CHESAPEAKE UTILITIES CORP

Chesapeake Utilities Corporation is an energy delivery company engaged in the distribution of natural gas, electricity and propane, the transmission of natural gas, the generation of electricity and steam, and in providing mobile compressed natural gas and other energy-related services to its customers. The company operates primarily in the Mid-Atlantic region, North Carolina, South Carolina, Florida and Ohio. The industry is subject to state and federal regulation by agencies such as the Delaware PSC, Maryland PSC, Florida PSC, and FERC, with rates designed to recover prudent operating and financing costs and provide a reasonable return for stockholders. Competition in natural gas distribution comes from alternative energy sources including electricity, oil, propane and renewables, while natural gas transmission competes with other interstate and intrastate pipeline companies. Electric distribution does not compete directly with other electricity distributors for residential and commercial customers but does compete with other electricity suppliers and alternative fuel providers for industrial customers. Propane operations compete with national and local independent companies primarily on the basis of price and service.

The company's strategy is focused on growing earnings from a stable, regulated energy delivery foundation and investing in related businesses and services that together provide opportunities for returns greater than traditional utility returns. The company seeks to identify and develop opportunities across the energy value chain, with emphasis on regulated midstream and downstream investments that are accretive to earnings per share and create opportunities to continue a record of top tier returns on equity relative to its peer group. The growth strategy includes continued investment and expansion of regulated operations, as well as investments in other related non-regulated businesses and services including sustainable investments such as renewable natural gas related investments. The company does not name specific competitors in the filing but describes the competitive landscape for each business segment.

The company generates revenue through regulated energy distribution and transmission services, as well as unregulated energy operations including propane sales, energy transmission and supply, energy generation, mobile CNG/RNG services, and sustainable investments. Regulated energy revenues are based on rates regulated by state PSCs or FERC, designed to recover all prudent operating and financing costs and provide a reasonable return. The cost of natural gas or electricity delivered is passed through to customers under PSC-approved fuel cost recovery mechanisms, so adjusted gross margin is generally not impacted by fluctuations in the cost of natural gas or electricity. Unregulated energy revenues come from propane sales to residential, commercial/industrial, wholesale and AutoGas customers, natural gas supply agreements, electricity and steam generation, and mobile CNG/RNG services.

The Regulated Energy segment includes natural gas distribution operations serving Delmarva (Delaware and Maryland) and Florida (FPU and FCG), natural gas transmission operations including Eastern Shore (Delaware/Maryland/Pennsylvania), Peninsula Pipeline (Florida), and Aspire Energy Express (Ohio), and electric distribution operations (FPU in Florida). For the year ended December 31, 2025, the Regulated Energy segment reported net income of $119.7 million ¹ and total assets of $3,425.3 million ². Natural gas distribution operations include Delmarva Natural Gas with 114,245 ³ average customers and Florida Natural Gas Distribution with 228,949 ⁴ average customers. FPU Electric Distribution had 33,516 ⁵ average customers. Natural gas transmission operations include Eastern Shore with design day capacity of 320,411 Dts/d ⁶ and Peninsula Pipeline with design day capacity of 1,087,171 Dts/d ⁷. Aspire Energy Express had firm transportation capacity of 300,000 Dts/d ⁸ and operating revenue of $1.5 million ⁹.

The Unregulated Energy segment includes propane operations (Sharp, Diversified Energy, FPU and Flo-gas) serving Pennsylvania, Delaware, Maryland, Virginia, North Carolina, South Carolina, and Florida, with net income of $12.7 million ¹⁰ and total assets of $192.1 million ¹¹. Propane operations sold 78,624,000 ¹² gallons to an average of 92,402 ¹³ customers. Energy Transmission (Aspire Energy) in Ohio reported net income of $5.0 million ¹⁴ and total assets of $150.5 million ¹⁵, owning approximately 2,800 miles ¹⁶ of natural gas pipeline systems in 40 counties ¹⁷ in Ohio. Energy Generation (Eight Flags) in Florida reported net income of $1.7 million ¹⁸ and total assets of $30.0 million ¹⁹, with a CHP plant producing approximately 21 MW ²⁰ of electricity and 75,000 pounds per hour ²¹ of steam. Marlin Gas Services reported net income of $5.1 million ²² and total assets of $66.6 million ²³, maintaining a fleet of CNG trailers, mobile compression equipment, LNG tankers and vaporizers, and an internally developed patented regulator system allowing delivery of over 7,000 Dts/d ²⁴ of natural gas. Sustainable investments and other reported a net loss of $3.2 million ²⁵ and total assets of $55.8 million ²⁶.

On November 30, 2023, the company completed the acquisition of FCG for $922.8 million ²⁷ in cash, including working capital adjustments. FCG serves approximately 125,000 ²⁸ residential and commercial natural gas customers across eight counties in Florida. In 2025, the company continued advancing its sustainable investments including the construction and operation of its first full scale RNG production facility in Lee, Florida utilizing dairy waste, production of raw biogas at the Planet Found poultry anaerobic digester facility in Worcester County, Maryland, and FERC approval and construction advancing for the Worcester Resiliency Upgrade project, an LNG storage facility project on Delmarva. The company had more than 1,300 ²⁹ employees at December 31, 2025, 186 ³⁰ of whom are union employees represented by two labor unions. The company maintained a $450.0 million ³¹ unsecured revolving credit facility with certain lenders.

For the fiscal year ended December 31, 2025, total operating revenues were $1,023.6 million ³² compared to $1,003.4 million ³³ in 2024. Net income was $141.0 million ³⁴ compared to $131.1 million ³⁵ in 2024. Diluted earnings per share were $5.90 ³⁶ compared to $5.49 ³⁷ in 2024. The company declared dividends of $2.695 ³⁸ per share in 2025, $2.510 ³⁹ per share in 2024, and $2.305 ⁴⁰ per share in 2023.

