Good day, and thank you for standing by. Welcome to the Fiscal Year 2021 Unitil Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Todd Diggins, Director of Finance. Please go ahead.

Good morning, and thank you for joining us to discuss Unitil Corporation's fiscal year 2021 financial results. Speaking on the call today will be Tom Meissner, Chairman, President and Chief Executive Officer; and Bob Hevert, Senior Vice President, Chief Financial Officer and Treasurer. We will discuss financial and other information on this call. As we mentioned in the press release announcing this call, we have posted information, including a presentation, to the Investors section of our website at unitil.com. We will refer to that information during this call. Moving to Slide 2, the comments made today about future operating results or events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that can cause actual results to differ materially from those predicted. Statements made on this call should be considered together with cautionary statements and other information contained in our most recent Annual Report on Form 10-K and other documents we have filed with or furnished to the Securities and Exchange Commission. Forward-looking statements speak only as of today and we assume no obligation to update them. This presentation contains non-GAAP financial measures. The accompanying supplemental information more fully describes these non-GAAP financial measures, and includes a reconciliation to the nearest GAAP financial measures. The company believes these non-GAAP financial measures are useful in evaluating its performance. With that, I will now turn the call over to Chairman, President and CEO, Tom Meissner.

Thanks, Todd, and good morning, everyone. Thanks for joining us today. I'm going to begin today's discussion on Slide 3, which provides a brief overview of the Unitil’s business strategy. Unitil is a pure-play distribution utility in New England, serving some of the most desirable areas along the New Hampshire and Maine sea coast. Being a dedicated distribution utility, we do not own generation assets, nor do we have any of the large environmental obligations that often accompany them. In addition, our earnings are not impacted by commodity cost fluctuations as a result of approved recovery mechanisms. We have a diverse mix of residential, commercial, and industrial customers across the States, we serve and have about 25% more electric customers than gas. Through our regulatory strategies, we expect over 80% of our customers to be served under decoupled rate mechanisms by year end, which minimizes revenue fluctuations due to weather, energy efficiency, or business cycles. Moving now to Slide 4. Today, we announced strong results for fiscal year 2021, with net income of $36.1 million and earnings of $2.35 per share. This represents an increase of $0.20 per share or 9.3% over 2020, and reflects higher adjusted growth margins for both the electric and the gas divisions. Briefly, looking ahead, I'd like to reaffirm our long-term guidance of 5% to 7% growth in earnings per share, with earnings growth expected to be above the high end of that range over the next two years. Touching on a few strategic updates, operationally we continue to exceed industry standards, with a strong focus on continuous improvement. Customer satisfaction remains at an all-time high, and we were once again recognized with an EEI Emergency Response Award, reaffirming our best-in-class storm preparedness and rest practices. Later on the call, Bob will provide a refresh of our investment plan, but I wanted to mention that we continue to have robust investment opportunities, and we forecast long-term rate-based growth of 6.5% to 8.5%. Finally, as noted on previous calls, we continue to embed sustainability into all aspects of our business strategy. We see this as a key underpinning to our long-term success. Our 2021 corporate sustainability report can be viewed on our company website. Now, with that, I'll pass it over to Bob, who will provide further detail on our 2021 results.

Thank you, Tom, and good morning, everyone. I will begin on Slide 5. As Tom mentioned, this morning we announced fiscal year 2021 net income of $36.1 million, and earnings per share of $2.35. Net income increased by $3.9 million or $0.20 per share compared to fiscal year 2020. The increase in earnings reflects higher electric and natural gas adjusted gross margins, partially offset by higher operating expenses. Turning to Slide 6. For the 12 months ended December 31, 2021, electric adjusted gross margin was $97.4 million, an increase of $4.5 million or 4.8% compared to fiscal year 2020. The $4.5 million increase was driven by higher rates and customer growth. Our commercial and industrial unit sales increased by 3.5%, reflecting improving economic conditions in our service territories. Turning to Slide 7. For the 12 months end December 31, 2021, gas adjusted gross margin was $133.1 million, an increase of $10.5 million or 8.6% compared to fiscal year 2020. The increase in gas adjusted gross margin reflects higher rates in customer growth of $9.4 million, and $1.1 million due to the favorable effect of colder winter weather. Despite the colder peak heating system for the year, 2021 was about 8% warmer than normal. Moving on to Slide 8, we provide an earnings bridge comparing 2021 results to 2020. As I noted, 2021 adjusted gross margin increased by a combined $15 million, primarily as a result of higher distribution rates and customer growth in both our electric and gas operations. Operating and maintenance expenses increased by $3 million, attributable to higher labor costs of $1.6 million, and higher utility operating and maintenance costs of $1.4 million. Depreciation and amortization increased by $5 million, reflecting higher levels of utility plant and service, and higher amortization expense. Taxes, other than income taxes, increased…

