8-K
CHESAPEAKE UTILITIES CORP 734-6799 false 0000019745 0000019745 2020-08-06 2020-08-06

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): August 6, 2020

 

 

Chesapeake Utilities Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-11590   51-0064146

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

909 Silver Lake Boulevard, Dover, Delaware   19904
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: 302. 734.6799

Not Applicable

Former name or former address, if changed since last report

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock - par value per share $0.4867   CPK   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company      

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 7.01

Regulation FD Disclosure.

On August 6, 2020, Chesapeake Utilities Corporation (the “Company”) posted a presentation that was used during its conference call to discuss the Company’s financial results for the second quarter ended June 30, 2020 on its website (www.chpk.com) under the “Investors” section. This presentation is being furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Report”).

The information contained in this Item 7.01 and in Exhibit 99.1 attached to this Report is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section. Furthermore, such information shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

 

Item 9.01

Financial Statements and Exhibits.

 

Exhibit
Numbers
   Description
99.1    2020 Second Quarter Earnings Call Presentation
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    Chesapeake Utilities Corporation
August 7, 2020     By:  

Beth W. Cooper

    Name:   Beth W. Cooper
    Title:   Executive Vice President and Chief Financial Officer
EX-99.1

Exhibit 99.1 Commitment Growth Chesapeake Utilities Leadership Safety Corporation Sustainability Solutions Driven By Energy Strength Team Second Quarter 2020 Service Earnings Conference Call August 6, 2020 Performance Community ValueExhibit 99.1 Commitment Growth Chesapeake Utilities Leadership Safety Corporation Sustainability Solutions Driven By Energy Strength Team Second Quarter 2020 Service Earnings Conference Call August 6, 2020 Performance Community Value


Jeff Householder President & CEO Presenting jhouseholder@chpk.com Today: Beth Cooper Executive Vice President, CFO and Asst. Secretary bcooper@chpk.com Jim Moriarty Executive Vice President, General Counsel , Corporate Secretary and Chief Policy and Risk Officer jmoriarty@chpk.com 2Jeff Householder President & CEO Presenting jhouseholder@chpk.com Today: Beth Cooper Executive Vice President, CFO and Asst. Secretary bcooper@chpk.com Jim Moriarty Executive Vice President, General Counsel , Corporate Secretary and Chief Policy and Risk Officer jmoriarty@chpk.com 2


Forward Looking Statements and Other Disclosures Safe Harbor Statement: Some of the Statements in this document concerning future Company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements. You should refer to the additional information contained in ChesapeakeUtilities’ 2019 Annual Report on Form 10-K, the Form 10-Q for the quarter ended March 31, 2020 filed with the SEC and other SEC filings concerning factors that could cause those results to be different than contemplated intoday’s discussion. REG D Disclosure:Today’s discussion includes certain non-GAAP financial measures as defined under SEC Regulation D. Although non-GAAP measures are not intended to replace GAAP measures for evaluation ofChesapeake’s performance, Chesapeake believes that portions of the presentation, which include certain non-GAAP financial measures, provide a helpful comparison for aninvestor’s evaluation purposes. Gross Margin (non-GAAP measure): Gross Margin is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electric and propane distribution operations and the cost of labor spent on different revenue-producing activities and excludes depreciation, amortization and accretion. Other companies may calculate gross margin in a different manner. COVID-19 Impact: At this time, we cannot fully quantify the impact that the Coronavirus Disease 2019 (“COVID-19”) will have on the economy, and more particularly, on Chesapeake Utilities Corporation (“ChesapeakeUtilities” or the“Company”). The earnings and capital estimates we have included herein do not reflect any estimates of the potential impact. For the second quarter and year-to-date we have provided financial accounting estimates of the short-term impact of COVID-19. As we gain further clarity on the disruption to our operations caused by COVID-19, including the impact on our projected gross margin, EPS estimates, timing of capital expenditures, etc., we will update our guidance as necessary. 3Forward Looking Statements and Other Disclosures Safe Harbor Statement: Some of the Statements in this document concerning future Company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements. You should refer to the additional information contained in ChesapeakeUtilities’ 2019 Annual Report on Form 10-K, the Form 10-Q for the quarter ended March 31, 2020 filed with the SEC and other SEC filings concerning factors that could cause those results to be different than contemplated intoday’s discussion. REG D Disclosure:Today’s discussion includes certain non-GAAP financial measures as defined under SEC Regulation D. Although non-GAAP measures are not intended to replace GAAP measures for evaluation ofChesapeake’s performance, Chesapeake believes that portions of the presentation, which include certain non-GAAP financial measures, provide a helpful comparison for aninvestor’s evaluation purposes. Gross Margin (non-GAAP measure): Gross Margin is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electric and propane distribution operations and the cost of labor spent on different revenue-producing activities and excludes depreciation, amortization and accretion. Other companies may calculate gross margin in a different manner. COVID-19 Impact: At this time, we cannot fully quantify the impact that the Coronavirus Disease 2019 (“COVID-19”) will have on the economy, and more particularly, on Chesapeake Utilities Corporation (“ChesapeakeUtilities” or the“Company”). The earnings and capital estimates we have included herein do not reflect any estimates of the potential impact. For the second quarter and year-to-date we have provided financial accounting estimates of the short-term impact of COVID-19. As we gain further clarity on the disruption to our operations caused by COVID-19, including the impact on our projected gross margin, EPS estimates, timing of capital expenditures, etc., we will update our guidance as necessary. 3


