Chesapeake Utilities Corporation Reports Higher Third Quarter Results

DOVER, Del., Nov. 5, 2015 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) today reported third quarter and year-to-date financial results. The Company's net income for the three months ended September 30, 2015 was $5.1 million, or $0.33 per share. This represents an increase of $1.9 million, or $0.11 per share, over the same quarter in 2014.

For the nine months ended September 30, 2015, the Company reported net income of $32.5 million or $2.16 per share. This represents an increase of $6.5 million or $0.38 per share, compared to the same period in 2014.

"Our higher results for the third quarter and year-to-date are the current harvest of our continued growth in productive assets, which now exceed $1.0 billion, and the concerted efforts of our employees to reap sustained earnings growth from those assets," stated Michael P. McMasters, President and Chief Executive Officer of Chesapeake Utilities Corporation. "We are currently working on several large growth projects, including the combined heat and power plant in Florida and new natural gas transmission services on the Delmarva Peninsula, while continuing to identify and develop additional growth opportunities within and beyond our current markets to provide future earnings and dividend growth for our investors."

A more detailed discussion and analysis of the Company's results for each segment is provided in the following pages.

Comparative Results for the Quarters Ended September 30, 2015 and September 30, 2014

The Company's operating income for the three months ended September 30, 2015 was $10.9 million, an increase of $3.1 million over the same quarter in 2014. The increase in operating income was driven by a $5.1 million increase in gross margin, which was partially offset by an increase of $2.0 million in other operating expenses to support growth. The higher consolidated operating income reflected improved results in both the regulated and unregulated energy segments.  Additional details on key variances in gross margin and other operating expenses are provided in the Financial Summary Highlights section later in this release.  As a result of the sale of BravePoint, Inc. ("BravePoint") in October 2014, the Company no longer reports the Other segment.

Regulated Energy Segment

Operating income for the Regulated Energy segment increased by $2.6 million to $11.8 million for the quarter ended September 30, 2015, compared to the same quarter in 2014.  The increased operating income reflects additional gross margin of $4.3 million, partially offset by a $1.7 million increase in other operating expenses. The significant components of the gross margin increase included:

• $1.7 million generated from natural gas service expansions completed in 2014 and 2015;
• $1.1 million generated by additional Gas Reliability Infrastructure Program ("GRIP") investments by the Florida natural gas distribution operations;
• $896,000 from customer growth in natural gas distribution and transmission services beyond recent service expansions; and
• $673,000 from a base rate increase in the Florida electric distribution operation that was approved by the Florida Public Service Commission ("PSC") in September 2014.

The significant components of the increase in other operating expenses included:

• $696,000 in higher payroll and benefits costs as a result of additional personnel to support growth;
• $507,000 in higher depreciation, asset removal and property tax costs associated with recent capital investments to support growth; and
• $208,000 in higher accruals for incentive compensation as a result of the higher quarterly financial results.

Unregulated Energy Segment

The Unregulated Energy segment reported an operating loss of $1.0 million for the quarter ended September 30, 2015, compared to an operating loss of $2.0 million for the same quarter in 2014. The Unregulated Energy segment typically reports an operating loss in the third quarter due to the seasonal nature of the operations of a large portion of this segment. The reduction in the operating loss reflects $3.8 million in higher gross margin partially offset by a $2.8 million increase in other operating expenses.  The significant components of the gross margin increase included:

• $2.0 million generated by Aspire Energy of Ohio, LLC, ("Aspire Energy of Ohio"), following the acquisition of Gatherco, Inc. ("Gatherco") on April 1, 2015;
• $1.0 million of additional gross margin in the propane distribution business as a result of higher retail propane margins per gallon due to the retail pricing strategy guided by local market conditions, and lower propane costs; and
• $479,000 in higher gross margin from the Company's natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. ("PESCO") generated as the results of its strategic growth initiatives have started to materialize.

The significant components of the increase in other operating expenses included:

• $1.9 million in costs from the operation of Aspire Energy of Ohio, following the acquisition of Gatherco on April 1, 2015;
• $443,000 in higher payroll and benefits costs as a result of additional personnel hired to support growth;
• $141,000 in higher depreciation and property tax costs reflecting a higher level of assets resulting from our growth;
• $126,000 in additional costs for facility maintenance; and
• $102,000 in higher accruals for incentive compensation as a result of the higher year-to-date financial results and a larger workforce.

