What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 196 added, 181 removed, 759 unchanged (33% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

8 unchanged sentences

Operations 41,217 40,182 128,147 120,981

Transaction-related expenses 3,899 — 3,899 —

Maintenance 5,125 4,501 15,487 13,273

3 unchanged sentences

Operating Income 20,228 18,648 103,488 99,981

Other income, net 831 2,584 1,107 3,498

Other income (expense), net ( 72 ) 957 1,036 4,454

Interest charges 7,076 6,240 21,272 17,404

11 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

3 unchanged sentences

Employee Benefits, net of tax:

Reclassifications of amortization of prior service credit and actuarial loss, net of tax of $3 and $6, $5 and $13, respectively 12 18 21 35

Reclassifications of amortization of prior service credit and actuarial loss, net of tax of $3, $6, $10 and $19, respectively 11 18 32 53

Cash Flow Hedges, net of tax:

8 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Assets June 30,

Assets September 30,

2023 December 31,

36 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities June 30,

Capitalization and Liabilities September 30,

2023 December 31,

38 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

49 unchanged sentences

Compensation Treasury

Balance at March 31, 2022 17,719,388 $ 8,624 $ 373,694 $ 421,344 $ 1,850 $ 6,477 $ ( 6,477 ) $ 805,512

Balance at June 30, 2022 17,734,794 $ 8,632 $ 376,866 $ 428,833 $ 1,370 $ 7,018 $ ( 7,018 ) $ 815,701

Net income — — — 9,662 — — — 9,662

6 unchanged sentences

Treasury stock activities — — — — — ( 15 ) 15 —

Balance at June 30, 2022 17,734,794 $ 8,632 $ 376,866 $ 428,833 $ 1,370 $ 7,018 $ ( 7,018 ) $ 815,701

Balance at September 30, 2022 17,738,785 $ 8,634 $ 378,261 $ 428,941 $ ( 1,398 ) $ 7,003 $ ( 7,003 ) $ 814,438

Balance at December 31, 2021 17,655,410 $ 8,593 $ 371,162 $ 393,072 $ 1,303 $ 7,240 $ ( 7,240 ) $ 774,130

Net income — — — 63,646 — — — 63,646

Other comprehensive income — — — — 67 — — 67

Other comprehensive loss — — — — ( 2,701 ) — — ( 2,701 )

Dividends declared ($1.550 per share) — — — ( 27,777 ) — — — ( 27,777 )

4 unchanged sentences

Treasury stock activities — — — — — ( 237 ) 237 —

Balance at September 30, 2022 17,738,785 $ 8,634 $ 378,261 $ 428,941 $ ( 1,398 ) $ 7,003 $ ( 7,003 ) $ 814,438

Balance at June 30, 2023 17,796,741 $ 8,662 $ 380,830 $ 477,795 $ ( 3,059 ) $ 9,001 $ ( 9,001 ) $ 864,228

Balance at March 31, 2023 17,789,856 $ 8,659 $ 379,703 $ 472,209 $ ( 1,983 ) $ 8,816 $ ( 8,816 ) $ 858,588

Net income — — — 9,407 — — — 9,407

6 unchanged sentences

Treasury stock activities — — — — — ( 14 ) 14 —

Balance at June 30, 2023 17,796,741 $ 8,662 $ 380,830 $ 477,795 $ ( 3,059 ) $ 9,001 $ ( 9,001 ) $ 864,228

Balance at September 30, 2023 17,796,741 $ 8,662 $ 382,551 $ 476,601 $ ( 1,137 ) $ 8,987 $ ( 8,987 ) $ 866,677

Balance at December 31, 2022 17,741,418 $ 8,635 $ 380,036 $ 445,509 $ ( 1,379 ) $ 7,060 $ ( 7,060 ) $ 832,801

7 unchanged sentences

Treasury stock activities — — — — — 1,927 ( 1,927 ) —

Balance at June 30, 2023 17,796,741 $ 8,662 $ 380,830 $ 477,795 $ ( 3,059 ) $ 9,001 $ ( 9,001 ) $ 864,228

Balance at September 30, 2023 17,796,741 $ 8,662 $ 382,551 $ 476,601 $ ( 1,137 ) $ 8,987 $ ( 8,987 ) $ 866,677

(1) 2,000,000 shares of preferred stock at $ 0.01 par value have been authorized.

1 unchanged sentence

accordingly, no information has been included in the statements of stockholders’ equity.

(2) Includes 110,277 , 108,143 , 110,835 , and 116,238 shares at June 30, 2023, December 31, 2022, June 30, 2022 and December 31, 2021, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(2) Includes 106,960 , 108,143 , 107,659 , and 116,238 shares at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(3) Can include shares issued under the Retirement Savings Plan, DRIP and ATM equity issuances.

1 unchanged sentence

(5) The shares issued under the SICP are net of shares withheld for employee taxes.

For the six months ended June 30, 2023 and 2022, we withheld 19,859 and 21,832 shares, respectively, for employee taxes.

For the nine months ended September 30, 2023 and 2022, we withheld 19,859 and 21,832 shares, respectively, for employee taxes.

The accompanying notes are an integral part of these condensed consolidated financial statements.

13 unchanged sentences

Calculation of Earnings Per Share

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

11 unchanged sentences

Diluted Earnings Per Share $ 0.53 $ 0.54 $ 3.47 $ 3.58

Acquisition of Davenport Energy

In June 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City, North Carolina propane division for approximately $ 2.0 million.

Through this acquisition, we expanded our operating footprint further into

North Carolina, where customers are served by Sharp Energy’s Diversified Energy division.

Sharp added approximately 850 customers, along with distribution of approximately 0.4 million gallons of propane annually.

We recorded $ 1.5 million in property plant and equipment, $ 0.5 million in goodwill, and immaterial amounts associated with customer relationships and non-compete agreements, all of which are deductible for income tax purposes.

All amounts initially recorded in connection with this acquisition are now final as a result of the conclusion of the measurement period;

no further adjustments were necessary.

The financial results associated with this acquisition are included within our propane distribution operations within our Unregulated Energy segment.

