costs in the amount
of $45.8 million including interest
which will be amortized over six years; (c) recover these storm
costs through a surcharge for a total of $7.7 million annually; and
(d) collect an annual increase in revenue of $3.3 million to
recover capital costs associated with new plant and a regulatory
asset for the cost of removal and undepreciated plant. The new base
rates and storm surcharge were effective on November 1, 2020. The
following table summarizes the impact of the Hurricane Michael
regulatory proceeding for the three and nine months ended
September 30, 2021 and 2020:
|
For the Three
Months Ended
September 30,
|
|
For the Nine
Months Ended
September 30,
|
(in
thousands)
|
2021
|
|
2020
(1)
|
|
2021
|
|
2020
|
Gross
Margin
|
$
|
3,264
|
|
|
$
|
8,261
|
|
|
$
|
8,984
|
|
|
$
|
8,261
|
|
Depreciation
|
(305)
|
|
|
(883)
|
|
|
(913)
|
|
|
(883)
|
|
Amortization of
regulatory assets
|
2,079
|
|
|
6,238
|
|
|
6,237
|
|
|
6,238
|
|
Operating
income
|
1,490
|
|
|
2,906
|
|
|
3,660
|
|
|
2,906
|
|
Amortization of
liability associated with interest expense
|
(293)
|
|
|
(1,132)
|
|
|
(930)
|
|
|
(1,132)
|
|
Pre-tax
income
|
1,783
|
|
|
4,038
|
|
|
4,590
|
|
|
4,038
|
|
Income tax
expense
|
451
|
|
|
1,106
|
|
|
1,213
|
|
|
1,106
|
|
Net income
|
$
|
1,332
|
|
|
$
|
2,932
|
|
|
$
|
3,377
|
|
|
$
|
2,932
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts reflected for
the quarter ended September 30, 2020 include the cumulative effect
of the Hurricane Michael settlement dating back to January 1,
2020.
|
Capital Cost Surcharge Programs
In December 2019, the FERC approved Eastern Shore's
capital cost surcharge which became effective January 1, 2020. The surcharge, an approved item
in the settlement of Eastern Shore's last general rate case, allows
Eastern Shore to recover capital costs associated with mandated
highway or railroad relocation projects that required the
replacement of existing Eastern Shore facilities. Eastern Shore
expects to produce gross margin of approximately $1.2 million in 2021 and $2.0 million in 2022 from relocation projects,
which is ultimately dependent upon the timing of filings and the
completion of construction.
Elkton Gas STRIDE Plan
In March 2021, Elkton Gas filed a strategic
infrastructure development and enhancement ("STRIDE") plan with the
Maryland PSC. The STRIDE plan proposes to increase the speed of
Elkton Gas' Aldyl-A pipeline replacement program and to recover the
costs of the plan in the form of a fixed charge rider through a
proposed 5-year surcharge. Under Elkton Gas' proposed STRIDE plan,
the Aldyl-A pipelines would be replaced by 2023. In June 2021, the Company reached a settlement with
the Maryland PSC Staff and the Maryland Office of the Peoples
Counsel. The STRIDE plan is expected to go into service in the
fourth quarter of 2021 and is expected to generate $0.3 million of additional gross margin in
2022 and $0.4 million annually
thereafter.
COVID-19 Regulatory Proceeding
In October 2020, the Florida PSC approved a joint
petition of the Company's natural gas and electric distribution
utilities in Florida to establish
a regulatory asset to record incremental expenses incurred due to
COVID-19. The regulatory asset will allow the Company to seek
recovery of these costs in the next base rate proceedings. In
November 2020, the Office of Public
Counsel filed a protest to the order approving the establishment of
this regulatory asset treatment, contending that the order should
be reversed or modified and to request a hearing on the protest.
