Chesapeake Utilities Corp. is acquiring Elkton Gas from South Jersey industries for a reported $15 million.
Upon completion of the transaction, Elkton Gas will become a wholly-owned subsidiary of Chesapeake Utilities. The transaction was approved by the boards of both companies.
South Jersey had acquired Elkton Gas last year as part of a purchase of natural gas utilities from Southern Co.
The acquisition, which is expected to close in the first half of 2020, is subject to approval by the Maryland Public Service Commission.
Elkton Gas delivers natural gas to approximately 7,000 residential and commercial customers in a portion of Cecil County, MD.
Elkton Gas will continue to operate out of its existing office with the same local personnel.
Elkton Gas has been a long-term customer of Eastern Shore Natural Gas Company, an interstate transmission pipeline company owned by Chesapeake Utilities Corporation.
The acquisition would allow Chesapeake Utilities to bolster its presence in the county, which has seen growth in distribution center jobs, with a Great Wolf Lodge in the works.
Elkton Gas has operated under various owners over the years, but never expanded outside its franchised territory. In the heavily regulated natural gas industry, incentives for expansion were limited by the volatile nature of natural gas prices.
The discovery of vast natural gas resources in Pennsylvania changed that equation, with Chesapeake expanding its system on the Delmarva Peninsula. Delmarva Power, which has a neighboring natural gas utility in northern New Castle County, is also working to add natural gas customers.
The lack of natural gas service had long been viewed as a negative in efforts to attract business to Cecil, which has long been viewed as the most rural county along the I-95 corridor between Washington, D.C., and Boston.
Several years ago, Chesapeake expanded into Cecil County outside of Elkton and has managed the territory largely from its Delaware operations.
“This is an exciting fit and aligns with our company’s growth strategy to identify new investment opportunities to further our future earnings growth. The acquisition of Elkton Gas is significant in that it jumpstarts our current operation, enabling us to more quickly expand our footprint in Cecil County,” said Jeff Householder, CEO of Chesapeake Utilities Corporation. “We are excited about our prospects for natural gas distribution growth in this growing area and are committed to delivering superior service to the customers and communities we serve by: increasing their energy options; growing our systems and infrastructure in order to provide safe and reliable delivery of energy to customers; and providing exceptional customer service.”
“Acquiring these operational resources in Cecil County offers close proximity to the I-95 interstate corridor and to our existing Cecil County service territory which will better position us for the commercial, industrial and residential growth opportunities projected for the area,” said Shane Breakie, vice president of Chesapeake Utilities Corporation, who oversees the company’s Delmarva natural gas operations including Cecil County. “Adding the Elkton Gas platform including their talented team of employees to our existing presence creates a stronger consolidated operation to better support customers and the natural gas infrastructure in the area.”
“The sale of this asset supports the goals of our strategic plan, to focus on our core business in New Jersey while identifying opportunities to strengthen our balance sheet,” said Mike Renna, South Jersey Industries CEO.
Chesapeake Utilities Corporation is a diversified energy company engaged in natural gas distribution and transmission; electricity generation and distribution; propane gas distribution; and other businesses. Chesapeake is based in Dover and has operations in Delmarva, Ohio, and Florida.