Acquisition of Florida City Gas

In September 2023, we entered into a definitive stock purchase agreement with NextEra Energy, Inc.

to acquire FCG for approximately $ 923.0 million in cash, subject to certain working capital adjustments.

The transaction is expected to close by the end of the fourth quarter of 2023, subject to customary closing conditions and certain regulatory approvals, at which time FCG will become a wholly-owned subsidiary of the Company.

FCG is a regulated utility that is expected to be included within our Regulated Energy segment.

FCG serves approximately 120,000 residential and commercial natural gas customers across eight counties in Florida, including Miami-Dade, Broward, Brevard, Palm Beach, Hendry, Martin, St.

Lucie and Indian River.

Its natural gas system includes approximately 3,800 miles of distribution main and 80 miles of transmission pipe.

Simultaneous with execution of the definitive purchase agreement, we obtained a commitment for a 364-day bridge loan facility (the “Bridge Facility”) for up to $ 965.0 million to fund the acquisition.

In October 2023, the Bridge Facility commitment was extended to include additional lending parties.

The Bridge Facility may be utilized to finance the acquisition in whole or part, largely based upon the proceeds from any related debt and/or equity financings we undertake.

For additional details related to the Bridge Facility see Note 15, Short-Term Borrowings.

Acquisition of Planet Found Energy Development

In October 2022, we acquired Planet Found Energy Development, LLC ("Planet Found") for $ 9.5 million.

In connection with this acquisition, we recorded a $ 0.9 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

In connection with this acquisition, we recorded a $ 0.9 million liability which was subject to the seller's adherence to various provisions contained in the purchase agreement and was released after the first anniversary of the transaction closing.

We accounted for this acquisition as a business combination within our Unregulated Energy segment beginning in the fourth quarter of 2022.

Planet Found's farm scale anaerobic digestion pilot system and technology produces biogas from 1,200 tons of poultry litter annually, which can be used to create renewable energy in the form of electricity or upgraded to renewable natural gas.

The transaction will accelerate our efforts in converting poultry waste to renewable, sustainable energy while simultaneously improving the local environments in our service territories.

The operating revenues and operating income of Planet Found were not material to our consolidated results for the three and six months ended June 30, 2023.

The transaction accelerated our efforts in converting poultry waste to renewable, sustainable energy while simultaneously improving the local environments in our service territories.

The operating revenues and operating income of Planet Found were not material to our consolidated results for the three and nine months ended September 30, 2023.

In connection with this acquisition, we recorded $ 4.4 million in intangible assets associated primarily with intellectual property and non-compete agreements, $ 4.0 million in property plant and equipment, $ 1.1 million in goodwill, and less than $ 0.1 million in working capital, all of which are deductible for income tax purposes.

The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions and finalization prior to the first anniversary of the transaction closing.

Revenue Recognition

2 unchanged sentences

Typically, our customers pay for the goods and/or services we provide in the month following the satisfaction of our performance obligation.

The following table displays our revenue by major source based on product and service type for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

The following tables display our revenue by major source based on product and service type for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

27 unchanged sentences

(1) In accordance with the Florida PSC approval of our natural gas base rate proceeding, effective March 1, 2023, our natural gas distribution businesses in Florida (FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities' CFG division, collectively, “Florida natural gas distribution businesses”) have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

( 2) Total operating revenues for the three months ended June 30, 2023 include other revenue (revenues from sources other than contracts with customers) of $ 0.2 million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively and $( 0.1 ) million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively, for the three months ended June 30, 2022.

( 2) Total operating revenues for the three months ended September 30, 2023 include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively, and $ 0.1 million for both our Regulated and Unregulated Energy segments for the three months ended September 30, 2022.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

The following table displays our revenue by major source based on product and service type for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

27 unchanged sentences

(2) Total operating revenues for the six months ended June 30, 2023 include other revenue (revenues from sources other than contracts with customers) of $ 0.8 million and $ 0.2 million for our Regulated and Unregulated Energy segments, respectively and $ 0.1 million and $ 0.2 million for our Regulated and Unregulated Energy segments, respectively, for the six months ended June 30, 2022.

(2) Total operating revenues for the nine months ended September 30, 2023 include other revenue (revenues from sources other than contracts with customers) of $ 0.9 million and $ 0.3 million for our Regulated and Unregulated Energy segments, respectively, and $ 0.2 million and $ 0.3 million for our Regulated and Unregulated Energy segments, respectively, for the nine months ended September 30, 2022.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

1 unchanged sentence

The timing of revenue recognition, customer billings and cash collections results in trade receivables, unbilled receivables (contract assets), and customer advances (contract liabilities) in our condensed consolidated balance sheets.

The balances of our trade receivables, contract assets, and contract liabilities as of June 30, 2023 and December 31, 2022 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of September 30, 2023 and December 31, 2022 were as follows:

Trade Receivables Contract Assets (Current) Contract Assets (Non-current) Contract Liabilities (Current)

3 unchanged sentences

42,988 18 3,589 1,207

Decrease $ ( 20,547 ) $ — $ ( 534 ) $ ( 389 )

Increase (Decrease) $ ( 18,699 ) $ — $ ( 732 ) $ 224

Our trade receivables are included in trade and other receivables in the condensed consolidated balance sheets.

4 unchanged sentences

Our performance obligation is satisfied over the term of the respective customer retail program on a ratable basis.

For the three months ended June 30, 2023 and 2022, we recognized revenue of $ 0.2 million and $ 0.3 million, respectively.

For the six months ended June 30, 2023 and 2022, we recognized revenue of $ 0.4 million and $ 0.7 million, respectively.

For the three months ended September 30, 2023 and 2022, we recognized revenue of $ 0.1 million and $ 0.3 million, respectively.

For the nine months ended September 30, 2023 and 2022, we recognized revenue of $ 0.5 million and $ 1.0 million, respectively.

Remaining Performance Obligations

Our businesses have long-term fixed fee contracts with customers in which revenues are recognized when performance obligations are satisfied over the contract term.