The Company's Florida regulated business units reached a settlement
with the Office of Public Counsel in June
2021. The settlement allowed the business units to establish
a regulatory asset of $2.1 million. This amount includes COVID-19
related incremental expenses for bad debt write-offs, personnel
protective equipment, cleaning and business information services
for remote work. The Company's Florida regulated business units
will amortize the amount over two years beginning January 1, 2022 and recover the regulatory asset
through the Purchased Gas Adjustment and Swing Service mechanisms
for the natural gas business units and through the Fuel Purchased
Power Cost Recovery clause for the electric division. This results
in annual additional gross margin of $1.0 million that will be offset by a
corresponding amortization of regulatory asset expense for both
2022 and 2023.
Other major factors influencing gross margin
Weather Impact
Weather was not a significant
factor in the third quarter. For the nine-month period,
weather conditions accounted for $6.5
million of increased gross margin compared to the same
period in 2020, primarily due to a 7.2 percent increase in HDDs and
a return to pre-pandemic conditions that resulted in increased
customer consumption. Assuming normal temperatures, as detailed
below, gross margin would have been higher by $1.3 million. The following table summarizes HDD
and CDD variances from the 10-year average HDD/CDD ("Normal") for
the three and nine months ended September
30, 2021 and 2020.
|
Three Months
Ended
|
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
|
September
30,
|
|
|
|
2021
|
|
2020
|
|
Variance
|
|
2021
|
|
2020
|
|
Variance
|
Delmarva
Peninsula
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
9
|
|
|
43
|
|
|
(34)
|
|
|
2,595
|
|
|
2,416
|
|
|
179
|
|
10-Year Average HDD
("Normal")
|
47
|
|
|
48
|
|
|
(1)
|
|
|
2,736
|
|
|
2,797
|
|
|
(61)
|
|
Variance from
Normal
|
(38)
|
|
|
(5)
|
|
|
|
|
(141)
|
|
|
(381)
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
1
|
|
|
2
|
|
|
(1)
|
|
|
573
|
|
|
412
|
|
|
161
|
|
10-Year Average HDD
("Normal")
|
1
|
|
|
—
|
|
|
1
|
|
|
550
|
|
|
613
|
|
|
(63)
|
|
Variance from
Normal
|
—
|
|
|
2
|
|
|
|
|
23
|
|
|
(201)
|
|
|
|
Ohio
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
41
|
|
|
86
|
|
|
(45)
|
|
|
3,489
|
|
|
3,383
|
|
|
106
|
|
10-Year Average HDD
("Normal")
|
78
|
|
|
79
|
|
|
(1)
|
|
|
3,660
|
|
|
3,691
|
|
|
(31)
|
|
Variance from
Normal
|
(37)
|
|
|
7
|
|
|
|
|
(171)
|
|
|
(308)
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
Actual CDD
|
1,330
|
|
|
1,365
|
|
|
(35)
|
|
|
2,340
|
|
|
2,637
|
|
|
(297)
|
|
10-Year Average CDD
("Normal")
|
1,402
|
|
|
1,416
|
|
|
(14)
|
|
|
2,563
|
|
|
2,559
|
|
|
4
|
|
Variance from
Normal
|
(72)
|
|
|
(51)
|
|
|
|
|
(223)
|
|
|
78
|
|
|
|
Natural Gas Distribution Margin Growth
Customer
growth for the Company's natural gas distribution operations, as a
result of the addition of new customers (excluding acquisitions)
and the conversion of customers from alternative fuel sources to
natural gas service, generated $0.6
million and $2.2 million of
additional margin for the three and nine months ended September 30, 2021, respectively. The average
number of residential customers served on the Delmarva Peninsula
increased 4.0 percent and 4.1 percent for the three and nine months
ended September 30, 2021, while
Florida customers increased by and 4.7 percent and 5.0 percent, for
the three and nine months ended September
30, 2021, respectively. A larger percentage of the margin
growth was generated from residential growth given the expansion of
natural gas into new housing communities and conversions to natural
gas as the Company's distribution infrastructure continues to build
out. The Company anticipates continued customer growth as new
communities continue to build out due to population growth and
infrastructure is added to support the growth, there is also
