Greetings and welcome to the Chesapeake Utilities Corporation Second Quarter Financial Results. And as a reminder, this conference is recorded, Thursday, August 5, 2021. I would now like to turn it over to Beth Cooper, Investment Vice President, Chief Financial Officer and Assistant Secretary. Please go ahead.

Thank you and good afternoon, everyone. It is great to be with all of you today. We appreciate you joining us to review our second quarter and year-to-date performance through June 30, 2021. Yesterday, we announced our financial results, which demonstrated how we continue growing and operating effectively, serving our customers, identifying and executing on new investment projects and keeping our employees as safe as possible in this ever-changing environment. As shown on Slide 2, participating with me on the call today are Jeff Householder, President and Chief Executive Officer and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer. We also have other members of our management team joining us virtually. Today’s presentation can be accessed on our website under the Investors section and Events & Webcast subsection. After our prepared remarks, we will open the call up for questions. Moving to Slide 3, I would like to remind you that matters discussed this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The Safe Harbor for forward-looking statements section of the company’s 2020 Annual Report on Form 10-K and our first and second quarter Form 10-Qs provide further information on the factors that could cause such statements to differ from our actual results. Additionally, I’d like to mention that we have added some new disclosures in our quarterly reports to highlight some of our key environmental, social and governance or ESG initiatives. While Jim typically talked about these initiatives during our earnings conference calls, as he will later on today, we wanted to provide more disclosure in our filed documents. We would welcome your feedback on our enhanced reporting. Now, I will turn the call over to Jeff to provide some opening remarks on the company’s second quarter and year-to-date results and the key drivers of our performance. Jeff?

Thank you, Beth and good afternoon and thank you for joining our call today. Let’s start, as usual, with an update on COVID-19 and our continuing efforts to manage through the ongoing pandemic. When we spoke during the first quarter earnings call, the trend was positive in terms of reduced COVID-19 infections and serious illness. The vaccines along with continued preventative measures were proving to be remarkably effective. The good news didn’t last long as the U.S. relaxed many of its pandemic precautions and vaccine levels plateaued. We have seen an uptick in COVID-19 cases across the country, including in our core service territories. As has been widely reported in Florida, the case levels are now greater than at any time over the entire course of the pandemic and hospitals are full. However, Florida and all of the other states we serve remain at this point open for business. Notwithstanding the latest COVID surge, we are not to-date experiencing any significant COVID-related reductions in usage or margin in any of our services there is. Our return to the office plan has long included the possibility that we would see another surge in COVID cases this fall. Over the past few months, we have been watching the Delta variant’s impacts in India and in the UK. Even prior to the Delta variant spreading in the U.S., our remote work teams were not scheduled to return to the office until late fall after school resumed and after we had a better view of any additional surge. We have been operating effectively for well over a year with a remote administrative workforce and there was really no need to risk returning to the office in the midst of another potential wave of cases. Of course, Chesapeake is an essential business providing essential energy…

Thanks, Jeff. Turning to Slide 5, net income from continuing operations for the second quarter was $13.8 million compared to $10.7 million for the same quarter of last year. This represents growth in net income of $3.1 million. Earnings per share from continuing operations for the second quarter compared to the second quarter last year grew by $0.14 to $0.78 per share representing growth of just under 22%. On a year-to-date basis, net income from continuing operations was $48.3 million compared to $39.7 million for the same period last year. This represents a growth in net income of $8.6 million or approximately 22%. EPS from continuing operations for the same period compared to the first half of 2020 grew by $0.34 to $2.75 per share, representing growth of over 14%. The EPS growth rate compared to the net income growth rate for both the quarter and year-to-date reflect the large issuance of stock in the latter half of 2020, ensuring we achieved our target equity range. As shown on Slide 6, higher net income was the result of the gross margin drivers, Jeff, highlighted earlier, coupled with continued expense management, business efficiencies and standardization and collaboration across the enterprise. Specifically, for the second quarter, gross margin increased 13.9% compared to the second quarter last year, while operating income grew by 25.6%. Our strong performance for the quarter was led by the Regulated Energy segment as the second and third quarters are seasonally light for the unregulated energy segment as a whole. Slide 7 and 8 highlight the key drivers of gross margin and expenses for both the quarter compared to last year as well as year-to-date. For the quarter, the key margin drivers generated $0.44 per share after tax. Higher earnings for the quarter reflect increased earnings across the business…