Revenue for these businesses for the remaining performance obligations, at June 30, 2023, are expected to be recognized as follows:

Revenue for these businesses for the remaining performance obligations, at September 30, 2023, are expected to be recognized as follows:

(in thousands) 2023 2024 2025 2026 2027 2028 2029 and thereafter

8 unchanged sentences

Refer to the additional details below pertaining to the Customer Information System Regulatory Asset Petition and COVID-19 impact.

In September 2023, the Delaware Division submitted the first-in-the-state Energy Efficiency Rider application for natural gas with the Delaware PSC after obtaining an affirmative recommendation from the Delaware Energy Efficiency Advisory Council (“EEAC”).

The application applies to a portfolio of four programs including, Home Energy Counseling, Home Performance with Energy Star, Assisted Home Performance with Energy Star, and standard Offer Program in which customers can participate and allow for recovery.

In October 2023, the opening order in the docket was issued with comments due in December 2023.

Ocean City Maryland Reinforcement:

In March 2022, we filed a Section 7(f) - Request for Service Area Determination with the FERC regarding plans to extend our natural gas facilities across the Delaware/Maryland state line from Sussex County, Delaware, to Worcester County, Maryland, to provide a secondary feed to Sandpiper Energy.

The FERC approved the Section 7(f) request on August 29, 2022.

The project will increase the reliability of the existing distribution system in those areas while also expanding infrastructure to serve new customers.

Construction was completed during the second quarter of 2023.

During the second quarter of 2022, we began construction of an extension of service into North Ocean City, Maryland.

Our Delaware natural gas division and Sandpiper installed approximately 5.7 miles of pipeline across southern Sussex County, Delaware to Fenwick Island, Delaware and Worcester County, Maryland.

The project reinforces our existing system in Ocean City, Maryland and enables incremental growth along the pipeline.

Construction of this project was completed in the second quarter of 2023.

Wildlight Expansion:

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Beachside Pipeline Extension:

In June 2021, Peninsula Pipeline and Florida City Gas entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas’ growth along the Indian River's barrier island.

In June 2021, Peninsula Pipeline and, at that time, an unrelated party, Florida City Gas entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas’ growth along the Indian River's barrier island.

As part of this agreement, Peninsula Pipeline constructed 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida area, traveling east under the Intercoastal Waterway and southward on the barrier island.

The project was placed in-service during April 2023.

St.Cloud / Twin Lakes Expansion:

Cloud / Twin Lakes Expansion:

In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU, for an additional 2,400 Dt/d of firm service in the St.

1 unchanged sentence

As part of this agreement, Peninsula Pipeline will construct a pipeline extension and regulator station for FPU.

The extension will be used to support new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes.

The expansion will also improve reliability and provide operational benefits to FPU's existing distribution system in the area, supporting future growth.

The extension supports new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes.

The expansion also improves reliability and provides operational benefits to FPU's existing distribution system in the area, supporting future growth.

The petition was approved by the Florida PSC in October 2022.

We expect this expansion to be placed into service during the third quarter of 2023.

The expansion was placed into service during the third quarter of 2023.

Storm Protection Plan:

6 unchanged sentences

The Commission approved the petition in April 2023.

Approval of the agreement allowed Peninsula Pipeline to complete the acquisition of the existing pipeline in May 2023 which is being utilized to serve our current natural gas customers as well as enable us to serve new customers.

Approval of the agreement allowed Peninsula Pipeline to complete the acquisition of the existing pipeline in May 2023 which is being utilized to serve both current and new natural gas customers.

In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program.

GUARD is a ten-year program to enhance the safety, reliability, and accessibility of portions of our natural gas distribution system.

We have identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and M&R equipment and system reliability projects.

In August 2023, the Florida PSC approved the GUARD program, with the exception of reliability projects with an approximate value of $10 million.

The remainder of the program was approved as filed, which included $205 million of capital expenditures projected to be spent over a 10-year period.

We identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and maintenance and repair equipment and system reliability projects.

In August 2023, the Florida PSC approved the GUARD program, which included $ 205.0 million of capital expenditures projected to be spent over a 10-year period.

Newberry Expansion :

In April 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 8,000 Dt/d of firm service in the Newberry, Florida area.

In July 2023, the Florida PSC approved the company's recommendation to proceed with this project.

Peninsula Pipeline will construct a pipeline extension, which will be used by FPU to support the development of a natural gas distribution system to provide gas service to the City of Newberry.

The petition was approved by the Florida PSC in the third quarter of 2023.

Amendment to Escambia County Agreement :

2 unchanged sentences

The additional delivery point comes at the request of an FPU customer and will be used to enhance natural gas service in the area.

Currently, the petition is under review by the Florida PSC.

A decision is expected in the third quarter of 2023.

The amendment was approved by the Florida PSC in the third quarter of 2023.

Florida Electric Depreciation Study :

The Florida PSC requires electric utilities to file a depreciation study every four years to reevaluate and set depreciation rates for the utility's plant assets.

In June 2023, FPU filed a petition with the Florida PSC for approval of it’s proposed depreciation rates.

If approved, new rates will become effective retroactively on January 1, 2023.

In June 2023, FPU filed a petition with the Florida PSC for approval of its proposed depreciation rates.

If approved, new rates would become effective retroactively as of January 1, 2023.

Eastern Shore

1 unchanged sentence

In January 2022, Eastern Shore submitted a prior notice filing with the FERC pursuant to blanket certificate procedures, regarding its proposal to install an additional compressor unit and related facilities at Eastern Shore's compressor station in Bridgeville, Sussex County, Delaware.

The project will enable Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on its pipeline system.

The project obtained FERC approval in December 2022, and is under construction, estimated to go into service in the fourth quarter of 2023.

The project enables Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on its pipeline system.

The project obtained FERC approval in December 2022 and went into service in October 2023.

Capital Cost Surcharge :

In December 2022, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities as a result of mandated highway relocation projects as well as compliance with a Pipeline and Hazardous Materials Safety Administration ("PHMSA") regulation.

Administration ("PHMSA") regulation.

The capital cost surcharge mechanism was approved in Eastern Shore’s last rate case.

2 unchanged sentences

The combined revised surcharge became effective January 1, 2023.

