Chesapeake Utilities (CPK)

Beth Cooper SVP, CFO & Assistant Secretary
Mike McMasters President & CEO
Mark Levin Seaport Global Securities
Call transcript
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Good morning. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Utilities Second Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Vice CFO, Senior your may conference. President Cooper, you and begin Beth

Beth Cooper

And Utilities to to conference morning welcome Good everyone. Chesapeake call morning. you taking our call. for second the in time participate this Thank XXXX quarter

gas Delaware. President houses new Joining CEO, operations, Also our here Energy distribution of management Lane Mike members [indiscernible] joining today Dover, and team me Campus team. other our and present Shore many This us Eastern McMasters. facility pipeline is care our today customer natural new our Company’s state-of-the-art there’re technology at information our in our operations, group

well refer Turning X, Report on our note today, XX-K our Slide include like that Please could are presentation XXXX for I would understanding in Form may business. those of our actual a to looking Please remind that our meaningful forward-looking uncertainties we statements to risks cause as risks statements. to we that in involve to differ forward non-GAAP and that to today’s measures before both include Annual you these certain as that from discussion our begin, uncertainties. also believe results and filings we presentation

President for the turn over I like the would remarks Now to quarter. him some on to and Mike opening call make McMasters, CEO, to

Mike McMasters

strong Thanks, Beth. us for year so the for I far after guess this since was quarter a very us to-date. strong

we growth earnings -- We’re superior forecast, about target growth. that are that on with that this dividend talked comfortable so year and hit EPS XX% are very the earlier and pretty to continued

same XX.X% growth ’XX. so May. income our year-to-date by Key earnings rose X.X%, in rose income XX%. Second in quarter net X.X%, about far dividend net XX%, increased the We drove drivers EPS EPS

case. Our natural system settlement gas operations in rate expansions had Shore Eastern transmission

also contributed distribution the far and programs. helped safety we has and got weather well. in Our More normal so sales growth in Aspire electric gas increases operations Energy the in customer to reliability growth, Propane as -- Ohio, increased ’XX and and strong have us. sales Growth operations and safety of

Finally, helped. by offset partially lower reductions entities have regulated federal income and tax our rates rate

completion capital now It’s returns, the Natural on and Florida ’XX. increase projects. generating I’ll and million given increase forecasted in Northwest Eastern spending XX in we’ve service over Gas to contribution quarter. in the expansion margin Beth. track on XXXX spending the second and a in pipeline On Shore further by project CapEx side, turn With accelerated to that, for it completed expansion pipeline

Beth Cooper

bit the touching just to more. little a X, Turning Slide numbers on

our look so this the of things thought it’s and have at both as particularly both as One income helpful the growth be from gross quarter as when quarter to well and as year-to-date, look for a margin would net EPS our what well our we at perspective income tax the a reform and our operating in you on complicated it been our little basis. year-to-date results

from that our income regulated margin operations to across income a A operating quarter of when where financing are a our slide a throughout see a we’ve for a quarter growth is EPS had also that margin XX.X% things regulated a terms X% well segment XX.X%. like at and from When there’s made line income not this consolidated large margin last experienced line meaningful look that this the operating regulated those our you the our segment. to is were XX.X% higher less for you part also we XX%. that of the the we the for profitable were when you’ll basis, energy the our unregulated the our of margin at and you large board. being XX.X% at XX.X% income as part with we income and unregulated and the the see growth made we’ve to line, rate that gross growth are really release, well press items double basis, in digit look the EPS operations per and the get XX.X% year unregulated the operating achieved operating expense are interest at net non-weather energy the growth XX.X% that the operating from generated our that consolidated of growth gross Q double able growth flat than for items. loss that growth non-recurring year, operating that highlight income digit to in margin unregulated so our growing Once segment of those and non-recurring digit us a income slightly XX.X%, or though basically When a XX% cost had on as particular, as basically gross and it that as growth this and on increasing at a XX.X% income income actually it those growth achieved gross consolidated a segment do margin it’s year. in we as well in operating get we’ve energy on year-to-date and we on XX.X% share, gross in XX.X%. energy of Recall earnings our quarter. our When look with excess because the quarter line. our You’ll excluding EPS growing growth year-to-date basis, do this terms adjusted was to grew double operating gross you On included regulated income basis segment we of on net consolidated both in operating increases year-to-date growing also growth is income in too XX.X% Driving again basis and of growth generate

per on basis. just to Moving on to there’s as things a couple I’d a to share like Slide X it of about talk relates that

