Chesapeake Utilities Corporation Aktie

Welcome to Chesapeake Utilities Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events & Presentations subsection. After our prepared remarks, we will open up the call for questions. On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on 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 our 2025 Annual Report on Form 10-K and in our first quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results.

Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G.

A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the Appendix of this presentation, our earnings release and our first quarter Form 10-Q. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here as highlighted on Slide 3. May is Electrical Safety Month and a great time to ensure we are safely using the power of electricity.

Be mindful of overloaded outlets, damaged cords and using electrical appliances near water. Also be sure to use lithium-ion batteries safely, only use the correct charger, avoid charging on beds or couches and never use damaged or overheating batteries. Small daily choices can prevent fires, injuries and protect ourselves, our homes and our loved ones.

I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on this quarter's key accomplishments and our capital growth program. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will discuss the Florida City Gas rate case and stakeholder engagement.

Jeff Sylvester, current Senior Vice President and Chief Operating Officer and incoming Chief Financial Officer, joins us today for his first earnings call. Jeff will summarize our first quarter performance and financing updates.

And Beth Cooper, Executive Vice President and Chief Financial Officer, who has announced her retirement at the end of June, joins us for her 71st and final earnings call. Beth will discuss dividend and earnings growth and then close with our value proposition.

With that, it's my distinct pleasure to turn the call over to Jeff Householder.

Thank you, Lucia, and good morning, all. Let me start today by recognizing Beth Cooper, who announced her retirement in March following 36 years of service to the company. In the last 18 years as our Chief Financial Officer, Beth's strategic and financial leadership has led to incomparable growth, including a $3 billion increase in our market capitalization, 10x growth in total assets and net income as well as a 366% increase in earnings per share.

Most importantly, Beth embodies the best of Chesapeake Utilities. She has an authentic passion for delivering results and an impressive ability to build connections and relationships internally and externally. So thank you, Beth. It's been an honor to work alongside you.

We are eternally grateful for your significant contributions to this company. I'd also like to welcome Jeff Sylvester to our call, who will transition from COO to formally assume the CFO role on July 1 of this year. Jeff brings deep financial and operational knowledge of our business, along with valuable expertise in data analytics and process and technology transformation, all of which are fundamental to our next stage of growth and development.

I look forward to continuing to work closely with Jeff as we remain focused on the 3 pillars of our growth strategy, prudent deployment of capital, a proactive regulatory agenda and business transformation actions that meet the energy delivery and service expectations of our customers and communities.

I'll now move on to Slide 5. We had a strong start to the year, reporting a 16% increase in adjusted net income and an 11% increase in adjusted earnings per share compared with the first quarter of last year.

We generated an incremental $12 million of margin from transmission and infrastructure projects and $11 million of margin from distribution system growth, updated rates and increased customer usage given the much colder winter we experienced in the first quarter.

Slide 6 highlights the connection between growth in our service areas and our long-term growth strategy. I can continue to report a quarter of solid commercial customer growth and above-average residential customer growth, 3.3% in Delmarva, 2.2% for Florida Public Utilities and 2% for Florida City Gas. Increasing demand for natural gas and propane remains core to our long-term growth strategy.

Population growth, homebuilding and the needs of our customers continue to provide investment opportunities to upgrade and expand our energy delivery systems and invest in technology that provides safe, reliable and affordable service to our customers. Investing in our delivery systems and continuously improving our business operations to realize meaningful service and value improvements will drive long-term earnings growth and enable us to appropriately scale the enterprise.

Now let's shift to Slide 7, which summarizes our 2026 projected capital program and our progress to-date. Through the end of the first quarter, we've invested $122 million of capital across the business. This is in line with our full year 2026 capital expenditure guidance of $450 million to $500 million.

Slide 8 shows additional detail on our major capital projects. We forecast these projects to contribute approximately $31 million of gross margin in 2026 and an additional $20 million in 2027. We've made some recent updates to one of the projects on the table on Slide 9, WRU, our LNG storage facility in Bishopville, Maryland.

As you can see in the latest photos on Slide 9, there has been significant construction progress at the Delmarva site. You may recall that last fall, the FERC Notice to Proceed process took a couple of months longer than we expected. We had hoped to make up much of this time, but the severe winter weather in the first quarter and a few design modifications that will simplify future expansion kept us from accelerating construction.

The snow, ice and freezing temperatures we experienced in January and February significantly limited the pace of construction. The site was actually totally inaccessible for several days due to roadway travel restrictions. While the winter weather boosted usage and margins in our existing businesses, it was not helpful to the WRU construction schedule.

WRU is a substantial complex project that will deliver significant peak day service capabilities to Delmarva customers. The tanks and primary structural and control room facilities are in place. We're working to complete the control electronics, on-site piping and interconnections to our Eastern Shore Natural Gas Transmission System. Coming out of this winter, I spent quite a bit of time assessing our progress and the overall project schedule.

I'm happy with the effort we're making to push the project to completion. I'm also realistic about where we stand today and the need to build an additional time for a FERC commissioning process that is not governed by a specific time requirement. We're engaged in a third-party pre-commissioning process, so I don't foresee any substantive FERC issues, but we're building in additional time in the schedule. So the schedule changes mean that we expect significantly reduced margin contributions from WRU in 2026.

This impact is partially offset by the margin benefits from weather this quarter and incremental Eastern Shore Natural Gas peaking capacity, which will be online prior to the full in-service date of WRU. However, full year EPS will be reduced by approximately $0.10. The project is still on track to come online early next year and generate $17 million of 2027 margin.

I will say that the extreme temperatures this winter only solidified the need for this project and will likely lead to a potential LNG facility expansion at the site in the near future. Increased storage at the southern end of our system will further improve reliability, reduce supply costs during peak usage times and enable continued system expansion to serve customer growth in the future.

I'll now shift to Slide 10 to highlight several projects that are in progress or on the horizon. There are a number of potential expansion opportunities ahead of us that provide significant growth potential as we serve growing demand across our service areas. The first is the Delmarva Regional Enhancement, which we discussed on our last earnings call.

This $75 million 20-mile project expands transmission infrastructure in our Delmarva region. Permitting has begun and construction is expected to start next year. We are also evaluating opportunities for potential expansions of this project as demand remains high. We've also discussed a project to explore the potential for extending our Eastern Shore natural gas system into Accomack County, Virginia.

Supported by a $6.5 million grant, we're beginning feasibility and design studies to assess the opportunity to serve customers on Virginia's Eastern Shore, including the NASA Wallops Island facility. We also remain engaged with partners in the community at the Cape and Port of Canaveral to explore potential opportunities for LNG transportation and storage. We're continuing to identify and evaluate potential sites for storage as demand remains high for the space and cruise industries there.

And lastly, we continue to evaluate multiple opportunities to expand transmission capacity into South Florida to serve the substantial population growth and energy demand in the Greater Miami area. We ultimately believe that a future expansion into this area is necessary and are evaluating numerous options to meet the growing demand in South Florida.

With that, I'll turn to Jim to provide regulatory and stakeholder engagement updates.

Thank you, Jeff, and good to be with all of you today. I'll start with Slide 11. On April 20, we filed a rate case for our Florida City Gas business, requesting a base rate increase of approximately $47 million and an ROE of 11.25%.

This request comes more than 3 years following FCG's last rate increase request prior to our acquisition and updates cost recovery for a number of key areas, including capital investment, operational expense, insurance, depreciation and property taxes. Included in our filing was a request for interim rates of $16 million, which we expect to be effective in the third quarter of this year.

While a full procedural schedule has not yet been set, we expect the hearing to occur in the fourth quarter of 2026 or in early 2027, with full rates expected to be effective shortly thereafter. We remain conscious of the impact to our customers, so we have incorporated cost savings and efficiencies across the business into our overall assumptions wherever possible.

We value the opportunity to serve our FCG customers and we'll continue to work together with the Florida PSC staff and Office of Public Counsel to achieve a constructive outcome. Speaking of customers, I'll now turn to Slide 12 to provide an update on stakeholder engagement.

In March of this year, we published our 2025 Annual Report, which includes highlights of our 2025 stakeholder engagement work, including investments in our teammates, customers and communities. We believe that serving all stakeholders creates a virtuous and sustainable cycle of long-term performance and growth. So we remain focused on driving collaboration and value with all those we serve so that no one is left behind.

With that, I am very pleased to turn the call to Jeff Sylvester, who will discuss our financial results in more detail.

Thanks, Jim, and good morning, everyone. I'm excited to be here today, and I'm honored to be stepping into the Chief Financial Officer role on July 1 of this year. I started my career in finance, so I'm looking forward to reengaging in our financial operations and expanding the collaboration between our finance and operational teams, the latter of which I've led for the last 7 years.

A top priority of mine over that period has been the implementation of our One Company approach and related operational and technological transformations. Slide 13 provides an overview of our business transformation themes, all of which form a stronger platform for efficient and effective operations as we become a much larger organization.

Mike Galtman, who has served as our Chief Accounting Officer for the last 7 years, has recently transitioned into a newly established Chief Transformation Officer role. His new responsibilities embed him deeply into our transformation efforts, including the [ One Core ] project and ongoing improvements across our finance, technology and operational areas. Melissa Barnes has recently joined the team as our new Chief Accounting Officer.

Melissa brings a wealth of experience in technical accounting, external reporting, large-scale finance transformations and internal controls. She is already adding tremendous value, and we are excited to have her on board. Now shifting to the results for the quarter. As shown on Slide 14, our financial results continue to demonstrate strong performance and growth across all metrics.

Adjusted gross margin was approximately $206 million, up 13% and adjusted net income was approximately $59 million, up 16% from the first quarter of 2025. Adjusted earnings per share were $2.47 this quarter, representing an 11% increase over the first quarter of 2025. Slide 15 provides additional detail on the key drivers of our first quarter performance. Continued demand for natural gas drove $0.27 of incremental adjusted EPS, including $0.21 related to transmission capital projects and a $0.06 of distribution growth across our service areas.

Margin from our infrastructure program investments contributed an additional $0.17 per share this quarter and permanent rates from our 3 rate cases added $0.13 in the first quarter 2026 adjusted EPS. Cold weather across our system, particularly in Delmarva region and in our Propane and Aspire businesses drove increased consumption that added $0.14 of earnings for the quarter.

We also benefited from improved Aspire system performance driven by rate changes and higher gathering fees. We also had gains from off-system natural gas sales within the quarter, driving a combined $0.07 of incremental earnings per share. These gains were partially offset by a few factors, including $0.20 of higher payroll and benefit expenses, $0.29 increased operational expenses, $0.04 of higher credit collections and customer service costs.

As I mentioned earlier, we were able to achieve a higher percentage increase in operating income and net income as compared to gross margin, demonstrating that we are effectively managing our cost structure despite the significant growth in margin. We also incurred $0.05 per share of increased depreciation and amortization expense, driven by increasing levels of capital investment as we actively deploy capital.

Lastly, financing activities included in our debt and equity issuances over the last 12 months as we return to our target capital structure, reduced adjusted EPS by $0.05. Shifting to Slide 16; adjusted gross margin for our regulated segment was approximately $148 million this quarter, up 15% from the first quarter of last year.

As mentioned earlier, our focus on cost management enabled similar growth in our regulated operating income, up 18% to approximately $71 million in the first quarter of 2026. Our Unregulated Energy segment also demonstrated strong margin growth relative to the first quarter of last year, with adjusted gross margin of 8% to approximately $59 million in the first quarter of 2026.

This incremental margin was primarily driven by higher propane consumption and strong performance in our Ohio Aspire operations. Much of this fell to the bottom line, enabling unregulated operating income growth of 8% to $28 million for the first quarter of this year. I'll now move to Slide 17 to review our capital structure and financing activities.

At March 31, our equity capitalization was 50% with 107,000 shares issued during the first 3 months of the year. We also continue to maintain strong liquidity and sufficient capacity to support growth with ability of 74% of our total debt capital of $793 million between our revolving credit facility and private placement shelf facilities as of March 31, 2026.

To support our robust capital investment program, we expect to issue $60 million of equity throughout full year 2026 using our ATM and waiver programs. We also look forward to refinancing the first tranche of debt issued during the Florida City Gas acquisition, which should generate overall interest expense savings.

With that, it's my distinct pleasure to turn the call over to Beth.

Thanks, Jeff, and good morning, everyone. As shown on Slide 18, yesterday, our Board of Directors approved a $0.20 or 7.3% increase in our annualized dividend payment from $2.74 per share to $2.94 per share. This reflects our 66th consecutive year of dividend payments and our 23rd consecutive year of dividend increases.

Alongside our equity and debt plans, our dividend policy continues to be a key component of our capital allocation strategy as we fund growth capital investment to drive earnings growth and overall total shareholder return. Previously, our Board approved a dividend payout target range of 45% to 50% enabling us to deliver a long-term dividend CAGR of 9%, which aligns with our long-term earnings growth rate over that same 10-year time period.

This payout ratio also enables us to retain 50% to 55% of earnings, which has been a meaningful part of our financing plan as we fund increasing levels of capital to drive sustainable business growth to meet increasing customer demand. Slide 19 demonstrates our track record of strong and consistent earnings growth over the last approximate 19 years, most of which made up my tenure as CFO.

