Chesapeake Utilities Corporation Q4 FY2025 earnings call

• 2025 was a year of outstanding performance with 19th consecutive year of earnings growth, generating adjusted earnings of $6.01 per share, 12% growth relative to 2024. Invested $470 million in 2025, a 32% increase over 2024, a record of non-acquisition capital. - FCG has been a strong fit, with $250 million of CapEx invested in first two years post-acquisition, integrated into Chesapeake family. - 2026 focus includes investing $450 - $500 million of capex, reaching successful outcome on Florida City Gas general rate case, undertaking largest technology system implementation (One Core ERP), and maintaining strong balance sheet. - Regulatory strategy: successful rate cases in Maryland, Delaware, and Florida electric jurisdictions drove gross margin, Florida City Gas depreciation study outcome led to filing general rate case for FCG in mid-April 2026. - Business transformation: five key themes (customer experience, operational excellence, digital agility, employee experience, financial modernization) with ERP project (One Core) to be implemented with system go-live in Q2 2027.

In 2025, the regulated segment had an adjusted gross margin of $494 million, a 12% increase over 2024, with regulated operating income up 13% to approximately $222 million. The unregulated segment had an adjusted gross margin of $145 million in 2025, up 13% from the prior year, with Marlin gas services driving $11 million of additional gross margin and propane and Aspire energy contributing an additional $5.7 million. Residential customer growth across service areas was above average, with Delmarva having 4.1% growth, Florida Public Utilities up 3.6%, and Florida City Gas at 2.2%.

• Reaffirmed 2028 adjusted EPS range of $7.75 to $8 per share, with long-term adjusted EPS growth target of 8%. - 2026 capital expenditure guidance of $450 million to $500 million, including technology capex for ERP. - Intend to refinance first tranche of debt from FCG acquisition and finance capital program with mix of earnings, equity, and debt, maintaining 50-50 capital structure.

Q: You reaffirmed your full-year 28 EPS target. Can you walk us through the growth rate for full-year 25 to full-year 27 to reach a full-year 28?

A: Beth mentioned reaffirmed 2028 EPS guidance, historical long-term EPS guidance, and annual capital guidance with projects underway to enable forecast to 2028.

Q: Can you talk about the first quarter thus far? It seems like we've had some pretty cold snaps, and I'm just kind of curious what you're thinking about tailwind from weather in the first quarter?

A: Weather has impact, with Maryland having weather normalization, Delaware and propane having impact, Florida having cooler weather, and being mindful of customer payment and operations.

Q: Can you talk about the ERP and what you see as the benefits where you might see cost savings or, you know, sort of synergistic value creation? Can you quantify any of that?

A: Benefits include better data utilization for decisions, customer service efficiencies, supply chain opportunities, field services improvements, accounting and finance improvements, with cost savings expected but not quantified yet.

Q: How surprised were you by the Florida decision and, you know, was that somewhat of a tacit invitation to file a rate case?

A: Jim said surprised by Florida decision getting caught up in vortex, but accepting and moving on to file general rate case shortly.

Q: Are you planning on giving guidance this year for full-year 2026?

A: Beth said will not be giving annual guidance for 2026 at this time.

Q: Can you provide an update on the Florida Pipeline project that starts in the Indian Town Gas Hub and kind of where that stands at this point and when it will make it into the plant?

A: Jeff said continuing engineering design, expect engineering design cost estimate in 30-60 days, on track with project start date this year.

Q: For my first question, I'd like to maybe draw your attention to page 43 PDF of your 10-K. I think you're basically saying that the adjusted gross margin from Full Circle Dairy and Noble was $10.9 million in 2025, and you're projecting 26 to be $28.5 million and 27 to be $29.7 million, I guess. Can you walk us through the delta between 25 and 26?

A: Paul was told the line is compilation of Marlin, Full Circle Dairy, and Noble RNG project, growth mainly from Marlin, not just Full Circle Dairy, with operating expenses associated.

Q: Can you also maybe, I guess this would be more Jim, can you walk us through how interim rates are set in Florida and what we should expect in terms of when interim rates come into play in July?

A: Interim rate filing in Florida typically 60 days after filing date, expecting early July, traditional methodology involves looking at rate base and ROE range, will argue current ROE for city gas is lower than traditional levels.

Q: Just thoughts on just the overall customer growth. I mean, again, just Delmarva continues to be really strong. I'm just kind of wondering if you see that as kind of sustainable or kind of any reason why that number can't continue in the near future?

A: Alex was told Delmarva growth is sustainable with strong growth in Delaware, planned infrastructure growth, and need for additional pipeline capacity to support growth.

Q: Just maybe a follow-up on your comments a little bit earlier just on a little opportunity on the financing of the FCG acquisition debt. Could you just talk a little bit about kind of what that opportunity might be in terms of kind of a help on interest expense and if you see some additional ongoing opportunities down that path in the next couple of years?

A: Beth said there's opportunity to refinance FCG acquisition debt, with plan to shave 50-100 bps off coupon rate by blending different tenors.