Comparative Results for the Nine Months Ended September 30, 2015 and September 30, 2014

The Company's operating income for the nine months ended September 30, 2015 was $61.6 million, an increase of $11.7 million over the same period in 2014.  A gain from a customer billing system settlement in the second quarter of 2015 contributed $1.5 million to operating income in the year-to-date results.  The remainder of the increase in 2015 operating income was driven by an increase in gross margin of $16.1 million, which was partially offset by an increase of $5.9 million in other operating expenses necessary to support growth. 

Regulated Energy Segment

Operating income for the Regulated Energy segment increased by $6.6 million to $47.6 million for the nine months ended September 30, 2015, compared to the same period in 2014. The increased operating income reflects the $1.5 million gain from a customer billing system settlement.  The remainder of the increase in operating income was due to an increase in gross margin of $12.9 million, partially offset by a $7.8 million increase in other operating expenses. The significant components of the gross margin increase included:

• $4.1 million generated from natural gas service expansions completed in 2014 and 2015, as more fully discussed in the Major Projects and Initiatives section below;
• $3.2 million in customer growth in natural gas distribution and transmission services beyond recent service expansions;
• $3.1 million generated by the Florida GRIP; and
• $2.4 million from a base rate increase for the Florida electric distribution operation.

The significant components of the increase in other operating expenses included:

• $1.9 million in higher payroll and benefit costs as a result of additional personnel to support growth and increased overtime on the Delmarva Peninsula in early 2015 due to colder weather;
• $1.3 million in higher depreciation, asset removal and property tax costs associated with recent capital investments to support growth;
• $987,000 in legal and consulting costs associated with the billing system settlement and other transactions;
• $811,000 in higher accruals for incentive compensation as a result of improved year-to-date financial performance;
• $680,000 in higher service contractor and other consulting costs;
• $497,000 in additional amortization expense due to a change in the amortization of regulatory assets and liabilities, primarily in the Florida electric distribution operation; and
• $353,000 in additional costs for facility maintenance.

Unregulated Energy Segment

Operating income for the Unregulated Energy segment increased by $4.8 million to $13.7 million for the nine months ended September 30, 2015, compared to the same period in 2014. The increased operating income was driven by a $10.4 million increase in gross margin, which was partially offset by a $5.5 million increase in other operating expenses.  The significant components of the gross margin increase included:

• $6.7 million generated from higher retail propane margins per gallon due to the retail pricing strategy, guided by local market conditions, and lower propane costs as a result of favorable supply management and hedging activities;
• $3.7 million in gross margin generated from Aspire Energy of Ohio, which was acquired in April 2015 and therefore not included in prior year results;
• $404,000 in additional gross margin generated by PESCO due to the execution of its growth strategy; partially offset by
• $854,000 in decreased gross margin for Xeron, inc. ("Xeron"), due to lower volatility in wholesale propane prices.

Other operating expenses increased by $5.5 million due primarily to:

• $3.8 million in costs from the operation of Aspire Energy of Ohio, following the acquisition of Gatherco;
• $1.0 million in higher payroll and benefits expense due to increased seasonal overtime and additional resources hired to support growth;
• $379,000 in additional costs for facility maintenance; and
• $337,000 in increased accruals for incentive compensation as a result of improved year-to-date financial results in 2015 as well as a larger workforce.

Matters discussed in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company's 2014 Annual Report on Form 10-K for further information on the risks and uncertainties related to the Company's forward-looking statements.

The discussions of the results use the term "gross margin," a non-Generally Accepted Accounting Principles ("GAAP") financial measure, which management uses to evaluate the performance of the Company's business segments. For an explanation of the calculation of "gross margin," see the footnote to the Financial Summary.

Unless otherwise noted, earnings per share information is presented on a diluted basis.

Conference Call

Chesapeake Utilities Corporation will host a conference call on Friday, November 6, 2015 at 10:30 a.m. Eastern Time to discuss the Company's financial results for the quarter ended September 30, 2015. To participate in this call, dial 866.821.5457 and reference Chesapeake Utilities Corporation's 2015 Third Quarter Financial Results Conference Call. To access the replay recording of this call, please visit the Company's website at http://investor.chpk.com/results.cfm or download the replay on your mobile device by accessing the Audio cast section of the Company's IR App.