increased load from new commercial and industrial
customers. The details are provided in the following
table:
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
2021
|
|
September 30,
2021
|
(in
thousands)
|
Delmarva
Peninsula
|
|
Florida
|
|
Delmarva
Peninsula
|
|
Florida
|
Customer
Growth:
|
|
|
|
|
|
|
|
Residential
|
$
|
226
|
|
|
$
|
208
|
|
|
$
|
1,049
|
|
|
$
|
788
|
|
Commercial and
industrial
|
84
|
|
|
102
|
|
|
183
|
|
|
217
|
|
Total Customer
Growth
|
$
|
310
|
|
|
$
|
310
|
|
|
$
|
1,232
|
|
|
$
|
1,005
|
|
Capital Investment Growth and Associated Financing
Plans
The Company's capital expenditures were
$151.4 million for the nine months
ended September 30, 2021. The following table shows a range of
the forecasted 2021 capital expenditures by segment and by business
line:
|
2021
|
(dollars in
thousands)
|
Low
|
|
High
|
Regulated
Energy:
|
|
|
|
Natural gas
distribution
|
$
|
76,000
|
|
|
$
|
79,000
|
|
Natural gas
transmission
|
58,000
|
|
|
63,000
|
|
Electric
distribution
|
8,000
|
|
|
8,000
|
|
Total Regulated
Energy
|
142,000
|
|
|
150,000
|
|
Unregulated
Energy:
|
|
|
|
Propane
distribution
|
11,000
|
|
|
12,000
|
|
Energy
transmission
|
16,000
|
|
|
20,000
|
|
Other unregulated
energy
|
13,000
|
|
|
15,000
|
|
Total Unregulated
Energy
|
40,000
|
|
|
47,000
|
|
Other:
|
|
|
|
Corporate and other
businesses
|
3,000
|
|
|
3,000
|
|
Total Other
|
3,000
|
|
|
3,000
|
|
Total 2021 Forecasted
Capital Expenditures
|
$
|
185,000
|
|
|
$
|
200,000
|
|
The capital expenditure forecast is subject to continuous review
and modification. Actual capital requirements may vary from the
above estimates due to a number of factors, including changing
economic conditions, capital delays because of COVID-19 that are
greater than currently anticipated, customer growth in existing
areas, regulation, new growth or acquisition opportunities and
availability of capital. Historically, actual capital expenditures
have typically lagged behind the forecasted amounts.
The Company's target ratio of equity to total capitalization,
including short-term borrowings, is between 50 and 60 percent. The
Company's equity to total capitalization ratio, including
short-term borrowings, was 51 percent as of September 30,
2021.
The Company may utilize more temporary short-term debt, when the
financing cost is attractive, as a bridge to permanent long-term
financing, or if the equity markets are more volatile. The Company
currently maintains a multi-tranche $400.0
million syndicated revolving line of credit (the
"Revolver"), with multiple participating lenders to meet its
short-term borrowing needs. The two tranches of the facility
consist of a $200.0 million 364-day
short-term debt tranche and a $200.0
million five-year tranche, both of which have three (3)
one-year extension options which can be authorized by our Chief
Financial Officer. The Company is eligible to establish the
repayment term for individual borrowings under the five year
tranche of the facility and to the extent that an individual loan
under the revolver exceeded 12 months, the outstanding balance
would be classified as a component of long-term debt.
The 364-day tranche of the Revolver expires in August 2022 and the five-year tranche expires in
August 2026; both tranches are
available to provide funds for the Company's short-term cash needs
to meet seasonal working capital requirements and to temporarily
fund portions of the Company's capital expenditures. As of
September 30, 2021, the pricing under the 364-day tranche of
the Revolver does not include an unused commitment fee and
maintains an interest rate of 0.70 percent over LIBOR. As of
September 30, 2021, the pricing under the five-year tranche of
the Revolver included an unused commitment fee of 0.09 percent and
an interest rate of 0.95 percent over LIBOR. The Company's total
available credit under the Revolver at September 30, 2021 was
$203.4 million.