We remain committed to a long-term earnings per share compounded annual growth rate of 8% through 2028 and are reaffirming our 2028 earnings per share guidance of $7.75 to $8 per share. As we mentioned on previous calls, we expect to revisit our capital guidance range by February 2027, given the progress we have made in the last 2 years, coupled with our expectations for capital investment in 2026.

Moving to Slide 20; there is no better way to close our call than to summarize what an amazing and wonderful place to work Chesapeake has been for me over the last 36 years. I am extremely grateful to have served as CFO for the last 18 years during such pivotal growth. Much of what has made my experience so special are the key drivers that often make Chesapeake a differentiated investment.

Delivering on our promises and taking our commitment seriously has never wavered. We have driven significant growth over the last several decades, and I have complete confidence in the team's ability to continue this track record for years to come. Our talented team focused on our growth strategy is capable of great things.

While these 3 pillars have been formalized in the last few years, they have always been core to our operations. We invest wisely, manage our regulatory agenda and continue to find new and better ways of working each and every year. Especially near and dear to me is our financial discipline.

I participated in more than 20 acquisitions and over $2.5 billion of equity and debt raises across the last 3 decades and can assure you that each transaction is carefully planned and executed. We recognize the value of long-term relationships with our financial partners and prioritize our financial health, diligent financial planning and analysis as well as strategic alignment in all we do.

And lastly, we are powered by our stakeholders, each and every one of you, our investors, our bankers, our partners, our teammates and our customers. We are nothing without our dedicated teammates, growing customers, close-knit communities and trusted partners. The bottom line is that the relationships we've built, both internally and externally are what matter the most.

I will forever treasure the valuable connections I've made and will carry them with me as I embark on my next adventures. Thank you for your personal support and encouragement of me over the years. I have been humbled by the outreach of so many wonderful colleagues and friends. I remain committed to Chesapeake's mission and sincerely appreciate your continued interest, support and investment in the company as well.

Thank you all. With that, we'll take your questions. Operator?

[Operator Instructions] Our first question today comes from Tate Sullivan with Maxim Group.

Congratulations, Beth, on all your achievements over the years at CPK and pleasure working with you. And moving to some of the comments from the call. Jeff, did you mention a new LNG storage exploration project in Florida in the Cape or is that -- have you mentioned that before? And is it for LNG delivery and not regasification of that natural gas?

Yes. We've been looking, Tate, at the opportunity, certainly subsequent to our acquisition of Florida City Gas and the inclusion of that service territory around Cape Canaveral and the Port of Canaveral. Lots of cruise ships coming and going. They're already fueling with liquefied natural gas, many of them.

Most of that gas is being barged in from Jacksonville. And there are certainly -- there's a limit to the capacity that the LNG facility in Jacksonville can provide and folks keep launching rockets from the Spaceport there, utilizing LNG and they'd like to expand that. And so we've had the possibility of working potentially with someone else to develop an LNG facility at the Cape that would provide service to both of those industries, and we continue to do that.

We have been looking at property up and down the intercoastal and even some inland sites, thought we had a -- probably the best location is a facility that's on the canal that runs down to the Port of Canaveral, pursued that for some period of time. The port has other designs on that property, which is certainly fine. That would have been the easiest, simplest, cheapest facility location, but there are many others that we're looking at, and we're pretty confident that we'll find something and develop that project.

Just one follow-up on that. Is Marlin currently delivering LNG in Florida or is that not the case?

No, certainly not any quantity. We have some capability to move LNG with Marlin tankers but we have -- serving either the port or the Spaceport. Those are coming, like I said, principally on the cruise ship side, down the intercoastal being barged in from Jacksonville and then truck deliveries from a variety of places into the Spaceport.

And one more, if I may. The customer growth rate, still an impressive growth rate, but the annual growth compared to the fourth quarter was down a little bit. Is that -- I mean, should I read into that in terms of where the range may fall in the EPS guide -- EPS for 2028 or was that just a quarter of weakness?

No. I think that's probably as much weather as it is anything else, especially in Delmarva. And we see those kinds of fluctuations seasonally in Florida. So we have a lot of homebuilding activity on the books and certainly a lot of builder and developer agreements that we've executed for many thousands of residences, both on the Peninsula of Florida and the Peninsula of Delmarva. So we're not signaling anything other than just the usual sort of seasonal fluctuations in building activity.

Congratulations Beth.

I appreciate it. It's been great working with you.

Our next question comes from J.C. Vidales with Ladenburg.

Beth, congratulations. It's been great to work with you.

Thank you, JC. It's been great with you as well.

So just a couple of questions. So I think this is the first time we kind of see some equity guidance for the year. In terms of the total CapEx plan that you all have, are you all able to give us some color in terms of your equity assumptions for that plan?

So I mean, in terms of the total capital budget of $450 million to $500 million for the year, you'll recall that we have a substantial portion of our earnings that are getting reinvested because of our dividend payout policy.

And so above and beyond that right now, just given the level of CapEx range that's out there, we've indicated that we expect to issue about $60 million plus. It could be a little bit more than that. But generally, that's a good area right now to assume. And it's a small amount that we'll be able to manage through our ATM and our traditional waiver program.

Okay. And then just a follow-up. In terms of a go forward for -- I think you gave guidance to '28 in CapEx. Is that a good assumption to use in terms of sizing of equity needs for the following years?

Well, as we've indicated, we're going to be readdressing the entire guidance range in February of 2027, given our progress and where we come -- where we've actually been from an actual standpoint through 2025 and our guidance right now for 2026.

If you were to look at what the run rate is in the base CapEx guidance range that is out there, it would be slightly less than this amount because the CapEx -- the average CapEx that's assumed on an annual basis is lower than the $450 million to $500 million.

Okay, great. And then just one last question for me. Should we expect or do you all expect to potentially issue '26 EPS guidance following the decision on your interim rates here in Florida?

I know maybe the depreciation ruling kind of potentially made you all not issue guidance for this year, but should we expect to change once you get an order on interim rates?

What we have typically done, we've given annual guidance only really one time in our history to-date. We've been a long-term guidance company putting out long-term CAGRs because as you have seen, as you've looked at our past, we have some fairly large transmission projects that don't necessarily make our earnings per share CAGRs a straight line as you look at it from year-to-year, but over the long-term, have generated that 8% plus from an EPS growth standpoint.

What you will see us put out this year would be additional margin information if there were to be a final rate case settlement this year. And we've already provided some indication about our expectations with information that we know, but it's certainly subject to being fine-tuned on the interim rate side. So we build a lot of our earnings estimates in through the margin table, just given, again, those large projects, those large initiatives that we have underway.

That's it from me. Beth, once again, congrats and looking forward catching up at AGA.

Our next question comes from Alex Kania with BTIG.

Again, congrats, Beth, and good luck to Jeff and Jeff in the aftermath of that departing. So just maybe 2 questions just on some projects. First might just be on thinking about the example of the kind of the small projects in Ohio with respect to kind of the large load data center. Do you kind of see any other opportunities like that evolving across the system?

I mean we hope to see that. Certainly, we're actively pursuing those opportunities in the areas that we currently serve. Ohio is certainly a place of interest to us. We have, as you know, facilities there and the [ AEE ] agreement that we've announced here recently.

And it's an area that seems to be of great interest from a data center perspective. And so as you might imagine, we are actively interested in doing what we do to extend gas service to those data centers. So I have nothing to report today, but we have great interest in that service area.

And there are other things going on in other places. I mean it's interesting to see some of the potential activity in Florida, and we've certainly had some interest in data center locations on the Delmarva Peninsula. So we'll see where all that goes. We're as interested in that as everybody else in the country is at this point. So we're, I think, positioned well in the service areas that we're currently in.

Okay, great. That's helpful. And then just on the South Florida capacity expansion, are there any -- I'm thinking maybe kind of further downstream in terms of what events or catalysts you might be willing to keep in mind to see -- to assess kind of the potential progress of that project? And maybe just to confirm to the extent that there -- do you see an opportunity, would that be kind of be treated as an intrastate project rather than having to go through a FERC process?

Yes, I'll take that in reverse order. I do think that that for us would be of interest as an intrastate pipeline. We have invested significantly in intrastate pipes in Florida. One of the things that was interesting to us about Florida City Gas and that acquisition was the full knowledge that there were capacity constraints in South Florida.

And certainly, Florida City Gas is not the only entity that serves in South Florida that's experiencing that. So I think the growth in population, the growth in customers and the growth in demand requires that at some point, we find a way to increase capacity capabilities in the South Florida area.

Again, we're in a very nice position, I think, to be able to do that. We serve facilities in the West Palm Beach area, close to interstate transmission interconnections, and we believe that there are possibilities to again expand the capacity all the way down to South Florida. So I look forward to someday, hopefully, being able to talk about a project that gets more gas down to that growing load center.

At this time, there are no further questions in queue. I will now turn the meeting back to Jeff Householder.

Thank you. We appreciate your continued interest in Chesapeake Utilities. So thank you for joining the call today. We look forward to seeing many of you here in a week or 2 in Scottsdale at the AGA Financial Forum.

I'll end just by continuing to congratulate Beth on her very long years of service with Chesapeake Utilities. It's been a remarkable run. She's been a great colleague and a great friend. And I'll leave you with one last statistic. She served as CFO in our company for 18 years. In every one of those years, we had record earnings. I'll see you all in Arizona. Goodbye.

Thank you. This concludes Chesapeake Utilities Corporation's first quarter 2026 earnings conference call. Please disconnect your line at this time, and have a wonderful day.

Welcome to Chesapeake Utilities Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open the call up for questions.

On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on 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 our 2025 annual report on Form 10-K provides further information on the factors that could cause such statements to differ from our actual results.

Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share. And the information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G.

A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our 2025 annual report on Form 10-K.

Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here with a moment on Women's Heart Health as highlighted on Slide 3. As February is American Heart Month, it's a good time to take care of ourselves and our loved ones by making small changes that can have a big impact on our heart health.

Cardiovascular disease is the #1 killer for women in particular. So it's important to understand the unique risk factors women face across various stages of life, including pregnancy and menopause. We are proud to be a long-standing supporter of the American Heart Association, which has in-depth resources for managing heart health risks and implementing changes that support long-term cardiovascular health.

It's now my pleasure to introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will summarize the highlights and accomplishments of 2025 and introduce our theme for 2026. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will provide updates on our regulatory strategy, business transformation efforts and stakeholder engagement. And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our full year financial results, financing updates and investment highlights.

I'll now turn the call over to Jeff.

Thank you, Lucia. Good morning. It's great to speak with you today. As shown on Slide 5, 2025 was a year of outstanding performance and growth. I'm proud of everything our team has done in the last year to deliver with purpose. We have once again reached significant new heights across our entire enterprise.

2025 was our 19th consecutive year of earnings growth. We generated adjusted earnings of $6.01 per share, reflecting industry-leading growth of 12% relative to full year 2024. Above-average residential growth of 3% across our service areas continues to serve as the primary driver for our capital program. We invested $470 million through 2025, a 32% increase over our 2024 capital spend and $20 million above our 2025 guidance range, a record of non-acquisition capital.

2025 was also a record year for incremental adjusted gross margin growth up $71 million. Included in that was transmission project margin of $19 million and incremental infrastructure margin of $14 million. Our proactive regulatory approach also contributed to our full year results with completed rate cases in our Maryland, Delaware and Florida electric jurisdictions, driving an additional $13 million of gross margin in 2025.

And lastly, we are pleased to end the year back at our target equity capitalization of 50%, exactly in line with the goal we laid out at the start of 2025 and ahead of the schedule we established at the time of the FCG acquisition.

Slide 6 provides additional detail on our record levels of earnings growth. For the fourth quarter and full year 2025, we generated double-digit growth in adjusted gross margin, adjusted net income and adjusted earnings per share. These results demonstrate our commitment to providing high-quality, safe and reliable service for all customers and driving value for all stakeholders.

I'll now shift to Slide 7, which highlights our above-average customer growth. We operate in some of the fastest-growing regions of the country. In 2025, we added nearly 11,000 residential, commercial and industrial customers across our natural gas and electric distribution service areas. In Delmarva, residential customer growth was 4.1%. Florida Public Utilities was up 3.6%, and Florida City Gas recorded a 2.2% increase. Residential community expansion drives corresponding commercial infrastructure growth. Our customer additions led to an incremental $7.4 million of adjusted gross margin in 2025.

We also see additional growth opportunities in Ohio, which has quickly become a top spot for data center build-outs. In addition to starting construction this year on the Duncan Plains pipeline to support AEP's data center fuel cell, we've been providing temporary virtual pipeline service through Marlin for a data center construction project north of Columbus, Ohio. We continue to explore a number of gas transportation projects and look forward to further expansion in the Ohio market.

Before I discuss our strategy and goals for the next year, I'd like to reflect on the significant progress we've made in just the first 2 years following our acquisition of Florida City Gas in late 2023, as detailed on Slide 8. FCG has proved to be a strong strategic and cultural fit and immediately provided a wide range of investment, expansion and improvement opportunities. We quickly got to work and have already invested approximately $250 million of CapEx, which is 50% of our 5-year FCG-related investment goal. These projects are expanding and reinforcing FCG's ability to provide reliable and affordable energy to meet customer demand.