About Chesapeake Utilities Corporation

Chesapeake Utilities Corporation is a diversified energy company engaged in natural gas distribution, transmission, gathering and processing, and marketing; electricity distribution; propane gas distribution and wholesale marketing; and other related services. Information about Chesapeake Utilities Corporation and the Chesapeake family of businesses is available at http://www.chpk.com or through its IR App.

For more information, contact:

Beth W. Cooper
Senior Vice President & Chief Financial Officer
302.734.6799

 

 

 

(1) "Gross margin" is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electricity and propane and the cost of labor spent on direct revenue-producing activities. Gross margin should not be considered an alternative to operating income or net income, which are determined in accordance with GAAP. Chesapeake believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structure for non-regulated segments. Chesapeake's management uses gross margin in measuring its business units' performance and has historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner.

Financial Summary Highlights

Key variances for the three months ended September 30, 2015 included:

 

¹⁾ The earnings per share impact, net of other changes shown above, includes $(0.01) of dilution from the issuance of 592,970 shares of Chesapeake's common stock in conjunction with the merger of Gatherco into Aspire Energy of Ohio on April 1, 2015.

 

 

Key variances for the nine months ended September 30, 2015 included:

 

⁽¹⁾ The earnings per share impact, net of other changes shown above, includes $(0.06) of dilution from the issuance of 592,970 shares of Chesapeake's common stock in conjunction with the merger of Gatherco into Aspire Energy of Ohio on April 1, 2015.

 

 

 

Major Projects and Initiatives

The following table summarizes gross margin for the Company's existing and future major projects and initiatives (dollars in thousands):

 

Existing Major Projects and Initiatives

The following table summarizes the Company's major projects and initiatives commenced since 2014 (dollars in thousands):

 

⁽¹⁾ Gross margin of $4.7 million and $16.5 million for the three and nine months ended September 30, 2014, respectively, and $21.8 million for the year ended December 31, 2014, related to projects initiated prior to 2014.  These projects were previously disclosed and are excluded from this table as they no longer result in period-over-period variances.

⁽²⁾ During the three and nine months ended September 30, 2015, the Company incurred $1.9 million and $3.8 million, respectively, in other operating expenses related to Aspire Energy of Ohio's operation. The Company expects to incur a total of $6.0 million in other operating expenses in 2015.

⁽³⁾ The gross margin is attributable to interruptible service Eastern Shore provided to an industrial customer beginning in April 2015. The interruptible service will be replaced by a 20-year contract for OPT ≤ 90 Service beginning in the third quarter of 2016.

Gatherco Acquisition
On April 1, 2015, the Company completed the merger with Gatherco, pursuant to which Gatherco merged with and into Aspire Energy of Ohio, a newly formed, wholly-owned subsidiary of Chesapeake. As a result of this merger, Aspire Energy of Ohio provides unregulated natural gas midstream services including natural gas gathering services and natural gas liquid processing services to over 300 producers through 16 gathering systems and over 2,000 miles of pipelines in Central and Eastern Ohio.  Aspire Energy of Ohio also supplies natural gas to Columbia Gas of Ohio, regional marketers of natural gas, and over 6,000 customers in Ohio through the Consumers Gas Cooperative, an independent entity, which Aspire Energy of Ohio manages under an operating agreement.

Aspire Energy of Ohio generated $2.0 million in additional gross margin and incurred $1.9 million in other operating expenses for the three months ended September 30, 2015.  For the six months following the merger through September 30, 2015, it generated $3.7 million of gross margin and incurred $3.8 million of other operating expenses.  The results of Aspire Energy of Ohio are projected to have a minimal impact on the Company's earnings per share in 2015, since the merger was completed after the first quarter, which has historically produced a significant portion of Gatherco's annual earnings. This acquisition is expected to be accretive to the Company's earnings in the first full year of operations, which will include the first quarter of 2016.

