Welcome to Chesapeake Utilities Corporation’s Third Quarter 2024 Earnings Conference Call. [Operator Instructions] I’d like to turn the call over to Lucia Dempsey, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Today’s presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open the call up for questions. On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on 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 our 2023 annual report on Form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share. And the information presented today includes the appropriate disclosures in accordance with the SEC’s Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation in our earnings release and in our third quarter Form 10-Q. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we’ll do so here with a moment on motor vehicle safety, as highlighted on Slide 3. The time change and shift into cooler temperatures, though we haven’t quite seen that yet, provides us an opportunity to check and update fluid levels, windshield wipers, roadside emergency supplies and ensure oil changes are on schedule. Also be aware of how the time change affects morning and evening visibility and exercise more caution around wet or slippery roads and increased traffic around holiday travel. I’ll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on demand in our growing service areas, capital investment plan and business transformation efforts, including an update on the Florida City Gas integration. Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our financial results, strong balance sheet and dividend and earnings growth trajectory. And Jim Moriarty, Executive Vice President, General Counsel and Corporate Secretary and Chief Policy and Risk Officer, will review our regulatory strategy, government affairs efforts and other company updates. With that, it’s my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning, and thanks to all of you for joining our call today. I’ll begin with Slide 5. Adjusted earnings per share this quarter was $0.80, bringing our year-to-date 2024 earnings per share to $3.76. Our results are well aligned with our expectations, with strong contributions from both Florida City Gas and our core natural gas operations. Our year-to-date earnings performance, combined with our growth expectations for remainder of 2024, enable us to reaffirm our full year 2024 adjusted earnings per share guidance of $5.33 to $5.45. Continued expectations of strong demand growth, along with our pipeline of capital projects and regulatory initiatives, drive customer value and enable us to reaffirm our 2025 and 2028 EPS guidance ranges. And as I’ll discuss in more detail shortly, our 2024 capital growth plan remains on track with $257 million invested in the first 9-months of this year and $300 million to $360 million expected for full year 2024. Turning to Slide 6. I’d like to start with a short update on Hurricane season. Overall, our systems fared well through Hurricanes Debby, Helene and Milton, for which we are grateful. While we did have a number of electric customers lose power during Hurricane Helene, we were able to restore power for the majority of our impacted customers within the first 24 hours. I’m pleased with the work our teams have been doing to practice our emergency response procedures and improve the quality and resiliency of our infrastructure and systems, which enabled us to respond quickly and effectively in communicating with customers and restoring their power. Our integration of Florida City Gas also continues on track as we make additional progress on standardizing operations, engaging with teammates and exploring investment opportunities to serve the significant growth in our new service areas.…

Thanks, Jeff, and good morning, everyone. It is great to be here with you today. Our financial results, as shown on Slide 13, demonstrate another quarter of strong growth with adjusted gross margin of approximately $122 million, up 29% from the third quarter of last year, driven by the addition of Florida City Gas as well as solid performance across all of our businesses. Strong margin growth, coupled with operational efficiencies drove significant growth in adjusted net income, up 48% to approximately $18 million for the quarter and up 30% to approximately $84 million for the first 9 months of 2024 compared to the same period in 2023. We also reported strong growth in adjusted earnings per share this quarter, up $0.11 to $0.80, a 15% increase over the third quarter of 2023. I’ll now turn to Slide 14 and highlight some of the key drivers of our third quarter 2024 adjusted EPS. Florida City Gas operations contributed $0.75 in adjusted EPS, reflecting another quarter of strong customer growth. Our legacy natural gas growth, infrastructure and transmission operations generated $0.11 of incremental EPS this quarter, driven by strong demand for natural gas and additional margin from infrastructure projects completed in 2024. Our Marlin virtual pipeline services delivered an additional $0.04 per share of benefit in the third quarter of 2024 as we expanded offerings for existing and new customers. Increased consumption in our natural gas distribution business added an additional $0.03 per share this quarter. These gains were partially offset by a few factors, including primarily $0.28 of operating expenses related to Florida City Gas, $0.02 of increased expenses related to payroll and insurance expenses, and approximately $0.46 related to financing the Florida City Gas acquisition. Moving to Slide 15. Adjusted gross margin for our Regulated Energy segment was approximately…