In the fourth quarter of 2020, the Company entered into two
$30.0 million interest rate swaps
with a notional amount of $60.0
million through September and December 2021 at a pricing of 0.205 and 0.20
percent, respectively. In February
2021, the Company entered into an additional interest rate
swap with a notional amount of $40.0
million through December 2021
with pricing of 0.17 percent. The Company's short-term borrowing is
based on the 30-day LIBOR rate. The interest rate swaps are cash
settled monthly as the counter-party pays us the 30-day LIBOR rate
less the fixed rate. At September 30,
2021, $70.0 million in
interest rate swaps remain outstanding to manage interest rate
fluctuations related to the Company's short-term debt.
In regards to long-term debt capital, on August 25, 2021, the Company entered into a Note
Purchase Agreement with multiple lenders to issue $50.0 million in uncollateralized senior notes.
Under the Note Agreement, the Company will issue the senior notes
on January 25, 2022 at a rate of 2.49
percent for a 15-year term. These senior notes, when issued, will
have similar covenants and default provisions as the existing
senior notes, and will have an annual principal payment beginning
in the sixth year after the issuance. The proceeds received from
the issuances of the senior notes will be used to reduce short-term
borrowings and to fund capital expenditures. In addition, on
September 24, 2021, the Company
entered into an Equipment Financing Agreement with Banc of America
Leasing & Capital, LLC to issue $9.6
million in sustainability linked financing for the purchase
of equipment by Marlin Gas Services. The equipment security note
bears a 2.46 percent interest rate and has a term of ten years.
Under the terms of the agreement, the Company granted a security
interest in the equipment to the lender, to serve as
collateral.
In terms of equity capital, the Company maintains an effective
shelf registration statement with the Securities and Exchange
Commission for the issuance of shares under its Dividend
Reinvestment and Direct Stock Purchase Plan (the "DRIP"). In
June 2020, the Company also filed a
shelf registration statement with the Securities and Exchange
Commission, which provides for the issuance of shares of its common
stock via a variety of offering types. In August 2020, the Company filed a prospectus
supplement under the shelf registration statement for an
At-the-Market ("ATM") program under which the Company may issue and
sell shares of common stock up to an aggregate offering price of
$75.0 million. In the third and
fourth quarters of 2020, the Company issued 1.0 million shares of
common stock through its DRIP and the ATM programs and received net
proceeds of approximately $83.0
million which were added to the Company's general funds and
then used to pay down short-term borrowing. Through the third
quarter of 2021, the Company issued less than 0.1 million shares of
common stock through its DRIP program and received net proceeds of
approximately $6.6 million which were
added to the Company's general funds.
Depending on the Company's capital needs and subject to market
conditions, in addition to other debt and equity offerings, the
Company may consider, as necessary in the future, issuing
additional shares under the direct stock purchase component of the
DRIP, the ATM program, or pursuant to its shelf registration
statement. More information about financing activities is included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2020 and the Company's Third Quarter 2021 Form