Worcester Resiliency Upgrade:

In August 2023, Eastern Shore filed an application with the FERC requesting authorization to construct the Worcester Resiliency Upgrade, which consists of a mixture of storage and transmission facilities in Sussex County, DE and Wicomico, Worcester, and Somerset Counties in Maryland.

The project will provide long-term incremental supply necessary to support the growing demand of the participating shippers.

Eastern Shore has requested certificate authorization by December 2024, with a target in-service date by the third quarter of 2025.

Various Jurisdictional Activity Related to the Joint Customer Information System Project

1 unchanged sentence

The petition was approved by the Maryland PSC in August 2022.

A similar petition for our Florida Regulated Energy businesses was filed during the same time frame and was initially denied.

The Florida PSC subsequently approved capitalization of these expenses.

A similar petition for our Florida Regulated Energy businesses was filed during the same time frame, however, the Florida PSC approved capitalization of these expenses in lieu of establishment of regulatory assets.

Additionally, our Delaware Division has the ability to defer these costs as a regulatory asset.

11 unchanged sentences

The regulatory asset is being amortized over two years and is recovered through the Purchased Gas Adjustment and Swing Service mechanisms for our natural gas distribution businesses and through the Fuel Purchased Power Cost Recovery clause for our electric division.

As of June 30, 2023 and December 31, 2022, our total COVID-19 regulatory asset balance was $ 0.7 million and $ 1.2 million, respectively.

As of September 30, 2023 and December 31, 2022, our total COVID-19 regulatory asset balance was $ 0.5 million and $ 1.2 million, respectively.

Summary TCJA Table

Customer rates for our regulated businesses were adjusted, as approved by the regulators, prior to 2020 with the exception of Elkton Gas, which implemented a one-time bill credit in May 2020.

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of June 30, 2023 and December 31, 2022:

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of September 30, 2023 and December 31, 2022:

Amount (in thousands)

Operation and Regulatory Jurisdiction June 30, 2023 December 31, 2022 Status

Operation and Regulatory Jurisdiction September 30, 2023 December 31, 2022 Status

Eastern Shore (FERC) $ 34,190 $ 34,190 Will be addressed in Eastern Shore's next rate case filing.

14 unchanged sentences

and Winter Haven, Key West, Pensacola, Sanford and West Palm Beach, Florida.

As of June 30, 2023 and December 31, 2022, we had approximately $ 3.4 million and $ 4.3 million, respectively, in environmental liabilities related to the former MGP sites.

As of June 30, 2023 and December 31, 2022, we have cumulative regulatory assets of $ 0.5 million and $ 0.8 million, respectively, for future recovery of environmental costs for customers.

Specific to FPU’s four MGP sites in Key West, Pensacola, Sanford and West Palm Beach, FPU has approval for and has recovered, through a combination of insurance and customer rates, $ 14.0 million of its environmental costs related to its MGP sites as of June 30, 2023.

As of September 30, 2023 and December 31, 2022, we had approximately $ 3.5 million and $ 4.3 million, respectively, in environmental liabilities related to the former MGP sites.

As of September 30, 2023 and December 31, 2022, we have cumulative regulatory assets of $ 0.5 million and $ 0.8 million, respectively, for future recovery of environmental costs from customers.

Environmental liabilities for our MGP sites are recorded on an undiscounted basis based on the estimate of future costs provided by independent consultants.

4 unchanged sentences

The remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of our West Palm Beach Florida site.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed later in 2023.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed in 2024.

Other Commitments and Contingencies

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If FPU fails to meet the requirements, it has to provide the supplier a written explanation of actions taken, or proposed to be taken, to become compliant.

Failure to comply with the ratios specified

in the Gulf Power agreement could also result in FPU having to provide an irrevocable letter of credit.

As of June 30, 2023, FPU was in compliance with all of the requirements of its fuel supply contracts.

Failure to comply with the ratios specified in the Gulf Power agreement could also result in FPU having to provide an irrevocable letter of credit.

As of September 30, 2023, FPU was in compliance with all of the requirements of its fuel supply contracts.

Eight Flags provides electricity and steam generation services through its CHP plant located on Amelia Island, Florida.

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The Board of Directors has authorized us to issue corporate guarantees securing obligations of our subsidiaries and to obtain letters of credit securing our subsidiaries' obligations.

The maximum authorized liability under such guarantees and letters of credit as of June 30, 2023 was $ 20.0 million.

The aggregate amount guaranteed related to our subsidiaries at June 30, 2023 was approximately $ 14.2 million with the guarantees expiring on various dates through May 2024.

The maximum authorized liability under such guarantees and letters of credit as of September 30, 2023 was $ 20.0 million.

The aggregate amount guaranteed related to our subsidiaries at September 30, 2023 was approximately $ 14.2 million with the guarantees expiring on various dates through August 2024.

In addition, the Board has authorized us to issue specific purpose corporate guarantees.

The amount of specific purpose guarantees outstanding at June 30, 2023 was $ 4.0 million.

As of June 30, 2023, we have issued letters of credit totaling approximately $ 5.9 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions, the capacity agreement between NEXUS and Aspire, and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through April 2024 and to date, none have been used.

The amount of specific purpose guarantees outstanding at September 30, 2023 was $ 4.0 million.

As of September 30, 2023, we have issued letters of credit totaling approximately $ 5.9 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions, the capacity agreement between NEXUS and Aspire, and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through September 2024 and to date, none have been used.

We do not anticipate that the counterparties will draw upon these letters of credit, and we expect that they will be renewed to the extent necessary in the future.

1 unchanged sentence

We use the management approach to identify operating segments.

We organize our business around differences in regulatory environment and the operating results of each segment are regularly reviewed by the chief operating decision maker, our Chief Executive Officer, in order to make decisions about resources and to assess performance.

We organize our business around differences in regulatory environment and the operating results of each segment are regularly reviewed by the chief operating decision maker, our President and Chief Executive Officer, in order to make decisions about resources and to assess performance.

