Chesapeake Utilities Corporation (CPK) Earnings

Management highlights

### Customer Growth - Delmarva residential customer growth hit 3%, Florida Public Utilities hit 2.1%, and Florida City Gas (FCG) hit 1.8%, all outperforming national averages; strong demand is supported by top-10 national population growth in Delaware and annual net population growth of 300,000 in Florida, equivalent to adding a city the size of Orlando annually. - Increasing demand for natural gas remains the core of the company's long-term growth strategy. ### Major Capital Project Updates - Announced the $1.2 billion Florida Energy Pathway Project (FEP), the largest single project in company history: a 97-mile intrastate natural gas transmission pipeline from Palm Beach County to Miami-Dade County, Florida, developed to resolve existing transmission capacity constraints and meet growing South Florida demand. Subsidiary Peninsula Pipeline Company (PPC) will own at least 51% of the project, with up to 49% open to external partners. The project is anchored by investment-grade shippers with committed capacity of nearly 250,000 decatherms per day, is expected to enter service in 2030, and represents a long-term regulated growth opportunity. - The Worcester Resiliency Upgrade (WRU) LNG storage project in Delmarva remains on schedule for full commercial operation in early 2027, and will deliver expanded peak-day natural gas service capacity to support growth at the southern end of the company's Delmarva system. - Other active development projects include the Delmarva Regional Enhancement Project (permitting underway, construction expected 2027), the Acomac County Exploration Project (feasibility study in progress), and LNG storage/transport opportunities at the Cape and Port of Canaveral (new waterside property under evaluation). ### Regulatory Update - FCG's base rate case filed in early 2026 requested a $47 million base rate adjustment and an 11.25% return on equity; a $16 million annualized interim rate adjustment was approved in late July 2026, generating over $6 million in incremental 2026 revenue. Management is working toward a constructive final outcome with Florida regulators, and is prepared to litigate if no settlement is reached. ### Operational and Strategic Initiatives - The company's enterprise ERP implementation transitioned to the Realize Build phase, remains on track for a 2027 go-live, and will deliver improved data capabilities and a scalable platform to support long-term growth. - The company launched the company-wide Spring Impact Days volunteer initiative, with over 500 employees participating in 30+ community events through the first half of 2026; the company has contributed nearly $1 million in charitable donations, partnerships, and sponsorships year-to-date. ### Capital Structure and Dividend - The company maintains a 50% equity capitalization target, matching the target as of Q2 end 2026; the revolving credit facility was recently amended to increase total borrowing capacity to $650 million (a $200 million increase), with 70% of total debt capacity still available as of Q2 end. - The board maintains a 45-50% dividend payout target, aligned with the most recent 7.3% annual dividend increase and upcoming $0.74 per share dividend payment, allowing 50-55% of earnings to be retained to fund the capital growth program.

Guidance

- Full year 2026 capital expenditure guidance was increased by $100 million, to a new range of $550 to $600 million, driven by initial spending on the FEP project and higher planned regulated distribution/infrastructure investments. - The 2024-2028 cumulative capital investment guidance was updated from an initial range to reflect that the company now expects to exceed $2.2 billion in total capital investment over this period, up from the previous expectation of exceeding $1.4 billion. - 2028 EPS guidance of $7.75 to $8.00 is reaffirmed. - A full update to 2027-2031 cumulative capital expenditure guidance and 2027-2031 annual EPS growth rate guidance will be provided on the full year 2026 earnings call in February 2027.

Segment performance

Chesapeake Utilities operates two core business segments: 1. **Regulated Segment**: Adjusted gross margin was $125 million in Q2 2026, representing a 6% increase year-over-year (YoY). Adjusted operating income rose 7% YoY to $55 million. This segment accounts for approximately 83.3% of the company's total adjusted gross margin. 2. **Unregulated Energy Segment**: Adjusted gross margin was $25 million in Q2 2026, a 2% increase YoY. This segment accounts for approximately 16.7% of the company's total adjusted gross margin. Company-wide consolidated Q2 2026 results: adjusted gross margin was $150 million (+5% YoY), adjusted net income was $25 million (+5% YoY), and adjusted earnings per share (EPS) was $1.05 (+1% YoY). For the first half of 2026, operational expenses fell to 45% of gross margin, the lowest level in company history.

Risks & headwinds

- Large capital projects like FEP carry multi-year construction, permitting, regulatory, and financing uncertainty; while management expects permitting to proceed smoothly for FEP, regulatory outcomes cannot be guaranteed. - There is broader industry uncertainty around residential customer growth due to broader U.S. housing market slowdowns, though management notes that growth in the company's service territories remains healthy and well above national averages. - Forward-looking statements about project timelines, demand growth, and financial performance are inherently subject to risks and uncertainties that could cause actual results to differ materially, with detailed risk factors disclosed in the company's 2025 10-K and Q2 2026 10-Q filings.

Analyst Q&A

• Q: What is the regulatory/permitting timeline for the FEP project, what is the rationale for the partnership structure, and will there be room for capacity upsizing? /

  A: FEP is an intrastate project under Florida PSC jurisdiction; permitting will begin in earnest shortly, with most of the route running through public right-of-way requiring limited land acquisition, so management expects a relatively smooth process for a project of this size. The partnership structure is designed to share construction and investment risk of the $1.2 billion project, balance capital allocation across the company's broader pipeline of projects, and manage the earnings impact during the multi-year construction period prior to 2030 in-service. Additional shipper commitments are still being accepted, and there is upside potential for future growth. A partnership deal is expected to be finalized this quarter, which will clarify financing details.

• Q: Is a settlement likely in the FCG rate case, and will you provide 2027+ EPS guidance alongside the February 2027 update? /

  A: The Office of Public Counsel has taken a position opposite the company's request, which is not unusual for rate cases. Management does not know if a settlement will be reached and is fully prepared to litigate if needed. Management confirmed that more clarity on the five-year growth rate and associated capital will be provided in the February 2027 update, but did not commit to specific 2027 standalone EPS guidance on this call.

• Q: How long has FEP been evaluated, what is the outlook for WRU expansion, and are you seeing customer growth headwinds from the U.S. housing slowdown? /

  A: Management identified South Florida natural gas capacity constraints as far back as the 1990s, and the FCG acquisition provided the opportunity to directly resolve these constraints. This is the company's first partnership-financed intrastate pipeline project. For WRU, while regulatory approval is not assumed, the strong and growing demand for natural gas on Delmarva makes a strong case for expansion, which will be the least-cost option to meet peak and long-term demand. Management notes a slight slowdown from peak post-pandemic growth, but customer growth across all service territories remains well above the national average, with no alarming headwinds to date.

• Q: How will FEP's lumpy capital profile be reflected in the long-term EPS growth guidance you will provide in February? /

  A: The five-year guidance to be released in February will cover through 2031, which will capture FEP's first full year of revenue in 2030. Management has not finalized how to present the growth trajectory across the construction and operation periods, but investors can expect full transparency across the full five-year window. Capital spending on FEP will ramp up gradually, with the majority of spending occurring in the middle of the 2026-2030 construction window.