Chesapeake focuses on regulated holdings with purchase of Florida City Gas

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Dover-based Chesapeake Utilities Corporation completed of the acquisition of Florida City Gas, which is now a wholly-owned subsidiary of the company.

This $900 million-plus transaction represents an expansion of Chesapeake Utilities’ footprint in a high-growth market in five of the top 10 most populous counties in the Sunshine State. It will double Chesapeake Utilities’ customer base and natural gas infrastructure in the state. Chesapeake’s other gas utility holdings are on the Delmarva Peninsula, which is seeing growth in some areas. Despite its warm climate, natural gas demand has grown in Florida, due to population growth.

Prior to the Florida Natural Gas deal Chesapeake had mainly grown by expanding its gas lines in existing markets along with “bolt on” acquisitions that included Elkton Gas in northeastern Maryland and a system in Ocean City, MD. The exception was a merger with Florida Public Utilities in an all-stock deal that greatly expanded the company’s its natural gas footprint and included a small electric utility in an area north of Jacksonville. Also, the company continued to add natural gas systems in all regions of Florida.

Its Delaware gas system extends from Middletown and includes Kent and eastern Sussex county. Areas north of the C&D Canal are in Delmarva Power’s gas territory.

Chesapeake shares were up nearly 4% on Friday. Shares have declined by low double digits over the last year. The company did issue additional stock to help pay for the purchase of the Florida utility. Utility stocks have not been popular on Wall Street, among them, Newark based Artesian Resources, which has seen its share price drop while it also issued stock. Artesian derives much of its revenue from regulated water utility operations.

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“We are pleased to formally welcome Florida City Gas and excited about the opportunities we can pursue given our combined capabilities,” said Jeff Householder, CEO, who formerly led Florida operations of the company before taking the C-Suite slot. “The integration of our businesses creates a compelling foundation: one focused on driving sustainable earnings growth consistent with our long-term track record. Together, we’ll strengthen our Florida presence, leveraging our core competencies and building upon our strong community and regulatory relationships, while continuing to meet the growing demand for natural gas.” 

As reported earlier, Chesapeake Utilities’ capital expenditure guidance is projected to be $1.5 billion to $1.8 billion for the five-year period ending 2028, an increase of 65% over its previous plan. Approximately 60% of the company’s upcoming five-year capital investment plan will be allocated to Florida, including investments related to pipeline replacement programs, expansions to support customer growth and increased transmission capabilities to reach new developments and support increased demand.

With this transaction, Chesapeake Utilities’ regulated operations are projected to represent approximately 87% of its business mix. Chesapeake also has pipelines, a propane business and a gas gathering operation in Ohio. Regulated businesses, while generating lower returns, typically provide more reliable earnings. Chesapeake has also sold off natural gas trading and a utility software businesses.

“We are excited about the long-term value creation anticipated from the FCG acquisition. Leveraging Chesapeake Utilities’ proven track record and disciplined approach, we aim to replicate the success of past acquisitions, like Florida Public Utilities,” said Beth Cooper, executive vice president, chief financial officer, treasurer and assistant corporate secretary. “We’ve successfully implemented the permanent financing plan for this transaction, maintaining a strong balance sheet. Well positioned for 2025 goals, we’ll drive earnings growth through strategic investments, regulatory initiatives and a continued focus on efficiencies.”  

Chesapeake got its start as a gas system in Dover and expanded into the Delmarva Peninsula. It later expanded into Florida with a strategy that included natural gas utility service coupled with propane for areas where adding piping was not profitable.

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