Commitment to Employees, Customers and Communities Investors/Financial Employees Community • Social distancing protocols in effect along with personal protective equipment, where appropriate • Reaffirm 2022 EPS target $4.70 to $4.90 and • Employees working remotely as much as possible Capital investment target range of $750 million to $1 billion 2018 thru 2022 Customers • Growth projects and business development activities continue as planned • Strong balance sheet and liquidity position • Our distribution and transmission businesses to provide adequate capital for growth are considered essential businesses • Dividend growth of 8.6% in 2020 driven by • Suspended service disconnects, waived late EPS growth fees, extended payment terms, etc. • Proactively promoting budget programs and payment options to customers Communities • Everyday commitment to local communities • $238,000 in contributions to local organizations to aid in the fight against the COVID-19 impact • Chesapeake is matching employee donations to local community organizations Driven by Commitment 4Commitment to Employees, Customers and Communities Investors/Financial Employees Community • Social distancing protocols in effect along with personal protective equipment, where appropriate • Reaffirm 2022 EPS target $4.70 to $4.90 and • Employees working remotely as much as possible Capital investment target range of $750 million to $1 billion 2018 thru 2022 Customers • Growth projects and business development activities continue as planned • Strong balance sheet and liquidity position • Our distribution and transmission businesses to provide adequate capital for growth are considered essential businesses • Dividend growth of 8.6% in 2020 driven by • Suspended service disconnects, waived late EPS growth fees, extended payment terms, etc. • Proactively promoting budget programs and payment options to customers Communities • Everyday commitment to local communities • $238,000 in contributions to local organizations to aid in the fight against the COVID-19 impact • Chesapeake is matching employee donations to local community organizations Driven by Commitment 4


Delivering Solid Results in 2020 • Achieved strong second quarter results; solid year- to-date operating earnings across all business units • Operational savings and best practices performance improvements being implemented across functional distribution and transmission businesses in all regions • Progressing on key deliverables: • Boulden acquisition integrated with Sharp Energy • Renewable natural gas projects underway on Delmarva st • Elkton Gas acquisition completed July 31 • Pipeline expansion projects continue to move forward • Hurricane Michael regulatory proceeding ongoing • Major Projects margin contribution: • 2020 estimate $38 million • 2021 estimate $52 million 5Delivering Solid Results in 2020 • Achieved strong second quarter results; solid year- to-date operating earnings across all business units • Operational savings and best practices performance improvements being implemented across functional distribution and transmission businesses in all regions • Progressing on key deliverables: • Boulden acquisition integrated with Sharp Energy • Renewable natural gas projects underway on Delmarva st • Elkton Gas acquisition completed July 31 • Pipeline expansion projects continue to move forward • Hurricane Michael regulatory proceeding ongoing • Major Projects margin contribution: • 2020 estimate $38 million • 2021 estimate $52 million 5


Second Quarter Overview Earnings Per Share Second Quarter Year-to-Date 2020 2019 2019 2020 $ 0.66 $ 0.50 $ 2.42 $ 2.25 Strong performance for the first half of 2020 : • Continued growth in the Company's businesses • Addition of the Boulden acquisition • Retail propane margins per gallon • Expense management • Gains from property sales overcame milder weather and the impact of COVID-19 • Interim billings related to Hurricane Michael recovery have been deferred pending final regulatory approval Our diverse and engaged employees’ ability to execute during these challenging times is demonstrated by our strong performance and significant business achievements during the quarter. Generating increased performance quarter-over- quarter, as well as on a year-to-date basis, was a significant accomplishment in the midst of the COVID-19 pandemic. We have continued to remain extremely focused on employee and customer health and safety as we safely and reliably deliver our essential energy services during this global pandemic. 6Second Quarter Overview Earnings Per Share Second Quarter Year-to-Date 2020 2019 2019 2020 $ 0.66 $ 0.50 $ 2.42 $ 2.25 Strong performance for the first half of 2020 : • Continued growth in the Company's businesses • Addition of the Boulden acquisition • Retail propane margins per gallon • Expense management • Gains from property sales overcame milder weather and the impact of COVID-19 • Interim billings related to Hurricane Michael recovery have been deferred pending final regulatory approval Our diverse and engaged employees’ ability to execute during these challenging times is demonstrated by our strong performance and significant business achievements during the quarter. Generating increased performance quarter-over- quarter, as well as on a year-to-date basis, was a significant accomplishment in the midst of the COVID-19 pandemic. We have continued to remain extremely focused on employee and customer health and safety as we safely and reliably deliver our essential energy services during this global pandemic. 6