Service Expansions
During 2014, Eastern Shore Natural Gas Company, ("Eastern Shore"), the Company's interstate pipeline subsidiary, executed a one-year contract with an industrial customer in New Castle County, Delaware to provide 50,000 Dts/d of additional transmission service from April 2014 to April 2015.  This contract was subsequently amended to provide 55,580 Dts/d of transmission service at a lower reservation rate through August 2020. The net impact of the contract resulted in a gross margin decline of $150,000 for the quarter ended September 30, 2015. For the nine months ended September 30, 2015, the extension of the contract generated additional gross margin of $509,000, net of the impact of the lower rate, compared to the same period in 2014, and will generate additional gross margin of $334,000 for 2015 compared to 2014.

In December 2014, Eastern Shore executed another short-term contract with the same customer in New Castle County, Delaware to provide an additional 10,000 Dts/d of Off Peak ≤ 90 firm transportation service ("OPT ≤ 90 Service") from December 2014 to March 2015.  The OPT ≤ 90 Service is a new firm transportation service that allows Eastern Shore not to schedule service for up to 90 days during the peak months of November through April each year. This short-term contract generated additional gross margin of $233,000 for the nine months ended September 30, 2015.

On October 1, 2014, Eastern Shore commenced a new lateral service to an industrial customer facility in Kent County, Delaware. This service commenced after construction of new facilities, including approximately 5.5 miles of pipeline lateral and metering facilities extending from Eastern Shore's mainline to the new industrial customer facility.  This service generated $463,000 and $1.4 million of gross margin for the three and nine months ended September 30, 2015, respectively.  On an annual basis, this service is expected to generate $1.8 million of gross margin in 2015 and annual gross margin of approximately $1.2 million to $1.8 million during the 37-year service period.

In April 2015, Eastern Shore commenced interruptible service to the same industrial customer in Kent County, Delaware and generated additional gross margin of $1.1 million and $1.5 million for the three and nine months ended September 30, 2015, respectively. The interruptible service is expected to generate $1.7 million of gross margin in 2015, and it is expected to be replaced by a 20-year OPT ≤ 90 Service beginning in the third quarter of 2016.

On January 16, 2015, the Florida PSC approved a firm transportation agreement between Peninsula Pipeline Company, Inc. ("Peninsula Pipeline"), and Chesapeake's Florida natural gas distribution division. Under this agreement, Peninsula Pipeline provides natural gas transmission service to support Chesapeake's expansion of natural gas distribution service in Polk County, Florida.  Peninsula Pipeline began the initial phase of its service to Chesapeake in March 2015, generating $340,000 and $501,000 of additional gross margin for the three and nine months ended September 30, 2015, respectively.  This service will generate an estimated annual gross margin of $908,000 in 2015 and, once completed, all phases of this service will generate an estimated annualized gross margin of $1.6 million. 

GRIP

GRIP is a natural gas pipe replacement program approved by the Florida PSC, designed to expedite the replacement of qualifying distribution mains and services (any material other than coated steel or plastic) to enhance reliability and integrity of the Company's Florida natural gas distribution systems. This program allows recovery, through regulated rates, of capital and other program-related costs, inclusive of a return on investment, associated with the replacement of the mains and services.  Since the program's inception in August 2012, the Company's Florida natural gas distribution operations have invested $69.6 million to replace 153 miles of qualifying distribution mains, $25.5 million of which was invested during the first nine months of 2015.  The Company expects to invest an additional $3.4 million in this program through the end of 2015.  The increased investment in GRIP generated additional gross margin of $1.1 million and $3.1 million, for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014.

Florida Electric Rate Case

On September 15, 2014, the Florida PSC approved a settlement agreement between Florida Public Utilities Company ("FPU") and the Florida Office of Public Counsel in FPU's base rate case filing for its electric operation, which included, among other things, an increase in FPU's annual revenue requirement of approximately $3.8 million and a 10.25 percent rate of return on common equity. The new rates became effective for all meter reads on or after November 1, 2014.  Previously, the Florida PSC approved interim rate relief, effective for meter readings on or after August 10, 2014. The higher base rates in FPU's electric operation generated $673,000 and $2.4 million in additional gross margin for the three and nine months ended September 30, 2015, respectively.