Thank you, Beth, and good morning, everyone. As Jeff discussed earlier, a proactive regulatory agenda is our second fundamental growth driver, and I would like to share several updates in this area, as shown on Slide 21. For our Maryland jurisdiction, in September 2024, we received approval for a $2.6 million revenue increase. On November 7th, we filed a Phase 2 proceeding to determine a schedule for incorporating this increase into customer rates. On August 12th, we filed a rate case in our Delaware jurisdiction, proposing a $12.1 million rate increase and an ROE of 11.5%. We also requested interim rate relief of $2.5 million, which was approved with an effective date of October 11, 2024. On August 22nd, we filed a rate case for our Florida electric operations, proposing a $12.6 million rate increase and an 11.3% ROE. That filing also included a request for $1.8 million in interim rates, which were approved with an effective date of November 1, 2024. We look forward to constructive conversations with our regulators on these filings in order to implement updated rates in the first half of 2025. We also continue to move forward with sustainable investments and recently reached an important milestone at our Full Circle Dairy RNG facility, as shown on Slide 22. We have completed commissioning at Full Circle Dairy and hosted a ribbon-cutting ceremony last week to mark the start of full RNG production operations. Since the start of test production in June, nearly 21,000 dekatherms of RNG have been captured at Full Circle and injected into our system in Yulee, Florida by our Marlin virtual pipeline capabilities. The site reached an additional milestone last week when it received qualified RIN status, or Q-RINS, which allows Full Circle Dairy to generate the highly regarded D3 RINS. This qualification…

Thanks, Jim. This year has been a critical turning point as we demonstrate our ability to integrate the meaningful acquisition of FCG, deliver on our 2024 EPS and capital guidance ranges and position the organization to achieve the significant growth embedded in our 2025 EPS guidance through capital investments and regulatory initiatives. We have continued to execute on our plan this past quarter, including delivering financial results that remain in-line with our full year expectations and represent top quartile earnings performance. While the weather has provided a less favorable backdrop as we began the fourth quarter, we will remain focused on our three key growth pillars throughout the remainder of 2024 and look forward to updating you on our full year accomplishments and forward-looking goals for 2025 and beyond. With that, we’ll take your questions. Operator?

Thank you. [Operator Instructions] And our first question is coming from Tate Sullivan with Maxim Group. Please go ahead.

Hi, thank you. I’m sorry if I missed it, but you covered the short-term impact to your service territories from the hurricanes. But does this help increase the amount of spending you can do in the future on ongoing storm hardening infrastructure work? Or is there something in future rate cases that will help you increase the rate base related to that?

Thank you, Tate, and good morning. First off, I would say we were very fortunate in that the service areas that we’re primarily serving in the state. There was minimal impact to our operations. And so, as we talked about on the call, Jeff mentioned, we had customers that were out of service for a little less than 24 hours. So, in terms of CapEx and what we’re doing in terms of our storm protection and improvement plans, those plans continue. Nothing has really changed or accelerated because of the hurricanes. What we did see and we will continue to see is that our system is becoming more and more reliable and resilient, and that was certainly the case with these three.

Thank you, Beth. And Jeff, can you comment on the Florida City Gas? I mean, the customer count, average customers increased quarter-over-quarter. Should we just look at it, the customer growth opportunity set with Florida City Gas is very similar to the growth of Florida natural gas distribution in general? Or are there different pockets of higher growth?

I think that’s – I think in general, they are very similar. We’re certainly seeing significant activity on City Gas’s system in the Port St. Lucie area. I mean that continues to be an area of substantial growth as the population in South Florida kind of continues to migrate a little farther north. Although we’re happy with what we see in – certainly in the Brevard County areas and in Miami as well. But St. Lucie is probably the big driver of growth from a residential customer perspective. Now if you look to commercial and industrial, things move around a little bit. We’re seeing significant opportunities in the Miami area relative to those customer classes. And again, on FBU’s territory in Florida, lots of development in our Central Florida areas. So we’re still seeing the Wildlight development up in Nassau County, almost into Georgia, growing by leaps and bounds. So we’re pretty happy with what we see. I think we’ve been reporting about a 3.9% growth rate in residential customers, and we frankly see that continuing into the future.

Understood. Thank you.