Our operations are entirely domestic and are comprised of two reportable segments:

8 unchanged sentences

The following table presents financial information about our reportable segments:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

9 unchanged sentences

Total intersegment revenues $ 5,878 $ 7,886 $ 19,575 $ 20,592

Operating Income

Operating Income (Loss)

Regulated Energy $ 24,912 $ 23,663 $ 91,828 $ 84,202

2 unchanged sentences

Operating income 20,228 18,648 103,488 99,981

Other income, net 831 2,584 1,107 3,498

Other income (expense), net ( 72 ) 957 1,036 4,454

Interest charges 7,076 6,240 21,272 17,404

3 unchanged sentences

(1) All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 30, 2023 December 31, 2022

Identifiable Assets

5 unchanged sentences

Common Stock Issuances

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our DRIP and ATM programs.

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our DRIP and our previous ATM programs.

Depending on our capital needs and subject to market conditions, in addition to other possible debt and equity offerings, we may issue additional shares under the direct stock purchase component of the DRIP.

In 2022, we issued less than 0.1 million shares at an average price per share of $ 136.26 and received net proceeds of $ 4.5 million under the DRIP.

In the first six months of 2023, there were no issuances under the DRIP.

In the first nine months of 2023, there were no issuances under the DRIP.

Our most recent ATM equity program, which allowed us to issue and sell shares of our common stock up to an aggregate offering price of $ 75.0 million, expired in June 2023.

We expect to execute a new ATM during the third quarter of 2023.

We use the net proceeds from our share issuances, after fees, for general corporate purposes, including, but not limited to, financing of capital expenditures, repayment of short-term debt, financing acquisitions, investing in subsidiaries, and general working capital purposes.

Accumulated Other Comprehensive Income (Loss)

Defined benefit pension and postretirement plan items, unrealized gains (losses) of our propane swap agreements designated as commodity contracts cash flow hedges, and the unrealized gains (losses) of our interest rate swap agreements designated as cash flow hedges are the components of our accumulated other comprehensive income (loss).

The following tables present the changes in the balance of accumulated other comprehensive income (loss) components as of June 30, 2023 and 2022.

Defined benefit pension and postretirement plan items, unrealized gains (losses) of our propane swap agreements designated as commodity contract cash flow hedges, and the unrealized gains (losses) of our interest rate swap agreements designated as cash flow hedges are the components of our accumulated other comprehensive income (loss).

The following tables present the changes in the balances of accumulated other comprehensive income (loss) components as of September 30, 2023 and 2022.

All amounts in the following tables are presented net of tax.

Defined Benefit Commodity Interest Rate

Pension and Contracts Swap

Pension and Contract Swap

Postretirement Cash Flow Cash Flow

5 unchanged sentences

Net current-period other comprehensive income (loss) 32 ( 458 ) 668 242

As of June 30, 2023 $ ( 2,485 ) $ ( 1,079 ) $ 505 $ ( 3,059 )

As of September 30, 2023 $ ( 2,474 ) $ 634 $ 703 $ ( 1,137 )

As of December 31, 2021 $ ( 3,268 ) $ 4,571 $ — $ 1,303

Other comprehensive income before reclassifications — 2,206 — 2,206

Other comprehensive income (loss) before reclassifications — ( 613 ) 153 ( 460 )

Amounts reclassified from accumulated other comprehensive income (loss) 53 ( 2,294 ) — ( 2,241 )

Net prior-period other comprehensive income 35 32 — 67

As of June 30, 2022 $ ( 3,233 ) $ 4,603 $ — $ 1,370

Deferred gains or losses for our commodity contracts and interest rate swap cash flow hedges are recognized in earnings upon settlement.

Net prior-period other comprehensive income (loss) 53 ( 2,907 ) 153 ( 2,701 )

As of September 30, 2022 $ ( 3,215 ) $ 1,664 $ 153 $ ( 1,398 )

Deferred gains or losses for our commodity contract and interest rate swap cash flow hedges are recognized in earnings upon settlement.

Amortization of the net loss related to the defined benefit pension plan and postretirement plans is included in the computation of net periodic costs (benefits).

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See Note 12, Derivative Instruments , for additional details.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net, gains and losses on propane swap agreement contracts are included in revenue and unregulated propane and natural gas costs, and the realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

The income tax benefit is included in income tax expense in the accompanying condensed consolidated statements of income.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net, gains and losses on commodity contracts are included in revenue and unregulated propane and natural gas costs, and the realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

The income tax effects of these items are included in income tax expense in the accompanying condensed consolidated statements of income.

Employee Benefit Plans

Net periodic benefit costs for the FPU Pension Plan for the three and six months ended June 30, 2023 and 2022 is set forth in the following table:

Three Months Ended Six Months Ended

June 30, June 30,

FPU Pension Plan 2023 2022 2023 2022

Net periodic cost (benefit) for the FPU Pension Plan for the three and nine months ended September 30, 2023 and 2022 is set forth in the following table:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

(in thousands)

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Expected return on plan assets ( 668 ) ( 857 ) ( 2,004 ) ( 2,571 )

Amortization of net (gain) loss 110 124 220 248

Amortization of net loss 110 124 330 372

Total periodic cost (benefit) $ 75 $ ( 284 ) $ 225 $ ( 852 )

The following table presents the amounts included in the regulatory asset and accumulated other comprehensive income (loss) that were recognized as components of the FPU Pension Plan's net periodic benefit cost during the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

June 30, June 30,

FPU Pension Plan 2023 2022 2023 2022

The following table presents the amounts included in the regulatory asset and accumulated other comprehensive income (loss) that were recognized as components of the FPU Pension Plan's net periodic cost (benefit) during the three and nine months ended September 30, 2023 and 2022:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

(in thousands)

2 unchanged sentences

Recognized from regulatory asset 89 100 267 300

Total net loss in net periodic benefit cost $ 110 $ 124 $ 220 $ 248

Total net loss in net periodic cost (benefit) $ 110 $ 124 $ 330 $ 372

(1) See Note 9 , Stockholders' Equity .

Net periodic benefit cost for our other pension and post-retirement benefit plans were not material for the three and six months ended June 30, 2023 and 2022.

Net periodic benefit costs for our other pension and postretirement benefit plans were not material for the three and nine months ended September 30, 2023 and 2022.

The components of our net periodic costs have been recorded or reclassified to other expense, net in the condensed consolidated statements of income.