Great. Thanks, Bob. Turning now to Slide 13. We've seen strong customer growth in recent years. And as I've mentioned before, we operate in service areas that have seen incredible economic development. Further supporting this unique growth opportunity, is the potential for customer conversions to natural gas, as the States we serve have the highest dependency on fuel oil for home heating in the nation. By increasing the penetration of natural gas, we can both reduce emissions and save customers money. Moving on now to Slide 14, we procure a diverse and reliable supply of natural gas in order to meet the demands of our growing customer base. Unitil maintains pipeline capacity and underground storage capacity originating from both the north and the south. From the north, we have interconnections with Portland Natural Gas Transmission, and the Maritimes & Northeast Pipeline, as well as capacity on pipelines further upstream. From our south, we have interconnections with Tennessee Gas Pipeline Company. We supplement pipeline and storage capacity with delivered peaking supplies arranged in advance of the winter heating season to ensure we have adequate supply to meet our customers’ needs, even on the coldest New England days. In fact, January will likely be a record month for gas fails due to our growing customer base, as well as colder than normal weather. And we can confidently say we have adequate supplies to meet customer demand throughout our service areas for the winter period. Turning to Slide 15. As I touched on earlier, we continue to excel operationally, and strive to continuously improve. Both our electric reliability and our gas emergency response, widely surpass industry standards, and we were a awarded the Edison Electric Institute's Emergency Response Award for the fourth time in five years. Additionally, the American Gas Association has recognized…

Great. Thanks, Tom. That wraps up the material on this call. Thank you for attending. I'll now turn the call over to the operator who will coordinate questions.

Thank you. [Operator instructions]. Our first question will come from the line of Julien Dumoulin-Smith from Bank of America. You may begin.

Hey, this is actually Kody Clark on for Julien. Good morning, Tom, and Bob. So, first on the CapEx budget that you outlined, you state that there could be upside for strategic projects around advanced energy system and clean energy solutions. Can you give some color on what those projects might look like, what the size might be, and if you have any sense on timing and when these projects could show up in the capital plan?

Sure. Well, first of all, we’re very focused on electrification opportunities relating to transportation in particular. So, we have a focus on expanding EV infrastructure. That would be one area. We're also looking at solar to the extent that we're allowed under statute, and we’re still trying to prove out the business case for that, but that's an area of potential upside in the years ahead that we've not reflected in our capital plan. And I think as we mentioned also, we’re continuing to pursue R&G as a supply opportunity, and we don't have a concrete business case for that yet, but we are pursuing both the regulatory and legislative structure that would allow us to recover R&G supply to try to advance our supply portfolio in that area.

Okay. Got it. Understood. And then next on the UES settlement, just curious where you all were able to come to an agreement. Was it principally around just the rate of return? And I guess asked a little differently, are the core programs and asks intact with the settlement agreement?

Hey, Kody, it's Bob. I think, well, first off, we’re in the middle right now, Kody, of finalizing the settlement agreement. And so, as I'm sure you can appreciate, we really cannot speak to the specifics of the agreement until it's filed, but it's fair to say that the agreement we have is comprehensive, and it's comprehensive in scope and it's comprehensive in terms of the parties to the agreement. So, it covers a host of issues that were included in the filing, but we really can't speak to it in particular beyond that.

Okay, understood. That's fair. And then just lastly, if I can, on customer growth, as you discussed, the opportunity for natural gas conversion in New Hampshire and Maine, just wondering what you're assuming for electric and gas within that 5% to 7% EPS growth rate.

Kody, this is Tom. I'm not sure that we have specific assumptions recommended. Our 5% to 7% EPS growth rate, I think, is based more on assumptions around rate-based growth and investment that we anticipate in the next five years. What we are seeing - in terms of conversions, I think we a little bit of a slowdown during the pandemic because people weren't undertaking activities like that, but we are seeing an uptick now, and we're also seeing a significant sort of increase in development projects coming through, largely because of the housing shortage that we're seeing, and the value of homes reflecting significant inflation in this area. So, between the two, I think organic growth and switching over to natural gas from fuel oil, we're seeing pretty healthy opportunity in the years ahead.

Okay. Thanks so much for the time.

[Operator instructions]. Our next question will come from the line of Shelby Tucker from RBC Capital Markets. You may begin. Shelby, your line is open.

Sorry for that. Good morning, everyone. Just to follow on Kody's question about renewable natural gas, some parts of the country have a lot of resources like poultry farms. Could you maybe give us a sense of the type of resources are available within your territories for renewing natural gas?

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Got it. Thanks, Bob. And then maybe Tom, as we look at the addressable market for natural gas over the home heating market, can you remind me how much of Maine, New Hampshire, actually is, I guess, reachable through your pipes and how much more investment you would have to make to reach more of those homes?

Sure. To that point Shelby, I think clearly, especially in Maine, only a small portion of the State is really addressable with natural gas, just due to the rural nature of the State. We tend to operate in the highest density areas of the State now, although there still is opportunities for smaller cities in that State that don't currently have natural gas. I think our overall penetration at Northern is still somewhere around 60%. So, we still have plenty of opportunity on our existing means and our existing system just to convert customers over who already have natural gas available to them.

Got it. And then the last question I have is, if I recall correctly, a decent chunk of your CapEx is still going more to gas than to electric. I mean, should we see - but we've seen a greater slice of the CapEx going to electricity. Where do we see that trend over time?

Well, part of the trend we're seeing is, we're actually completing pipe replacement on the gas side. So, we finished in New Hampshire a couple of years ago. In Maine, we'll be complete in 2024. So, pipe replacement essentially will be limited to Fitchburg Gas & Electric thereafter until sometime in the 2030s. So, that's why the gas spend is tending to come down a little bit. On the electric side, we're seeing more opportunity to advance the grid, invest in electrification, and pursue some of the other strategic opportunities we talked about.

Got it. So, as your gas program comes off, we should see a similar type of CapEx program, but just money skewed more to electricity.

Yes, that's what we anticipate.

Got it. Great. Thank you very much.

[Operator instructions]. And I'm not showing any further questions today. That will end our Q&A segment as well as our conference for today. Thank you for participating, everybody. You may now disconnect. Everyone, have a great day.