Financial Summary GAAP Income and Income from Continuing Operations Second Quarter Year-to-Date (in thousands except per share data) 2020 2019 2020 2019 Operating Income $ 17,977 $ 18,165 $ 60,111 $ 62,287 Other income (expense), net (279) (320) 3,039 (380) Interest Charges 5,054 5,552 1 0,868 11,180 Income from Continuing Operations Before Income Taxes 12,644 12,293 52,282 5 0,727 Income Taxes on Continuing Operations 1,983 3,379 1 2,580 1 3,002 Income from Continuing Operations 10,661 8,914 3 9,702 3 7,725 Income (loss) from Discontinued Operations, Net of Tax 295 (610) 184 (757) Net Income $ 10,956 $ 8 ,304 $ 39,886 $ 36,968 Diluted EPS from Continuing Operations $0.64 $0.54 $2.41 $2.30 Diluted EPS (GAAP) $0.66 $0.50 $2.42 $2.25 • Net income for the quarter ended June 30, 2020 was $11.0 million, or $0.66 per share, compared to $8.3 million or $0.50 for the same quarter of 2019. • Net income for the six months ended June 30, 2020 was $39.9 million, or $2.42 per share, compared to $37.0 million, or $2.25 per share, for the same period in 2019, representing an increase of 7.6 percent. 7Financial Summary GAAP Income and Income from Continuing Operations Second Quarter Year-to-Date (in thousands except per share data) 2020 2019 2020 2019 Operating Income $ 17,977 $ 18,165 $ 60,111 $ 62,287 Other income (expense), net (279) (320) 3,039 (380) Interest Charges 5,054 5,552 1 0,868 11,180 Income from Continuing Operations Before Income Taxes 12,644 12,293 52,282 5 0,727 Income Taxes on Continuing Operations 1,983 3,379 1 2,580 1 3,002 Income from Continuing Operations 10,661 8,914 3 9,702 3 7,725 Income (loss) from Discontinued Operations, Net of Tax 295 (610) 184 (757) Net Income $ 10,956 $ 8 ,304 $ 39,886 $ 36,968 Diluted EPS from Continuing Operations $0.64 $0.54 $2.41 $2.30 Diluted EPS (GAAP) $0.66 $0.50 $2.42 $2.25 • Net income for the quarter ended June 30, 2020 was $11.0 million, or $0.66 per share, compared to $8.3 million or $0.50 for the same quarter of 2019. • Net income for the six months ended June 30, 2020 was $39.9 million, or $2.42 per share, compared to $37.0 million, or $2.25 per share, for the same period in 2019, representing an increase of 7.6 percent. 7


Key drivers of Our Performance Second Quarter of 2020 Compared to Second Quarter of 2019 • Gross Margin increased $5.1 million • Eastern Shore and Peninsula Pipeline service expansions $1.8 million • Increased demand for Marlin Gas Services $1.1 million • Increased retail propane margins per gallon $0.9 million • Natural gas growth (excluding expansions) $0.8 million • Contribution from Boulden acquisition $0.5 million • Operating expenses increased $2.9 million (57% of margin variance) • Payroll and depreciation due to growth $1.9 million • Insurance expense related to higher market premiums $0.5 million • Boulden operating expenses $0.5 million • Net Unusual items ($1.6 million) • Unfavorable COVID-19 impacts ($3.6 million) • Increased customer consumption $2.0 million - primarily due to colder weather • Recognized $1.7 million net income tax benefit associated with the CARES Act 8Key drivers of Our Performance Second Quarter of 2020 Compared to Second Quarter of 2019 • Gross Margin increased $5.1 million • Eastern Shore and Peninsula Pipeline service expansions $1.8 million • Increased demand for Marlin Gas Services $1.1 million • Increased retail propane margins per gallon $0.9 million • Natural gas growth (excluding expansions) $0.8 million • Contribution from Boulden acquisition $0.5 million • Operating expenses increased $2.9 million (57% of margin variance) • Payroll and depreciation due to growth $1.9 million • Insurance expense related to higher market premiums $0.5 million • Boulden operating expenses $0.5 million • Net Unusual items ($1.6 million) • Unfavorable COVID-19 impacts ($3.6 million) • Increased customer consumption $2.0 million - primarily due to colder weather • Recognized $1.7 million net income tax benefit associated with the CARES Act 8


Key Business Factors: COVID–19 Impact • Chesapeake Utilities is an “essential business” to our customers and communities. As such, our operational activities and construction projects continue; all the while, we are adhering to safety guidelines and social distancing. • The Company’s pandemic response plan, which has included all employees who can to telework, and providing personal protective equipment (PPE) to those customers who have continued to operate in the field delivering our essential services. • For the three and six months ended June 30, 2020, respectively, the COVID-19 impacts were $2.5 million and $2.9 million, respectively • Primarily driven by reduced consumption of energy largely in the commercial and industrial Margin sector • COVID-19 margin decreases offset by higher residential use due to stay at home provisions • Additional expenses incurred in support of the ongoing delivery of or our essential services during these unprecedented times ($1.8 million for Second Quarter and Year-to-Date) • Personal protective equipment cost, premium pay for field operations and higher bad debt Expenses expense • COVID-19 related expenses offset by reduced travel cost and lower financing costs • As the COVID-19 pandemic is ongoing, the Company to date has not established regulatory assets associated with the incremental expense impact, as currently authorized by Maryland and Delaware PSCs Regulatory • In Florida, the PSC has decided not to address a Regulatory asset Statewide, but rather for each independent utility request with a petition. • No significant COVID-19 on our FERC Regulated interstate transmission line 9Key Business Factors: COVID–19 Impact • Chesapeake Utilities is an “essential business” to our customers and communities. As such, our operational activities and construction projects continue; all the while, we are adhering to safety guidelines and social distancing. • The Company’s pandemic response plan, which has included all employees who can to telework, and providing personal protective equipment (PPE) to those customers who have continued to operate in the field delivering our essential services. • For the three and six months ended June 30, 2020, respectively, the COVID-19 impacts were $2.5 million and $2.9 million, respectively • Primarily driven by reduced consumption of energy largely in the commercial and industrial Margin sector • COVID-19 margin decreases offset by higher residential use due to stay at home provisions • Additional expenses incurred in support of the ongoing delivery of or our essential services during these unprecedented times ($1.8 million for Second Quarter and Year-to-Date) • Personal protective equipment cost, premium pay for field operations and higher bad debt Expenses expense • COVID-19 related expenses offset by reduced travel cost and lower financing costs • As the COVID-19 pandemic is ongoing, the Company to date has not established regulatory assets associated with the incremental expense impact, as currently authorized by Maryland and Delaware PSCs Regulatory • In Florida, the PSC has decided not to address a Regulatory asset Statewide, but rather for each independent utility request with a petition. • No significant COVID-19 on our FERC Regulated interstate transmission line 9


