Greetings. Thank you for standing by. Welcome to the Chesapeake Utilities Corporation Results for Fourth Quarter and Full-Year 2021. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. The conference is being recorded Thursday, February 24, 2022. And now I would like to turn the conference over to Alex Whitelam, Head of the Investor Relations. Please go ahead.

Thank you, Scott. And good afternoon, everyone. We know it's late in the day and we appreciate you joining us. We're excited to present Chesapeake Utilities results for the fourth quarter and full-year of 2021. As you saw on our press release issued yesterday, the company reported record financial performance for the year, demonstrating our continued ability to deliver long-term sustainable growth for our stakeholders. As shown on slide two, participating with me on the call today are Jeff Householder, President and Chief Executive Officer, Beth Cooper, Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary, and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer. We also have other members of our management team joining us virtually. Today's presentation can be accessed on our website under the Investors’ page in the Events and Presentation subsection. After our prepared remarks, we will open the call up for questions. Moving to Slide 3, I'd like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of the company's 2021 Form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company has refined its disclosures to report adjusted gross margin in accordance with the SECs Regulation G. A reconciliation of GAAP gross margin to adjusted gross margin is provided in the appendix of this presentation and in our earnings release. Now I will turn the call over to Jeff to provide some opening remarks on the company's results and the key drivers of our performance. Jeff?

Thank you, Alex. Good afternoon and thank you all for joining our call today. Let me start out by thanking all of my colleagues across the company for their hard work and dedication, despite another roller coaster year with multiple COVID variants, supply chain disruptions, and other challenges in the marketplace, our team came together. And once again, delivered record financial results. Our performance speaks to the strong and unique culture we have at Chesapeake, a culture that I'm very proud to be part of. I want to also recognize the newest members of the Chesapeake family, the employees working in our recently acquired diversified energy propane distribution operations, in the Carolinas and up in Pennsylvania. As usual above will provide a more detailed overview of our financial results in just a moment. But on Slide 4, I wanted to highlight a few of the key accomplishments our team achieved this year. Compared to 2020, diluted earnings per share from continuing operations increased by an impressive 12.4% to $4.73. This marked our 15th consecutive year with earnings growth. And in fact, in just the last six years, we've doubled our net income to $83 million in 2021, and our business earnings growth was driven primarily by the ability to prudently invest capital in margin producing projects. 2021 continued our long history of growth investments. We deployed $228 million of capital last year, our largest annual capital investment result other than 2018, which included the electric system rebuild after Hurricane Michael. Over the last 10 years, we've invested approximately $1.75 billion to expand and improve our systems. These investments have consistently produced incremental margins that support attractive returns. In 2021, our adjusted gross margin increased by more than $33 million. A significant percentage of our investments support upgrades and expansions in…

Thank you, Jeff. And good afternoon, everyone. It's certainly great to be with all of you today. I'd first like to begin and reiterate Jeff's recognition for our team and also welcome our new Diversified energy teammates. In 2021, we experienced record growth because of the tremendous work from everyone across the organization. As you'll see on slide 11, we achieved 12.4% earnings growth for the year. As Jeff mentioned, this marked the 15th consecutive year of earnings growth, something we are all truly proud of. Some of the key margin drivers for the year included pipeline expansion projects and organic growth in our natural gas distribution system, increased consumption as pre -pandemic conditions returned, along with more advantageous weather conditions in the first half of the year, contributions from the acquisitions of Elkton Gas, Western Natural Gas, the Escambia Meter Station, and Diversified Energy, higher performance within our propane businesses, regulated infrastructure programs, including the pipeline programs in Florida and Maryland, as well as Eastern Shore's Capital Cost surcharge programs, increased performance from our Aspire Energy and Marlin subsidiaries, along with increased performance from our electric utility. To put it simply, Chesapeake Utilities executed on all fronts in 2021, with each of our business units adding to the Company's overall growth. Turning to Slide 12, what you will see is that our adjusted gross margin increased $4.9 million and $32.8 million for the fourth quarter and full-year respectively. Net income for the fourth quarter was $22.7 million. For the full-year, net income increased by 16.7%, over 2020, to $83.5 million. The EPS growth rate compared to the net income growth rates for both the quarter and year-to-date reflect the large issuance of stock in the latter half of 2020 as we rebalanced our capital structure to achieve our target…