10-Q.
Chesapeake
Utilities Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Income (Unaudited)
|
(in thousands,
except shares and per share data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating
Revenues
|
|
|
|
|
|
|
|
Regulated
Energy
|
$
|
80,396
|
|
|
$
|
82,762
|
|
|
$
|
282,503
|
|
|
$
|
259,235
|
|
Unregulated Energy and
other
|
26,939
|
|
|
18,657
|
|
|
127,101
|
|
|
91,925
|
|
Total Operating
Revenues
|
107,335
|
|
|
101,419
|
|
|
409,604
|
|
|
351,160
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
Regulated Energy cost
of sales
|
15,294
|
|
|
16,271
|
|
|
72,785
|
|
|
67,490
|
|
Unregulated Energy and
other cost of sales
|
12,072
|
|
|
5,640
|
|
|
55,578
|
|
|
30,250
|
|
Operations
|
34,075
|
|
|
34,959
|
|
|
109,886
|
|
|
105,516
|
|
Maintenance
|
4,267
|
|
|
3,717
|
|
|
12,568
|
|
|
11,695
|
|
Gain from
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
(130)
|
|
Depreciation and
amortization
|
15,798
|
|
|
18,293
|
|
|
46,460
|
|
|
42,793
|
|
Other taxes
|
5,716
|
|
|
5,133
|
|
|
18,039
|
|
|
16,028
|
|
Total operating
expenses
|
87,222
|
|
|
84,013
|
|
|
315,316
|
|
|
273,642
|
|
Operating
Income
|
20,113
|
|
|
17,406
|
|
|
94,288
|
|
|
77,518
|
|
Other income
(expense), net
|
339
|
|
|
(40)
|
|
|
2,180
|
|
|
2,997
|
|
Interest
charges
|
4,975
|
|
|
4,584
|
|
|
15,134
|
|
|
15,452
|
|
Income from
Continuing Operations Before
Income Taxes
|
15,477
|
|
|
12,782
|
|
|
81,334
|
|
|
65,063
|
|
Income Taxes on
Continuing Operations
|
2,993
|
|
|
3,502
|
|
|
20,563
|
|
|
16,082
|
|
Income from
Continuing Operations
|
12,484
|
|
|
9,280
|
|
|
60,771
|
|
|
48,981
|
|
Income (Loss) from
Discontinued Operations, Net of Tax
|
(9)
|
|
|
(19)
|
|
|
(17)
|
|
|
165
|
|
Net
Income
|
$
|
12,475
|
|
|
$
|
9,261
|
|
|
$
|
60,754
|
|
|
$
|
49,146
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
17,582,115
|
|
|
16,533,748
|
|
|
17,538,461
|
|
|
16,466,106
|
|
Diluted
|
17,659,643
|
|
|
16,592,842
|
|
|
17,610,158
|
|
|
16,523,200
|
|
Basic Earnings Per
Share of Common Stock:
|
|
|
|
|
|
|
|
Earnings from
Continuing Operations
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.46
|
|
|
$
|
2.97
|
|
Earnings from
Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Basic Earnings Per
Share of Common Stock
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.46
|
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share of Common Stock:
|
|
|
|
|
|
|
|
Earnings from
Continuing Operations
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.45
|
|
|
$
|
2.96
|
|
Earnings from
Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Diluted Earnings Per
Share of Common Stock
|
$
|
0.71
|
|
|
$
|
0.56
|
|
|
$
|
3.45
|
|
|
$
|
2.97
|
|
Chesapeake
Utilities Corporation and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
Assets
|
|
September 30,
2021
|
|
December 31,
2020
|
(in thousands,
except shares and per share data)
|
|
|
|
|
Property,
Plant and Equipment
|
|
|
|
|
Regulated
Energy
|
|
$
|
1,688,938
|
|
|
$
|
1,577,576
|
|
Unregulated
Energy
|
|
324,083
|
|
|
300,647
|
|
Other businesses and
eliminations
|
|
35,183
|
|
|
30,769
|
|
Total property,
plant and equipment
|
|
2,048,204
|
|
|
1,908,992
|
|
Less:
Accumulated depreciation and amortization
|
|
(405,263)
|
|
|
(368,743)
|
|
Plus:
Construction work in progress
|
|
56,773
|
|
|
60,929
|
|
Net property,
plant and equipment
|
|
1,699,714
|
|
|
1,601,178
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
5,886
|
|
|
3,499
|
|