Financial Summary COVID-19 Operating Income Impacts Second Quarter Year-to-Date 2020 2020 (dollars in thousands) Gross Margin: Regulated Energy Segment $ (2,201) $ (2,430) Unregulated Energy Segment (317) (442) Total Gross Margin Impacts $ (2,518) $ (2,872) Other Operating Expenses: Regulated Energy Segment $ (1,014) $ (906) Unregulated Energy Segment (369) (487) Other businesses and eliminations (391) (391) Total Other Operating Expense Impacts $ (1,774) $ (1,784) Operating Income: Regulated Energy Segment $ (3,215) $ (3,336) Unregulated Energy Segment (686) (929) Other (391) (391) Total Operating Income Impacts $ (4,292) $ (4,656) • Gross Margin loss and incremental operating expenses reduced operating income by $4.3 million and $4.6 million compared to the prior year quarter and year-to-date periods • Favorable income tax benefit resulting from the CARES Act resulted in $1.7 million offset to operating income impacts 10Financial Summary COVID-19 Operating Income Impacts Second Quarter Year-to-Date 2020 2020 (dollars in thousands) Gross Margin: Regulated Energy Segment $ (2,201) $ (2,430) Unregulated Energy Segment (317) (442) Total Gross Margin Impacts $ (2,518) $ (2,872) Other Operating Expenses: Regulated Energy Segment $ (1,014) $ (906) Unregulated Energy Segment (369) (487) Other businesses and eliminations (391) (391) Total Other Operating Expense Impacts $ (1,774) $ (1,784) Operating Income: Regulated Energy Segment $ (3,215) $ (3,336) Unregulated Energy Segment (686) (929) Other (391) (391) Total Operating Income Impacts $ (4,292) $ (4,656) • Gross Margin loss and incremental operating expenses reduced operating income by $4.3 million and $4.6 million compared to the prior year quarter and year-to-date periods • Favorable income tax benefit resulting from the CARES Act resulted in $1.7 million offset to operating income impacts 10


COVID – 19: Expense Expectations Expenses expected to Expenses expected to Areas unchanged and increase: decrease: managed appropriately: •Capital spending and •Bad debt expense, AR •Administrative costs as aging and collection business development we slow personnel hiring dunning opportunities continue and implement continuous process •No disruption of energy improvements across transmission and •Personal protection business units distribution supply chain equipment for field service personnel•Interest rates are expected to remain low •Fleet fuel cost, travel cost, through 2020 and into conference fees and •Social distancing 2021 employee education costs infrastructure •Adequate liquidity from requirements multiple sources •Move toward targeted long- term capital structure •Staffing levels – No layoffs or furloughs expected – continue to maintain our salary and wage structure 11COVID – 19: Expense Expectations Expenses expected to Expenses expected to Areas unchanged and increase: decrease: managed appropriately: •Capital spending and •Bad debt expense, AR •Administrative costs as aging and collection business development we slow personnel hiring dunning opportunities continue and implement continuous process •No disruption of energy improvements across transmission and •Personal protection business units distribution supply chain equipment for field service personnel•Interest rates are expected to remain low •Fleet fuel cost, travel cost, through 2020 and into conference fees and •Social distancing 2021 employee education costs infrastructure •Adequate liquidity from requirements multiple sources •Move toward targeted long- term capital structure •Staffing levels – No layoffs or furloughs expected – continue to maintain our salary and wage structure 11