We've also fully integrated the FCG team into the Chesapeake family and aligned a number of functions and processes with our legacy operations under our One Company approach. FCG is now active on our 1CX SAP customer billing platform, and we've consolidated all regulated customer service operations into one coordinated team. These integration and investment accomplishments are important for several reasons. One, we've done what we said we would do. We've also strengthened our track record of above-average growth, and we're demonstrating our ability to finance, integrate and capitalize on transformational opportunities that support consistent long-term growth.

I'd now like to talk about our outlook, strategy and goals for 2026 and beyond. Core to that discussion and to our record-breaking performance and growth over the last year are the 3 pillars of our growth strategy shown on Slide 9. We remain committed to prudently deploying capital, proactively managing our regulatory agenda and continually transforming our business operations as we believe consistent and successful execution will continue to drive top quartile growth and total shareholder return.

I'll now move to Slide 10 to introduce our theme for this year, Transforming for Growth, Powered by People, which particularly resonates with where we are today. We're building on a well-established blueprint for top quartile performance. We're transforming the business to prepare for a new level of scale and growth, and we're powered by strong relationships across all stakeholders, teammates, customers, regulators, investors and our communities.

In this year of transformation, there are a few specific deliverables that we're focused on for 2026. We're focused on investing $450 million to $500 million of CapEx, including successful completion of a number of projects and initiating construction on a new set of opportunities that are presently under development. We're focused on reaching a successful outcome on our general rate case for Florida City Gas, which Jim will discuss shortly in more detail. As part of a whole host of business transformation initiatives across our organization, we're undertaking the largest technology system implementation in our history with our multiyear enterprise resource plan or ERP.

I know I've said it before when we were embarking on the 1CX project, but this ERP implementation, which we're calling 1CORE is going to be bigger and even more transformational than anything we've done thus far, and Jim will discuss more on that shortly. And finally, we're focused on maintaining a strong balance sheet and investment-grade credit ratings as we fund our significant capital investment program and continue to drive strong earnings and dividend growth in support of top quartile shareholder return.

I'll now turn to Slide 11, which provides a detailed look into our 2026 capital plan. Following a record-breaking $470 million of capital invested in 2025, we're initiating full year 2026 capital expenditure guidance of $450 million to $500 million. This plan assumes levels of transmission, distribution and infrastructure investment similar to last year alongside an increase in technology CapEx for the ERP. I will note that approximately 20% to 30% of this capital will drive margin growth in 2027 or later, given regulatory recovery time lines and expected project completion dates.

Slide 12 provides an update on our major capital projects. Nearly all are generating margin through interim or full service, driving $22.8 million of adjusted gross margin in full year 2025. We forecast these projects to contribute approximately $47 million of gross margin in 2026 and an additional $9 million in 2027.

Turning to Slide 13. I'd like to highlight 2 projects for Eastern Shore natural gas that could further support the significant demand growth in our northern service areas.

The first is the Delmarva Regional Enhancement project, which I am pleased to be announcing today. This investment includes over 20 miles of 16- and 24-inch pipeline and looping to add firm capacity and improve reliability, driven by increased shipper demand identified during our latest open season. We currently estimate capital investment of approximately $75 million and an in-service date around the end of 2028.

Second project was announced a few weeks ago when we were awarded a $6.5 million grant by the Accomack County Board of Supervisors to begin to assess feasibility, design and engineering of new infrastructure that would bring natural gas to Virginia's Eastern Shore. We're working with local stakeholders and potential customers to ascertain the size, route and cost for this potential system, which could extend natural gas from Princess Anne, Maryland to Temperanceville, Virginia, serving homes and major employees, including the NASA Wallops Flight facility, Wallops Island operations and other regional commercial and industrial customers. While still in very early stages, we are excited about the opportunity to extend our system into Virginia to deliver safe, reliable natural gas to the Accomack County community.

I'll now shift to Slide 14 to discuss our 5-year capital investment guidance of $1.5 billion to $1.8 billion through 2028. Given our 2024 and 2025 capital spend, combined with our identified and ongoing capital investments, we've invested and identified a total of $1.6 billion toward our 5-year range. As we've discussed, we intend to provide a more significant update to this range a year from now in order to incorporate outcomes of our strategic planning session this summer and make additional headway on multiple potential investment projects under evaluation and development.

With that, I'll turn to Jim to discuss our second and third pillars, regulatory strategy and business transformation initiatives.

Thank you, Jeff. It is great to be with you all again today. I'll start with Slide 15, which includes updates on our regulatory agenda. As Jeff mentioned at the start of the call, successful rate cases in our Delaware, Maryland and Florida electric jurisdictions drove over $12 million of incremental gross margin in 2025 and are expected to generate over $18 million in 2026, the first full year of revised rates.

Our Florida City Gas depreciation study also concluded last week. The Florida Public Service Commission denied our request for a 2-year amortization of the $19 million excess depreciation reserve and adopted its staff recommendation of only $6.8 million of excess depreciation recovered over the life of the assets. This results in annual depreciation savings of approximately $500,000.

Given the timing of the order, we opted to not reopen the books for 2025 and instead will apply 2 years' worth of reduced depreciation expense or close to $1 million in 2026. And as you'll recall, achieving our 2025 earnings guidance included appropriate cost recovery and return on equity at FCG, which did not happen. We had hoped to avoid filing a general rate case and utilize depreciation expense savings from the excess reserve to delay a customer rate adjustment for as long as possible.

Given the outcome of the depreciation study, however, we immediately submitted notice of intent, indicating our plan to file a general rate case for FCG in mid-April of 2026. This rate request will ensure appropriate cost recovery and an improved allowed ROE. We expect interim rates to be effective by early July 2026 and look forward to FCG returning to its earnings contribution levels in 2027 and beyond.

I'd now like to turn to the 2 core elements of our theme for 2026, which Jeff introduced earlier. Starting with transformation for growth. Slide 16 provides an update on our business transformation efforts, which is a particular focus this year as we implement significant transformations within technology, systems and processes to drive continued operational excellence as a much larger organization. We've identified 5 key transformation themes: customer experience, operational excellence, digital agility, employee experience and financial modernization, each of which will be addressed through one or more projects in 2026.

In January of this year, we held an official kickoff event for our ERP project, which we're calling 1CORE. We brought together 130 teammates and external partners to align around our objectives and goals as we implement SAP solutions for our finance, supply chain, asset management and human resource functions. We expect to invest approximately $75 million in 2026 and are targeting a system go-live date in Q2 of 2027.

We are also implementing employee training and wellness programs, new software tools and organizational structure updates across the company to strengthen our people, simplify processes and leverage new technologies. These initiatives will deliver better service for our customers and facilitate continued long-term growth of the organization.

The second element of our 2026 theme is powered by people, which recognizes the important role all our stakeholder groups play to drive our long-term success. Slide 17 provides highlights on the work underway to actively engage with our key stakeholder groups, teammates, customers, regulators, legislators, partners, investors and our communities overall. We're focused on attracting and retaining change-focused teammates and have rolled out multiple programs on training, development, organizational change management and wellness.

We are committed to placing our more than 440,000 customers at the center of everything we do as we continue to prioritize safe, reliable and affordable service. We're grateful to maintain strong constructive relationships with regulators, legislators, business partners and investors. Whether seeking project approval or capital financing, we rely on these trusted partners to enable sustainable positive growth for all stakeholders.

And finally, we are thankful for the communities in which we work and live. We support local organizations. We communicate with our neighbors. We improve our environments, all of which is core to our mission and reflected in the work we do each and every day.

With that, I'll turn the call over to Beth for a more detailed discussion of our financial results.

Thanks, Jim, and good morning, everyone. Slide 18 shows our record-breaking financial results for full year 2025. We generated approximately $639 million of adjusted gross margin, $141 million of adjusted net income and $6.01 of adjusted earnings per share in 2025, all representing double-digit increases over full year 2024.

Adjusted net income was up 16%, which translated into a 12% increase in adjusted EPS after we purposely advanced our equity to total capitalization ratio back to 50% to support our CapEx program at a faster pace than our forecasted financial models post FCG. This reflects Chesapeake's highest level of annual earnings and our 19th year of consecutive earnings growth, as I will discuss in more detail shortly.

Our results were driven by consistent growth across our entire business as detailed on Slide 19. For full year 2025, our key margin drivers added $2.41 per share, only partially offset by increased expenses and financing costs of $1.79 per share. Record levels of capital investment drove $0.58 of incremental adjusted EPS from transmission expansion projects and $0.43 from infrastructure projects to improve reliability and resiliency across our regulated businesses.

Growth in our service areas and increasing demand for natural gas drove $0.51 of incremental adjusted EPS, including $0.28 of higher customer consumption and $0.23 of distribution system customer growth. Permanent rates from the 3 rate cases we completed in 2025 added $0.39 of adjusted EPS and our unregulated businesses generated $0.29 of net incremental earnings per share, largely driven by substantial growth in our Marlin Virtual Pipeline transportation business and supported by strong performance in our Propane and Aspire Energy operations.

As I just mentioned, these positive margin gains were partially offset by a few factors, most notably $0.51 from the absence of the RSAM benefit we recorded in 2024 and we were unable to repeat given the outcome of the Florida City Gas depreciation study. We also incurred $0.31 per share of increased depreciation and amortization expense related to our significant levels of capital investment and $0.41 per share of additional operating expenses directly attributable to our sustained growth.

However, we continue to drive operational efficiencies, leading to operational expenses at only approximately 45% of adjusted gross margin for full year 2025. Lastly, financing activity, including our debt and equity issuances over the last 12 months to fund our capital expenditures and return to our target capital structure, reduced adjusted EPS by $0.35 per share, particularly as we accelerated our equity capitalization back to 50%.

Shifting to Slide 20. Adjusted gross margin for our Regulated segment was $494 million in 2025, a 12% increase over full year 2024. This growth continues to be driven by strength in our core business operations with high levels of capital investment to support rapidly growing service areas and improved regulatory recovery following our 3 rate cases. Our focus on cost management enabled similar growth in our regulated operating income, up 13% to approximately $222 million for full year 2025 despite again, the absence of the $15.5 million RSAM benefit recorded in 2024.

Moving to Slide 21. We continue to see outstanding performance from our unregulated segment with full year 2025 adjusted gross margin of $145 million, up 13% relative to the prior year. Our Marlin Gas Services business continues to meet the rapid growth in demand for virtual pipeline transportation, driving $11 million of additional gross margin with our Propane and Aspire Energy businesses contributing an additional $5.7 million of gross margin in 2025.

I'll now move to Slide 22 to highlight our financing and capital accomplishments this past year. I'm proud to report that we ended 2025 at an equity capitalization of 50%, meeting the goal we set at the start of the year, 3 years ahead of the target we actually established for ourselves following the acquisition of Florida City Gas. We issued $123 million of equity or 961,000 shares, ending the year with nearly 24 million shares outstanding. Our equity capitalization was also boosted by $76 million of retained earnings.

We also made meaningful moves to further strengthen our balance sheet and access to capital. At the start of the year, we secured our inaugural credit rating with Fitch earning investment-grade issuer and instrument ratings. Then in June, we amended and extended one of our long-term shelf agreements, followed by a $200 million debt issuance in August and September. And just last week, we extended and amended our second private placement shelf facility, providing us additional debt capacity.

We ended the year maintaining strong liquidity with 78% of our total capacity of $755 million available between our revolving credit facility and our private placement shelf facilities. As we look to 2026, we are excited to refinance the first tranche of debt that we issued in conjunction with the Florida City Gas acquisition and plan to finance our robust capital program with a mix of earnings retained in the business, equity and debt, generally maintaining our 50/50 capital structure overall.

Slide 23 demonstrates how our dividend policy remains a key component of our capital allocation strategy. We also remain committed to consistent dividend growth. Our annualized dividend per share of $2.74 reflects a 7% annual increase from 2024 and is reflected in the long-term dividend CAGR of 9%. Our policy also facilitates significant earnings reinvestment as our Board-approved dividend payout target range of 45% to 50% allowed us to retain 54% of earnings in 2025 to support our capital investment plan, a higher percentage than most of our peers.

We will continue to support long-term dividend growth while reinvesting significant earnings back into the company, enabling our investors to benefit from both long-term top quartile earnings and strong dividend growth.

As shown on Slide 24, our 2025 adjusted EPS result was remarkable for a number of reasons.

First, we generated 12% growth relative to 2024, which is significantly above the industry average. It is particularly meaningful that we achieved this growth rate despite receiving no recovery and amortization of the excess depreciation reserve and also while successfully driving our equity capitalization back to 50%.

Second, 2025 marks our 19th year of consecutive earnings growth. Since 2007, we've grown year-over-year earnings, demonstrating our unwavering track record of higher earnings performance and commitment to increasing shareholder value.

Third, our 2025 EPS represents a 9.1% CAGR over this 19-year time period, which highlights our ability to drive consistent above-average returns now and into the future. And speaking of the future, we are reaffirming our 2028 adjusted EPS range of $7.75 to $8 per share as we remain on track to meet our long-term adjusted EPS growth target of 8%.