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The portion of the unrecognized pension and postretirement benefit costs related to FPU’s unregulated operations and Chesapeake Utilities' operations is recorded to accumulated other comprehensive income (loss).

During the three and six months ended June 30, 2023, there were no contributions to the FPU Pension Plan and we do not expect to contribute to the FPU Pension Plan during 2023.

During the three and nine months ended September 30, 2023, there were no contributions to the FPU Pension Plan and we do not expect to contribute to the FPU Pension Plan during 2023.

The Chesapeake SERP, the Chesapeake Postretirement Plan and the FPU Medical Plan are unfunded and are expected to be paid out of our general funds.

Cash benefits paid under these other post retirement benefit plans for the three and six months ended June 30, 2023 were approximately $ 0.2 million and $ 0.3 million, respectively.

We expect to pay total cash benefits of approximately $ 0.4 million for these other post retirement benefit plans in 2023.

Cash benefits paid under these other postretirement benefit plans for the three and nine months ended September 30, 2023 were approximately $ 0.2 million and $ 0.5 million, respectively.

We expect to pay total cash benefits of less than $ 1.0 million for these other postretirement benefit plans in 2023.

Non-Qualified Deferred Compensation Plan

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All obligations arising under the Non-Qualified Deferred Compensation Plan are payable from our general assets, although we have established a Rabbi Trust to informally fund the plan.

Deferrals of cash compensation may be invested by the participants in various mutual funds (the same options that are available in the Retirement Savings Plan).

Deferrals of cash compensation may be

invested by the participants in various mutual funds (the same options that are available in the Retirement Savings Plan).

The participants are credited with gains or losses on those investments.

Assets held in the Rabbi Trust, recorded as Investments on the condensed consolidated balance sheet, had a fair value of $ 11.7 million at June 30, 2023 and $ 10.6 million at December 31, 2022.

Assets held in the Rabbi Trust, recorded as Investments on the condensed consolidated balance sheet, had a fair value of $ 11.1 million at September 30, 2023 and $ 10.6 million at December 31, 2022.

The assets of the Rabbi Trust are at all times subject to the claims of our general creditors.

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The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted, and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

June 30, June 30,

The table below presents the amounts included in net income related to share-based compensation expense for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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Our Compensation Committee is authorized to grant our key employees the right to receive awards of shares of our common stock, contingent upon the achievement of established performance goals and subject to SEC transfer restrictions once awarded.

Our President and CEO has the right to issue awards of shares of our common stock, to other officers of the Company, contingent upon various performance goals and subject to SEC transfer restrictions.

Our President and CEO has the right to issue awards of shares of our common stock, to other officers and key employees of the Company, contingent upon various performance goals and subject to SEC transfer restrictions.

We currently have several outstanding multi-year performance plans, which are based upon the successful achievement of long-term goals, growth and financial results and comprise both market-based and performance-based conditions and targets.

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For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each share granted.

The table below presents the summary of the stock activity for awards to key employees for the six months ended June 30, 2023:

The table below presents the summary of the stock activity for awards to key employees for the nine months ended September 30, 2023:

Number of Shares Weighted Average

3 unchanged sentences

Expired ( 2,053 ) $ 94.64

Outstanding—June 30, 2023 214,546 $ 116.04

During the six months ended June 30, 2023, we granted awards of 80,752 shares of common stock to key employees under the SICP, including awards granted in February 2023 to key employees appointed in officer positions.

Forfeited ( 1,364 ) $ 114.90

Outstanding—September 30, 2023 213,182 $ 116.56

During the nine months ended September 30, 2023, we granted awards of 80,752 shares of common stock to officers and key employees under the SICP, including awards granted in February 2023 to key employees appointed to officer positions.

The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, 2025.

All of these stock awards are earned based upon the successful achievement of long-term financial results, which are comprised of market-based and performance-based conditions or targets.

The fair value of each performance-based condition or target is equal to the market price of our common stock on the grant date of each award.

The fair value of

each performance-based condition or target is equal to the market price of our common stock on the grant date of each award.

For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each market-based award granted.

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Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $ 2.5 million.

At June 30, 2023, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 25.5 million.

At June 30, 2023, there was approximately $ 8.7 million of unrecognized compensation cost related to these awards, which will be recognized through 2025.

At September 30, 2023, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 20.8 million.

At September 30, 2023, there was approximately $ 8.6 million of unrecognized compensation cost related to these awards, which will be recognized through 2025.

Non-employee Directors

3 unchanged sentences

Accordingly, our directors that served on the Board as of May 2023 each received 765 shares of common stock, respectively, with a weighted average fair value of $ 124.12 per share.

At June 30, 2023, there was approximately $ 0.8 million of unrecognized compensation expense related to shares granted to non-employee directors.

At September 30, 2023, there was approximately $ 0.6 million of unrecognized compensation expense related to shares granted to non-employee directors.

This expense will be recognized over the remaining service period ending in May 2024.

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Occasionally, we may enter into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates.

As of June 30, 2023, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

As of September 30, 2023, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

As of June 30, 2023, the volume of our commodity derivative contracts were as follows:

As of September 30, 2023, the volume of our commodity derivative contracts were as follows:

Business unit Commodity Contract Type Quantity hedged (in millions) Designation Longest Expiration date of hedge

Sharp Propane (gallons) Purchases 22.1 Cash flow hedges June 2026

Sharp Propane (gallons) Sales 3.2 Cash flow hedges December 2023

Sharp Propane (gallons) Sales 6.3 Cash flow hedges March 2024

Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with the propane volumes that are expected to be purchased and/or sold during the heating season.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in June 2023 through June 2026) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in September 2023 through June 2026) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

If the index prices are lower than the contract prices, Sharp will pay the difference.

We designated and accounted for the propane swaps as cash flow hedges.

designated and accounted for the propane swaps as cash flow hedges.

The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss) and later recognized in the statement of income in the same period and in the same line item as the hedged transaction.

We expect to reclassify unrealized losses of approximately $ 1.1 million from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the next 12 -month period ended June 30, 2024.

We expect to reclassify unrealized losses of approximately $ 0.8 million from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the 12 -month period ended September 30, 2024.

Interest Rate Swap Activities

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Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily mark-to-market relative to maintenance margin requirements.

