Chesapeake Utilities closes Florida City Gas deal

December 1, 2023 25

Chesapeake Utilities in Dover will now have two-thirds of its capital investment plan in the next five years focused in Florida now that it closes on the Florida City Gas acquisition. | DBT PHOTO BY KATIE TABELING

DOVER — Within 65 days, Chesapeake Utilities has completed the purchase of Florida City Gas for $937 million, signaling that the central Delaware company will now spend more than half of its capital investments in the Sunshine State.

The utility company announced the sale was completed Friday, after quickly securing loan financing and completing a share sale in mid-November to supplement cash on hand. Florida City Gas serves five of the top 10 most populous counties in Florida, doubling Chesapeake Utilities’ customer base.

With Florida City Gas’ network of 3,800 miles of distribution main pipeline and 80 miles of transmission pipe, it also positions Chesapeake Utilities for significant growth.

“We are pleased to formally welcome Florida City Gas and excited about the opportunities we can pursue given our combined capabilities,” Chesapeake Utilities President and CEO Jeff Householder said in a statement. “The integration of our businesses creates a compelling foundation: one focused on driving sustainable earnings growth consistent with our long-term track record.”

To fund the acquisition, Chesapeake Utilities sold 4.4 million of shares of non-voting common stock at $82.72 per share. Barclays, RBC Capital Markets and Wells Fargo acted as joint lead book-running managers for the offer. When the sale closed Nov. 14, the utility company raised $367.2 million.

After announcing the acquisition’s completion Friday, Chesapeake Utilities’ share price rose more than 3% to a 60-day high of nearly $99.

Chesapeake Utilities also filed notice with the U.S. Securities and Exchange Commission that it will take out six loans totaling $550 million with an average 6.5% interest rate, due between 2027 and 2038, to help pay for the acquisition.

Headquartered in east Dover, Chesapeake Utilities is a diversified energy delivery company with a concentration on natural gas and offers services in electricity generation, propane among others. Among its assets includes 3,330 transmission lines across six states and 4,900 distribution mains. With more than 100,000 residential and commercial customers in natural gas, the company has picked up more business throughout the years by acquiring other companies.

Meanwhile, Florida City Gas serves about 120,000 residential and commercial natural gas customers across eight counties, including Miami-Dade and Palm Beach. Florida City Gas has historically shown a 4% annual residential customer growth rate over the last 4 years, in part due to the Sunshine State’s growing population with retirees seeking warmer climates.

“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,” Householder said.

With Florida City Gas and Florida Public Utilities, which Chesapeake Utilities bought in 2009, the company’s operations in Florida are expected to comprise roughly 60% of its operating income, according to a presentation made to investors on the deal.

Chesapeake Utilities projects its expenditure guidance to rise 65% to $1.8 billion for the five-year period that ends in 2028. More than two-thirds of the company’s capital projects will now be in Florida, including pipeline replacement programs, increased transmission capabilities and other expansions to support customer growth.

With this transaction, Chesapeake Utilities’ regulated operations are projected to represent approximately 87% of its business portfolio.

“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,” Chesapeake Utilities Chief Financial Officer Beth Cooper said. “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.”