UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
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Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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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. ☐
Explanatory Note
| Item 7.01 | Regulation FD Disclosure. |
On March 18, 2020, management from the Company participated in the West Coast Utilities Conference sponsored by Siebert Williams Shank & Co. Inc. The Company provided a virtual presentation to investors, analysts, and other third parties. The Company’s investor presentation includes certain forward-looking information. A copy of this investor presentation material is attached to this Amendment as Exhibit 99.1. The investor presentation material is also available in the “Investors” section of the Company’s website, sub-section “Events and Presentations” (www.chpk.com).
The information contained in this Item 7.01 and in Exhibit 99.1 attached to this Amendment 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. |
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Description | |||
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| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |||
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 | ||||||
| March 19, 2020 |
By: |
/s/ Beth W. Cooper | ||||
| Name: |
Beth W. Cooper | |||||
| Title: |
Executive Vice President and Chief Financial Officer | |||||
Siebert Williams Shank West Coast Utilities Conference March 18-19, 2020 Exhibit 99.1
Forward Looking Statements and Other Disclosures COVID-19 Impact: At this time, we cannot quantify the impact that the COVID-19 virus will have on the economy, and more particularly, on the Company. The gross margin, earnings and capital estimates we have included herein do not reflect any estimates of the potential impact. 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. 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, and you should refer to the additional information contained in Chesapeake Utilities Corporation’s 2019 Annual Report on Form 10-K filed with the SEC and our other SEC filings concerning factors that could cause those results to be different than contemplated in today’s discussion. REG G Disclosure: Today’s discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. Although non-GAAP measures are not intended to replace the GAAP measures for evaluation of Chesapeake’s performance, Chesapeake believes that the portions of the presentation, which include certain non-GAAP financial measures, provide a helpful comparison for an investor’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.
Financial Results 3
Business Overview Diversified Energy Delivery Business Natural Gas Distribution Delaware, Maryland, Florida Electric Distribution Florida Propane Distribution and AutoGas Delaware, Maryland, Pennsylvania, Virginia, Florida Natural Gas Transmission Delaware, Maryland, Pennsylvania, Florida Marlin Mobile CNG Temporary Services and Combined Heat & Power Eastern United States Regulated Energy Unregulated Energy 81% 19% Natural Gas Transportation Ohio 4
Market Capitalization Increased Performance is Driving Increased Value
Seek dividend growth supported by EPS growth 2019 Annual GAAP EPS growth of 14.7% 2019 Annualized Dividends per share growth of 9.5% CAGR Growth 2019 (3-yr CAGR) 2019 (5-yr CAGR) 2019 (10-yr CAGR) Basic GAAP EPS 11.4% 9.9% 10.6% Dividends Per Share 9.9% 8.5% 6.8% Growth in EPS and Dividends A Long-Term, Successful Track Record
Capital Projects – High Return / High Investment Peer ROE vs. Capital Expenditures (Three Year Performance - January 2017 – December 2019) 7 Chesapeake Utilities Three-Year Performance vs. Peer Group As of 12/31/19 CPK Med 75th Cap EX 21.7% 12.8% 14.2% EPS Growth 11.2% 7.5% 13.5% ROE 11.9% 10.0% 10.6% Div. Growth 9.9% 5.8% 7.7% TSR 14.6% 11.9% 15.2% Capital Expenditures/Total Capitalization Chesapeake CPK Performance Peer Group Electric & Combination Groups
2019 Strategic Accomplishments 8 Engaged, energized Chesapeake team to support growth EPS growth: (Basic) 9.5% annualized dividend growth supported by earnings growth Exited Energy Marketing business after strategic review generating $5.4 million after-tax gain Completed Ohl and Boulden acquisitions to enhance propane margin and future growth Identified new projects/initiatives to position the Company for continued success including Marlin Gas Services, the Del-Mar Energy Pathway pipeline, the Callahan and other Florida and Ohio transmission expansion projects, and the pending Elkton Gas acquisition GAAP Cont. Ops. 1-year 14.7% 7.2% 3- year 11.4% 10.3% 5- year 9.9% 8.5% 10-year 10.6% 9.9% Generated a Return on Equity of 12% (11.3% from continuing operations), while investing $199 million in capital in 2019
Culture of Sustainability Conservation program to help customers reduce energy costs and receive energy-saving products and programs Modern pipeline infrastructure with zero miles of cast iron Invested $144 million in Gas Reliability and Infrastructure Project Own and operate Eight Flags, one of the most energy efficient combined heat and power plants (CHP) which displaced reliance on coal Own a virtual pipeline, Marlin Gas Service, providing energy solutions to customers across the nation Community Gas Systems, an efficient community-based underground infrastructure Alternative energy vehicles and fueling stations (e.g., AutoGas and CNG) We have replaced millions of gallons of No. 2, 4 and 6 fuel oil , as well as diesel fuel LNG and RNG opportunities 9 Our businesses embrace the Company’s culture of sustainability where progress creates value.
Key Projects Driving Growth 10
2020 – 2022 Strategic Growth Initiatives 2019E: $170mm to $185mm 2018: $283mm 2020 – 2022E: $297mm to $532mm Complete transmission projects DNG and FPU gas organic growth Elkton Gas acquisition Propane business growth via acquisitions, start-ups and AutoGas Develop new transmission infrastructure projects Expand Marlin CNG delivery RNG and LNG transport services and RNG processing Combined Heat and Power Projects Total Shareholder Return Earnings Per Share Growth Dividend Growth Disciplined Capital Investment Return on Equity
Capital Expenditures 2019 and 2020 We spent just under $200 million in 2019 and have a robust capital forecast for 2020. We will continue to update this forecast as we move through the year, including any capital deployment delays resulting from the impact of COVID-19.
Major Projects and Initiatives Increasing Shareholder Value by Continuously Seeking and Developing Projects and Initiatives Key 2019 Margin Increase Drivers: $12.6 MM from new pipeline projects $6.8 MM from recent acquisitions $3.2 MM from regulatory initiatives We continue to pursue projects that will further enhance our margin growth in 2020 and 2021, and will add to the table as projects are finalized. We will continue to update our gross margin estimates as we move through the year, including any margin impacts as a result of COVID-19. Margin numbers for Elkton Gas acquisition and Hurricane Michael regulatory proceeding will be added once finalized. Additions to Table since September 2019: - 2020 additional margin of $3.0 million - 2021 now included: $8.2 million margin
West Palm Beach Expansion Enhances Reliability and Provides Additional Customer Growth 14 $33 million capital investment $2.1 million margin in 2019 $5.0 million margin in 2020 $5.2 million margin in 2021 Q4 - 2018 initial service; fully in-service Q1 - 2020 Four PPC projects to serve FPU’s natural gas distribution systems expansions in Palm Beach County. Resolves a pipeline capacity constraint. Projects /Phases include Belvedere, Westlake/Arden, Avenir and Research Park - Marlin Gas is providing temporary service for customers ahead of the project schedule
Del-Mar Energy Pathway Project Under Development Strategic Growth Initiative 15 Provides additional natural gas transmission pipeline infrastructure in Eastern Sussex County, Delaware and expands service into Somerset County, Maryland; serves four large anchor customers Estimated Project Cost: $ 37 MM Estimated In Service Date: Beginning of fourth quarter 2021* Estimated Annual Gross Margin: 2019- $ 0.7 million (Interim Service) 2020- $ 2.5 million 2021- $ 4.1 MM 2022 forward - $ 5.1 MM *FERC issued authorization for the project on January 7, 2020.
Callahan Pipeline Project in Nassau County, Florida Another Strategic Growth Initiative 16 Peninsula Pipeline is constructing a jointly owned 26 mile pipeline serving Nassau and Duval counties in Florida; Project will be jointly owned and built with Seacoast Gas Transmission (affiliate of Emera) Estimated CPK Project Cost: $ 32.5 Million* Estimated In Service Date: Third Quarter of 2020 Estimated Annual Gross Margin: 2020- $ 3.2 million 2021 forward - $ 6.4 million 15 Miles of pipe constructed already and project is on schedule *Total project cost is estimated at $65 million – Chesapeake and Seacoast will fund 50% each.
Aspire Energy – Natural Gas Pipeline Project Guernsey Power Station In December 2017, Aspire executed a binding precedent agreement with Guernsey Power Station, LLC (GPS) providing for the relocation of an existing 6” steel Aspire pipeline (completed March 2018). Aspire received the exclusive rights to provide natural gas transportation services for a ten year (300,000 Dths per day for a proposed 1,650 MW power plant). Guernsey Power Station began construction in Q4 2019. Aspire is finishing design work and reviewing bids for construction of interconnect facilities between the Tallgrass Energy Partners Rockies Express Pipeline (REX) and GPS. GPS is expected to be in service by late 2021. Capital Expenditures $5.5MM Annual Margin $1.4MM 17
Propane Growth Initiatives Multiple Streams of Growth Maintain/develop residential builder relationships to capitalize on new development opportunities These relationships are translating into new CGS in non-core markets AutoGas Fueling Stations Strategic partners key Multi-fleet fueling station network to support efficiency for our customers Providing fleets/bus solutions Start-ups and Acquisitions Expand beyond existing service territories In-fill acquisitions between operations Ohl and Boulden acquisitions Poultry Production Growth in poultry production on Delmarva Superior infrastructure and grower relations Residential Community Gas Systems 25 18 PROPANE FLORIDA PROPANE DELMARVA Our propane operations complement natural gas distribution to serve customers’ energy needs in areas where natural gas is currently unavailable.
Marlin Gas Services – Engine for Growth and Customer Service Continues to Exceed Performance Expectations 19 In thousands Emergency Services Utility Gas Supply Services Pipeline Integrity Services Marlin Gas Services continues to actively expand the territories it serves, as well as leverage its patented technology to serve liquefied natural gas transportation needs and to aid in the transportation of renewable natural gas from the supply sources to various pipeline interconnection points.
