CHESAPEAKE UTILITIES Q2 FY26 earnings call CPK

Chesapeake Utilities announced the Florida Energy Pathway (FEP) project, a 97-mile intrastate natural gas transmission pipeline running from Palm Beach County to Miami-Dade County. This is the largest single project in the company's history, representing a total investment of approximately $1.2 billion. The project is expected to be in service in 2030 and is anchored by multiple investment-grade shippers who have committed to nearly 250,000 dekatherms per day of capacity. The company's subsidiary, Peninsula Pipeline Company (PPC), will construct and operate the line, funding and owning at least 51%, while seeking partners for up to 49%.

The company increased its full-year 2026 capital guidance by $100 million to a range of $550 million to $600 million, primarily driven by initial spending for FEP and increased regulated distribution and infrastructure investments. Chesapeake Utilities now expects to exceed $2.2 billion in capital investment from 2024 through 2028, an increase from the initial five-year range of $1.4 billion. Management plans to provide updated 2027-2031 capital expenditure guidance and an earnings growth rate on the full-year 2026 earnings call in February 2027.

Chesapeake Utilities continues to experience solid commercial customer growth and above-average residential customer growth, with Delmarva at 3%, Florida Public Utilities at 2.1%, and Florida City Gas at 1.8%. The company noted that Delaware consistently ranks in the top 10 for population growth, and Florida is projected to add nearly 300,000 net new residents annually. This demographic trend is expected to drive increased natural gas demand for years to come, supporting the company's long-term growth strategy despite a general slowdown in customer growth from peak levels.

The Worcester Resiliency Upgrade (WRU) LNG storage facility project remains on schedule, with site and facility construction progressing well. The company anticipates bringing the full project online early next year (2027). WRU is designed to deliver significant peak day service capabilities and support natural gas expansion at the southern end of the system. Management sees strong potential for future expansions of the facility due to continuous demand and growth on the Delmarva Peninsula.

Earlier this year, Chesapeake Utilities filed a rate case for its Florida City Gas business, requesting a base rate adjustment of approximately $47 million and an 11.25% Return on Equity (ROE). The company successfully secured approval for a $16 million annualized interim rate adjustment from the Florida Commission in late July, which is expected to generate over $6 million of increased revenue in 2026. While management aims for a constructive outcome, they are prepared to fully litigate the case if a settlement with the Office of Public Counsel is not reached.

The company is making substantial progress on its ERP project, having successfully transitioned into the realized build phase last month and remaining on track for a planned 2027 go-live. This investment is expected to strengthen enterprise capabilities, improve data analytics, and provide a scalable platform for future growth. Operationally, the company's expenses represented only 45% of gross margin for the first half of the year, marking its lowest point to date and reinforcing its focus on efficiency.

Beyond FEP, Chesapeake Utilities is advancing other expansion projects. The Delmarva Regional Enhancement Project is moving forward with permitting underway and construction expected to start in 2027. The Accomack County Exploration project in Virginia is progressing with feasibility analysis to serve customers on the Eastern Shore. Additionally, the company continues to explore LNG transportation and storage opportunities at the Cape and Port of Canaveral, having identified a promising waterside property to fuel space programs and cruise ships.