Chesapeake Utilities Corp. has entered into an agreement to purchase the operating assets of Eastern Shore Gas Company and its affiliate, Eastern Shore Propane Company. Both are indirect, wholly-owned subsidiaries of Energy Equity Partners, L.P. The deal opens the door to Dover, Del.-based Chesapeake expanding its natural gas service to the Ocean City, Md. area.
Terms of the transaction, subject to approval by Maryland regulators and governmental entities, were not immediately disclosed.
Chesapeake has been expanding in its two market areas, The Delmarva Peninsula and Florida, aided by growing supplies of natural gas.
Eastern Shore provides propane distribution service to approximately 11,000 residential and commercial customers in Worcester County, Md., primarily in Ocean City, West Ocean City, Ocean Pines, Berlin, Pocomoke and Snow Hill.
The propane distribution services are provided from central storage facilities through underground gas distribution mains and services that are similar to a natural gas distribution system.
These systems are under the jurisdiction of the Maryland Public Service Commission. Eastern Shore Propane provides propane bulk delivery service via individual propane tanks to more than 500 customers throughout Worcester County.
“Chesapeake is in the process of evaluating the potential conversion of some of the facilities of Eastern Shore Gas from propane to natural gas. Where economical and feasible, Chesapeake expects to undertake such conversions where feasible.
Chesapeake is also in the process of developing programs to assist customers in the conversion to natural gas in those areas where it becomes available,” said Jeffrey R. Tietbohl, Vice President of Chesapeake and senior leader responsible for Chesapeake’s natural gas distribution operating division in Maryland.
The transaction expands Chesapeake Utilities’ distribution system operations on the Eastern Shore of Maryland; increases Chesapeake’s platform for natural gas expansion efforts in Worcester County; and adds more than 11,500 new customers,nearly doubling Chesapeake Utilities’ current 12,800 natural gas distribution system customers served in Maryland.
“Chesapeake has been meeting the energy needs of the Delmarva Peninsula for more than 150 years. This acquisition further highlights Chesapeake’s commitment to grow our natural gas and propane operations on the Eastern Shore of Maryland. We believe this acquisition will enable us to grow our natural gas distribution business in Worcester County more quickly,” said Michael P. McMasters, CEO of Chesapeake Utilities.
In 2011, Chesapeake announced plans to initially extend its natural gas transmission pipeline through its subsidiary Eastern Shore Natural Gas Company to parts of Worcester County, Md. ESNG’s construction of the natural gas transmission pipeline in Worcester County is proceeding as planned and is expected to be completed later this summer. Chesapeake’s Maryland Division currently provides natural gas distribution service to customers in Wicomico, Dorchester and Caroline Counties.
Chesapeake expects to finance the purchase of the Eastern Shore Gas and Eastern Shore Propane operating assets using unsecured short-term debt. Management expects the transaction to be earnings accretive in 2013 and thereafter.
The transaction is subject to the approval of the Maryland Public Service Commission and the consent of certain local jurisdictions. The acquisition is expected to be completed in the fourth quarter of 2012.
Chesapeake Utilities is a diversified utility company engaged in natural gas distribution, transmission and marketing; electric distribution; propane gas distribution and wholesale marketing; advanced information services and other related services.
Chesapeake, through several divisions and subsidiaries, provides natural gas and propane distribution service to approximately 86,000 customers on the Delmarva Peninsula. It also plans to offer natural gas service to Cecil County, Md. in the northeastern corner of the state.
Chesapeake owns and operates a 402-mile interstate pipeline that transports natural gas from various points in Pennsylvania to customers in Delaware, Maryland and Pennsylvania through ESNG, its pipeline transmission subsidiary.
Well said!