Before we open the call for Q&A, I'd like to highlight some of the reasons that Chesapeake Utilities remains a uniquely valuable investment for years to come, as shown on Slide 25. As I just discussed, we take financial discipline and execution very seriously and are highly focused on building on our track record of performance and growth with many financial records being set in 2025.

We will continue to execute on our 3 pillars of growth, enabled by continued growing demand for natural gas throughout our service areas and the need for continued reliability, capacity and expansion. Our disciplined approach to financing, including ensuring balance sheet strength and upholding investment-grade credit metrics keep us well positioned to address market volatility and achieve successful regulatory outcomes as we fund our growth plan. All of these elements set the stage for growth in 2026 and beyond.

As we transform the company for growth, we are continually reminded that we are powered by people and that strengthening relationships and creating value for all stakeholders will continue to differentiate us now and into the future. We sincerely appreciate your continued interest, support and investment in our company, and thank you for joining us today.

With that, we'll take your questions. Operator?

[Operator Instructions] Our first question is coming from Nicholas Campanella with Barclays.

This is Michael Brown on for Nicholas Campanella. My first question is, you reaffirmed your full year '28 EPS target. Can you walk us through the growth rate for full year '25 through full year '27 to reach a full year '28?

Michael, I'm sorry. This is Beth. Can you restate your question? Would you mind?

You reaffirmed your full year '28 EPS target. Can you walk us through the growth rate from full year '25 through full year '27 to get to full year '28?

We have -- at the present time, as we -- as I talked about on the call, we have reaffirmed our 2028 EPS guidance. And Michael, you may recall this, but I will just remind you, as a company, we've historically provided long-term EPS guidance given some of the capital expenditures that we incur and how the timing of getting some of those capital expenditures underway and completed.

And so what we've done is actually put out there our long-term EPS CAGR of 8% and again, reaffirmed our 2028 EPS guidance. Also in conjunction with that, we have put out our annual capital guidance this year and some of the projects that are underway that will hopefully, both with that information and also the information that we include in our major projects table, enable you to provide a forecast as we move through that period to 2028.

We'll take our next question from Chris Ellinghaus with Siebert.

Can you talk about the first quarter thus far? It seems like we've had some pretty cold snaps. And I'm just kind of curious what you're thinking about tailwind from weather in the first quarter.

Sure. Great question. Certainly, weather has been top of mind for us like many across the country with the weather that we've experienced. As you may recall, in our northern service territories on the Maryland side, we have weather normalization, right? So that's going to somewhat stabilize the impact of the weather for our Maryland operations.

In Delaware, there will certainly be an impact, and we've begun to quantify the first part of that for January, but the numbers certainly are preliminary, and we're not in a position to really talk about that just yet. Similarly, on the propane side, there will be some benefit that comes from the weather in Florida. You also may recall with cooler -- the colder weather there -- also in weather, we have a greater portion of our bill that is more of a fixed than a variable component. So again, more weather normalized when you get to Florida.

So yes, coming out of the gate, there will be some impact in January and as we're seeing into February. What we're also, Chris, being very mindful of is the impact on our customers and wanting to work with them, certainly from a payment standpoint, working with them to hopefully put those that may need it in touch with some of the social service agencies.

And then finally, from an operations standpoint, I can't say enough about from our standpoint, how our team operated during this challenging time, how our facilities were maintained, a no disruption of service across our systems. And again, we look forward to providing more information when we jump on our first quarter call.

Okay. I'm not quite sure if you have insights into this, but I'm guessing over your wide-ranging Florida service areas that the temperatures were fairly unusually cool. Is that fair?

In certain parts of our areas in Florida, absolutely. I can tell you, I've just been down in Florida. And when I landed, it wasn't the normal temperatures. I'm traditionally accustomed to. So yes, there would be.

But again, with our rate design over the last several years, we have limited that a little bit more than as we've moved over the last couple of years. But certainly, there will be some, and there will also be some, to your point, that may come from certainly the propane side as well down there.

Okay. The growth in the FCG customers for the year, you do have this wide-ranging FCG service area. Does that suggest versus maybe the more Miami proper area that there are some portions of the service area that are growing in the 3% to 4% range?

There are portions of Florida that certainly have higher growth than others. I think it's -- and I would say it's probably closer to the 3-ish-percent in some of those areas. What I would also say, though, is despite what individuals may think about growth, let's say, in more of a metropolitan area like Miami, what you are seeing, we saw this last year on one of the trips down there when we took a ride in the service area and with our team looked at some of what's going on, there is a lot of redevelopment that's going on there.

So opportunities to particularly have increased margin that comes from commercial infrastructure that's being constructed when particular buildings are being torn down and multi-unit dwellings are being constructed, again, there may be more opportunities as well. So yes, higher in certain markets, but there are opportunities from a commercial side and a residential side, even in some of those lower growing markets.

The other thing, Chris, that I would point out, and I think your point to some degree, I would just highlight, we try to make it very clear in our earnings release. In Florida, in particular, the amount of commercial infrastructure that is supporting the residential growth that is going on down there is pretty phenomenal. It's also happening on the Peninsula, but to a much lesser degree, more driven there by residential. So we're continuing to see the levels of growth that we had thought we would experience over the last several years since Florida City Gas. So that's been exciting that it's been on track.

Chris, I'll just add -- this is Jeff. I'll just add a little detail to that specific to your question. If you look at the city gas service territories, where we're seeing significant residential growth followed by, as Beth indicated, a substantial amount of commercial service growth is in the Port St. Lucie area around Vero Beach and then up in the Brevard County area, especially to the West of the county out in the Viera communities. And so those are significantly higher growth areas than what we're experiencing currently in the Miami portion of that service territory.

That's kind of what I was thinking. Can you talk about the ERP and what you see as the benefits where you might see cost savings or sort of synergistic value creation? Can you quantify any of that?

Sure. I can talk a -- go ahead, Jeff. Go ahead, please.

No, no, go ahead, please.

I was just going to start off, one of the ways that we've been talking about it internally, Chris, and we've been working on establishing some metrics would be as we think about and talk about from time to time, our O&M expenses as a percentage of gross margin. So as this project starts to be underway on the back end, certainly of this project and many other technology improvements that we're making, you'll see us referring to that, in particular, as we talk about that benchmark O&M as a percentage of gross margin. And you may recall, Chris, we've been talking about that pretty much since Jeff became our CEO coming out of the gate and talking about that each year. And if you look at our history, we've been on a declining path as we've continued to grow.

So I would say that out of the gate -- Jeff, maybe I'll turn it to you, and you can touch on just some of the things that we're thinking about from the technology standpoint.

Sure. I think this is a drive to accumulate data in a more proactive way that allows us to actually utilize that data and making better decisions about the company. I mean that's fundamentally what this is. To specifically talk about a handful of areas that we believe we'll see efficiencies and ultimately some cost savings.

I think there are opportunities on the customer service side, certainly, with respect to electronic billing, moving customers into a portal relationship with the company, reducing the number of calls to our call centers, automatic meter reading. All of those things, I think, are on the horizon for us that will provide significant efficiencies. There are a variety of supply chain issues here that we believe that kind of march down this One Company approach that we've been looking at to standardize things across all of our operating areas over the last few years.

We've just sort of scratched the surface, I think, on the way we buy materials and supplies and services in the company. And so I think there are significant opportunities there. A number of field services operations activities, especially in the way we schedule work and control kind of the flow of orders back and forth from a computer system out into the field and back without having to physically touch those. There are a variety of accounting and finance improvements that I think we'll see just how we process accounts payable. I mean and on and on and on. I mean, it's the sort of classic ERP opportunity here.

And so, linking that into our recently installed what we call 1CX, the SAP Customer Service Billing and Field Services Management Systems that we have in place across the company now, I think will continue to drive some of the cost savings that Beth was trying to support and to quantify.

We haven't gotten to a number. I mean, I walk around with one in my head, but I'm certainly not ready to begin to publicly describe that. But I think it is significant. And I think we will see that we will realize those cost savings, and they will flow through ultimately to keep customers' bills down to allow us to redeploy some of those dollars in support of some of the capital operations that we're pursuing and to make the company more efficient and less costly.

Okay. Maybe one last question for Jim. Jim, how surprised were you by the Florida decision? And was that somewhat of a tacit invitation to file a rate case?

Well, thank you, Chris. I mean that's a very good question. Our purpose all along was to kind of simplify what was the RSAM to a more traditional approach to depreciation. I think in some ways, we got caught up in the continuing tendency of the Supreme Court review and action. And while that was still pending, I think the OPC took a certain stand against what we were trying to do. And then that just fed into taking a lot longer than we or really anyone anticipated to land with a decision.

We were -- our approach was to avoid as long as possible a general rate increase filing. But with this decision now, we made the decision to go forward, and that's what we're doing. So I guess we were surprised in some way that a relatively simple straightforward application of traditional approaches got caught up in this vortex for the past year. But we're accepting it, and we're moving on, and we'll be filing here very shortly.

So there seem to be some sympathy at the Supreme Court when they did the oral argument. What happens from now if some constructive order comes out of the Supreme Court?

Well, I think ultimately, that's helpful for us. It really will address an issue that we're no longer going to deal with, and that is the validity of the RSAM. But I think in supporting that approach, I think it helps all of us in Florida that are filing rate cases.

Did I lose you, Chris?

We'll take our next question from Mike Brown with Barclays.

Are you planning on giving guidance this year for full year '26?

We -- again, what we are doing is basically reaffirming our 2028 guidance at this time. We don't -- historically, other than the year post Florida City Gas, we gave guidance on an annual basis in 2024 coming out of the acquisition because we knew that year with the transaction just occurring at the end of the year, we knew we could be accretive, but it was much less than what our historical run rate had been. So we provided annual guidance.

But we have a long term -- our long-term track record going back to 2018 when we initiated guidance is we follow a long-term view of the CAGR that we can achieve over a period of time. And so the short answer after I gave you the long-winded answer, Mike, is that we will not be, at this time, giving annual guidance for 2026.

Can you provide an update on the Florida pipeline project that starts in the Indiantown gas hub and kind of where that stands at this point and when it will make it into the plan?

So we are -- Jeff, do you want to start this one off?

No. No, no. Go, Beth. Go sorry.

No. I'm going to defer to you, Jeff, and let you kick this one off.

Okay. All right. Fairly simple explanation. We are continuing the engineering design on that project and are working through -- in fact, I'm looking across the hall at the group of engineering folks that are working on that project as we speak. I think we're in pretty good shape to get an engineering design cost estimate here over the next 30 to 60 days on at least the first significant segments of that to get down toward our distribution system in Miami.

I believe that we will be on time with our estimated project start date, which I will probably hold back a little bit on describing when that is, but certainly sometime this year. It looks like we will be able to find the pipe and get the right of ways that we need to identify completed. So I'm pretty comfortable that we're on the right track with that project at this point.

We'll take our next question from Paul Fremont with Ladenburg.

And hopefully, you have less snow down there than we have up here, Beth. I guess, for my first question, I'd like to maybe draw your attention to Page 43 PDF of your 10-K. I think you're basically saying that the adjusted gross margin from Full Circle Dairy and Noble was $10.9 million in 2025, and you're projecting '26 to be $28.5 million and '27 to be $29.7 million, I guess. Can you walk us through the delta between '25 and '26?

So Paul, the line that you're looking at is actually a compilation of Marlin, Full Circle Dairy and our Noble RNG project that is in Ohio. It is not just Full Circle Dairy. And so some of the growth -- a big part of the growth that year-over-year, we've been experiencing, particularly if you look in the major project table, is actually coming more from Marlin because as you can imagine, with the facilities being in place for both Full Circle Dairy and our Ohio operations, there's not a steady -- they've both been in operation now for a year.

And so the opportunities for Full Circle Dairy for us, and certainly, we're going to have a follow-up with you and our other analysts would be around the production tax credit side. I know you've been talking to me about that. I think we've talked previously on the phone before around the investment tax credit that, that's really something for us that gets amortized over the life of the project. It is not a won and done. So the big part of the growth that you're seeing in any margin there is really going to be related to what Marlin is doing and less about those 2 facilities that are operating as planned.

And if I look at that uplift, I mean, wouldn't that essentially offset the absence of RSAM for 2026, based on the?

Well, that would be great. Well, that would be great if we stopped there at the margin line. But as you know, there's operating expenses that are associated with that growth. And so with Marlin and it continuing to serve increasing amounts of -- an increasing projects, there's certainly costs associated with the labor side and other incremental expenses that are variable. And so you can't just unfortunately look at that line.

I like to look at that line too, but then I have to remind myself that there's variable costs. So a significant chunk of that would be offset in payroll-related costs. If we have to buy additional equipment to support that demand that's associated with depreciation and certainly property taxes associated with that, that all gets factored into it. So we can certainly walk through some of that as we get together, but that would need to be factored into your calculations.

And then can you just quantify specifically the amount of PTC benefit that you're expecting to book in '26?

We have some preliminary estimates on that. We are continuing to refine those, and I would certainly love for us to set up some time and walk through that. We're not quite there. We're still noodling with that a little bit, but we can certainly walk through where we are in our assumptions behind that.