Trade and other
receivables
|
|
47,570
|
|
|
61,675
|
|
Less: Allowance for
credit losses
|
|
(2,980)
|
|
|
(4,785)
|
|
Trade and other
receivables, net
|
|
44,590
|
|
|
56,890
|
|
Accrued
revenue
|
|
11,318
|
|
|
21,527
|
|
Propane inventory, at
average cost
|
|
6,917
|
|
|
5,906
|
|
Other inventory, at
average cost
|
|
6,716
|
|
|
5,539
|
|
Regulatory
assets
|
|
12,021
|
|
|
10,786
|
|
Storage gas
prepayments
|
|
4,663
|
|
|
2,455
|
|
Income taxes
receivable
|
|
12,702
|
|
|
12,885
|
|
Prepaid
expenses
|
|
15,555
|
|
|
13,239
|
|
Derivative assets, at
fair value
|
|
12,185
|
|
|
3,269
|
|
Other current
assets
|
|
440
|
|
|
436
|
|
Total current
assets
|
|
132,993
|
|
|
136,431
|
|
Deferred
Charges and Other Assets
|
|
|
|
|
Goodwill
|
|
38,803
|
|
|
38,731
|
|
Other intangible
assets, net
|
|
7,298
|
|
|
8,292
|
|
Investments, at fair
value
|
|
11,490
|
|
|
10,776
|
|
Operating lease
right-of-use assets
|
|
9,602
|
|
|
11,194
|
|
Regulatory
assets
|
|
107,872
|
|
|
113,806
|
|
Receivables and other
deferred charges
|
|
14,056
|
|
|
12,079
|
|
Total deferred
charges and other assets
|
|
189,121
|
|
|
194,878
|
|
Total
Assets
|
|
$
|
2,021,828
|
|
|
$
|
1,932,487
|
|
Chesapeake
Utilities Corporation and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
Capitalization and
Liabilities
|
|
September 30,
2021
|
|
December 31,
2020
|
(in thousands,
except shares and per share data)
|
|
|
|
|
Capitalization
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Preferred stock, par
value $0.01 per share (authorized 2,000,000 shares), no shares
issued and outstanding
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock, par
value $0.4867 per share (authorized 50,000,000 shares)
|
|
8,560
|
|
|
8,499
|
|
Additional
paid-in capital
|
|
361,066
|
|
|
348,482
|
|
Retained
earnings
|
|
378,897
|
|
|
342,969
|
|
Accumulated
other comprehensive income (loss)
|
|
2,439
|
|
|
(2,865)
|
|
Deferred
compensation obligation
|
|
7,186
|
|
|
5,679
|
|
Treasury
stock
|
|
(7,186)
|
|
|
(5,679)
|
|
Total
stockholders' equity
|
|
750,962
|
|
|
697,085
|
|
Long-term debt,
net of current maturities
|
|
505,459
|
|
|
508,499
|
|
Total
capitalization
|
|
1,256,421
|
|
|
1,205,584
|
|
Current
Liabilities
|
|
|
|
|
Current portion of
long-term debt
|
|
16,206
|
|
|
13,600
|
|
Short-term
borrowing
|
|
192,026
|
|
|
175,644
|
|
Accounts
payable
|
|
53,026
|
|
|
60,253
|
|
Customer deposits and
refunds
|
|
35,782
|
|
|
33,302
|
|
Accrued
interest
|
|
4,783
|
|
|
2,905
|
|
Dividends
payable
|
|
8,442
|
|
|
7,683
|
|
Accrued
compensation
|
|
13,497
|
|
|
13,994
|
|
Regulatory
liabilities
|
|
5,357
|
|
|
6,284
|
|
Derivative
liabilities, at fair value
|
|
1,969
|
|
|
127
|
|
Other accrued
liabilities
|
|
23,454
|
|
|
15,240
|
|
Total current
liabilities
|
|
354,542
|
|
|
329,032
|
|
Deferred
Credits and Other Liabilities
|
|
|
|
|
Deferred income
taxes
|
|
225,448
|
|
|
205,388
|
|
Regulatory
liabilities
|
|
143,164
|
|
|
142,736
|
|
Environmental
liabilities
|
|
3,709
|
|
|
4,299
|
|
Other pension and
benefit costs
|
|
28,113
|
|
|
30,673
|
|
Operating lease -
liabilities
|
|
8,380
|
|
|
9,872
|
|
Deferred investment
tax credits and other liabilities
|
|
2,051
|
|
|
4,903
|
|
Total deferred
credits and other liabilities
|
|
410,865
|
|
|
397,871
|
|
Environmental and
other commitments and contingencies (1)
|
|
|
|
|
Total
Capitalization and Liabilities
|
|
$
|
2,021,828
|
|
|
$
|
1,932,487
|
|
|
(1)
|
Refer to Note 6 and 7
in the Company's Quarterly Report on Form 10-Q for further
information.