Thank you. And we will take our next question from Paul Fremont with Ladenburg. Please go ahead.

Hey. Congratulations. My – I guess just my first question has to do with, are you taking any regulatory action in advance of a possible Supreme Court decision that’s coming up in Florida in the first quarter of ‘25 on RSAM?

Well, there is currently – there is a hearing scheduled as it relates to the RSAM proceeding, and we will certainly be participating in that. And what I would say, Paul, as we have discussed and we have talked about in the past, certainly, there is that second tranche of RSAM, and that will – if we are able to pursue that, we will certainly rest with what happens with this proceeding. But keep in mind, we at legacy Chesapeake historically have approached the whole depreciation realm, thinking about it from a depreciation study perspective. So, that same opportunity or bucket of dollars is out there, whether it’s looked at under an RSAM mechanism or whether we would like to pursue it more as a traditional type of depreciation study. So, we are following that proceeding very closely. But again, we see opportunities given how we have historically pursued depreciation studies.

We are talking about…

I was going to ask Jim to also comment on that.

Good morning Paul. Hope all is well. We are looking forward to the oral argument on December 10th of the Florida Supreme Court. And we will be helping others defend the decision of the Florida Public Service Commission. As you can imagine, we do a lot of thinking about what that means and what it could mean. So, as Beth stated, we are fully engaged on the issue, and we are looking for a positive outcome. But if not, we will make sure to bring it back in, under our depreciation approach.

So, I mean I think it by your answer, you are going to wait until the Supreme Court issues its final decision before initiating any regulatory action, is that fair?

We are evaluating whether or not, we will await that. We haven’t made any final decision. Certainly, we will announce if we decide to go down that path. But we are still looking at it, Paul. We have been following it very closely.

Great. Also I guess how does the Republican control on a Federal level impact potential investment opportunities that you might have in either your pipeline business or LNG – adding to your LNG re-gasification?

I think it’s a very good question, Paul, and one that we are evaluating as well. We have always had a very favorable constructive relationship with our Federal regulators at FERC and elsewhere. And any time we have had a project on the front end, we work closely with all the stakeholders so that there were few, if any, protests to what we would propose. And we will continue that approach. I think what you will find is a lot of doors opening maybe a little quicker than they did in the past. But we are very excited about our Worcester Resiliency project on the Eastern Shore. So, I think we are going to see a lot of wind at our backs in the energy industry generally as we go forward and try and make sure that this country continues to benefit from all the resources we have here domestically.

And then last question for me. In terms of the Phase 2 Maryland proceeding, will that also deal with the unification of the three franchises?

That’s the plan, Paul. We made the filing yesterday on Phase 2. And now the other parties will weigh in, and then we will all be before the ALJ.

Right. Thank you so much.

Thank you, Paul.

Thank you.

[Operator Instructions] And we will take our next question from Chris Ellinghaus with Siebert Williams Shank. Please go ahead.

Hey. Good morning everybody.

Good morning Chris.

Jeff, is there anything that – through the FCG integration at this point that you have learned either about operations or about incremental investment opportunities that were not what you were expecting?

I think the level of potential opportunity has probably increased a little bit from what we were expecting before we got a good look at the unit. Nothing outrageously higher than what we had been reporting, but there is certainly growth there that we are pretty happy with. We are also seeing some operational synergies that we are beginning to harvest, frankly. They also, at City Gas had a number of things, like a 24/7 emergency call response center, that we have been able to leverage in our other operations areas. And so there are a variety of things like that. They were seeing that, I think promote the sort of synergies that we were hoping to find along with the growth opportunities that are a little bit more robust probably than we had originally anticipated. So, it’s – so far, it’s – we haven’t had any particular shocks to the system from acquiring that unit. It’s been more favorable generally speaking, I would say. Beth, I don’t know if you have anything to add to that.

No, I would agree. I think you have already seen those three RNG projects. You have seen the safe investment program increase by $50 million. We have gone in for that. We have made some other filings that actually take the best of what both entities are doing. So, overall, I don’t think – I think, Chris, where you were going, is there anything that may be more negatively. We have seen, I would say, no, the opposite is true.

Yes. The Miami Loop project, the Inner Loop project that we are talking about on this call is a good example of that. That’s a $70 million project. We had assumed that we would be able to do things like that. But I think now, Beth, we are probably a project – the Miami Inner Loop, I think, is project number 12…

That’s right, yes.