Thanks. As Beth noted, our capital capacity and the strength of our balance sheet continues to support growth. We are very comfortable with our previously updated capital guidance remains on target. Slide 11 highlights what we call our five platforms for growth, which focuses our internal efforts around optimizing earnings from our historic assets as well as our external focus on additional project development and acquisitions. As I noted a moment ago, we continue to experience significant demand for the energy services provided by our existing business units. Slide 12 highlights a few of the major initiatives underway. A significant portion of our projected capital investment is devoted to expanding our existing core businesses and capturing the growth in our service territories. As I previously noted, we also have several relatively small-scale pipeline projects under development that will likely increase our gas transmission investment. Our propane business continues to grow. We will keep looking for acquisition opportunities in the Mid-Atlantic and Southeast. And we see growth in Marlin Gas Services both organically and through acquisitions, along with increasing investment opportunities in the renewable natural gas market. When these major initiatives become viable projects, we capture them in our margin table. Our latest margin table highlighting key projects and initiatives as shown on Slide 13, including pipeline expansions, CNG and RNG, transportation, acquisitions and regulatory initiatives. On a year-to-date basis, our total margin increases over $27 million, of which $15.4 million is reflected in this table. As we frequently remind you, this total does not include organic growth or growth in unregulated energy businesses outside of acquisitions. It also does not include projects under development, but have not matured to the point where we are prepared to discuss capital or margin projections. The key projects we have included in Slide 13…

Thank you, Jeff and good afternoon everyone. It’s great to be with you today. I would like to begin by providing an update on legislative actions that we’ve been working on. As shown on Slide 19, the energy preemption bill in Florida that promotes consumer choice and the unrestricted availability of natural gas as an affordable, reliable and resilient energy resource was signed by the governor in late June. We, along with many others in the state, work diligently to advance this new law. Similar legislation has also been adopted in the state of Ohio, another one of our service territories. In addition, we are excited about a bill that we authored and sponsored in the state of Florida. This renewable energy bill cleared both chambers and was signed by the governor in late June. This new law defines biogas and renewable natural gas and promotes their use in transportation, electric generation and injection into gas distribution systems. The law also authorizes that the PSC to approve cost recovery for RNG contracts that may exceed market rates under certain conditions. With these new laws, Florida and Ohio joined 17 other states, which have firmly ensured that natural gas remains the clean, affordable, reliable and resilient energy resource that is readily available to meet the demands of our residential, commercial and industrial customers. I am proud of our government affairs team for driving and supporting such important legislation within these states. First and foremost, to ensure that natural gas is available to meet customer demand and also to provide a mechanism for renewable natural gas to be a viable port – part of energy portfolios throughout the states. Slides 20 and 21 lists some of our recent regulatory initiatives where we have proactively worked with our various public service commissions to…

Thanks, Jim. We tend for good reason to emphasize earnings per share on these goals. But I want to take a moment to focus on return on equity as another key measure of our overall financial performance. ROE is an important performance metric for us. Slide 24 charts our historical return on equity results. We’ve exceeded 11% ROE for the past 15 years. We consistently exceed our authorized regulated return limits. We’ve been prudently managing our regulated businesses to optimize returns, but our non-regulated businesses are major contributors to the higher than regulated returns we’ve produced over a long period of time. Our strategy of adding selected non-regulated assets capable of producing returns above those of our foundational regulated businesses has consistently benefited our shareholders. As you can see on Slides 25 and 26, we continue to reaffirm our 5-year capital guidance for the period 2021 to 2025 of $750 million to $1 billion. I’m excited that our latest strategic plan update gives us a high degree of confidence that we have significant investment opportunities ahead of us. We also continue to support our 2025 EPS guidance range of $6.05 to $6.25 per share, representing an average EPS growth of approximately 10% and from our initiation of guidance at the end of 2017. Natural gas remains a key component of the country’s long-term energy strategy. We believe that the markets we serve value, the energy services we deliver whether that’s natural gas, propane or electricity. Our customers have spoken wildly in this regard. At the same time, we have opportunities given our business mix, expertise and strategic approach to capitalize on new renewable energy opportunities that provide the bridge from the here and now to a more sustainable future. We’re committed to our growth strategy, focused on delivering top quartile performance, including shareholder return, which, by the way, has exceeded 16% compound annual growth for each period, 1, 3, 5, 10 and 20 years through July 31, 2021. Our investment proposition is based upon our commitment to performance, we outlined on Slide 27. Our strategy, our employee engagement initiatives, our financial objectives and our disciplined operating philosophy are all in support of sustaining a level of performance achieved by a few in our industry. I want to thank all of our dedicated Chesapeake Utilities employees. Our team takes great pride in our success and the work we do every day to deliver clean, reliable and safe energy to our customers. Thank you for joining us this evening. We will be happy to address any questions you may have.