Great. And then can you also maybe -- I guess this would be more, Jim. Can you walk us through what -- how interim rates are set in Florida and what we should expect in terms of when interim rates come into play in July?

Do you want me to start that, Jim? Or do you -- Jeff? I don't know, Jim, do you?

Well, I can take a pass at that. Yes, Jim is having some trouble.

Yes, please go ahead. Yes.

Okay. The interim rate filing in Florida typically comes about 60 days after the actual filing date. So we're looking for those, as you well know, sometime in probably July, early-July. The traditional methodology for determining interim rates is to look at kind of existing rate base, could be some adjustments in there, look at the bottom end of the ROE range and to do a relatively straightforward calculation of any deficiency that exists there and to apply it to calculating the interim rates. So we're assuming that we would see interim rates in effect for the last half of this year or until certainly the permanent rates actually go into effect. And so we'll see what the timing looks like on that.

I don't think at this point, we're quite ready to describe what we believe that interim rate calculation will result in. There are some things that we are and will, I'm sure, debate with the Public Service Commission as we file for interim rate. One of those, as you may recall, is that the current return on equity for City Gas is about 100 basis points lower than what we would traditionally see at other gas utilities in Florida. That was set because of the RSAM.

And so the rate-making deal that was established by NextEra before we acquired the company reduced ROEs from the more traditional levels down about 100 basis points. And so we'll argue that, that's no longer applicable. And there are a couple of other things that will roll around in there. What I will tell you, though, Paul, is that you were -- I think the path you were down a second ago is one that I continue to go down between the weather impacts between the other associated opportunities that we have within the company and the interim rates, I believe that we will not see significant impacts resulting from missing out on the depreciation study result that we had anticipated for this year.

And in fact, as you may know, what would be traditionally done by the Florida Public Service Commission is if that depreciation study result had occurred the way we filed it in '26, that would have been a reduction most likely to the interim rates. And so I think there is a -- it's disappointing that we didn't get that depreciation result. But in the great scheme of things, I think we'll be able to overcome that with the several things that are going right for us this year.

Great. And then last question for me. It looks as if there are 3 sort of additional RNG projects that maybe came online in '25. Are those -- can you describe -- are those dairy or otherwise in terms of their nature?

Those are basically -- go ahead, Beth. Sorry.

No, go ahead, Jeff.

Those are essentially RNG transport projects from landfills.

That's just the pipeline.

Yes, that's the pipeline or the Marlin service that begins before the pipeline shows up. And so that's what you're seeing there. We don't have the production facility investment.

We'll take our next question from Alex Kania with BTIG.

Just thoughts on just the overall customer growth. I mean, again, just Delmarva continues to be really strong. I'm just kind of wondering if you see that as kind of sustainable or kind of any reason why that number can't continue in the near future?

Sure. So being based here on the Delmarva Peninsula, I can tell you in talking with our team, we continue to actually see strong growth in Delaware. It is not slowing down. In fact, you've heard -- in fact, Alex, on a couple of calls ago, Jeff actually, we talked about a small town by the name of Ellendale, which for someone who's from Delaware. Again, it would not have been an area that I would have thought would be close to the resort areas, but it's about a half hour to 45 minutes in. That is one of the new areas that we have begun to provide natural gas distribution service to, and it continues.

There is a lot of planned also infrastructure growth, particularly in the Southern County of Delaware that is being anticipated given it's a growing population. There's a lot of retirement activity that's happening in terms of new developments. So the infrastructure that's coming along like medical facilities, other types of things to support that growth are also continuing to stay at pretty high levels. So we continue to be excited.

And what I would add to that, which is, again, even more exciting when you layer this on top, right, is as that growth continues, it also supports the need for additional pipeline capacity to bring more gas into the southern part of the Delmarva Peninsula. And so we've got projects. Jeff just talked about it -- the newest one today. I think you're going to see, Alex, continued upstream pipeline demands that necessitate increased expansion there. So all continues. Nothing has changed from -- in terms of our view at this time.

Great. And then just maybe a follow-up on your comments a little bit earlier just on a little opportunity on the financing of the FCG acquisition debt. Could you just talk a little bit about kind of what that opportunity might be in terms of kind of a help on interest expense and if you see some additional ongoing opportunities down that path in the next couple of years?

Absolutely. Great question, an area that I absolutely love. So you're spot on this morning. Yes, I mean, when we did the Florida City Gas financing, we unfortunately had to place debt that had a sixth handle to it -- a 6-plus handle to it. And so we have steady retirements that are going to happen over the next several years. So there's going to be a robust refinancing plan that has to take place.

You're going to see us, Alex, take a similar approach to what we did last year, which means we'll be looking at blending a portfolio of different tenors to accomplish a rate that's much more in line with what we would be expecting and based upon our history in terms of our long-term debt portfolio. So I don't think it's unreasonable to think that the opportunity exists for us to shave anywhere from 50 bps to 100 bps off of the coupon rate as long as things stay where they are. And so that's what you should expect to see from us this year.

And that does conclude the Q&A portion of today's call. I would now like to hand it back to Jeff Householder for any closing remarks.

Thank you, and thank all of you for joining us this morning. We'll continue to provide significant information on our capital deployment, our project status and our margin production throughout the year.

We look forward to continuing our long track record of strong growth and top quartile financial success. And we look forward to seeing many of you at the AGA Financial Forum out in Scottsdale here in the next couple of months. So thanks again. We'll talk to you soon. Goodbye.

Thank you. This concludes Chesapeake Utilities Corporation's Fourth Quarter and Full Year Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Welcome to Chesapeake Utilities Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions.

On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on 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 our 2024 annual report on Form 10-K and in our third quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results.

Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our third quarter Form 10-Q.

Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here with a moment on kitchen and fire safety as highlighted on Slide 3. The holidays are coming up, which often means more time gathering together and cooking with friends and family.

This makes it a great time to remember safe kitchen practices, particularly as Thanksgiving is the leading day for home cooking fires. Be extra vigilant and aware to keep kids, pets and flammable materials away from heat and open flames, ensure any burned food or materials are completely saturated with water before throwing away and remember to use a metal lid, sheet pan, baking soda, salt or a fire blanket to extinguish grease fires.

I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on this quarter's key accomplishments and highlights, our full year guidance metrics and our capital growth program. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will provide updates on our regulatory activity, our ongoing business transformation efforts and our stakeholder engagement.

And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our financial results, financing updates and investment highlights.

With that, it's my pleasure to turn the call over to Jeff.

Thank you, Lucia, and good morning. We appreciate you joining our discussion today. The highlights on Slide 5 demonstrate how we've continued to deliver with purpose over the last few months. Our growth trajectory continues, and we've expanded our capital investment program.

A number of our 2025 projects are already in service and producing significant margin. We've finalized multiple positive regulatory filings and strengthened our balance sheet in support of future growth. As shown on Slide 6, we reported adjusted earnings per share of $0.82 for the third quarter of 2025 and $4.06 year-to-date, an 8% increase over the same period last year.

As you know, the third quarter always contributes the smallest percentage of our full year earnings, so my remarks will focus on our performance in the first 9 months of 2025. Year-to-date, we've achieved double-digit growth in adjusted gross margin, operating income and adjusted net income relative to the same period in 2024. That performance is a testament to our focus on driving growth, effectively working with our regulators and operating efficiently to meet our customers' needs.

Our results continue to align with our expectations. So we are reaffirming our full year 2025 EPS guidance of $6.15 to $6.35 per share, as shown on Slide 7. As we've previously indicated, this EPS range does assume we reach a successful outcome for 2025 in the FCG depreciation study proceeding, which Jim will discuss further on today's call. On the capital investment side, we continue to invest capital at a run rate of over $1 million a day with $336 million already invested in the first 9 months of this year, including $123 million invested in the third quarter.

Given this pace, we are again increasing our 2025 full year capital expenditure guidance to $425 million to $450 million, a $25 million increase over the top end of our prior range. I'll now shift to Slide 8 to discuss the increase in customer demand for natural gas that's driving our strategic investment in some of the fastest-growing regions of the country.

Both of our core service areas generated another quarter of above-average residential customer growth, 4.3% in Delmarva, 3.9% for Florida Public Utilities and 2.1% for Florida City Gas. I'll mention just a couple of examples to illustrate the demand for natural gas across our service areas. We're in the early stages of building out natural gas distribution for an underserved area in Southern Delaware that includes 2,000 new homes in Ellendale, Delaware.

We also recently became the natural gas provider for a new community development in Port St. Lucie, Florida, which has begun to construct the first of 6 phases of what will ultimately be a community with hundreds of new homes. Last month, we also expanded propane distribution to a fleet of Greensboro school district buses, which confirms our broader propane growth strategy in North Carolina.

We also see additional growth opportunities in Ohio, which has become fifth in the nation for data center potential as ranked by Ohio's Economic Development Corporation. The Ohio opportunity is supported by significant natural gas production in the state and constructive governmental and regulatory frameworks. The opportunities we have to serve increasing customer demand, improve system reliability and operate efficiently are the basis for our overall growth strategy, which in turn drives sustainable earnings.

We remain committed to increasing shareholder value by focusing on the 3 pillars of our growth strategy, as shown on Slide 9, prudently deploying capital, proactively managing our regulatory agenda and continually transforming our business operations to enhance safety and customer service and support future growth.

Successful execution of these 3 pillars will enable us to maintain top quartile growth and total shareholder return. Slide 10 provides some highlights of our 2025 capital program. Construction projects overall remain on track and on budget and more than 400 gas distribution projects have been placed in service through the first 9 months of this year.

Most importantly, this capital investment is generating significant gross margin, $14 million in the third quarter, nearly $34 million in the first 9 months of this year and $50 million expected for full year 2025. Given our pace of investment thus far and our additional opportunities ahead, we are again increasing our full year 2025 capital expenditure guidance, adding $25 million to the top end of our prior range for an updated range of $425 million to $450 million.

Approximately $15 million of the increase is related to initial spending on our multiyear enterprise resource planning process and about $10 million is related to recently approved Eastern Shore natural gas system improvements. This updated range reflects capital investment of approximately $800 million between last year and this year, a significant increase that reflects the many growth opportunities across all our businesses.

I'll now provide an update on WRU, our LNG storage facility in Bishopville, Maryland, as shown on Slide 11. Construction is well underway. Tanks are in place. We've been pouring a lot of concrete. The system control building has been erected and the majority of the equipment needed to complete the facility is now on site. Last month, we also successfully completed our first PHMSA inspection.

This project remains the lowest cost infrastructure option to deliver affordable energy and protect against weather-related disruptions in the southernmost portion of our Delmarva service area. We continue to target bringing the project online in mid-2026, dependent on construction completion and final FERC approval. As shown in detail on Slide 12, all of our major transmission capital projects are advancing as expected with more than half now in service.

We forecast these projects to contribute approximately $23 million of gross margin in 2025 and double that amount or $46 million in 2026. Shifting to Slide 13. The capital projects included on this slide support our 5-year capital investment plan of $1.5 billion to $1.8 billion through 2028. At this point, we've identified at least $1.4 billion of the capital plan with a number of projects already in service or under construction.

Most importantly, approximately 70% of that investment requires no additional regulatory approval or support. Not yet included in this forecast is the investment in our full ERP project as well as a number of projects that are still under exploration and development, as shown on Slide 14.

We continue to explore a number of additional potential expansion opportunities, including serving the space industries in Virginia and Florida, expanding our systems in the southern part of Delmarva and Florida and meeting incremental demand for our Marlin virtual pipeline services to transport RNG, CNG and LNG.

In just the last 2 weeks, I met with Florida Governor DeSantis and members of our leadership and external affairs teams have met with the Maryland and Delaware governors and their teams. We continue to partner with local state and federal electric representatives to advance the design and construction of much needed energy infrastructure in those states.

Maintaining strong relationships with all stakeholders and actively participating in energy coalitions advocating for a resilient and affordable energy future is key to driving these expansion projects forward to meet growing energy demand for years to come.

With that, I'll turn to Jim to discuss our regulatory strategy and business transformation initiatives.

Thank you, Jeff, and good to be with you all this morning. I'll start with Slide 15 as I provide some updates on our regulatory activity. After a great deal of effort, we now have permanent rates in effect for our Delaware, Maryland and Florida electric jurisdictions following successful conclusion of the 3 rate cases that we filed last year.

Last month, we also reached settlement on the rate design and tariff-related elements of the Delaware rate case. And on October 15, the Delaware Commission approved that settlement. Altogether, updated rates are driving $13.1 million of margin this year and $18.2 million of margin in 2026, a testament to our proactive strategy, constructive relationships with regulators and our highly diligent and dedicated internal regulatory team.

Slide 16 provides an update on the one remaining regulatory filing still outstanding, our traditional depreciation study filing for Florida City Gas. Following unexpected regulatory delays, we agreed to amend the filing from a proposed agency action or PAA proceeding to a standard hearing process. This transition provides for a more structured and traditional process for consideration of the filing and an updated schedule.

Under the new schedule, the company submitted testimony in early October, restating our request for a 2-year amortization of the excess depreciation reserve retroactive to January 1, 2025. Per the filing we made earlier this week alongside updated testimony, the excess reserve is now $19 million, primarily reflecting updates to expected useful lives for certain asset classes.