Benefits of Boulden Acquisition 25 20 Ohl Acquisition December 2018 Added approximately 5,200 customers in five counties in Delaware, Maryland and Pennsylvania effective 12/16/19 Overlays nicely with Elkton Gas acquisition to establish a strong unified energy delivery platform in Cecil County Solid customer base with opportunities for future growth Operational synergies, including supply, for northern Delmarva Additional services and pricing programs are being offered to customers Operations will be integrated into Sharp’s Delmarva operations Boulden Acquisition December 2019 Boulden and Ohl acquisitions expected to add $5.2 million margin in 2020
Elkton Gas Company Strategic Acquisition for Delmarva Natural Gas Summary of Transaction: On December 5, 2019, Chesapeake Utilities and South Jersey Industries entered into an agreement under which Chesapeake will acquire Elkton Gas Company for approximately $15 million The transaction is expected to close by the end of the third quarter 2020, subject to receiving approval from the Maryland Public Service Commission Elkton Gas serves approximately 7,000 customers within a franchised area of Cecil County, Maryland Its territory is contiguous to Chesapeake’s franchised service territory in Cecil County, Maryland Elkton Gas has been a customer of Chesapeake’s interstate transmission pipeline subsidiary, Eastern Shore Natural Gas, since 1959 when natural gas first became available to serve the town of Elkton Elkton Gas will continue to operate out of its existing office with the same local personnel With the expanded presence in Cecil County, the gas distribution system can be serviced locally with Chesapeake personnel rather than remotely from our Dover, DE operations center
Existing Cecil County Operations Elkton Gas and Chesapeake Utilities Current SJI – Elkton Cecil County Operations Leased Administrative Office Space Owned Operations Facilities Nine Local Employees 7,000 Customers, Primarily Residential Current CPK - Cecil County Operations No Office or Operations Facilities in Cecil County No Local Employees; Employees of the Delaware Division Provide Support 30 Commercial, 7 Industrial and 3 Residential Customers
Elkton Gas Company Strategic Fit Elkton Gas gives CPK an operational platform in Cecil County including personnel, a contractor pool and an operations center which will enable Chesapeake to more quickly expand our footprint in Cecil County Additional growth is expected in the area, due to its proximity to I-95 and the potential for a new interchange which is expected to spur additional commercial and industrial development A new 623 acre mixed use development has been proposed that would potentially add 4,289,000 sq. ft. of industrial/warehouse space, 257,600 sq. ft. of commercial/retail space and 1,205 homes Access to I-95 also provides potential opportunities for Marlin to expand its CNG and LNG business The acquisition will provide access to additional upstream capacity resources
Capital Investment Guidance Continued Record Investment in Our Business to Drive Growth $303,153 $250,000 Target 2018 – 2022: $750 million - $1 billion Management reaffirms its five year capital expenditure guidance of $750 million to $1 billion. Through the first two years (2018-2019) of the five-year forecasted period through 2022, the Company has invested $482 million on new capital expenditures. *We will continue to update this forecast as we move through the year, including any capital deployment delays resulting from the impact of COVID-19.
Current Earnings Guidance 2022 EPS Target Range of $4.70 - $4.90 On February 26, 2020, we updated our EPS guidance based on our current strategic plan planned investments and growth prospects. $4.70 $4.55 $3.72 $4.20 $4.90 We are continuing to monitor the COVID-19 impacts and will provide updates, as necessary, to our EPS target range, in the future.
Chesapeake Utilities Corporation Committed to Superior Performance – TSR, EPS, Dividend Growth We seek to identify and develop opportunities to drive our future earnings growth and increase shareholder value. Executing on Our Strategy: Seek development projects to serve new customers, provide new services and expand into new service areas. Pursue expansion projects that serve long-term commercial and industrial customers. Investing in propane opportunities to access new markets with significant growth potential. Pursue new platforms for growth including CNG, LNG, RNG. Maintain our track record of financial discipline to invest in earnings accretive projects. Period Ended Peer Rank vs. Peer Rank vs. Peer Rank vs. Peer Rank vs. 12/31/2019 CPK Median Peers CPK Average Peers CPK Average Peers CPK Average Peers 1 Year 20% 23% 7 14.8% 4.6% 3 9.5% 5.9% 3 59% 35% 1 3 Year 15% 12% 4 11.5% 7.5% 4 9.9% 5.8% 2 60% 40% 1 5 Year 16% 13% 4 9.9% 5.7% 3 8.5% 6.4% 2 59% 35% 1 10 Year 19% 15% 2 10.7% 5.3% 2 6.8% 5.2% 3 57% 26% 1 CPK 2018 - 2022 Target 7.75% to 9.50% Dividend Growth Supported By Earnings Growth 50% to 55% 15% Chesapeake Utilities Corporation Total Return (Annualized) Diluted Earnings Growth (CAGR) Dividend Growth (CAGR) Retention Rate
Thank You! Beth Cooper Executive Vice President, CFO and Asst. Secretary bcooper@chpk.com Any Questions? Thomas E. Mahn Vice President and Treasurer tmahn@chpk.com