Capital Expenditures Forecast Estimate for 2020 Forecast for Fiscal 2020 (dollars in thousands) Low High Regulated Energy: Natural gas distribution $ 75,000 $ 80,000 Natural gas transmission 70,000 80,000 Electric distribution 5,000 7,000 Total Regulated Energy 150,000 167,000 Unregulated Energy: Propane distribution 10,000 13,000 Energy transmission 10,000 15,000 Other unregulated energy 14,000 19,000 Total Unregulated Energy 34,000 25,000 Other: Corporate and other businesses 1,000 1,000 Total 2020 Capital Expenditures $ 185,000 $ 215,000 The Company's capital expenditures were $88.4 million for the six months ended June 30, 2020. We will continue to update this forecast as we move through the year, including any unexpected capital delays resulting from COVID-19. 12Capital Expenditures Forecast Estimate for 2020 Forecast for Fiscal 2020 (dollars in thousands) Low High Regulated Energy: Natural gas distribution $ 75,000 $ 80,000 Natural gas transmission 70,000 80,000 Electric distribution 5,000 7,000 Total Regulated Energy 150,000 167,000 Unregulated Energy: Propane distribution 10,000 13,000 Energy transmission 10,000 15,000 Other unregulated energy 14,000 19,000 Total Unregulated Energy 34,000 25,000 Other: Corporate and other businesses 1,000 1,000 Total 2020 Capital Expenditures $ 185,000 $ 215,000 The Company's capital expenditures were $88.4 million for the six months ended June 30, 2020. We will continue to update this forecast as we move through the year, including any unexpected capital delays resulting from COVID-19. 12


Capital Capacity to Support Future Growth Available Financing Capacity (in thousands) • $370 million bank lines of credit through Stockholders' Equity Long-Term Debt Short-Term Debt * * October 2020 $1,500,000 • $95 million incremental liquidity if needed $1,325,388 $1,294,716 through October 2020 $1,140,852 • $50 million 3.00% funded July 15, 2020 $302,005 $292,971 $944,079 $306,393 • $40 million 2.96% to be funded August 14, 2020 $1,000,000 $805,010 • $310 million private placement shelf facilities $260,390 $430,106 $440,168 $689,692 available for additional financing needs $221,970 $316,020 $182,548 $197,395 $136,954 $500,000 $149,006 Chesapeake seeks to align permanent financing with the in-service dates of its $593,277 $561,577 $518,439 $486,294 $446,086 capital projects $358,138 $0 • $31.7 million increased equity year-to-date 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 6/30/20 • $25.8 million earnings retention • $ 4.1 million issued under stock plans Equity/Permanent 70.6% 76.5% 71.1% 62.1% 56.1% 58.0%• $ 1.8 million other comprehensive Capitalization income Equity/Total 51.9% 55.4% 51.5% 45.4% 43.4% 44.8% Capitalization Target Equity to Total Capitalization Ratio **Short-term Debt Includes Current Portion of Long-Term Debt of 50% or Higher Green Line Shows 50% Equity to Total Capital Target 13Capital Capacity to Support Future Growth Available Financing Capacity (in thousands) • $370 million bank lines of credit through Stockholders' Equity Long-Term Debt Short-Term Debt * * October 2020 $1,500,000 • $95 million incremental liquidity if needed $1,325,388 $1,294,716 through October 2020 $1,140,852 • $50 million 3.00% funded July 15, 2020 $302,005 $292,971 $944,079 $306,393 • $40 million 2.96% to be funded August 14, 2020 $1,000,000 $805,010 • $310 million private placement shelf facilities $260,390 $430,106 $440,168 $689,692 available for additional financing needs $221,970 $316,020 $182,548 $197,395 $136,954 $500,000 $149,006 Chesapeake seeks to align permanent financing with the in-service dates of its $593,277 $561,577 $518,439 $486,294 $446,086 capital projects $358,138 $0 • $31.7 million increased equity year-to-date 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 6/30/20 • $25.8 million earnings retention • $ 4.1 million issued under stock plans Equity/Permanent 70.6% 76.5% 71.1% 62.1% 56.1% 58.0%• $ 1.8 million other comprehensive Capitalization income Equity/Total 51.9% 55.4% 51.5% 45.4% 43.4% 44.8% Capitalization Target Equity to Total Capitalization Ratio **Short-term Debt Includes Current Portion of Long-Term Debt of 50% or Higher Green Line Shows 50% Equity to Total Capital Target 13


Chesapeake Utilities 2020 – 2022 Strategic Growth Initiatives Complete Develop new transmission transmission projects Earnings infrastructure projects Per Share Growth DNG and FPU gas organic Expand Marlin growth CNG delivery Total Return on Dividend Shareholder Equity Growth RNG and LNG Return Elkton Gas transport acquisition services and RNG processing Propane Disciplined business growth Capital Combined Heat via acquisitions, Investment and Power start-ups and Projects AutoGas 14Chesapeake Utilities 2020 – 2022 Strategic Growth Initiatives Complete Develop new transmission transmission projects Earnings infrastructure projects Per Share Growth DNG and FPU gas organic Expand Marlin growth CNG delivery Total Return on Dividend Shareholder Equity Growth RNG and LNG Return Elkton Gas transport acquisition services and RNG processing Propane Disciplined business growth Capital Combined Heat via acquisitions, Investment and Power start-ups and Projects AutoGas 14


Recent and Current Pipeline Expansions Transmission of Natural Gas Services to New Territories Recently Projects Completed Underway Callahan Expansion ESNG 2017 System (FL) Expansion Project Full Service June (Delmarva Peninsula) 2020 West Palm Beach County Expansion Northwest Florida (FL) Expansion Full Service Q3 2020 Del-Mar Energy Pathway Expansion Auburndale Expansion (new county in (FL) Maryland) Full Service Q4 2021 Guernsey Pipeline Expansion (Ohio) Partial Service Q4 2021 15Recent and Current Pipeline Expansions Transmission of Natural Gas Services to New Territories Recently Projects Completed Underway Callahan Expansion ESNG 2017 System (FL) Expansion Project Full Service June (Delmarva Peninsula) 2020 West Palm Beach County Expansion Northwest Florida (FL) Expansion Full Service Q3 2020 Del-Mar Energy Pathway Expansion Auburndale Expansion (new county in (FL) Maryland) Full Service Q4 2021 Guernsey Pipeline Expansion (Ohio) Partial Service Q4 2021 15