We currently maintain a broker margin account for Sharp which was classified within our Other Current Assets on the consolidated balance sheet with a balance of $ 1.4 million as of June 30, 2023.

We currently maintain a broker margin account for Sharp which was classified within our Other Current Assets on the condensed consolidated balance sheet with a balance of $ 1.4 million as of September 30, 2023.

At December 31, 2022, $ 0.1 million was classified in Other Current Liabilities on the consolidated balance sheet.

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We did not have any derivative contracts with a credit-risk related contingency.

Fair values of the derivative contracts recorded in the consolidated balance sheets as of June 30, 2023 and December 31, 2022, are as follows:

Fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, are as follows:

Derivative Assets

Fair Value As Of

(in thousands) Balance Sheet Location June 30, 2023 December 31, 2022

(in thousands) Balance Sheet Location September 30, 2023 December 31, 2022

Derivatives designated as cash flow hedges

3 unchanged sentences

$ 2,753 $ 3,769

(1) Derivative assets, at fair value include $ 1.7 million and $ 2.8 million in current assets in the condensed consolidated balance sheet at June 30, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

(1) Derivative assets, at fair value include $ 2.3 million and $ 2.8 million in current assets in the condensed consolidated balance sheet at September 30, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

Derivative Liabilities

Fair Value As Of

(in thousands) Balance Sheet Location June 30, 2023 December 31, 2022

(in thousands) Balance Sheet Location September 30, 2023 December 31, 2022

Derivatives designated as cash flow hedges

3 unchanged sentences

$ 929 $ 2,215

(1) Derivative liabilities, at fair value include $ 2.2 million and $ 0.6 million in current liabilities in the condensed consolidated balance sheet at June 30, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

(1) Derivative liabilities, at fair value include $ 0.8 million and $ 0.6 million in current liabilities in the condensed consolidated balance sheet at September 30, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

The effects of gains and losses from derivative instruments on the condensed consolidated financial statements are as follows:

Amount of Gain (Loss) on Derivatives

Location of Gain For the Three Months Ended June 30, For the Six Months Ended June 30,

Location of Gain For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in thousands) (Loss) on Derivatives 2023 2022 2023 2022

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Fair Value Hierarchy Description of Fair Value Level Fair Value Technique Utilized

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities Investments - equity securities - The fair values of these trading securities are recorded at fair value based on unadjusted quoted prices in active markets for identical securities.

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Investments - equity securities - The fair values of these trading securities are recorded at fair value based on unadjusted quoted prices in active markets for identical securities.

Investments - mutual funds and other - The fair values of these investments, comprised of money market and mutual funds, are recorded at fair value based on quoted net asset values of the shares.

Level 2 Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability Derivative assets and liabilities - The fair value of the propane put/call options, propane and interest rate swap agreements are measured using market transactions for similar assets and liabilities in either the listed or over-the-counter markets.

Level 2 Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Derivative assets and liabilities - The fair value of the propane put/call options, propane and interest rate swap agreements are measured using market transactions for similar assets and liabilities in either the listed or over-the-counter markets.

Level 3 Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (i.e.

supported by little or no market activity) Investments - guaranteed income fund - The fair values of these investments are recorded at the contract value, which approximates their fair value.

supported by little or no market activity).

Investments - guaranteed income fund - The fair values of these investments are recorded at the contract value, which approximates their fair value.

Financial Assets and Liabilities Measured at Fair Value

The following tables summarize our financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements, by level, within the fair value hierarchy as of June 30, 2023 and December 31, 2022:

Fair Value Measurements Using:

As of June 30, 2023 Fair Value Quoted Prices in

As of September 30, 2023 Fair Value Quoted Prices in

Active Markets

22 unchanged sentences

Derivative liabilities $ 2,215 $ — $ 2,215 $ —

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the six months ended June 30, 2023 and 2022:

Six months ended June 30,

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the nine months ended September 30, 2023 and 2022:

Nine months ended September 30,

(in thousands)

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Investment income from the Level 3 investments is reflected in other income, net in the condensed consolidated statements of income.

At June 30, 2023, there were no non-financial assets or liabilities required to be reported at fair value.

At September 30, 2023, there were no non-financial assets or liabilities required to be reported at fair value.

We review our non-financial assets for impairment at least on an annual basis, as required.

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The fair value of short-term debt approximates the carrying value due to its near-term maturities and because interest rates approximate current market rates (Level 2 measurement).

At June 30, 2023, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 666.8 million, compared to the estimated fair value of $ 573.3 million.

At September 30, 2023, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 664.8 million, compared to the estimated fair value of $ 548.6 million.

At December 31, 2022, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately $ 600.8 million, compared to a fair value of approximately $ 505.0 million.

3 unchanged sentences

Our outstanding long-term debt is shown below:

June 30, December 31,

September 30, December 31,

(in thousands) 2023 2022

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The amended agreements expand the total borrowing capacity and extend the term of the agreements for an additional three years from the effective dates.

The following table summarizes the current available capacity under our Shelf Agreements at June 30, 2023:

The following table summarizes the current available capacity under our Shelf Agreements at September 30, 2023:

(in thousands) Total Borrowing Capacity Less:

4 unchanged sentences

MetLife Shelf Agreement 200,000 ( 50,000 ) — 150,000

Total Shelf Agreements as of June 30, 2023

Total Shelf Agreements as of September 30, 2023

$ 605,000 $ ( 350,000 ) $ — $ 255,000

3 unchanged sentences

We are authorized by our Board of Directors to borrow up to $ 375.0 million of short-term debt, as required.

At June 30, 2023 and December 31, 2022, we had $ 95.8 million and $ 202.2 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 5.33 percent and 5.04 percent, respectively.

In August 2022, we amended both tranches of our Revolver, which now bear interest using SOFR as the benchmark interest rate, plus a 10-basis point SOFR adjustment.

In addition, the 364-day tranche was extended through August 2023.

We expect to renew the 364-day tranche of the Revolver upon its current expiration.

As part of these amendments, the parties agreed to eliminate the previous covenant capping the aggregate investments limit at $ 150.0 million where we maintain an ownership interest less than 50 percent.