First question is from the line of Tate Sullivan from Maxim Group. Please go ahead.

Hi, thank you. Good afternoon. Jeff, I thought I’d start with the Florida, hold a new detail on the Florida related projects. And I think the dynamics of projects and providing customers is a bit different than Delmarva. I mean can you refresh I mean, how it could – and some of the projects seem to be serving other service territories as well. Can you just give a broad overview on how it’s different and it seems like there is some urgency to add capacity to Florida, too ?

Well, I’ll tell you, it’s a little bit of both, right? We have, for a number of years, as you well know, have been expanding our transmission network on Delmarva, Eastern Shore Natural Gas projects, and we continue that today as we move down to Somerset County in Maryland and other places on the Peninsula. We have been duplicating that kind of activity in Florida for a number of years with our Peninsula Pipeline intrastate transmission business. And so those two pipelines are providing transmission transportation service to primarily the distribution companies that are serving end-use customers, although certainly, both of those systems provide direct service to a variety of industrial customers along the way. And so we’re seeing the same kinds of things are happening on both Delmarva and in Florida where there is significant growth, significant demand substantial homebuilding activity followed by the usual commercial infill, a variety of industrial customers in both Delmarva and Florida, and we are building pipelines, both transmission and distribution to serve those customers. So I don’t know if it sounded like we were focusing on the transmission business more in Florida than the we were in Delmarva. We just happen to have two or three new projects in Florida and are continuing to look for additional opportunities on Delmarva. But I would say both of the areas are right for growth. We’re seeing, as I mentioned, many, many, many housing starts in both service territories that we and other gas utilities, frankly, they are providing service to and our transmission expansions are providing service to those distribution facilities, at a large measure they are providing services to the end use customers.

Yes. I mean the growth continues in both service territories, and – and I also will follow-up on Escambia meter station to just – I mean what – can you give us a slight more background on why would Florida Power & Light want to get – sell one of their distribution systems within their territory, I think or how did that acquisition…

It’s a interconnect point on smarter gas transmission that actually is providing service into an FP&L pipeline that’s delivering gas to the Crist Power facility, which was coal and is now converting over to primarily natural gas service. It was part of a negotiated agreement between us and FP&L that we hope at some point in the future, we haven’t nailed this down yet. But we hope that at some point in the future, it will provide an opportunity for us to have access to additional quantities in that area. So, it’s step one of what may be a multistep process to expand our opportunities to deliver more gas in the Pensacola area. So, we will see if that happens. But it has not been finalized at this point.

Okay. And last one, you mentioned I think earlier in your remarks, 15 new customers a day in Delmarva, and is that about the same in Florida or if…?

Maybe just to a hair less than that, although our – I think our percentage growth rate is just a fraction more than what we saw on Delmarva. But we have really been growing significantly on the Delmarva Peninsula. It’s just amazing to see the homebuilding activity on the peninsula over the last 1.5 years or so. So yes, we have, I think, more net customers now in Delmarva, but fractionally more than they do in Florida, but the growth rates are relatively similar, both of them in the 4% or 5% per year range.

And I would add – I am sorry, is just going to add to what Jeff. In our press release, we actually included some of that margin information on the customer growth. And so you can see in there that the trend that we are running is very similar to what we have been doing for several years now and a little bit higher in some cases, slightly higher. So, year-to-date, we have got margin incrementally from this new customer growth of about $1.7 million. So, strong customer growth continues from time-to-time that we will go back and forth between the growth rate on Delmarva and Florida, which is higher, but they are both running at significantly above the industry growth rate and that appears like it’s going to continue into the foreseeable future.

Okay. Thank you, Beth. Thank you, Jeff.

The next question is from the line of Brian Russo from Sidoti. Please go ahead.

Good afternoon.

Good afternoon.

Yes. Just on – do you sense that the constructive backdrop for natural gas in Florida and now with the legislation you just discussed. Is that accelerating projects in Florida and enabled you to advance some of the projects you have announced? And can we expect projects that might have been further out in your pipeline can now be accelerated with the legislative support?

There is probably a little of that. But I will tell you that in Florida and Jim is up in here and help me with this as any second. But it’s a very constructive business environment. The regulatory structure here is supportive of expansion and has been for many, many years throughout a number of different governors and a number of different legislators. And so I don’t know that it’s accelerating anything that we wouldn’t have already been able to do here. But it certainly is a nice feeling to that. You are not going to have to fight your way through a number of different local gas brands and to make sure that we continue to provide customers the fuel choice that we think is central to what we do and to what other energy providers are doing.

Okay. And if I recall on the last conference call, you were discussing possibly investing in RNG processing facilities up in, I think, Maryland, maybe it was with Bioenergy DevCo, any update there?

We are currently in the process of working with a number of different LNG facilities and the Bioenergy DevCo facility, which you mentioned happens to be in Delaware. The CleanBay Renewables facility has a project under development then in Westover, Maryland. Our intention is to be engaged and actively involved in both of those projects. We have an investment underway right now developing a gas processing facility that we are purchasing from Lockheed that is scheduled to go to the Bioenergy DevCo facility. And we are working with Bioenergy DevCo to develop the final contractual arrangements that we will deal with how that facility is operated and who operates and how all that works. And so it’s one of those evolving contract and deal structure issues that I spoke of earlier. It’s interesting to see these renewable projects kind of emerge and as people like us and others are interested in investing in them. There are a variety of different potential options that people are looking at to structure those investments. And so we are right along with others in that path. But I think you will see us being very actively involved in what Bioenergy DevCo is doing and what CleanBay Renewables is doing on the Delmarva Peninsula as well as a number of other projects and close to our existing service territory.

Okay, great. And then the capital cost surcharge program, I believe its $2 million margin in 2022 to wind down for 2022 or does that program extend past that year?

That is basically what’s been included there, Brian, is the annualized margin, so to speak, from the investment that’s been made at that point in time. If there are additional investments set at some point in the future get added, then we would go back in for an additional rider associated with those.

Okay, got it. And then just lastly on the Elkton STRIDE, if I recall in the – with Elkton, you agreed to stay out in terms of raising rates or filing rate cases. I suppose that, that’s still in place and then the STRIDE program is treated separately from all other regulatory and rate matters? Is that the way to look at it?

That is the way to look at it. We have certain requirements as it relates to our various Maryland jurisdictions in regards to when we have to come back in. And so one of the things that we are looking at is given that we have several small – several different entities we may be approaching that more from a consolidated standpoint. So, that timing may change in regards to Brian, when we go back in after consultation and working with the PSC and looking at that. But right now, there is a planned timeframe for when we can go back in, in regards to Elkton, but this RIDER was established outside of that, yes.

Okay, great. And then just lastly, if I heard correctly, you mentioned that Marlin might be pursuing acquisitions. I was just curious if you could elaborate on that a bit?

Probably not much, I can tell you that, yes, we are pretty opportunistic looking at possibilities that come along. There have been and we think there likely will be some opportunities to acquire businesses or to at least look at the opportunity to acquire businesses that are similarly constructed as Marlin. And so we will see how that goes. I think there will be a little bit of consolidation in that market over the next couple of years, especially as the opportunities continue to show up in the renewable natural gas transport markets and then some of the gas capture markets that I mentioned earlier, ensuring that gas doesn’t escape to the atmosphere when a segment of pipe needs to be taken out of service for maintenance. So, we think there are opportunities to organically grow more and we are doing that, making some substantial investments in adding equipment and facilities and personnel resources. But I think there may also be some opportunities much as we see on the Portland side for acquisition.

Alright. Thank you very much.

Thank you.

Next question is from the line of Roger Liddell with Clear Harbor Asset Management. Please go ahead.

Good afternoon Jeff and Beth. I wanted to focus on Slide 24, the return on equity performance. It’s quite extraordinary to state the obvious. And so the generic issue I am pursuing here is the durability of ROEs, such as you have caught up. And what I mean by durability, I think the company has had an extraordinary ability to create, to generate shared savings opportunities. And as a sidebar of comment question perhaps that uptick in ROEs starting roughly in 2010, may have been the consequence of your arrangement in Florida. And I think that, that whole opportunity was created by how you structured it as a win-win and shared savings. But there is a lot that’s happened politically and regulatorily over the last decade. Is there – I would like your perspective on the political and regulatory climate attitude, stands for shared savings. And can you tell us that you have an ability to create the same kinds of shared saving opportunities that have characterized this extraordinary period of ROE?