Future Major Projects and Initiatives

White Oak Mainline Expansion Project: In December 2014, Eastern Shore entered into a precedent agreement with an industrial customer in Kent County, Delaware, to provide a 20-year natural gas transmission service for 45,000 Dts/d for the customer's new facility, upon the satisfaction of certain conditions. This new service will be provided as OPT ≤ 90 Service and is expected to generate at least $5.8 million in annual gross margin.  In November 2014, Eastern Shore requested authorization by the Federal Energy Regulatory Commission ("FERC") to construct 7.2 miles of 16-inch pipeline looping and 3,550 horsepower of new compression in Delaware to provide this service. The estimated cost of these new facilities is approximately $30.0 million. Eastern Shore anticipates receiving the FERC's authorization in 2015, with service targeted to commence in the third quarter of 2016, following construction of the new facilities. As previously discussed, during the three and nine months ended September 30, 2015, the Company generated $1.1 million and $1.5 million, respectively, in additional gross margin by providing interruptible service to this customer.

System Reliability Project: On May 22, 2015, Eastern Shore submitted an application to the FERC seeking authorization to construct, own and operate approximately 10.1 miles of 16-inch pipeline looping and auxiliary facilities in New Castle and Kent Counties, Delaware and a new compressor at its existing Bridgeville compressor station in Sussex County, Delaware.  Eastern Shore further proposes to reinforce critical points on its pipeline system.  The total project will benefit all of Eastern Shore's customers by modifying the pipeline system to respond to severe operational conditions experienced during actual winter peak days in 2014 and 2015. Since the project is intended to improve system reliability, Eastern Shore requested a predetermination of rolled-in rate treatment for the costs of the project and an order granting the requested authorization by December 2015. This project is expected to be in service by late third quarter of 2016 and will be included in Eastern Shore's upcoming 2017 rate case filing. The estimated cost of the project is $32.1 million. The estimated annual gross margin associated with this project, assuming recovery in the 2017 rate case filing, is approximately $4.5 million.

Texas Eastern Transmission, LP ("TETLP") Capacity Expansion Project: On October 13, 2015, Eastern Shore submitted an application to the FERC to make certain measurement and related improvements at its TETLP interconnect facilities which will enable Eastern Shore to increase natural gas receipts from TETLP by 53,000 Dts/day, for a total capacity of 160,000 Dts/d. Eastern Shore expects the project to be approved by the end of the year and in service by the end of February 2016. On a short-term basis, the Company anticipates that Eastern Shore will generate approximately $2.1 million in additional gross margin.

Eight Flags: Eight Flags Energy, LLC, ("Eight Flags"), one of the Company's unregulated energy subsidiaries, is engaged in the development and construction of a Combined Heat and Power ("CHP") plant in Nassau County, Florida. This CHP plant, which will consist of a natural-gas-fired turbine and associated electric generator, is designed to generate approximately 20 megawatts of base load power and will include a heat recovery system generator capable of providing approximately 75,000 pounds per hour of unfired steam. Eight Flags will sell the power generated from the CHP plant to FPU for distribution to its retail electric customers pursuant to a 20-year power purchase agreement. It will also sell the steam to an industrial customer pursuant to a separate 20-year contract. FPU will transport natural gas through its distribution system to Eight Flags' CHP plant, which will produce power and steam. On a consolidated basis, this project is expected to generate approximately $7.3 million in annual gross margin, which could fluctuate based upon various factors, including, but not limited to, the quantity of steam delivered and the CHP plant's hours of operations. Eight Flags' CHP plant is expected to be operational at the beginning of the third quarter of 2016. Chesapeake's total projected investment, by Eight Flags and other Chesapeake affiliates, to construct the CHP plant and associated facilities is approximately $40.0 million.

The following table summarizes estimated in-service dates and gross margin for the foregoing projects (dollars in thousands):

 

 

Other factors contributing to gross margin increase

Weather and Consumption
Weather was not a significant factor in the gross margin increase for the quarter ended September 30, 2015, compared to the same period in 2014.  Weather was also not a significant factor in the gross margin increase for the nine months ended September 30, 2015, compared to the same period in 2014, because the first quarter of 2015 and 2014 were both significantly colder than normal (10-year average weather) on the Delmarva Peninsula.  The following tables summarize the heating degree-day ("HDD") and cooling degree-day ("CDD") information for the three and nine months ended September 30, 2015 and 2014 and the gross margin variance resulting from weather fluctuations in those periods.