Additionally the 364-day tranche of the facility now offers a reduced interest margin similar to the five-year tranche for amounts borrowed in connection with new sustainable investments.

All other terms and conditions remain unchanged.

Borrowings outstanding under the sustainable investment sublimit of the 364-day tranche amounted to $ 9.4 million at June 30, 2023.

At September 30, 2023 and December 31, 2022, we had $ 118.6 million and $ 202.2 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 5.61 percent and 5.04 percent, respectively.

Borrowings outstanding under the sustainable investment sublimit of the 364-day tranche amounted to $ 9.4 million at September 30, 2023.

In October 2023, August 2023 and August 2022, we entered into amendments to our Revolver which resulted in modifications to both tranches of the facility.

The amendment in October 2023, allowed for a change in our funded indebtedness ratio from 65 percent to 70 percent during the quarter in which the acquisition of FCG is consummated and the quarter subsequent to the closing of the acquisition.

The amendment in August 2023 served to renew the 364-day tranche of the Revolver, providing for $ 175.0 million of short-term debt capacity.

Additionally, the amendment provided for the following:

borrowings under the 364 days facility shall now bear interest (i) based upon the SOFR, plus a 10 -basis point credit spread adjustment, and an applicable margin of 1.05 percent or less, with such margin based on total indebtedness as a percentage of total capitalization or (ii) the base rate, as selected by our discretion.

Further, the amendment provided that borrowings under the 364 days green loan shall now bear interest at (i) the SOFR rate plus a 10 -basis point credit spread adjustment and an applicable margin of 1.00 percent or less, with such margin based on total indebtedness as a percentage of total capitalization or (ii) the base rate plus 0.05 percent or less, as selected by our discretion.

The amendment entered into in 2022 served to reset the benchmark interest rate to SOFR and to eliminate a previous covenant which capped our investment limit to $ 150.0 million for investments where we maintain less than 50 percent ownership.

The 364-day tranche of the Revolver expires in August 2024 and the five-year tranche expires in August 2026, both of which are available to fund our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures.

Borrowings under both tranches of the Revolver are subject to a pricing grid, including the commitment fee and the interest rate charged based upon our total indebtedness to total capitalization ratio for the prior quarter.

As of September 30, 2023, the pricing under the 364-day tranche of the Revolver included an unused commitment fee of 9 basis points and maintains an interest rate of 75 basis points over SOFR plus a 10 basis point SOFR adjustment.

As of September 30, 2023, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 9 basis points and an interest rate of 95 basis points over SOFR plus a 10 basis point SOFR adjustment.

The availability of funds under the Revolver is subject to conditions specified in the credit agreement, all of which we currently satisfy.

1 unchanged sentence

We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio of no greater than 65 percent.

As of June 30, 2023, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August 2023 and the five-year tranche expires in August 2026, both of which are available to fund our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures.

As of June 30, 2023, the pricing under the 364-day tranche of the Revolver included an unused commitment fee of 9 basis points and maintains an interest rate of 70 basis points over SOFR plus a 10 basis point SOFR adjustment.

As of June 30, 2023, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 9 basis points and an interest rate of 95 basis points over SOFR plus a 10 basis point SOFR adjustment.

Our total available credit under the Revolver at June 30, 2023 was $ 298.3 million.

As of June 30, 2023, we had issued $ 5.9 million in letters of credit to various counterparties under the Revolver.

As of September 30, 2023, we were in compliance with this covenant.

Our total available credit under the Revolver at September 30, 2023 was $ 250.5 million.

As of September 30, 2023, we had issued $ 5.9 million in letters of credit to various counterparties under the Revolver.

These letters of credit are not included in the outstanding short-term borrowings and we do not anticipate that they will be drawn upon by the counterparties.

The letters of credit reduce the available borrowings under the Revolver.

In connection with our acquisition of FCG, we entered into a 364-day Bridge Facility commitment with Barclays Bank PLC for up to $ 965.0 million.

In October 2023, the Bridge Facility commitment was extended to include additional lending parties.

For additional information on interest rate swaps related to our short-term borrowings, see Note 12, Derivative Instruments .

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Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”).

While lease liabilities are not re-measured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized

in the period in which the obligation for those payments was incurred.

While lease liabilities are not re-measured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

A 100-basis-point increase in CPI would not have resulted in material additional annual lease costs.

1 unchanged sentence

The exercise of lease renewal options is at our sole discretion.

The amounts disclosed in our consolidated balance sheet at June 30, 2023, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

The amounts disclosed in our consolidated balance sheet at September 30, 2023, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

Our existing leases are not subject to any restrictions or covenants that would preclude our ability to pay dividends, obtain financing or enter into additional leases.

As of June 30, 2023, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

The following table presents information related to our total lease cost included in our consolidated statements of income:

Three Months Ended Six Months Ended

June 30, June 30,

As of September 30, 2023, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

The following table presents information related to our total lease cost included in our condensed consolidated statements of income:

Three Months Ended Nine Months Ended

September 30, September 30,

(in thousands) Classification 2023 2022 2023 2022

2 unchanged sentences

(1) Includes short-term leases and variable lease costs, which are immaterial .

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at June 30, 2023 and December 31, 2022:

(in thousands) Balance sheet classification June 30, 2023 December 31, 2022

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at September 30, 2023 and December 31, 2022:

(in thousands) Balance sheet classification September 30, 2023 December 31, 2022

Operating lease assets Operating lease right-of-use assets $ 12,842 $ 14,421

2 unchanged sentences

Total lease liabilities $ 13,399 $ 14,944

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating leases at June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating leases at September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.5 % 3.4 %

The following table presents additional information related to cash paid for amounts included in the measurement of lease liabilities included in our condensed consolidated statements of cash flows as of June 30, 2023 and 2022:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2023 2022

Operating cash flows from operating leases $ 2,196 $ 2,124

The following table presents the future undiscounted maturities of our operating and financing leases at June 30, 2023 and for each of the next five years and thereafter:

The following table presents the future undiscounted maturities of our operating and financing leases at September 30, 2023 and for each of the next five years and thereafter:

(in thousands) Operating Leases (1)

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements