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.

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, Beth 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. 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 our regulated transmission and distribution operations. As Jim Moriarty likes to say, we are the beneficiaries of our geography, and our service areas continue to experience above national average customer growth. In our natural gas distribution businesses, we saw year-over-year average customer growth increase by more than 4%. The growth in distribution customers has also contributed to expansions of our upstream gas transmission businesses in our Delmarva and Florida service territories, which are in highly desirable locations. Our capital investments are supporting the infrastructure to meet the continued customer demand for natural gas. We've also added more than 20,000 customers to our propane operations through the diversified energy acquisition and the organic growth of our propane business. We produced solid results for our shareholders in 2021. In January, we achieved our 61st consecutive year of paying a dividend. We're proud of this long track record and we're excited with the runway we have to continue increasing dividends given our current payout level and our earnings performance. 2021 was the 18th consecutive year we've increased our dividend, and for the past five years, we've been growing the dividend at an average of 9.5% per year. We've also achieved significant returns for our investors. In 2021, total shareholder return was 37%. We've been in the top quartile in our industry for shareholder returns for the past 1, 3, 5, 10, and 20-year periods. In fact, we've been at the 90% plus level over that entire period. I mentioned before on these calls that our investments extend beyond pipe, wire, and tanks to ensure that we can continue to support our growing energy delivery businesses. Over the past several years, we've been investing in our people, processes, and technology. We continue to enhance our safety culture. The over-safety town training facility opened last year and we're budgeted to build floor operational training facilities starting this year. Our pipeline safety management system implementation continues on track. We've initiated a comprehensive employee engagement process to strengthen the connection between each employee and our long-term strategy and objectives. We improved our employee communications capabilities with new technology. We expanded our equity, diversity, and inclusion initiatives. I believe that our EDI actions are not only the right moral choice, but ensuring diverse thinking and an inclusive environment produces better overall business results. Given the magnitude of our capital investments, we're progressively improving our project assessment and project management practices. We took a big step last year in establishing a roadmap that will guide our technology replacements and upgrades over the next several years. Our business transformation process is a series of intentional, considered steps that prepare us for the company we will become over the next several years. In all, a number of impressive achievements for the year by our team.

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 by $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 capitalization range. As Jeff highlighted, the company's net income has more than doubled since 2015. Remarkable growth over a short period of time. Let me provide some additional color on the factors driving earnings growth for the quarter and the full-year periods. On Slide 13, we highlighted the key contributors to earnings growth for the fourth quarter. Let me provide some additional detail. The first two are non-typical items with the absence of regulatory deferral of COVID-19 expenses and reduced interest expense related to early extinguishment of FPU first mortgage bonds. Cumulatively, these represented a $0.02 headwind. Contributions from the acquisitions for natural gas and diversified energy, in addition to the Escambia Meter Station, generated an incremental $0.03 in earnings for the quarter. Our core businesses delivered additional margin contributions that increased earnings by $0.19 per share over the prior year, fourth quarter. This includes higher operating income from organic growth, higher demand and propane usage as demand returns closer to pre-pandemic conditions, higher performance in our propane operations, along with additional income from our regulated infrastructure programs. Offsetting this, growth was a $0.04 headwind tied to warmer weather throughout the fourth quarter, compared to the same period last year. Higher depreciation, amortization and property tax costs associated with new capital investments represented $0.04. Operating expenses tied to the acquisition were another $0.02, and then also operating expenses tied to growth in our core business were a net $0.02 higher as well. Changes in shares outstanding due to our equity offerings, again that I mentioned from last year and this year, helped us align with our target capital structure, but were a $0.06 headwind. And finally, other items, including other income tax and net other changes, added back $0.02.

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, respectively. Finally, our Eastern Shore natural gas interstate transmission unit has the 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.

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 a 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, 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.

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

Hi, thank you. Good afternoon and thank you for the details. Starting at Slide 6, Jeff, where you discuss many of your investments across the East Coast below Pennsylvania, could you talk a little about the return profile on the unregulated investments in multiple states? Does it begin with a negative return in the initial year for initiatives like the CNG fueling system and hydrogen testing, and then accelerate afterward? How should we view the timing of returns on these investments?

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, 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 that we 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 in 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.

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. 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. 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 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.

Good afternoon. I wanted to quickly follow up on the hydrogen blending. What kind of capital investment do you think this might lead to? Is it utility investments or more related to the expansion of the Marlin fleet?

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. 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. That turbine will be equipped to accommodate greater percentages of hydrogen.

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 noting the typical on the utility side. At the Southern expansion, we just talked about that briefly, that's out there as well, so some of our pipeline expansions, also our traditional organic growth. As Jeff said, there have 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. Anything above and beyond that would certainly be additional dollars that would come into play later in the year. 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 hundred thousand. So it wasn't substantial, but particularly again, on Delmarva or in Florida, but mostly in Ohio. They're all at different stages and continue to progress. As we've discussed in previous calls, some take longer due to the permitting process or securing financing. However, each of these projects is still moving forward. For instance, Bioenergy DevCo is in the permitting phase, while the CleanBay projects are working on obtaining financing. Overall, the outlook remains positive; it's just that some projects will require more time to reach the point of full construction and operation. We have numerous projects like this, both in Delmarva and Florida, that we are actively reviewing and assessing.

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 project, 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. We're excited about 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 and moving forward with that and continuing to expand in the Southern portion of our service territory on the peninsula.

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. 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.