RGC RESOURCES INC Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• Regulatory: Received favorable commission decisions, settled general rate case enabling $4.08M annual revenue increase (ROE 9.9%), agreed on depreciation rates, and received approval for SAVE and RNG riders effective October 1, 2024.
• Operations: 2024 fiscal year had nearly 8 miles of main extensions/renewals, 631 new service connections, and 412 renewed services.
• 2025 Expectations: Capital spending plan $21.6M, growth in service territory including Franklin County with MVP gas availability, midstream expected modest contribution to earnings with cash distributions received, and a 4% annual dividend increase to $0.83.

Segment Performance:

• Delivered Gas Volumes: Fourth quarter 2024 volumes were 5% lower than Q4 2023 due to warm fall weather and lower commercial volumes, including a temporary shutdown. Full fiscal year 2024 volumes remained steady compared to the prior year.
• Capital Spending: Fiscal 2024 capital spending totaled $22.1 million, down from $25.3 million in 2023, primarily due to less spending on the RNG facility.
• Earnings: Fourth quarter 2024 net income was $141,000 ($0.01 per share) vs. $1 million ($0.10 per share) in Q4 2023. Fiscal 2024 net income grew to $11.8 million ($1.16 per share) from $11.3 million ($1.14 per share) in 2023, overcoming inflationary costs and higher interest rates with strong equity affiliate earnings.

Guidance:

• Fiscal 2025 earnings forecasted in $1.18 to $1.25 per share range.
• Midstream expected to contribute modestly to earnings in 2025, with an estimated $3.2M from RGC midstream cash distributions.
• Capital spending plan for 2025 is $21.6M, in line with 2024 spending.

Risks:

• Regulatory actions in Franklin County service require local government approval, not completely within control.
• Interest rate fluctuations impacting floating rate debt, which affects interest expense and bottom line.

Q: Michael Gaugler asked about MVP flows during cold snap, expansion potential, and use of cash from MVP.

A: Paul Nester said MVP flows are between 1.5 Bcf to 2 Bcf a day; Tim Mulvaney mentioned considering opportunities like compression and Southgate to enhance cash flow from MVP.

Q: Tim Winter inquired about rate base numbers for Roanoke rate order and Mountain Valley, and considerations for holding vs selling MVP interest.

A: Tommy Oliver stated net rate base for Roanoke rate order was around $200M to $220M; Paul Nester discussed the complex considerations including tax implications for holding vs selling MVP interest, noting the balance sheet investment in MVP is ~$21M.