|
Chesapeake
Utilities Corporation and Subsidiaries
|
Distribution
Utility Statistical Data (Unaudited)
|
|
|
|
For the Three
Months Ended September 30, 2021
|
|
For the Three
Months Ended September 30, 2020
|
|
|
Delmarva NG
Distribution
|
|
Chesapeake
Utilities Florida
NG Division
|
|
FPU NG
Distribution
|
|
FPU Electric
Distribution
|
|
Delmarva NG
Distribution
|
|
Chesapeake
Utilities Florida
NG Division
|
|
FPU NG
Distribution
|
|
FPU Electric
Distribution
|
Operating
Revenues
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
6,891
|
|
|
$
|
1,511
|
|
|
$
|
5,889
|
|
|
$
|
11,575
|
|
|
$
|
6,722
|
|
|
$
|
1,412
|
|
|
$
|
5,749
|
|
|
$
|
16,055
|
|
Commercial
|
|
6,060
|
|
|
1,917
|
|
|
5,553
|
|
|
10,218
|
|
|
5,321
|
|
|
1,517
|
|
|
4,983
|
|
|
11,642
|
|
Industrial
|
|
1,769
|
|
|
3,643
|
|
|
7,639
|
|
|
618
|
|
|
1,982
|
|
|
3,235
|
|
|
6,028
|
|
|
646
|
|
Other
(1)
|
|
29
|
|
|
944
|
|
|
2,931
|
|
|
710
|
|
|
(45)
|
|
|
1,145
|
|
|
3,175
|
|
|
708
|
|
Total Operating
Revenues
|
|
$
|
14,749
|
|
|
$
|
8,015
|
|
|
$
|
22,012
|
|
|
$
|
23,121
|
|
|
$
|
13,980
|
|
|
$
|
7,309
|
|
|
$
|
19,935
|
|
|
$
|
29,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume (in Dts
for natural gas and KWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
224,510
|
|
|
63,778
|
|
|
249,830
|
|
|
95,004
|
|
|
210,787
|
|
|
56,754
|
|
|
243,255
|
|
|
101,555
|
|
Commercial
|
|
556,708
|
|
|
1,073,177
|
|
|
334,276
|
|
|
95,689
|
|
|
508,172
|
|
|
1,047,271
|
|
|
302,504
|
|
|
88,250
|
|
Industrial
|
|
1,366,112
|
|
|
7,060,313
|
|
|
1,168,458
|
|
|
1,851
|
|
|
1,144,210
|
|
|
5,999,386
|
|
|
1,080,078
|
|
|
1,596
|
|
Other
|
|
69,337
|
|
|
—
|
|
|
826,780
|
|
|
—
|
|
|
53,093
|
|
|
—
|
|
|
738,191
|
|
|
—
|
|
Total
|
|
2,216,667
|
|
|
8,197,268
|
|
|
2,579,344
|
|
|
192,544
|
|
|
1,916,262
|
|
|
7,103,411
|
|
|
2,364,028
|
|
|
191,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
87,685
|
|
|
18,625
|
|
|
63,324
|
|
|
25,408
|
|
|
84,343
|
|
|
17,930
|
|
|
60,353
|
|
|
25,104
|
|
Commercial
|
|
7,751
|
|
|
1,606
|
|
|
4,070
|
|
|
7,347
|
|
|
7,740
|
|
|
1,583
|
|
|
4,017
|
|
|
7,282
|
|
Industrial
|
|
209
|
|
|
16
|
|
|
2,531
|
|
|
2
|
|
|
204
|
|
|
16
|
|
|
2,494
|
|
|
2
|
|
Other
|
|
5
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Total
|
|
95,650
|
|
|
20,247
|
|
|
69,931
|
|
|
32,757
|
|
|
92,308
|
|
|
19,529
|
|
|
66,869
|
|
|
32,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
Months Ended September 30, 2021
|
|
For the Nine
Months Ended September 30, 2020
|
|
|
Delmarva NG
Distribution
|
|
Chesapeake
Utilities Florida
NG Division
|
|
FPU NG
Distribution
|
|
FPU Electric
Distribution
|
|
Delmarva NG