The company's growth strategy includes prudent deployment of investment capital, optimizing earnings growth in existing businesses through organic growth, territory expansions, and new products and services, identification and pursuit of additional pipeline expansions including new interstate and intrastate transmission projects, growth of Marlin Gas Services' CNG transport business and expansion into LNG and RNG transport services as well as methane capture, and identifying and undertaking additional strategic propane acquisitions that provide a larger foundation in current markets and expand the brand and presence into new strategic growth markets. The company is also focused on leveraging current capabilities, including its integrated set of energy delivery businesses, to support and contribute to a more sustainable future. In February 2026, FCG provided notice to the Florida PSC of its intent to file a petition seeking a general rate base increase based on a 2027 projected test year, with the rate case filing expected to be submitted in April 2026.

The company's growth strategy also includes driving regulatory initiatives that align with its growth strategy and investment plans, and continually executing on business transformation initiatives with increased opportunities to transform the company with a focus on people, process, technology and organizational structure. The company is implementing a technology roadmap that will significantly advance its technological capabilities, though the implementation of new software in multiple phases involves risks including expectations not being achieved, inadequate planning, continued team engagement, new security risks, integration challenges, and the ability to recover appropriate costs as approved by regulators.

The filing does not provide specific margin or cost outlook figures or efficiency targets.

The company's operational outlook includes continued investment in infrastructure projects. The company is constructing the Worcester Resiliency Upgrade project, an LNG storage facility project on Delmarva, which received FERC approval and is advancing. The company also constructed a dairy manure RNG facility at Full Circle Dairy in Madison County, Florida, which became operational with the first injection of RNG during the second quarter of 2024. The company continues to invest in safety and simulation training programs, including state-of-the-art training facilities known as Safety Towns located in Dover, Delaware and DeBary, Florida.

The company's capital allocation strategy includes continued pursuit of growth requiring capital investment in excess of cash flow from operations, with successful execution dependent upon access to equity and debt on acceptable terms. The company has a $450.0 million ⁴¹ unsecured revolving credit facility. The company declared dividends of $2.695 ⁴² per share in 2025, $2.510 ⁴³ per share in 2024, and $2.305 ⁴⁴ per share in 2023. The filing does not specify R&D spending levels, share repurchase authorization amounts, or specific capital expenditure plans for the upcoming period.

The company faces structural headwinds including fluctuations in weather conditions that directly influence the volume of natural gas and propane sold and delivered, with a significant portion of revenue derived from the five-month peak heating season (November through March). Other than the Maryland natural gas distribution business which has revenue normalization mechanisms, warmer than normal weather generally results in less revenue. The company also faces risks from severe weather events such as hurricanes, ice storms and other damaging weather events, particularly in service areas susceptible to more frequent severe weather events. The company is subject to risks from changes in environmental and other laws and regulations, including those intended to address climate change, and the Inflation Reduction Act of 2022 signed into law in August 2022 with hundreds of billions of dollars in incentives for renewable energy, clean hydrogen, and clean fuels, which could accelerate the transition away from fossil fuels and impact demand for the company's products and services.

The company faces constraints from the capital-intensive nature of its regulated energy businesses, with the need to access credit and capital markets to execute its business strategy. The company's ability to issue new debt and equity capital and the cost of capital are greatly affected by financial performance and conditions of the financial markets, and a downgrade in current credit ratings could negatively impact access to and cost of debt. The company also faces risks from increasing interest rates, which could increase the cost of future debt issuances, and from inflationary and supply chain issues that could impact the availability and cost of equipment, materials and other resources necessary for operations and infrastructure growth. The presidential administration has taken action to impose substantial new or increased tariffs, which could increase the cost of imported materials and equipment, disrupt supply chains, and create adverse capital and credit market conditions.

The company's financial results may fluctuate significantly due to factors outside its control, including weather variations, commodity price changes, and interest rate movements, with a significant portion of natural gas distribution and propane revenue derived from the five-month peak heating season. The company's business strategy requires capital investment in excess of cash flow from operations, making access to equity and debt on acceptable terms critical, and a downgrade in current credit ratings could negatively impact access to and cost of debt. The company faces risks from increasing interest rates, which could increase the cost of future debt issuances, and from inflationary and supply chain issues that could impact the availability and cost of equipment and materials. The company is subject to risks from severe weather events, natural disasters, and acts of terrorism that could damage assets and cause operational interruptions. The company faces cybersecurity risks associated with protection of its infrastructure and facilities, with the U.S. government issuing public warnings that energy assets might be specific targets of cybersecurity threats or attacks, and the company could be required to expend significant resources to continue to modify or enhance procedures and controls.

Management's message emphasizes the company's strategy of growing earnings from a stable, regulated energy delivery foundation and investing in related businesses and services that provide opportunities for returns greater than traditional utility returns. The company seeks to identify and develop opportunities across the energy value chain, with emphasis on regulated midstream and downstream investments that are accretive to earnings per share and create opportunities to continue a record of top tier returns on equity relative to its peer group. Key strategic priorities include prudently deploying investment capital through organic growth, territory expansions, new products and services, additional pipeline expansions, growth of Marlin Gas Services' CNG transport business and expansion into LNG and RNG transport services, and additional strategic propane acquisitions. The company is also focused on proactively managing its regulatory agenda to align with growth strategy and investment plans, and continually executing on business transformation initiatives with a focus on people, process, technology and organizational structure. The company's culture is described as grounded in a solid foundation of regulated businesses but enhanced by an entrepreneurial, innovative and competitive market mindset.