Elkton Gas Company Summary of Transaction Acquisition Completed • Chesapeake Utilities and South Jersey Industries completed the agreement for the acquisition of Elton Gas Company at a price of approximately $15 million on July 31, 2020. • Elkton Gas serves approximately 7,000 customers within a franchised area of Cecil County, Maryland contiguous to Chesapeake’s franchised service territory in Cecil County • Elkton Gas has been a customer of Chesapeake’s interstate transmission pipeline since 1959. • With the expanded presence in Cecil County, the gas distribution system can be serviced locally with Chesapeake personnel 16Elkton Gas Company Summary of Transaction Acquisition Completed • Chesapeake Utilities and South Jersey Industries completed the agreement for the acquisition of Elton Gas Company at a price of approximately $15 million on July 31, 2020. • Elkton Gas serves approximately 7,000 customers within a franchised area of Cecil County, Maryland contiguous to Chesapeake’s franchised service territory in Cecil County • Elkton Gas has been a customer of Chesapeake’s interstate transmission pipeline since 1959. • With the expanded presence in Cecil County, the gas distribution system can be serviced locally with Chesapeake personnel 16


Key Regulatory Initiatives Hurricane Michael Limited Proceeding • October 2018 Hurricane Michael – Northwest Florida • August 2019 FPU filed limited proceeding with Florida PSC • Fourth Quarter 2019 FPU and the Office of Public Counsel filed a request to approve interim rates • FPU continues to work with the • Requested recovery of storm related costs through a Florida PSC on Hurricanes Michael change in base rates and Dorian storm recovery • Requested certain storm related costs as a regulatory asset for costs not allowed through the storm reserve, as well as the recovery of plant investment • Interim rates were established in January 2020 and have been fully reserved pending final resolution of the proceeding 17Key Regulatory Initiatives Hurricane Michael Limited Proceeding • October 2018 Hurricane Michael – Northwest Florida • August 2019 FPU filed limited proceeding with Florida PSC • Fourth Quarter 2019 FPU and the Office of Public Counsel filed a request to approve interim rates • FPU continues to work with the • Requested recovery of storm related costs through a Florida PSC on Hurricanes Michael change in base rates and Dorian storm recovery • Requested certain storm related costs as a regulatory asset for costs not allowed through the storm reserve, as well as the recovery of plant investment • Interim rates were established in January 2020 and have been fully reserved pending final resolution of the proceeding 17


Major Projects and Initiatives Gross Margin Contributions 18Major Projects and Initiatives Gross Margin Contributions 18


Indicative RNG Scenario on the Delmarva Peninsula Across the CPK Value Chain Composting Plant Organic Fertilizer generates Raw Compost Fertilizer Landfill Renewable Natural Gas Poultry Farms processes (RNG) can be flared off, generate or processed and Chicken Waste & Waste Water cleaned and ultimately Biodigester distributed to residential LDC generates customers Processed Fertilizer and RNG Economic and Environmental Sustainability After processing and cleaning, RNG For Delmarva poultry industry and Chesapeake Bay Watershed can be transported by Marlin to See CPK press releases dated June 18 and July 7, 2020 regarding Eastern Shore Natural Gas pipelines, and ultimately distributed to new partnerships with Bioenergy DevCo and CleanBay Renewables Chesapeake LDC residential customers 19Indicative RNG Scenario on the Delmarva Peninsula Across the CPK Value Chain Composting Plant Organic Fertilizer generates Raw Compost Fertilizer Landfill Renewable Natural Gas Poultry Farms processes (RNG) can be flared off, generate or processed and Chicken Waste & Waste Water cleaned and ultimately Biodigester distributed to residential LDC generates customers Processed Fertilizer and RNG Economic and Environmental Sustainability After processing and cleaning, RNG For Delmarva poultry industry and Chesapeake Bay Watershed can be transported by Marlin to See CPK press releases dated June 18 and July 7, 2020 regarding Eastern Shore Natural Gas pipelines, and ultimately distributed to new partnerships with Bioenergy DevCo and CleanBay Renewables Chesapeake LDC residential customers 19