Distribution
|
|
Chesapeake
Utilities Florida
NG Division
|
|
FPU NG
Distribution (2)
|
|
FPU Electric
Distribution (2)
|
Operating
Revenues
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
56,616
|
|
|
$
|
5,281
|
|
|
$
|
26,607
|
|
|
$
|
29,483
|
|
|
$
|
49,472
|
|
|
$
|
4,773
|
|
|
$
|
23,857
|
|
|
$
|
30,973
|
|
Commercial
|
|
28,833
|
|
|
6,018
|
|
|
20,726
|
|
|
26,295
|
|
|
23,190
|
|
|
4,791
|
|
|
17,811
|
|
|
25,716
|
|
Industrial
|
|
6,200
|
|
|
11,240
|
|
|
23,900
|
|
|
1,477
|
|
|
6,444
|
|
|
9,754
|
|
|
19,323
|
|
|
956
|
|
Other
(1)
|
|
(4,156)
|
|
|
2,878
|
|
|
799
|
|
|
3,314
|
|
|
(4,534)
|
|
|
3,700
|
|
|
3,886
|
|
|
1,327
|
|
Total Operating
Revenues
|
|
$
|
87,493
|
|
|
$
|
25,417
|
|
|
$
|
72,032
|
|
|
$
|
60,569
|
|
|
$
|
74,572
|
|
|
$
|
23,018
|
|
|
$
|
64,877
|
|
|
$
|
58,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume (in Dts
for natural gas and KWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
3,557,168
|
|
|
295,564
|
|
|
1,242,872
|
|
|
238,458
|
|
|
2,867,349
|
|
|
269,273
|
|
|
1,136,539
|
|
|
235,283
|
|
Commercial
|
|
3,225,803
|
|
|
3,453,636
|
|
|
1,237,492
|
|
|
232,873
|
|
|
2,730,931
|
|
|
3,270,286
|
|
|
1,119,081
|
|
|
220,238
|
|
Industrial
|
|
4,495,793
|
|
|
21,687,034
|
|
|
3,676,442
|
|
|
8,691
|
|
|
3,667,782
|
|
|
21,015,935
|
|
|
3,466,115
|
|
|
13,978
|
|
Other
|
|
228,666
|
|
|
—
|
|
|
2,364,525
|
|
|
—
|
|
|
196,076
|
|
|
—
|
|
|
2,000,351
|
|
|
—
|
|
Total
|
|
11,507,430
|
|
|
25,436,234
|
|
|
8,521,331
|
|
|
480,022
|
|
|
9,462,138
|
|
|
24,555,494
|
|
|
7,722,086
|
|
|
469,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
87,211
|
|
|
18,622
|
|
|
62,640
|
|
|
25,351
|
|
|
83,752
|
|
|
17,784
|
|
|
59,638
|
|
|
24,983
|
|
Commercial
|
|
7,816
|
|
|
1,604
|
|
|
4,089
|
|
|
7,336
|
|
|
7,766
|
|
|
1,582
|
|
|
3,982
|
|
|
7,268
|
|
Industrial
|
|
209
|
|
|
16
|
|
|
2,507
|
|
|
2
|
|
|
203
|
|
|
16
|
|
|
2,511
|
|
|
2
|
|
Other
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Total
|
|
95,242
|
|
|
20,242
|
|
|
69,242
|
|
|
32,689
|
|
|
91,739
|
|
|
19,382
|
|
|
66,145
|
|
|
32,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Operating Revenues
from "Other" sources include unbilled revenue, under (over)
recoveries of fuel cost, conservation revenue, other miscellaneous
charges, fees for billing services provided to third parties, and
adjustments for pass-through taxes.
|
(2)
|
Prior period numbers
have been changed to confirm to current presentation
|
View original
content:https://www.prnewswire.com/news-releases/chesapeake-utilities-corporation-reports-third-quarter-2021-results-301415795.html
SOURCE Chesapeake Utilities Corporation