On Wednesday, the State of Florida Office of Public Counsel filed testimony objecting to the company's proposal and recommending that the existing depreciation rates remain in effect until the company files a new depreciation study as part of a rate case at a future date. The company will be filing rebuttal testimony later this month to address these arguments. Staff testimony will follow next week, and the hearing is scheduled for December 11.

The process is expected to conclude no later than February 2026, but could be completed earlier if all parties are able to reach a settlement. We are focused on securing successful recovery of the excess depreciation to support our 2025 full year results and will provide future updates as available. I'll now turn to Slide 17 to provide an update on our business transformation efforts, which is the third pillar in our growth strategy for a reason.

Transformation is the engine that enables technology, systems and processes to evolve in order to maintain our track record of growth as we become a much larger organization. In the last few months, we've continued to make strides with upskilling our team, including attracting additional talent in finance, strategic planning, information technology, change management and human resources.

We are completing the final preparation stages of our enterprise resource critical project that will have significant transformational impacts across the organization as we implement improvements in asset management, supply chain, human resources, accounting and finance. We expect to invest approximately $15 million in this project this year, and we'll provide total capital spend for this multiyear project on our next call.

Slide 18 provides a couple of updates on our engagement with stakeholders. In September, we were pleased to welcome Lisa Eden as our newest member of the Board of Directors. Lisa brings extensive experience in finance, strategic planning, talent management and information technology, having recently retired as Senior Vice President and Chief Financial Officer at TXNM Energy, Inc.

We look forward to Lisa's valuable insights and contributions in the years to come. We were also honored to receive several recognitions in the last few months. First, our Delmarva natural gas distribution business and our Sharp Energy propane distribution business were recognized as Stars of Delaware as voted by the Delaware Daily State News readers.

Second, Chesapeake Utilities was also named a 2025 Champion of Board Diversity for the third consecutive year by the Forum of Executive Women. And finally, we were named Employer Champion of the Year for Kent County by the Delaware Department of Labor State Rehabilitation Council. These awards reflect our unbroken commitment to excellence and inclusion of all members of our communities as we provide reliable and affordable energy solutions that enable families, businesses and the communities we serve the opportunity to flourish.

Our colleagues also continue to support the communities in which they live and work through the contribution of their time and resources. Through September, our teammates have volunteered over 1,500 hours and have contributed over $488,000 in charitable donations and corporate sponsorships, supporting organizations that align with our 4 focus areas of giving: safety and health, community development, education and environmental stewardship.

With that, I will turn the call to Beth for a more detailed discussion of our financial results.

Thanks, Jim, and good morning, everyone. As shown on Slide 19, our financial results for the third quarter of 2025 continue to demonstrate steady growth that supports our full year growth targets. Adjusted gross margin was approximately $137 million, up 12% and adjusted net income was approximately $20 million, up 8% from the third quarter of 2024.

We also sustained growth in adjusted earnings per share of $0.82, a 3% increase over the third quarter of last year, which includes an increase of 1 million more shares outstanding compared with a year ago. I'll now provide some additional detail on the key drivers of our third quarter performance as shown on the adjusted EPS bridge on Slide 20. Continued demand for natural gas drove $0.22 of incremental adjusted EPS, including $0.17 related to transmission capital projects and $0.05 of distribution growth across our service areas.

Margin from our infrastructure program investments contributed an additional $0.12 per share this quarter and permanent rates from our 3 rate cases added $0.11 in third quarter 2025 adjusted EPS. Our unregulated businesses generated net incremental earnings of $0.09 per share, largely driven by continued growth in our Marlin Virtual Pipeline transportation business.

These gains were partially offset by a few factors, including $0.14 per share of increased depreciation and amortization expense, driven by growth in total assets as we actively deploy capital and $0.10 again from the absence of an RSAM benefit recorded in the third quarter of 2024. We also incurred additional operating expenses of $0.12 per share this quarter, driven by incremental facilities, maintenance, insurance and employee-related expenses.

However, we continue to drive operational efficiencies, leading to operational expenses at only 34% of adjusted gross margin in the third quarter of 2025 relative to 37% in the same period last year. Our results were also impacted by 15% fewer cooling degree days this quarter relative to the third quarter a year ago, which drove slightly lower consumption in our Florida electric business.

Financing activity, including our debt and equity issuances over the last 12 months, reduced adjusted EPS by $0.07 per share. And finally, some changes in our billing accruals also impacted the third quarter of this year from a timing perspective, but will not impact full year results. Shifting to Slide 21. Adjusted gross margin for our Regulated segment was approximately $115 million this quarter, up 12% from the third quarter of last year.

This growth continues to be driven by strength in our core business operations, organic natural gas transmission expansions, which are a direct result of distribution growth as well as increased rates following the conclusion of our 3 rate cases. Our focus on cost management enabled similar growth in our regulated operating income, up 11% to approximately $49 million in the third quarter of 2025.

Our unregulated Energy segment also demonstrated strong growth relative to the third quarter of last year, as shown on Slide 22, with adjusted gross margin up 13% to approximately $22.5 million. Our Marlin Gas Services business continues to meet the rapid growth in demand for virtual pipeline transportation, driving $3.1 million of additional gross margin when combined with the incremental contribution from Full Circle Dairy in the third quarter of this year.

This growth was supported by increased performance from Aspire Energy, but tempered by changes in margins and service fees within our propane operations for the third quarter, leading to an overall gross margin increase of $2.6 million. While higher than the same period a year ago, margins did not fully cover the normal operating costs in the quarter as is typical during the least weather-sensitive quarter of the year.

I'll now move to Slide 23 to review our capital structure and financing activities. At September 30, our equity capitalization was 49% with $83.1 million of equity issued through the first 9 months of the year. In the third quarter alone, we issued approximately 126,000 shares with an additional 105,000 shares issued in October 2025.

We also completed the previously announced $200 million issuance of new long-term unsecured senior notes in the private placement debt market with $150 million funded in August and $50 million funded in September of this year at a blended 5.04% coupon. These capital raises support our overall financing strategy, which ensures we are committed to superior balance sheet strength.

We also continue to maintain strong liquidity and sufficient capacity to support growth with availability of 87% of our total capacity of $755 million between our revolving credit facility and private placement shelf facilities at the end of September 2025. Moving to Slide 24. Alongside our equity and debt plans, our dividend policy continues to be a key component of our capital allocation strategy as we fund growth capital investment to drive earnings growth and overall total shareholder return.

Our Board has approved a dividend payout target range of 45% to 50%, allowing us to retain 50% to 55% of earnings, which has been a meaningful part of our financing plan. We also remain committed to consistent dividend growth. Our annualized dividend per share of $2.74 reflects a 7% annual increase from 2024 and supports a long-term dividend CAGR of 9% while still facilitating significant earnings reinvestment.

We will continue to support long-term dividend growth while reinvesting significant earnings back into the company, enabling our investors to benefit from both long-term top quartile earnings and strong dividend growth. As we've discussed many times, we are committed to a long-term earnings per share compounded annual growth rate of 8% through 2028 to drive top quartile shareholder returns, as shown on Slide 25.

Our third quarter results align with our full year 2025 adjusted EPS guidance range of $6.15 to $6.35 per share, inclusive of a successful outcome on the Florida City Gas depreciation study as both Jeff and Jim have previously discussed. This range represents an EPS growth rate of 14% to 16% over 2024 or on average, approximately 8% to 10% annually over the last 2 years.

Before we shift to Q&A, let's review the unique differentiators as shown on Slide 26, that enable us to drive significant shareholder value in 2025 and for years to come. We remain committed to delivering on our promises. We recognize that our consistent track record has driven expectations for continued strong growth, both in terms of performance and valuation.

We will continue to execute on our 3 pillars of growth, enabled by continued infrastructure reliability improvements and growing demand for natural gas throughout our service areas and supported by our increased 2025 capital guidance range of $425 million to $450 million. Our disciplined approach to financing, including ensuring balance sheet strength, upholding investment-grade credit metrics and sustaining our target capital structure keep us well positioned to address market volatility as we fund our growth plan.

All of these elements drive our ability to reach new heights, both in 2025 and beyond. We look forward to delivering with purpose and driving long-term value for all stakeholders. We sincerely appreciate your continued interest, support and investment in the company. Thank you for joining our call today.

With that, we'll take your questions. Operator?

[Operator Instructions] We'll take our first question from Barclays.

This is Nick Campanella. So I wanted to ask on the depreciation study. Just you kind of show in slides that the decision could be anywhere from December to February. I think you're very clear that this is included in guidance.

Just ability to kind of overcome that if you do get a decision, let's say, in January or February? Are you still able to kind of hit the range? Or is it fully predicated on that outcome? And then how would you kind of quantify what's in fiscal '25?

So we have -- Nick, as we've talked about previously, achieving the guidance range would assume that we do get a successful outcome from that rate -- from that proceeding. And where we actually fall within the range will ultimately be based on where that outcome is, meaning when you look at -- we have filed for a 2-year amortization period.

The standard is 5 years. So that will come into play. But as long as there is an outcome from the proceeding from the hearing in December, and we get a final order in time to be able to record it for 2025, that will determine ultimately the timing of the period as well as the amount that would enable us to achieve the guidance range.

And if it doesn't, is it just that you're at the lower end? Or I was just trying to parse through what you were saying there. And just to be completely clear, it's the $19 million that's kind of shown in slides, and I would just take half of that.

Yes, that is correct. And so achievement of that would enable us to be within the range and enable -- so there's some other factors certainly that we have to -- the reason why we're not saying exactly where it will depend on, again, the period of time, the ultimate conclusion of what gets approved in terms of amount.

And then certainly, there's other factors that could impact our results, but that is the clear differentiator to us being within the range or not being within the range. And I would add if for some reason, right, it's much lower than expected, we would anticipate that we're going to be filing a rate case next year anyway.

So we see dollars there that need to be part of the final outcome. We're very confident in the numbers that we've filed as being the excess reserve. And so we believe we're well positioned, whether it's through a depreciation study or ultimately, if we have to come back in some form of rate proceeding as well next year.

That's great. Really appreciate that clarity. And then I know Jim just kind of talked about the process overall in the prepared remarks and just brought up the prospects of settlement.

But just as you've seen kind of testimonies roll in, just how would you kind of frame the prospects to -- for parties to kind of come to a settlement before December? And are you really trying to achieve an all-party settlement? Or could this be more partial?

Yes, Jim, please go ahead.

Nick, this is Jim. As you know, it's very difficult to predict the process trying to land a case like this or if the parties will even entertain a potential settlement. We're working very hard if there were to be one. Our preference, of course, would be that it'd be unanimous. So I really can't say more than that, Nick, other than our historical approach would be try and resolve something, if at all possible.

Our next question comes from Tate Sullivan with Maxim Group.

First to follow up on a comment from earlier in the call. Jeff, did you say that you had 400 new distribution projects in service in the last 9 months? Or did I mishear that? And if I did not, what does that -- what qualifies as an individual project, please?

Yes, that's sure. Those are of a variety of different sizes. It is 400, just to give you some idea of the significant number of projects that we are moving forward on. Those range from distribution level subdivision projects up into some of the transmission work that we do.

So it really is just a compilation of the construction activity that's going on throughout the company. And it's a substantial increase over what we would typically see. And so some of that's reflective of the fact that we now have Florida City Gas in the fold and are doing construction activity on that system. And some of it continues to reflect the very substantial growth, especially in residential projects that we see both in Delmarva and in Florida. So yes, I didn't mean to -- that's not all $1 billion transmission projects, but it's a lot of things that add up to a significant amount of work and a substantial amount of customer growth.

Yes. I mean the scale of organizing all that. I mean, the previous year's period of 9 months, I mean, I imagine what, roughly 200 to 300 projects. Would that be fair? I mean just...

Yes, maybe even less. Yes, it's a significant amount of work, and our guys have done a really great job. We've spent a fair amount of time over the last couple of years in that particular area, trying to consolidate our construction teams, trying to make sure that we had different tools and systems that would allow us to track those projects in a better way, improving some of the supply chain issues.

I mean all of that has kind of come together intentionally to allow us to be able to actually move through that level of project.

And separately, you called out the Ohio data center growth in one of the slides. And just to refresh on the business, your Ohio business is an unregulated business -- energy segment, I believe.

And -- can you talk about the type of infrastructure? Is it pipelines to backup generators, pipelines to isolated power plants? Or can you talk about that opportunity?

On the data center side?

Yes.

Yes. What we actually have one announced project with AEP in Ohio right now to build a pipeline to serve a data center that AEP is building the project itself. We have a number of other possibilities out there that we're looking at. And I mean, we're in the same boat, I think, with a lot of people across the country.

As you well know, there are a lot of data center possibilities out there. Everybody is trying to understand where these things might actually land. We've seen, as we mentioned in the remarks, significant activity in Ohio. It seems to be one of those places where folks like the political regulatory climate.

They like the fact that there are in-state gas supplies that are possible and there are transmission opportunities there that can bring that gas to the projects as well as some large electric utilities that seem to be eager to pursue them. So we hope to continue to do business in Ohio with the possibility of adding additional transmission assets there.

And that's all of Ohio has been unregulated. Is that correct?