CPK’s Renewable Natural Gas Proposition Presents Multiple Investment Opportunities Distribution Transmission Marlin Operations Operations Potential investment Additional Interstate pipeline in gas processing transportation Investment interconnects for equipment which we equipment to receipt of renewable will seek to include support this growing Opportunity natural gas in rate base opportunity Tariff changes made No tariff changes by ESNG to accept Regulatory Unregulated Gas initially; will be part this pipeline quality Transport of the PGA. gas. PPC filing to be Actions done in the future. Multi-year contracts Multi-year contracts for receipt of gas into Multi-year contracts for processing and system and delivery to transport gas to Long-term Value receipt of gas into into distribution pipeline systems. distribution system. system. • As a result of the Bioenergy DevCo and CleanBay projects, the Company expects to generate $1.0 million in incremental margin in 2021 from renewable gas transportation. • These projects provide the opportunity for the Company to utilize renewable natural gas, and play an active role in the clean-up of poultry waste as well support the sustainability of agribusiness on Delmarva. • There are numerous profitable investment opportunities across the CPK value chain as we play a key role in ensuring a sustainable future for our local communities. 20CPK’s Renewable Natural Gas Proposition Presents Multiple Investment Opportunities Distribution Transmission Marlin Operations Operations Potential investment Additional Interstate pipeline in gas processing transportation Investment interconnects for equipment which we equipment to receipt of renewable will seek to include support this growing Opportunity natural gas in rate base opportunity Tariff changes made No tariff changes by ESNG to accept Regulatory Unregulated Gas initially; will be part this pipeline quality Transport of the PGA. gas. PPC filing to be Actions done in the future. Multi-year contracts Multi-year contracts for receipt of gas into Multi-year contracts for processing and system and delivery to transport gas to Long-term Value receipt of gas into into distribution pipeline systems. distribution system. system. • As a result of the Bioenergy DevCo and CleanBay projects, the Company expects to generate $1.0 million in incremental margin in 2021 from renewable gas transportation. • These projects provide the opportunity for the Company to utilize renewable natural gas, and play an active role in the clean-up of poultry waste as well support the sustainability of agribusiness on Delmarva. • There are numerous profitable investment opportunities across the CPK value chain as we play a key role in ensuring a sustainable future for our local communities. 20


ESG Stewardship • We remain steadfast in our commitment to environmental, social and governance stewardship, even through challenging times. • The key to our success is our strong culture that fully engages all of our team members across the organization. • We are a responsible company that promotes integrity, accountability and reliability, with the safety of those we serve as our highest priority. • Our diverse, talented and hard-working team is the drive behind our strategic growth and our commitment to providing safe, reliable, sustainable and efficient energy solutions to customers. • Our corporate governance is the foundation of our processes and our decision- making throughout the Company, beginning with our Board of Directors and extending to every employee. • We continue to cultivate the ChesapeakeUtilities’ sustainability story. 21ESG Stewardship • We remain steadfast in our commitment to environmental, social and governance stewardship, even through challenging times. • The key to our success is our strong culture that fully engages all of our team members across the organization. • We are a responsible company that promotes integrity, accountability and reliability, with the safety of those we serve as our highest priority. • Our diverse, talented and hard-working team is the drive behind our strategic growth and our commitment to providing safe, reliable, sustainable and efficient energy solutions to customers. • Our corporate governance is the foundation of our processes and our decision- making throughout the Company, beginning with our Board of Directors and extending to every employee. • We continue to cultivate the ChesapeakeUtilities’ sustainability story. 21


ESG At Our Core Women in Utilities Webinar – Be Extraordinary Measures to help keep employees, Everyday by Demonstrating Diversity. customers and communities safe and Equity, Diversity healthy during the COVID-19 pandemic. and Inclusion Council Promotes During these extraordinary times, we are honored to support our customers our Workplace and communities, including United Way, Salvation Army and Feeding America. Culture. Delivering Natural Gas To Somerset County, Maryland, To Support Environmentally Conscious Economic Growth The Somerset County Expansion Project will deliver natural gas service to Somerset County, Maryland. It will Partnering with CleanBay Renewables to Increase Sustainable extend natural gas service to the Energy in the Delmarva Community Eastern Correctional Institution and the We recently announced a new partnership with CleanBay Renewables Inc. (CleanBay), an University of Maryland Eastern Shore, enviro-tech company focused on the production of sustainable renewable natural gas, which will helping to improve eachfacility’s generate greenhouse gas credits associated with vehicular usage, and provide Chesapeake environmental profile while offering Utilities the opportunity to bring additional renewable natural gas to its Delmarva operations. significant economic benefits to the area. Residents and businesses along Next Steps in Our Sustainable Renewable Natural Gas Strategy the line will also have the choice to use We partnered with Bioenergy DevCo (BDC), a leading global developer of anaerobic digestion environmentally beneficial and less facilities that creates renewable energy and healthy soil products from organic material. The expensive natural gas service. joint project involves removing excess organics from poultry waste and converting it into Renewable Natural Gas. 22ESG At Our Core Women in Utilities Webinar – Be Extraordinary Measures to help keep employees, Everyday by Demonstrating Diversity. customers and communities safe and Equity, Diversity healthy during the COVID-19 pandemic. and Inclusion Council Promotes During these extraordinary times, we are honored to support our customers our Workplace and communities, including United Way, Salvation Army and Feeding America. Culture. Delivering Natural Gas To Somerset County, Maryland, To Support Environmentally Conscious Economic Growth The Somerset County Expansion Project will deliver natural gas service to Somerset County, Maryland. It will Partnering with CleanBay Renewables to Increase Sustainable extend natural gas service to the Energy in the Delmarva Community Eastern Correctional Institution and the We recently announced a new partnership with CleanBay Renewables Inc. (CleanBay), an University of Maryland Eastern Shore, enviro-tech company focused on the production of sustainable renewable natural gas, which will helping to improve eachfacility’s generate greenhouse gas credits associated with vehicular usage, and provide Chesapeake environmental profile while offering Utilities the opportunity to bring additional renewable natural gas to its Delmarva operations. significant economic benefits to the area. Residents and businesses along Next Steps in Our Sustainable Renewable Natural Gas Strategy the line will also have the choice to use We partnered with Bioenergy DevCo (BDC), a leading global developer of anaerobic digestion environmentally beneficial and less facilities that creates renewable energy and healthy soil products from organic material. The expensive natural gas service. joint project involves removing excess organics from poultry waste and converting it into Renewable Natural Gas. 22