I will take the first part of that, Beth, and then jump down and wait a minute. We are in the process, and we have talked about this a little bit in some of the previous earnings calls, looking at a business transformation across all of our units. And that involves organizational restructuring – it involves a simplification and standardization process within and among the business units. It’s driving us to look at the company more as one company than a collection of individual business units. And the intention to be perfectly bought and we say this internally all the time, was to allow us or enable us to double the size of the company again over the next several years as we have done three times since the 2010 period that you just pointed out on the chart. And so it’s tricky to continue to drive earnings and returns at the same time. But we are very careful in managing our cost and we are on the hunt for additional efficiencies across the company and refining those. We are fairly deliberate in looking at technology improvements over the course of the next several years and our ability to recover the major cost and those technology improvements from our regulated entities with a series of rate filings. We are looking at ways to continue to drive margin, as you have seen us do over the last many years. Our business development focus is pretty sharp. We do not make investments. And we do not look at acquisitions that would not be accretive pretty quickly and that would ultimately damage these returns. And so we have been very disciplined in our approach to growing this business. We are not just out there adding things because it’s interesting to add things or trying to get bigger just because we are fairly consistent, I think, year-in and year-out and prudently managing the assets that we have and then making sure that we add only those assets that are linked to things that we already do. And that will consistently allow us to continue to hit these targets. And so I think it’s a combination of managing the assets you have. We are looking for opportunities for efficiency improvements. And do not get out too far over skis in the growth acquisitions that we are pursuing. Beth, I am sure you have a lot to say in addition to that.

Can I bud in just for a second, I apologize. I didn’t ask the question clearly. I appreciate, Jeff, what you just went through in terms of the shared savings that you have driven through technology, through integrated operations scaling. But what I should have asked is shared savings for the communities that you serve and slow the ability to identify reductions in costs currently being borne by resi and industrial markets through a solution delivered by Chesapeake. There are savings enjoyed in the communities you serve, and therefore, those savings can drive a higher ROE. In fact, you have executed as promised and the benefit is in the community. Now is that – maybe that’s for Beth, did my clarification on my question, is that useful to you?

Sure. I think one of the things that, Roger, as you look back over our history, I think – if you look at our track record in terms of rate increases. One of the things that we have been really successful at as an organization is being able to grow and not – that not bearing and causing increases for our customers. If you look in our – all of our jurisdictions across the board, there has been limited activity from a rate standpoint. And so we have been able to grow, we have been able to not burden existing customers. And so, it is a little different situation that we have experienced relative to a lot of utilities that are frequently going in for rate increases to cover their investment. So in Delaware, I can tell you over the last, I think, 20 years, we have been in maybe once or twice in that period of time. Similarly, it’s been a very long period of time in Maryland, where we have been in for any regulatory action in our Maryland jurisdiction. Also in Florida, if you look at our FPU natural gas and our Central Florida Gas division, again, it’s been a long period of time. So, we are continuing to grow and we are managing successfully any implications to existing rate payers by ultimately keeping their rates without having to constantly increase them as we are growing. And we want to continue to do that. I think that’s also, as Jim likes to say, one of the great things that we have, right, we have areas that are – have lots of opportunity to continue to expand. So, an answer to where you started, I think, Roger, you are going to see us near what we have done historically. We are going to pursue growth in Florida because there is a desire and a demand for natural gas. You are going to see us do it on Delmarva, right. We have counties that want to see natural gas and want us to expand to display clean fuels. And at the same time, you are going to see us pursue alternatives and options like RNG and other things that bring competitive alternative energy solutions to our markets. And so I would answer, I think Chesapeake is in a great place. I think every year, we update our strategic plan. Every year, we come back. We have been able to say we support our guidance, as Jeff did today. So, I think our future is bright. I think we have got a lot of opportunities before us. But you are going to see us execute on with the same discipline that we have done for the last 15 plus years that this ROE chart shows.

Yes. Roger, that’s a much better question than the one I answered. But I appreciate the opportunity to that to chat about that a little bit. And I would add a couple of things to it. Obviously, the – just the shale gas revolution that has provided untold millions and billions of dollars, frankly, in energy savings have been passed through to customers on our systems as well as other systems around the country. And we continue to see a long runway ahead of pretty stable pricing there. And we will continue to, again, to pass those savings along. We are also seeing some interesting things happened on the renewable gas front. And while many of the green attributes of many of these projects are being moved into markets like California and Oregon even Canada, looking for a vehicle home through the LCFS program, for example, in California, and the economics supporting the development of the RNG facility are largely supported by the economics of the green attributes moving to these other markets. The commodity itself, the actual molecules of gas are all moving into distribution system some place. And they are generally speaking, moving at pricing that is at or in some cases, lower than what we see traditional shale gas pricing. And so it’s an interesting opportunity to continue to provide low price fuel in our distribution systems that are supported by renewable gas.

Good color. Thanks so much. Thank you for expanding the answer, very helpful.

It looks like there are no other questions at this time. I will turn it back to Jeff Householder for any closing remarks.

Well, thank you. I appreciate all of you staying with us this late into the evening. As always, if you have additional follow-up questions or need additional information, feel free to contact any of us, Beth, myself, Jim, and we would be delighted to help you. Thank you very much, and good evening.

That does conclude the conference call for today. We thank you for your participation, and you can now disconnect your lines.