That we filed with the PSC in Florida for small-scale transmission expansions, a lot of that surrounding certainly the Miami area. And so I think we will see additional projects like that as we began to try to provide for a more robust delivery of gas capacity into South Florida.

Okay. Great. Yes, I wanted to ask you about the Inner Loop project. What’s the timeline for that?

Jim, we filed that, what – a handful of weeks ago, I guess, fairly recently. I don’t have the exact date off the top of my head. I would expect the commission to look at that over the next two months or three months, and we will begin construction, hopefully, sometime in Q1 of next year. It’s a fairly significant set of projects, as we have described. And so, we will put that into service at least partially next year. And it will begin to do exactly what we are trying to do, which is to improve the deliverability of gas service into places in South Florida, especially Miami, where we are seeing growth and opportunity, especially in some of the – we are seeing a lot of on-shoring and re-shoring of manufacturing these days across the industry, and we are seeing that in things like cement production in South Florida coming back into the country. And so we have opportunities to increase deliverability into South Florida and take advantage of those industrial increases. So, that’s what we are trying to do.

Okay. Great. On Slide 20, you have been showing us this one bucket of additional opportunities for the year. Can you provide any color on where you stand in that bucket and what – sort of what you have been reaping so far?

So that, Chris, includes opportunities that we have in both, on Delmarva and in Florida as we look across the enterprise. So, again, there are things that we are doing, for example, from a control room perspective. There are things that we are doing as it relates to some of the infrastructure programs and the management and some of those savings and costs that are happening there. You are seeing a lot already. If you look at our expenses for the quarter and look at it on a year-to-date basis, there is really three things that are happening. Number one, it’s those synergies, some of which I just mentioned. Number two, you are seeing our business transformation efforts continue. In the third quarter, we went live with our Project 1CX in our utility billing system, in our legacy operations, and that has created not only efficiencies in how we do things, but also there is increased – some increased capitalization of costs as we are implementing that technology. So – and then, as you kind of move down that list and look at some of those other things, we are very active on the regulatory front in various jurisdictions. We have been successful in Maryland. I know the timing there is a little pushback, but we have been successful. And so, with all of those things, coupled with even the most recent debt placement and where we were able to place that debt. So, there is a lot of things as we lay out year-end, you are going to see – there is just many things that are going on across this enterprise, that are working to positively help us stay within that guidance range.

Okay. That helps. One more thing, can you give us any color on what was involved in the Marlin improvement in the quarter?

So, there has been – really, there has been a real focus there and a shout out to the management within our Marlin team who has had a focus really over the last year, we have talked about it in terms of the types of contracts and projects that we are entering into. So, we are focused on, number one, let’s ensure that we are locking in contracts that look like longer term contracts and are not more emergency one-time, you can’t recur type contracts. So, that’s been the first thing. The second thing that’s been happening and you are hearing us talk about, our role in RNG transportation. We are having more and more projects that we are taking on and services that we are providing kind of like on-hold services. And Jeff, I don’t know if there is anything else you would want to add there.

Maybe just one comment, we have spent a fair amount of time over the last handful of years building the asset base in Marlin so that we actually could look at that whole unit from a more commercial point of view. And we have done that, and we have moved the guy, Justin Stankiewicz into that role, that has a commercial view of the marketplace. He also has been running our renewable gas operations for a while. And so, that marriage between getting the tanks and the trucks and everything, the compressors and all the other equipment and assets we needed together at Marlin to actually take it out and begin to market it, has now come to the pass, and we have got people there that are interested in going out and looking for business that we now have the opportunity to actually satisfy the orders that come in. And so we are seeing a lot of that occurring and we will continue going forward to balance that commercialization of the business with the asset needs of the business and try to keep the kind of progress and success that you are seeing going.

Okay. Thanks. Appreciate the details everybody.

Thank you, Chris.

Thank you. And it appears that there are no further questions at this time. I will now turn the program over to Jeff Householder for closing remarks.

Well, thank you very much for joining us. We always appreciate the interest in Chesapeake Utilities. I hope you have a great Thanksgiving and we will talk to you soon.

Thank you. This concludes Chesapeake Utilities Corporation’s third quarter 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.