Thank you, Beth. And good afternoon. It's good to be with you all. Slide 21 lists some of our recent regulatory initiatives where we have proactively worked with our various public service commissions to secure recovery of key replacement and infrastructure investments in our businesses, while further supporting safe, reliable and economical energy to our customers. Florida Public Utilities continues to make significant progress with the Gas Reliability Infrastructure Program that began in 2012. Through the end of 2021, we have invested nearly $190 million to upgrade approximately 348 miles of distribution mains, increasing the safety and reliability of our systems for many Floridians. We expect to complete this program by the end of 2023 at the latest. In Elkton, Maryland, we continue to invest in the systems integrity by upgrading pipeline. The program went into service towards the end of 2021 and going forward, we expect the project will generate. $300,000 and $400,000 in adjusted gross margin in 2022 and 2023 respectfully. Finally, our Eastern Shore natural gas interstate transmission unit has authority to recover capital costs associated with mandated highway or railroad relocation projects. For the year, we generated $1.2 million in additional margin and expect $2 million in additional margin in 2022 and 2023. Moving to Slide 22, I want to echo Jeff's comments about the sustainability report we published earlier today. We are proud of the report and appreciate the tireless work from the cross-functional teams that came together to gather the data to help tell Chesapeake's story and our unwavering commitment to environmental, social, and governance matters. I would like to acknowledge the significant efforts of our corporate governance team, particularly Stacy Roberts (ph) and Breanna Smith (ph), who developed the initial game plan and pull together the information and metrics upon which we relied.…

Hi. Thank you, Jim. On Slide 24, we continue to reaffirm our long-term earnings and capital expenditure guidance. In 2025, we expect to deliver diluted earnings per share in the range of $6.05 to $6.25. This represents a compound annual growth rate of 9.1% to 9.5% over the five-year period. We also continue to expect to deploy $750 million to $1 billion in capital expenditure during the same period. 2021 provided a strong start to achieving that goal, and in 2022, we expect another $175 million to $200 million toward that target. Before I finish with our usual investment proposition slide, I wanted to reiterate the company's mission, vision, and values as displayed on Slide 25. 2021 was a critical year for our company as we revamped and updated these statements to align with where we want to go in the future and how we want to operate as a company. Our mission is straightforward. We're an energy delivery company and we plan to stay an energy delivery company. As the world moves toward a lower carbon future, we see great opportunity to contribute to that transition in a way that continues to provide benefits to all our stakeholders. Our vision of Chesapeake's future is also straightforward. We'll be a leader in delivering energy that contributes to a sustainable future. And the values we espouse, carrying integrity and excellence clearly describe how we plan to run our business. I think it's important that we both internally and publicly declare our purpose, intentions, and our values. They guide our strategy, and every decision we make. on Slide 26, we believe that natural gas will remain a key component of the country's long-term energy strategy. And we're capitalizing on new projects that will contribute to a future with cleaner and more sustainable energy. We're committed to our growth strategy and focused on continuing to deliver top quartile performance, including shareholder return, which has exceeded. 16% compound annual growth for each period, 1351020 years through 2021. When we said we will do something, we've typically done it, earning that credibility with our stakeholders has been critically important for our success. So we appreciate your confidence that we'll be successful on the lower carbon energy transition, we'll be successful in achieving our ESG objectives and ultimately successful in delivering continued financial performance. We're excited about where we've been and what we've accomplished. We are equally, if not more excited about where we're going. Future of Chesapeake Utilities is bright and we're proud of record results we deliver today. And with that Alex, why don't we open it up for questions?

Thanks Jeff. Scott, please open the line for the Q&A session.

Thank you. for the first question. And we have a question from the line of Tate Sullivan with Maxim Group. Please go ahead. Your line is open.

Hi. Thank you. Good afternoon and thank you for the details. And if I may, starting at Slide 6, Jeff, where you detail many of your investments across the East Coast below Pennsylvania. Can you just talk a little bit about the return profile on the unregulated investments in multiple states? I imagine it starts -- does it start at a negative return in the initial year on things like the CNG fueling system and hydrogen testing and then accelerate thereafter? How should we look at the timing of returns on these investments, please?

We have traditionally and historically tried to make sure that we make investments that are both accretive in year 1 and then have a reasonable return. They don't always, as you correctly indicate we hit our target return levels in year one. But we typically have not invested in too many things that drag those returns out over multiple years. And so I would tell you invest and certainly back this up in greater detail. I think most of the investments that we will be making, the propane acquisition, for example, the CNG fueling station in Savannah, and a number of other things that we're looking at, will bring us solid returns in a fairly short period of time. The hydrogen test is a different story. We have the ability to recover those costs immediately through the contract that the Eight Flags has with our electric utility, blessed by the Florida Public Service Commission. And so those sorts of things, I think are a little different category than an acquisition on the Propane side or the fueling station in Savannah, or some of the other non-regulated actions that we might be taking. Beth, do you want to illuminate that a little bit?

Sure. Actually, Jeff hit most of the points there. But I would just really echo the point on the return side, Tate. And one of the things that we do as an organization is we evaluate projects and as our capex committee reviews them, we're looking at what projects are going to contribute. We're adding them in, and factoring them into the consolidated organization with a view and an eye towards wanting to maintain a strong ROE, and always, as Jeff said, for them to be accretive to earnings per share coming out of the gate. And so that's actually caused us to walk away from a lot of deals. And so the projects that we undertake, we feel in relatively short order that they're going to be able to achieve the targets that we're looking for.

Thank you, Beth. And and following up Jeff on your comments about the hydrogen, I was not aware. So the testing that you're doing is being recovered by the customer on the regulatory side of that, correct in the most above.

Yeah, the testing program that we began a month or so ago and it will in the middle, will run as we change out to the new total bundle and test higher percentages as we transition over into green hydrogen. Virtually all of those costs are running through a fuel recovery clause in the contract that we have between Eight Flags in our electric utility. And so it's part of a coverable cost structure.

Okay. Thank you. I'll get back in the queue. Thank you all.

We do have a question from Brian Russo with Sidoti. Please go ahead. Your line is open.

Good afternoon. So just quickly -- just to follow up on the hydrogen blending. What type of capital investment ultimately do you think this could lead to? Is it utility investments or is it really expansion of the Marlin fleet, etc?

I think potentially it's both. We did not invest in what I would call significant capital in the test process. We modified an existing regular measurement station. We already had existing stainless steel pipe, for example, that runs from that station into the Eight Flags turbine area. And we modified a handful of our existing Marlin tankers so that they could be certified to operate with hydrogen. So the expenses that we had were relatively modest in this first test process. As we expand to include greater levels of hydrogen at that facility, we will take some additional steps but the significant investment would be in the program itself, and we're already in the process. As I mentioned, over regular turbine replacement this year, just to start at 30,000 annual replacement. And so that turbine coming from turbans, we will be equipped to accommodate greater percentages of hydrogen. So generally speaking, we have relatively minimal cost associated with putting those hydrogen blend together at Eight Flags. And what we're trying. to do, as I indicated is to provide an absorbable operational hydrogen blend in an industrial setting because we have a number of customers that we think can benefit from that on their own, and I think we could show them a way to do this that is not prohibitively costly, at least on the equipment side. Now paying for the hydrogen is another issue, right? I mean, hydrogen is not cheap at this point, especially green hydrogen produced with renewable electricity. And so we'll see where that goes as that market evolves over the next several years. We're already seeing changes in the hydrogen market as people are taking advantage of those fuel burning source.

Okay. Got it. And then the 2022 capex, $175 million to $200 million. Is there any rough breakdown in terms of the types of investments that capex supports whether it's Reg or Run-Reg or RNG and hydrogen or Marlin, etc.?

Thank you, Brian. We have not, other than the noting the typical on the utility side. At the Southern expansion, we just talked about that briefly, expansion that's out there as well, so some of our pipeline expansions, also our traditional organic growth. As Jeff said, there has been no significant projects announced in regards to hydrogen. If Marlin were to undertake some minor investments associated with being able to support those hydrogen projects, that would be potentially incorporated in the unregulated but it's more of the traditional growth coupled with the projects that we've already announced. And so anything above and beyond that would certainly be additional dollars that would come into play later in the year.

I apologize, but I might have missed this earlier. But what was the impact of weather in the fourth quarter and also the full-year versus normal?

Sure. So for the full-year versus normal, it ended up being about $2.2 million. For the fourth quarter, it was interesting because relative to normal, where you had the most significant variance was in Ohio; you had a little bit on the Delmarva Peninsula, but that was the biggest piece. That was in Ohio and that was several $100,000. So it wasn't substantial, but particularly again, on Delmarva or in Florida, but mostly in Ohio.

Okay. Got it. And then lastly, at these R&D projects you have under development still showing just a million dollars of margin in your large project table. I was just wondering if there was any update there.

They're all in various stages. They continue to be. And as we talked on previous calls, some of them, they take a little bit longer in terms of getting -- going through and getting the various permits or securing the necessary financing. But each of those projects are still underway, when you think about the Bioenergy DevCo they're in the permitting phase. In the case of the CleanBay projects, they are in the process of securing the financing. So again, all continue to look favorable. It's just as we've talked about, some of them takes a little bit longer to get to where they're ready to be fully constructed and in service. But there's a lot of projects like that, both on Delmarva and in Florida that we're actively looking at and evaluating.

Great. Thank you very much.

Thank you

And we have a follow up question from Tate Sullivan with Maxim Group. Please go ahead. Your line is open.

Thank you. Up on the Southern expansion project with the $2.3 million, I think per capital adjusted gross margin in '23. Have you talked about that project before? And is that related to a previous pipeline expansion projects, please.

That particular project is new in this quarter, Tate, as we had mentioned, that's adding additional compression to be able for us to be able to expand our capacity. We have a filing related to that project and so you have not seen that before. That's something that came about as a result of Eastern Shore's most recent open season process. And so we're pretty excited by that. That's largely driven by our continued growth on the distribution end, and so to support that growth. So we're excited about constructing that, moving forward with that and continuing to expand in the Southern portion of our service territory on the peninsula.

Okay. Thank you, Beth. That's it for me.

Thank you.

There are no further questions at this time. I will now hand the call back to Jeff Householder.

Thanks. Thanks for joining us today. I know it's the end of the day in the midst of a heavy earnings reporting week. We value your support, and we look forward to engaging with you throughout the year. And hopefully we can do some of that in person as time goes forward. Stay safe, and have a great day. Goodbye.

That concludes the call for today. We thank you for your participation and ask that you please disconnect your lines.