terms Shore Eastern of and $X.XX. that quarter-over-quarter. margin rates share. us as You’ll $X.XX a driver service settled EPS per increased were see that and by taxes in $X.XX by gross our utility basically from result being which comprised increased $X.XX coming expansions $X.XX rate overall big a with of That's growth other Lower of There by operations. GRIP per $X.XX. and $X.XX core income were represented case and benefitted share mechanisms regulatory was the

regulated some the You’ll tax $X.XX at at from the offset offsetting were that looked the the expenses slide provisions that impact, we contributed you’ll see on top, our note by quarter. operations a that was as $X.XX during was basically non-deductible unregulated the side

basis the for net a $X.XX quarter. on PESCO Lastly added

would to breakdown our would that expenses. Turning be to other be useful the next operating slide, things thought one of the we

we for it Shore, months Eastern under putting drops regards about you’ll And to so on what X% and during in out some And compensation as growth actually is factors you look drops in and infrastructure quarter, see second very you down can quarter. higher amortization on in given when what to from XX% non-recurring for this the PESCO the talked we’re property that take we’ve performance, and large taxes those done that basis from see the when very our a experienced X%. slide we’ve depreciation, carve to as X% you expenses easily that place quarter growth well that costs six our out at for in incentive cost expense

we dollars customers case the and the in the have of relates also the jurisdictions and on when but overall it to the to wanted basis filings Delaware year-to-date thing that X, our Shore operations added two to with offset overall increase on you same an operations. know not highlight the that included regards reserved $X.XX have we TCGA be to we’re In expenses a where of reconciliation relates jurisdictions. those Slide about it two that reserves. actually Florida, actively include deductable. as rate some with to got are to we our regulated as of jurisdictions, we the At at Eastern completed FERC being where Moving involved an tax we’ve look refunds bottom, we year-to-date our those our Maryland really by happened have $X.XX before a and unregulated basis, it impact will of In

about just a on X, think Moving to business Slide you as we highlight wanted year-to-date. to our

XX You of of term and by basically about core then balance the that generated being about making we that our that unregulated operations pipeline million will XX% coming call operating in still income other of up XX%. with from we part our operations note utility the the on operations,

at total we capitalization is looking try ended goals, that ourselves equity our to constantly capital end structure consistent the pretty of to still at to for where June, around we’re to As XX%, our where XXXX. we continue position year future the

the a at identified. financing another process $XX continue long-term are to we for as this market of projects a November and cost new schedules later in completing million for debt capital of permanent of necessary access We’re will net placement X.XX%, year as

it in our five on a the terms have of and capital whether spoke In easily, at at year. of we’re increased us XX% last and a to we over capitalization of see over look XX% slide a you recognize It horizon. end the of out projects significant you so presentation forecast at as look on have some being we you our Company at of XXX on are projects our of this line from we doubling June. whether XXX look on there that accelerated. the it briefly the earlier previous growth a invested approximately projects on on you that the projects last years, investing about When This million in slide result time about smaller is the those company average what capitalization, at or Mike looking million years actually capitalization see five also and our average some that today’s includes

impact this Slide come mentioned is Mike is also to the the Florida incremental and will Mike later other of meter XX.X effect from This bigger you million big margin in XXXX. reliability XXX,XXX here, with a in There project to program Shores year either and Smyrna Eastern X.X modernization and next million. this XX.X several Beach what said be add well or continuing this early of of are of minutes. January it system about an projects from earlier will will process well the year are we're in had total of of year next projects including this margin And terms translating recently before of we the North a generated is XXXX, an program rate few lastly for year quarter X.X for some adding expecting everything million. will are million. What and into in of adding to incremental XXXX into West the investments that’s add X.X expansion in that that the New XX.X projects are year and wanted project constructed project. million invest and additional well those a that million XXXX way our XXXX. new or and that total finalize million that million an In XXX,XXX Florida add year, to were in we will went drivers million incremental incremental done constructed Belvedere XX.X in addition interested XXXX on expect we then that the into $X.X will and substantial again highlight add certainly as additional see this well on prospective, that X.X will million add X to that X.X XX million reads add the about in talk to in then What’s and and add grid a margin be year another our year electric is to gross what as just I that Several listed margins the before

going the that back to key to him these I’m some Now Mike I discuss turn projects call mentioned. of for

Mike McMasters

Thanks Beth.

upgraded XXXX this look you just margin When with million so the see of Just approximately for goes total effect Daleville X,XXX returning as interconnect; capacity as to investment in XX the million at side well spend to Beth XX%. mainline looping, into affect things, ’XX. TETCO of slide, year-to-date to on half miles Compressor December the total control a the back project ’XX it's new XXX,XXX miles natural in When what we operations project of and stations that million. side this far gas the look you the pipeline compression in TETCO can Shore we’ve Station; first about incremental two expansion, year. of you of horsepower Eastern invested at XX.X% capital ’XX, the extensions, pressure full in in this margin mentioned $X million margins by increased $XXX $XX when of of slide description service, more XX you’ll you of at upgrades service XX The new look at incremental year

Turning second margin, of talked drive feel margin looking of pipeline sell quickly. XX well, new am capacity as about very just estimated projects, of good growth. of go this day out a of quarter little about relatively here for XX,XXX we that of capacity commitments miles fact in to pipeline per Florida customer and the going transmission miles to XX total XX,XXX these capital, per rest currently million X.X annual Beth project Slide opportunities in pipeline; we’re gross The distribution -- dts Northwest XX; day, the that so with of pretty XXX,XXX can to and bit X I XXXX. the dts million feel of

capital, capital, of pipeline X.X Smyrna second million X and in same million of gross X.X pipeline. annual type of XXX,XXX estimated margin estimated Belvedere Annual margin pipeline, million expansions, miles quarter the New XXX,XXX and margin of of of million. X.X X.X numbers year-to-date. gross

you to X.XXX talk XX% growth, to commercial look natural -- Slide XX, Residential when XX% of sorry want gas me. year-to-date. Turning growth our I growth growth growth, distribution our the gas excuse million growth, X.XXX natural distribution I XX% million am industrial at growth,

the the Florida as by revenue million other well; June. growth and six in New XX,XXX, growth unbilled down so of service in X% X.XXX of effectively ended months total Northwest X% and

our you of Slide to return -- to is this, we’re XX, some on out side and see the we When lays right from Slide really growth you’ll hand kind growth trying equity document to the the hand at XX of Turning is at how weighted green how that line our running manage of degree. we picture look just do a left look how to the average the side.

You’ll see X.XX. that we’re median above the the median

so. At you requires things combined are remain capitalization, to get just also again so strong returns. going us investments it our two and XX% can the XX% that we’ll is We’re same do capital those expenditures, disciplined -- driving to growth XX.XX% as of mentioned total Beth we’re for making that these and very for and ROE and see averaging to that continue time,

average over dividend X.X% the at the remains when Turning our growth at look dividend are could driven see that see to X.X%, conservative these you you gross. strong obviously dividend and you strong Slide XX, payout look can growth. above and the you years, X.X%, growth very where our by When payout X.X%, or ratio that’s earnings recently XX.X% ratio

XXth today, We’ve percentile, The Slide the from the shareholder X percentile; XX flat quite one year say year the companies. above the shown three its above XXth XX almost percentile we’re our all years Turning guess fairly on amongst return, slowed to months. ranked been we’re last have slides and years, we’ve a years stock the I Chesapeake XXth bit. these XX percentile S&P price to years XX above slightly we’re been in -- down XX the shareholder return.

growth rest having right returns right of see XXth XXth XX the the utility. percentile. percentile percentile XXth XXst terms The can faster a now or years, really -- faster percentile, You higher industry unregulated is and the than recently more of shareholder in percentile, for now XXth

while capital our Moving overall our growth energy related in return profitably XX, our that pretty our total skills expertise. to existing is opportunities maintain when and by leverage incremental we capital to Slide about strategy, businesses deploying solid think shareholder reinvesting strategy

serve into and development new to expand projects new new services areas. We’re new service provide customers constantly seeking

systems natural We’re that investing gas customers industrial and power downstream plants. in as pipeline service end-users provide cooperatives, municipalities, to such LDCs

and commercial propane new projects potential. We’re investing perusing projects, growth in include natural These to to gas. long-term renewal markets customers. significant We're serve with opportunities industrial access

important. are strategies engagement our Finally,

infrastructure strategic for to strategies sustainable employees growth. engagement Our provide a

in with We're and our we training. live. talent engaging and development communities where work We’re targeted plans investing and

our awards, foundation are We’re top It key Chesapeake pursuing employees events. growth. through for brand our ultimately is driving the of excellence This safety the care growth. is who and workplace a

into to our earnings slide we will growth looking we’re drive can to to XX, shareholder that increase identify future develop Turning probably executable that opportunities continue projects value. growth and

we We opportunities are strategic proud and of that returns therefore the fact finding dividend are are earnings that and drives superior growth. producing total dividend driven by and as it

Our energized. team is

we're open that, environmentally With excellent team, competitive and We be take safe want We will at discipline capital a we to looking entrepreneurship, strong everything and innovative team, from very it questions. returns. and have generate and perspective. want strong responsible. We culture, up to


[Operator Global the line of Securities. from comes Seaport Instructions] question from first Mark Your Levin

line Your is now open.

Mark Levin

if of with that your think to questions. CapEx forward. to sub-segments the be about picture more Two be second -- and that question hike. the those over seeing to in you the And can her color that you're has opportunity then lines of active One you greatest quick opportunities the Maybe expect last is opportunities at more projects being the you Maybe where talked you look accelerated? may around big year talk next are some where opportunity? some going the to where about one around do some question the

Beth Cooper

a So, little the Mark, will bit first second question. and about talk Mike then talk I about one can about the

and where and small So feel looking they we in constantly at projects stage include can the likely at are that when that to terms are we’re happen our of capital forecast a expenditures, projects.

the in margin is this dollars we dollars And smaller be that when added terms including are are some to will where so, at regards on time there because there won't spent, in look projects we’re table here with, that. forward projects as moving dollars smaller is then came there time some we the to of projects. included be that also the are that we be the And line they at in acceleration projects

Mike McMasters

it's that to what's significant it's things say going on. driven think I first not And cost overrun by

when Again, disciplined it next just good really more of So but that for has where years, do year, it's doing be to a basically by earnings, growing we the this with it's manner, be the in to it look also so to we very to going the the about doing two over three years, it at want hard we of renewable. same do disciplined. think exception not

So we’re also pretty still with to and the in operations are look that with that side, our Delmarva now rates, the comfortable Florida in grow the those evolve. and transmission pretty distribution will the the Florida. I’m gas looking opportunities the are we've of we area strong well same both at continuing Delmarva natural continuing transmission got Ohio at as some we And traditional in right side, Ohio

distribution propane we’ve generating distribution gas community the growth with very doing, very some very and the side we’re good we've returns. On propane strategy on effective system implemented been seen strategy has we’re ago, again, side, years the comfortable that. strong What that

we’re has for which that -- that fuel would also been fueling be us to new territories helping get we vehicles, otherwise more addition effective, doing In into for not a propane recently in. been it’s very

CGS growth, gas me operation are the project to and tougher very natural with the to with CHP for CNG electric pretty we’re -- in [indiscernible] we’ve but look than the a we’re stuff -- the the bit doing distribution the electric opportunities companies facility that as stuff the coupled So Florida in know with excuse and of comes it you we’re on well. continuing distribution, one the little comfortable Electric stuff as for Peninsula. when distribution exploratory also

are few that think over when look closure, bring growth trying to and drive to these next at to but to continuing some I CHP things hard we’ll to so, hard we’re years ultimately And those see the those.

Mark Levin

and and go regarding I budget, has to the question, budget you when One board to follow-up to that perspective? but only in about outlook anything of from sort Beth the of on the have from we terms the a get the budget how might the and still XXXX year, beyond in we’re beyond and the been think affect CapEx CapEx of CapEx to -- revised in middle extrapolate XXXX XXXX know in the

Beth Cooper

the budget good last of would next of us be over XXXX. years to some for next record, -- track to finishing from is terms a standpoint just in in I the spent know maintenance that bit our five are and construction now the being and say up through $XX we year There’s our I process projects if that those expansions for years about but got of our look early going right be I distribution maintenance five would think you and we we’ve that in prepared, pretty doing in what level We’re terms million we’ve have normal some we’re the going also pure level the like operations. little of in going that indicate

for you’ll domain, But years investments we'd look information at So, have driving been the I think on be as five over you to kind placeholder and that public that. as more for we’ve as capital a able now certainly, we like we’re the last a focused to that end XX% pursuing of certainly achieving. out keep in end additional and book low the refine then and there


time, would no I over At this Mike There’re questions. to back turn call McMasters. the Instructions] [Operator further

Mike McMasters

Thank time this spending us some you. with I everyone want for morning. here to thank

providing total long our to driving earnings to term. serve per end. generate committed over that great and customers, Have the service shareholder share We’re supporting we return the excellent superior week a and communities to

Beth Cooper

you. Thank


This concludes today’s conference call.

You disconnect. now may