That's correct. I guess we have -- I should probably clarify that -- we have a small transmission pipeline that's sort of quasi-regulated in Ohio. But we don't have regulated distribution assets there in the sense that we do on Delmarva, Florida.

Okay. I asked this question because I saw an acquisition in Ohio territory as well recently in the industry and thank you for all the comments.

Our next question comes from Paul Fremont with Ladenburg.

I guess my first question, Beth, just to clarify, is the cutoff date for a Retroactive treatment of the amortization of the depreciation reserve, is that December 31? Or is that -- is it a different date?

So basically, Paul, as long as we would have an order that would be in the first week or 2 in February, we would be able -- because it would be a subsequent event and the magnitude of that subsequent event, it could be factored into our 2025 earnings.

Great. So it could be as late as the second week of February?

It could be as late as that. When it gets beyond that, it would be very challenging for us at that point. So yes, as long as an order is received, we can go back and we have worked through and evaluated that on the accounting side.

Mike Galtman and his team have researched that. We've talked to experts around that. And so yes, it could go back and be included because of the magnitude of that event.

Great. And then my second question is, can you help us split between the 22 that you had initially filed for and the 19 amended request?

Yes. So the process, Paul, as we started, and it actually -- it happens for all the parties. When you file that -- when you're filing that initial filing, you are certainly filing that with the thought that it is comprehensive. But as you continue to go through and look at the data, and we're scrubbing the data as we're moving through the process, ultimately, there are positive adjustments or things that you may find and sometimes there are updates that can be downward.

And in this particular case, the net effect of the adjustments that we found among the various different asset categories or classes ultimately resulted in a decline. We have had our work papers reviewed by some of the experts that we utilize -- but it happens. And so as we continue to scrub the data within our systems, we feel very good about that $19 million. But it is us just constantly going through and validating the data.

[Operator Instructions] We'll go next to Alex Kania with BTIG.

Maybe just a question just thinking about the -- maybe the year-end earnings call. Has there been just any kind of change in thinking about what the roll forward, what updates you may end up giving on the CapEx plan?

I know there's some discussion just about rolling in some of the projects that were talked a little bit about earlier on the call as well as the, I guess, the ERP or business transformation investments. But do you still consider planning on just keeping kind of the '28 long-term target? Or is there a sense maybe you want to do a more kind of full roll forward?

Thank you. Great question, Alex. So number one, I think right now, we happen to be in the process where we're working on and finalizing our 2026 budget. And that certainly, that is inclusive of our capital projects. And as we start the year, we have a really good sense and even years prior to that as we're moving through looking at the 5 years, it's a constant updating of CapEx guidance as we're looking at it.

So as I think about February, what you will definitely see is you will see us come out with our projection of our capital spend for the year that will be reflective of an updated estimate for our ERP process and plan. And so I think that will be something new that we will include. Our expectation right now is that we will continue to hold to the $1.5 billion to $1.8 billion through 2028.

And there is some likelihood in February of 2027 that we will revisit that and decide whether there's just an update or whether there's an extension of guidance from there. But most likely, we don't think it will be next year, but it will likely be the following year.

Great. And then just a follow-up on kind of the underlying growth of the businesses. It's just very notable that the Delmarva growth is even trending ahead of Florida. year-to-date. Do you -- what's kind of the view about how long that maybe could persist? I mean it's obviously a good thing to see. I'm just kind of curious about what the kind of current views are just in terms of trajectory of, let's say, in the Mid-Atlantic versus the Florida franchises.

Well, thank you. Great question. I happen to be -- and I'm certainly not saying this statistic is in true. I can't confirm it or deny it, but I happened to be in an event not long ago where the speaker at this particular setting was talking about Sussex County, which is really the county in Delaware where we're seeing the most growth because it's at our resort and beach areas.

And they were talking about some of the statistics they had seen, right, show that, that county is one of the fastest-growing counties in the entire country. And I think we're continuing to see that. That's reflected in our numbers. There's a substantial build-out that's occurring that for right now, we continue to see occurring into the foreseeable future.

You had Jeff talk about on the call today, actually what I would call more of a bedroom community to the beach areas. We're seeing growth actually start up in some of these small communities that I, as a lifetime resident of the state would not have expected some of these areas to be kind of natural extensions necessarily of the beach area, but the quality of life in the area that's around here, I think, is continuing to bring more people in.

So I think for right now, Alex, we're continuing to expect strong growth in that area. I don't think that takes away at all from the strong growth, though that we're also seeing in Florida. And one of the things that you saw us do in this particular release, and we're trying to make sure it stands out is that the areas that our Florida legacy business actually serves have tremendous growth that's also significantly above the industry average.

And we're seeing growth with even in Florida City Gas also pick up as well. So we're excited about the growth prospects and continue to be. And hopefully, those, as always, will continue to also result in some additional pipeline -- upstream pipeline capacity needs as well.

This does conclude today's question-and-answer session. I would now like to turn the program back over to Jeff Householder for any additional or closing remarks.

Well, thank you for joining our call this morning. We, as always, appreciate your continued interest in Chesapeake Utilities. I have to say that I like where we are this year, less than 2 years from the transformational FCG acquisition, double-digit growth in earnings.

We've more than doubled our pre-FCG capital investment, positive results in 3 rate cases, significant progress in our modernization business transformation efforts and really excellent outlooks for 2026. So we look forward to seeing many of you at the EEI Financial Forum in Florida in a couple of days and safe travels if you're headed to Florida. Goodbye.

Thank you. This concludes Chesapeake Utilities Corporation's Third Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Welcome to Chesapeake Utilities Corporation's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on 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 our 2024 annual report on Form 10-K and on our second quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the information today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our second quarter Form 10-Q.

Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here with a moment on digging safely as highlighted on Slide 3. Monday, August 11, is National 811 Day when utilities across the nation remind customers to call before they dig to prevent dangerous and costly damage to underground infrastructure, including natural gas pipelines, electric distribution lines and water pipes, among others. Whether installing a small mailbox or excavating a large stump, dial 811 before breaking ground to request local utilities to mark all underground lines, ensuring you can safely dig and complete your project.

I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on our key accomplishments and highlights since our last earnings call, our quarterly and year-to-date performance, our full year guidance metrics and our capital growth program. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will summarize our progress on multiple regulatory initiatives, our ongoing business transformation efforts and our stakeholder engagement. And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our financial results, financing updates and investment highlights.

With that, it is my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning. We appreciate you joining our discussion today. The highlights on Slide 5 demonstrate how we've continued to deliver with purpose over the last few months. Our growth trajectory continues as we've expanded our capital investment program, achieved regulatory success and maintained a strong balance sheet while financing future growth. As shown on Slide 6, we reported adjusted earnings per share of $1.04 for the second quarter of 2025, up 21% from the second quarter of 2024. This marks the fourth consecutive quarterly increase in earnings relative to the prior year period following the Florida City Gas acquisition, driven by continued growth in our service areas, successful integration of FCG and consistent focus on operational excellence.

Our second quarter performance, coupled with a strong start to the year, is driving double-digit growth in adjusted gross margin, operating income and adjusted net income for the first half of 2025 relative to the same period last year. These results are in line with our expectations, so we continue to reaffirm our full year 2025 EPS guidance of $6.15 to $6.35 per share, as shown on Slide 7. This range does assume a successful outcome in 2025 on the Florida City Gas depreciation study, which was filed with the Florida Public Service Commission at the start of this year, and Jim will provide an update on this filing later on the call.

On the capital investment side, growing demand for natural gas from residential, commercial and industrial customers continues to drive our robust capital program with $213 million already invested in the first 6 months of this year. Given this pace of investment and our expectations for the second half of the year, we are increasing our 2025 full year capital expenditure guidance to $375 million to $425 million, a $50 million increase over our prior range. A significant amount of our total capital spend this year will drive margin growth in 2026 and beyond, supporting our EPS guidance through 2028.

I'll now shift to Slide 8 to discuss the increasing demand for natural gas, as we strategically invest in some of the fastest-growing regions of the country. Both of our core service areas generated another quarter of above-average customer growth, leading to year-to-date residential customer growth of 4.2% in Delmarva and 3% in Florida compared with the first half of last year. We're seeing a number of multifamily developments opt to add natural gas instead of the typical all-electric build-outs and a number of business park developers in Delaware are leveraging state funding to install natural gas infrastructure, which attracts additional small business and manufacturing customers. We also continue to expand natural gas service to new developments across Florida. One recent example is Newfield in Palm City, a new farm-to-table community that combines housing, sustainable farming and a vibrant town center, where we're installing natural gas infrastructure to serve homes, schools, businesses and agricultural work.

The opportunities we have to serve increasing customer demand and improved system reliability are the basis for our overall growth strategy, which in turn drives sustainable earnings. We remain committed to increasing shareholder value by focusing on the 3 pillars of our growth strategy, as shown on Slide 9, which I'm certain you have memorized by now. In short, we are consistently focused on identifying and prudently deploying capital, proactively managing our regulatory agenda and continually transforming our business operations. We believe that successful execution of these 3 pillars will enable us to maintain top quartile growth and total shareholder return.

Slide 10 provides some highlights of our 2025 capital program. We were pleased to bring 6 major capital projects online within the first half of the year, supported in some cases by interim service from our Marlin Virtual Pipeline operations. Boynton Beach came online in the first quarter, and New Smyrna Beach, St. Cloud Expansion Project, and the 3 RNG transportation projects were brought online in the second quarter of this year. Altogether, projects placed in service thus far in the year generated $2.5 million in the second quarter and are expected to generate $9.8 million for full year 2025. All other construction projects remain on track and on budget.

We also have a number of incremental investments that are driving the $50 million increase in our full year capital expenditure guidance. We expect to spend approximately $20 million on additional infrastructure replacement and reliability projects through our GUARD and SAFE programs. About half or $10 million of the incremental capital investment for the Worcester Resiliency Upgrade, or WRU, will be spent this year as well as an additional $10 million to meet increased demand for our Marlin Virtual Pipeline services and $10 million as we build out infrastructure to support the rapid growth in our Port St. Lucie, Florida area.

We were particularly excited to announce our first data center-related project, Duncan Plains outside of Columbus, Ohio. We've entered into an agreement with American Electric Power to construct and operate an intrastate natural gas pipeline to power our new AEP fuel cell facility that will serve a data center. This $10 million capital project is expected to be online in the first half of 2027.

I'll now provide additional details on WRU, our LNG storage facility in Bishopville, Maryland, as shown on Slide 11. Last quarter, we shared that cost increases drove the total capital investment for the project to approximately $100 million and shifted the expected in-service date to the first half of 2026. We subsequently requested updated rates, and at the end of last month, received FERC approval to recover this incremental capital investment, which results in an additional $3.9 million of full year margin contribution upon project completion. In June, we took delivery of the storage tanks and are pleased to report that we now have all 5 tanks safely on site.

In July, we formally mobilized our contractor and received an initial notice to proceed from FERC, enabling us to begin site preparation and construction. This project remains the lowest cost project to support affordable energy and protect against weather-related disruptions for growing populations in Southern Delaware and Maryland. We look forward to having the project fully in service in the first half of 2026.

As shown in detail on Slide 12, all of our major capital projects are advancing as expected with more than half now in service. We forecast these projects to contribute approximately $23 million of gross margin in 2025 and $45 million in 2026.

As summarized on Slide 13, our regulated capital program benefits from multiple sources of investment, not just the new transmission projects, but also infrastructure projects that support reliability and resiliency. Our capital investment under our 4 regulated infrastructure programs are expected to generate gross margin of $27 million in 2025 and approximately $38 million in 2026.

Shifting to Slide 14. All of these projects support our 5-year capital investment plan of $1.5 billion to $1.8 billion, of which we've already identified and initiated at least $1.4 billion. Most importantly, approximately 70% of that investment requires no additional regulatory approval or support.

Not yet included in this forecast are a number of projects still under exploration and development, several of which are highlighted on Slide 15. We have a number of potential expansion opportunities ahead of us, including serving the space industries in Virginia and Florida, expanding our systems in the southern part of Delmarva and Florida and meeting incremental demand for our Marlin Virtual Pipeline services to transport RNG, CNG and LNG. As we determine the likelihood, size and timing of these potential projects alongside our upcoming strategic planning process, we will evaluate updates to our 5-year capital expenditure guidance.

With that, I'll turn to Jim to discuss our regulatory strategy and business transformation initiatives.

Thank you, Jeff, and glad to speak with everyone this morning. I'd like to start with an update on our rate cases, as shown on Slide 16. I'm pleased to report that we've now received final orders on all 3 rate cases that have been active over the last year. The final order for our Maryland rate case was effective in April and approved an annual revenue increase of $3.5 million. In June, we received a final order for our Delaware rate case, approving the previously settled $6.1 million annual revenue increase. And in early July, the Florida PSC issued a final order for our Florida electric rate case, approving the $8.6 million annual revenue increase that was previously settled. Following recovery of interim rates in the second quarter, permanent rates for each of these cases are now in place for the second half of the year. We are grateful for the constructive relationships we've maintained with our regulators across all 3 states that supported us achieving final conclusions for these filings.