Capital Investment Guidance Continued Record Investment in Our Business to Drive Growth $350,000 $303,153 Target 2018 – 2022 : $750 million - $1 billion $300,000 $282,861 $250,000 $215,000* $250,000 Reach $1 billion $198,986 $200,000 $30,000* $150,000 $185,000* $100,000 $50,000 Reach $750 $53,153 $0 2018 2019 Budget 2020 Target 2021-2022 *We will continue to update this forecast as we move through the year, including any capital deployment delays resulting from COVID-19. Management reaffirms its five year capital expenditure guidance of $750 million to $1 billion. From 2018 through June 30, 2020, the Company has invested $570 million on new capital expenditures. 23 Capital Expenditures in thousandsCapital Investment Guidance Continued Record Investment in Our Business to Drive Growth $350,000 $303,153 Target 2018 – 2022 : $750 million - $1 billion $300,000 $282,861 $250,000 $215,000* $250,000 Reach $1 billion $198,986 $200,000 $30,000* $150,000 $185,000* $100,000 $50,000 Reach $750 $53,153 $0 2018 2019 Budget 2020 Target 2021-2022 *We will continue to update this forecast as we move through the year, including any capital deployment delays resulting from COVID-19. Management reaffirms its five year capital expenditure guidance of $750 million to $1 billion. From 2018 through June 30, 2020, the Company has invested $570 million on new capital expenditures. 23 Capital Expenditures in thousands


Chesapeake Utilities Affirm 2022 Earnings per Share Guidance $4.90 $4.70 $4.16 $4.06 $3.96 * $3.72 2019 --------------2020-------------- ---2022--- *Note: 2019 GAAP Diluted EPS ($3.96) – Diluted EPS from Continuing Operations ($3.72) Note: Analyst estimates are through 8/5/2020. CPK does not support or endorse the analyst estimates as provided. 24 CPK 2019 Diluted EPS from Continuing Operations Analyst Estimate - Low Analyst Estimate - Average Analyst Estimate High CPK Guidance – Low Range CPK Guidance – High RangeChesapeake Utilities Affirm 2022 Earnings per Share Guidance $4.90 $4.70 $4.16 $4.06 $3.96 * $3.72 2019 --------------2020-------------- ---2022--- *Note: 2019 GAAP Diluted EPS ($3.96) – Diluted EPS from Continuing Operations ($3.72) Note: Analyst estimates are through 8/5/2020. CPK does not support or endorse the analyst estimates as provided. 24 CPK 2019 Diluted EPS from Continuing Operations Analyst Estimate - Low Analyst Estimate - Average Analyst Estimate High CPK Guidance – Low Range CPK Guidance – High Range


Chesapeake Utilities Closing Remarks • Strong earnings for the second quarter despite the uncertain challenges of the COVID-19 pandemic. • Engaged in expense management across the Company and operational efficiency in this new business normal situation. • Excited about our recently completed Elkton Gas acquisition, and our commitment to renewable natural gas to support sustainability of the Delmarva agribusiness industry and improving the environmental health of the Chesapeake Bay. • Regulatory proceeding for Hurricane Michael is underway but not included in year-to-date results. • We affirm our strategic planning guidance for 2022: - Capital Expenditures Range - $750 million to $1 billion - Earnings per Share - $4.70 to $ 4.90. • Focused on employee and customer health and safety as we deliver our essential energy services 25Chesapeake Utilities Closing Remarks • Strong earnings for the second quarter despite the uncertain challenges of the COVID-19 pandemic. • Engaged in expense management across the Company and operational efficiency in this new business normal situation. • Excited about our recently completed Elkton Gas acquisition, and our commitment to renewable natural gas to support sustainability of the Delmarva agribusiness industry and improving the environmental health of the Chesapeake Bay. • Regulatory proceeding for Hurricane Michael is underway but not included in year-to-date results. • We affirm our strategic planning guidance for 2022: Capital Expenditures Range - $750 million to $1 billion - Earnings per Share - $4.70 to $ 4.90. • Focused on employee and customer health and safety as we deliver our essential energy services 25


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v3.20.2
Document and Entity Information
Aug. 06, 2020
Cover [Abstract]  
Entity Registrant Name CHESAPEAKE UTILITIES CORP
Local Phone Number 734-6799
Amendment Flag false
Entity Central Index Key 0000019745
Document Type 8-K
Document Period End Date Aug. 06, 2020
Entity Incorporation State Country Code DE
Entity File Number 001-11590
Entity Tax Identification Number 51-0064146
Entity Address, Address Line One 909 Silver Lake Boulevard
Entity Address, City or Town Dover
Entity Address, State or Province DE
Entity Address, Postal Zip Code 19904
City Area Code 302
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common Stock - par value per share $0.4867
Trading Symbol CPK
Security Exchange Name NYSE
Entity Emerging Growth Company false