HDD and CDD Information

 

Gross Margin Variance attributed to Weather

 

Propane prices
Higher retail margins per gallon generated $597,000 and $5.7 million in additional gross margin by the Delmarva propane distribution operation for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014.  A large decline in propane prices in the first quarter of 2015 had a significant impact on the amount of revenue and cost of sales associated with the Company's propane distribution operations. Based on the Mont Belvieu wholesale propane index, propane prices in the first quarter of 2015 were approximately 59 percent lower than prices in the same quarter in 2014. As a result of favorable supply management and hedging activities, the Delmarva propane distribution operation experienced a decrease in its average propane cost in addition to the decrease in wholesale prices, which generated increased retail margins per gallon. During the second and third quarters of 2015, wholesale propane prices continued to remain significantly lower than prices in the same quarters of 2014.

In Florida, higher retail propane margins per gallon as a result of local market conditions generated $432,000 and $1.1 million of additional gross margin for the three and nine months ended September 30, 2015, respectively.

These market conditions, which are influenced by competition with other propane suppliers as well as the availability and price of alternative energy sources, may fluctuate based on changes in demand, supply and other energy commodity prices. The level of retail margins per gallon generated during the first nine months of 2015 is not typical and, therefore, is not included in the Company's long-term financial plans or forecasts.

Xeron, which benefits from wholesale price volatility by entering into trading transactions, generated additional gross margin of $131,000 for the three months ended September 30, 2015. On a year-to-date basis, Xeron experienced a gross margin decrease of $854,000, compared to the same period in 2014, due to lower wholesale price volatility.

Other Natural Gas Growth - Distribution Operations
In addition to service expansions, the natural gas distribution operations on the Delmarva Peninsula generated $250,000 and $1.1 million in additional gross margin for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014, due to an increase in residential, commercial and industrial customers served. The number of residential customers on the Delmarva Peninsula increased by 2.7 percent in the third quarter of 2015, compared to the same quarter in 2014.  The natural gas distribution operations in Florida generated $443,000 and $1.4 million in additional gross margin for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014, due primarily to an increase in commercial and industrial customers in Florida.

Capital Expenditures
The Company has revised its capital expenditures forecast for 2015 to be in the range of $130.0 million to $160.0 million, excluding amounts expended to acquire Gatherco. This range represents a significant increase over the average level of annual capital expenditures during the past three years, which equaled $94.8 million. The updated capital forecast reflects a shift in the timing of certain capital expenditures from 2015 to 2016. Major projects currently underway, such as the Eight Flags' CHP plant and associated facilities, anticipated new facilities to serve an industrial customer in Kent County, Delaware under the OPT ≤ 90 Service, and additional GRIP investments projected for 2015, account for approximately $99.0 million of the capital expenditures forecast for 2015. In addition, Eastern Shore is seeking FERC approval of a $32.1 million project to construct facilities that will improve the overall reliability and flexibility of its pipeline system.  Capital expenditures are subject to continuous review and modification by the Company's management and Board of Directors, and some anticipated capital expenditures are subject to approval by the applicable regulators.  Actual capital requirements may vary from the above estimates due to a number of factors, including changing economic conditions, changes in customer expectations or service needs, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of capital.  Historically, actual capital expenditures have typically lagged behind the budgeted amounts.

In order to fund the 2015 capital expenditures currently budgeted, the Company expects to increase the level of borrowings during the remainder of 2015 to supplement cash provided by operating activities. The Company's target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent, and the Company has maintained a ratio of equity to total capitalization, including short-term borrowings, between 54 and 60 percent during the past three years.  If the Company increases the level of debt during 2015 and 2016 to fund the budgeted capital expenditures, the ratio of equity to total capitalization, including short-term borrowings, will temporarily decline.

On October 8, 2015, the Company entered into a new revolving credit facility with certain lenders, which increased the Company's borrowing capacity by $150.0 million.  To facilitate the refinancing of a portion of the short-term borrowings into long-term debt, as appropriate, the Company also entered into a long-term private placement shelf agreement for $150.0 million.  The exact timing of any long-term debt or equity issuance(s) will be based on market conditions. In addition, for larger capital projects, the Company will seek to align, as much as feasible, any such long-term debt or equity issuance(s) with the earnings associated with commencement of service for the projects.

 

 

 

 

 

 

 

⁽¹⁾        Operating Revenues from "Other" sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for billing services provided to third parties and adjustments for pass-through taxes.

 

 

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SOURCE Chesapeake Utilities Corporation