Slide 17 provides additional detail on our traditional depreciation study filing for Florida City Gas, which included updated asset lives that reduced annualized depreciation expense by approximately $1 million and also included a 2-year amortization of an excess depreciation reserve. Through our normal discovery process, the excess depreciation amount was updated to $22.4 million. In April, the Office of Public Counsel filed a motion for reconsideration and subsequently filed a motion to dismiss the case. The Florida PSC staff is in agreement with the company and has recommended denial of the motion for reconsideration. A commission hearing on both motions is expected in September 2025, and a final order on this filing is still expected in the fourth quarter of this year. We continue to expect to reach a successful outcome on the depreciation study and will provide updates as available.

I'll now turn to Slide 18 to provide a few updates on our business transformation efforts that support our long-term growth. We are moving forward on the next steps of our multiyear enterprise resource plan, or ERP, which will build upon our SAP platform that consolidated our utility billing systems, further enabling us to operate as one company, enhance process efficiency and expand reporting and analytics across functions, including finance, procurement, human resources, customer care and field service management.

In June, we were excited to welcome Abhi Bhatwadekar to our team as our new Chief Information Officer. Abhi brings a wealth of industry experience and technology expertise, which will be valuable as we strengthen our innovation technology team and better align technology initiatives with our business objectives, strength and growth. And in July, we concluded the transition services agreement with NextEra Energy that had been in place since the Florida City Gas acquisition. This represents one of the last milestones in the FCG integration process as we bring all operations fully under the Chesapeake Utilities management.

Slide 19 provides a couple of updates on our engagement with stakeholders. In May, we published our third micro sustainability report, which highlights the ways we have invested in our employee, customer and community relationships throughout 2023 and 2024. These efforts have continued into 2025. Through June, we have contributed over $350,000 in charitable donations and corporate sponsorship for organizations and events across our service areas. In addition, more than 360 employees have volunteered over 1,000 hours throughout the first half of the year, supporting many organizations and causes near and dear to their hearts.

We were also honored to be named Best in the U.S. for Corporate Governance by World News Media in July of this year. This is our third year receiving this award. We are grateful for the recognition of our commitment to earning trust, upholding accountability and fostering a values-driven culture, which is central to our mission to deliver energy that makes life better for the people and communities we serve.

With that, I will turn the call to Beth for a more detailed discussion of our financial results.

Thanks, Jim, and good morning, everyone. Our financial results for the second quarter of 2025 continue to demonstrate steady growth and advancement toward our 2025 EPS guidance range as shown on Slide 20. Adjusted gross margin was approximately $143 million, up 13% from the second quarter of 2024. Margin growth from investments in transmission and distribution infrastructure, organic growth and regulatory initiatives, coupled with operational efficiencies led to adjusted net income of approximately $24 million, up 26% from the second quarter of 2024.

And even with a higher share count than a year ago, we reported double-digit growth in adjusted earnings per share, up $0.18 to $1.04, a 21% increase over the second quarter of 2024. This performance reflects our commitment to executing on our growth strategy as well as our focus on operational excellence, particularly as we achieved this growth without the benefit of $2.3 million of reduced depreciation expense that was recognized under the Florida City Gas RSAM mechanism in the second quarter of last year.

I'll now highlight some of the key drivers of our second quarter performance, as shown on the adjusted EPS bridge on Slide 21. Continued demand for natural gas drove $0.18 of incremental EPS, including $0.12 related to transmission capital projects and $0.06 of distribution growth across our service areas. Updated rates from our 3 rate cases contributed an additional $0.13 in adjusted EPS this quarter, and margin from our infrastructure program investments contributed $0.11 per share. Our unregulated businesses generated net incremental margin of $0.08, largely driven by increased Marlin Virtual Pipeline transportation services as well as margin from our Full Circle Dairy RNG production facility.

These gains were partially offset by a few factors, including $0.14 per share of increased depreciation and amortization expense, as this quarter had no RSAM related depreciation expense reduction compared with an $0.08 benefit in the second quarter of last year. We also incurred additional operating expenses of $0.09 per share this quarter as higher facilities, operations and maintenance expenses were only partially offset by lower payroll, benefits and employee expenses. Lastly, financing activity, including our debt issuance in November 2024, and additional equity issuances in the latter half of 2024 and the first half of 2025, reduced adjusted EPS by $0.08.

Shifting to Slide 22. Adjusted gross margin for our Regulated segment was approximately $118 million this quarter, up 14% from the second quarter of last year. As just discussed, this improvement was driven by organic transmission and distribution growth in our natural gas distribution operations and increased rates following the conclusion of our 3 rate cases. Our focus on cost management drove an even larger increase in regulated operating income, up 28% to approximately $52 million in the second quarter of 2025.

Our Unregulated Energy segment also demonstrated growth relative to the second quarter of last year, as shown on Slide 23. Adjusted gross margin was up 7% to approximately $25 million in the second quarter of 2025. Our Marlin Gas Services business continues to serve incremental demand for virtual pipeline transportation services, driving $3.5 million of additional gross margin when combined with the incremental contribution from Full Circle Dairy in the second quarter of 2025. This growth was partially offset by a $2.3 million reduction in propane margins, driven by lower consumption and higher commodity costs in this quarter.

I'll now move to Slide 24 to review our capital structure and financing activities. I'm excited to report that at the end of the quarter, we reached our equity capitalization target of 50%, as we've issued $66.2 million of equity throughout the first half of this year. With this level of equity, our total book capitalization has exceeded $3 billion for the first time, an important milestone as we continue our transformation to a mid-cap company. We've also made several advances to enhance our overall debt capacity to fund our capital investments.

In June, we amended and extended our long-term shelf agreement with MetLife, one of our key debt holders, allowing us to secure up to $200 million of new long-term debt through June 2030. At the end of July, we also took advantage of the favorable rate environment to commit to issue $200 million of new long-term unsecured senior notes in the private placement debt market. $150 million of this new debt was funded on August 1, 2025, with the remaining $50 million being funded in mid-September. We issued the debt at a blended 5.04% coupon, including $60 million of 4.88% 3-year notes, $50 million of 5.02% 5-year notes and $90 million of 5.16% 6-year notes.

Subsequent to locking in this financing, we met with Fitch and were subsequently notified that they had rated all of these new notes as an A- credit as we had initially targeted. Lastly, in early August, we also renewed our 364-day revolving credit facility for another year at the same terms and conditions. As you can see, we also continue to maintain strong liquidity and sufficient capacity to support growth with 64% of our revolving credit facility and private placement shelf facilities available at the end of June 2025. With the new long-term debt financings just executed in August and upcoming September, this availability will increase to 92%.

Alongside our equity and debt plans, our dividend policy continues to be a key component of our capital allocation strategy as we fund growth capital investment to drive earnings growth and overall shareholder return. As shown on Slide 25, our annualized dividend per share of $2.74 reflects a 7% annual increase from 2024 and supports a long-term dividend CAGR of 9%. We will continue to support long-term dividend growth while reinvesting significant earnings back into the company, enabling our investors to benefit from both long-term top quartile earnings and strong dividend growth.

As we have discussed many times, we are committed to our long-term earnings per share growth of 8% through 2028 to drive top quartile shareholder returns as shown on Slide 26. Our second quarter 2025 growth supports our trajectory toward our full year 2025 adjusted EPS guidance of $6.15 to $6.35 per share, inclusive of a successful outcome on the Florida City Gas depreciation study, as Jeff discussed earlier.

Before we shift to Q&A, I'd like to remind you of the unique differentiators shown on Slide 27 that enable us to drive shareholder value in 2025 and for years to come. We remain committed to delivering on our promises. We recognize that our consistent track record has driven expectations for continued strong growth, both in terms of performance and valuation. We will continue to execute on our 3 pillars of growth, enabled by continued infrastructure reliability improvements and growing demand for natural gas throughout our service areas and supported by our increased 2025 capital guidance range of $375 million to $425 million.

We will maintain our disciplined approach to financing, including ensuring balance sheet strength, upholding investment-grade credit metrics and sustaining our target capital structure, so that we remain well positioned to address market volatility as we fund our growth plan. That disciplined approach resulted in us achieving our target capital structure by the end of June and increasing our debt capacity meaningfully by our recent actions. All of these elements drive our ability to reach new heights, both in 2025 and beyond. We look forward to delivering with purpose and driving long-term value for all stakeholders and appreciate your continued interest, support and investment in our company.

With that, we'll take your questions. Operator?

[Operator Instructions] Our first question is coming from Nicholas Campanella with Barclays.

This is Michael Brown for Nicholas Campanello. First question is, was the successful outcome in the FCG depreciation study assumed in the $6.25 midpoint guidance for 2025 when you originally gave it? And what are the levers you have to offset it if you do not achieve a successful outcome?

Michael, this is Beth. And yes, considered within the full guidance range was a successful outcome on the Florida City Gas depreciation study. So what we're trying to -- since there's been a lot of questions, we really tried to hone in, in this call and point out that, that full band reflects a successful outcome on that filing.

Okay. Second question is, how do you plan to fund the additional CapEx for this year?

Sure. Great question. So we talked about quite a few things. Number one, where we sit on a year-to-date basis through at the end of June, we have reached our target capital structure, as we mentioned, at 50%. The long-term debt placements that we've done have opened up capacity on our revolver to the point that our revolver will probably be at the lowest level it's been in many, many years. Our goal is to continue to stay at our target capital structure, but the timing and construction of some of those projects that are longer term may result in us better aligning some of the equity with the in-service dates, but you're not going to see us vary significantly from our target capital structure, maybe a little bit like I mentioned, for those longer-term projects.

So we'll continue to pursue a capital structure that is around 50% plus equity to total capitalization. It may be slightly less than that at times because of bigger projects. And we have availability now with the revolver to have significant capacity. And again, we've accessed the long-term debt markets and expect to as we continue to move forward. So no different plan. Just certainly, we'll execute it in line with the timing of some of our projects from an equity perspective.

My last question. When do you anticipate like a full refresh of your key guidance next year?

We have our guidance, as you know, Michael, out through 2028. And so we're still second year into that. As always, we have an update on our strategic plan. I think likely, you'll see us continue to evaluate and come out with our new capital guidance for 2026 in February of next year. I think as we continue to execute on our strategic plan, we will look at the appropriateness of that range and decide whether a refresh is needed in any part or an extension at some potential time. But right now, we're really only into year 2, and that's kind of typically how we've approached it. If you look back in the past, we get a couple of years well into our guidance range before we provide a refresh.

And we'll go next to Michael Gaugler with Janney Montgomery Scott.

We've noticed a couple of gas companies in our coverage universe with Pennsylvania operations indicating this quarter, they're under NDAs for new projects for hyperscalers in the state. I know your exposure in Pennsylvania is limited. But with Eastern Shore and the Ohio assets, wondering if you're in discussions with anyone.

Well, Michael, I mean, as you know, I mean, Chesapeake, and I'll certainly turn it to Jeff for any additional commentary, but as you know, we're constantly -- our business development group is looking at projects across our different service territories. And at the point that any type of project like that might be finalized with us having executed an agreement, we would certainly disclose it. We're continuing -- you saw us actually introduce this new project in Ohio because that contract had been executed. So again, we are always looking at things, but we don't have anything at this point that we could disclose around any other particular projects. Jeff, I don't know if there's anything else you might want to add.

No, I think that is exactly right. I mean we see the same things that you're seeing in Pennsylvania and certainly in other places. And we have a continued interest in those sorts of opportunities, much as we announced the pipeline to the fuel cell that AEP is developing for a data center in Ohio. So those things continue to be intriguing, and we continue to pursue them.

Appreciate the color. And then just one other question. The recent PJM power auction, certainly interesting. I'm wondering if you're seeing greater incoming calls for natural gas service, given what looks like going to be higher electric prices for the next few years, probably out through 2031.

I don't know that we have any direct relationship there that we're discerning in the market, although you can, as you just did, presume that people are thinking about options and one of the options clearly is direct natural gas service. And so we are certainly talking to a number of larger commercial and industrial customers across our service territory outside of PJM, frankly, into Florida as well that are looking for increasing their natural gas capabilities. And so we continue to find that. Again, an opportunity for us to grow the business, and we're seeing those things pop up all over the place.

And we'll go next to Paul Fremont with Ladenburg.

My question has to do with, I guess, the schedule in the depreciation case. My understanding is, and I think it's next week that staff is supposed to come out with or file a third-party consultant report in the cases. Is that correct? And I guess, do you have any expectations with respect to what they are going to file?

So I would just say -- go ahead. I was just actually going to ask Jim. Jim, would you like to take this?

Yes. Thank you, Beth. Paul, as you probably know, the staff has been supportive of our approach here and in fact, has opposed an OPC motion to dismiss the proceeding. So we're expecting staff to make a recommendation in September and base that on their review of our filing, and we're confident that the filing will be received and be successful.

Great. And so what is it that -- is there anything on the schedule for them to do next week?

No, not the commission, Paul.

It appears we have no further questions at this time. I will now turn the program back over to Jeff Householder for any additional or closing remarks.

Thank you for joining us today. As always, we appreciate the continued interest in the company, and we look forward to updating you again next quarter. Goodbye.

Thank you. This concludes Chesapeake Utilities Corporation's Second Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.