What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-02 · 305 added, 374 removed, 581 unchanged (54% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

(in thousands, except shares and per share data)

Three Months Ended

(in thousands, except per share data)

Operating Revenues

Regulated Energy $ 168,426 $ 142,270

Unregulated Energy and other 29,136 40,073 139,447 182,339

Unregulated Energy 83,103 83,166

Other businesses and eliminations ( 5,785 ) ( 7,307 )

Total Operating Revenues 245,744 218,129

3 unchanged sentences

Operations 51,560 44,767

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

FCG transaction and transition-related expenses 921 —

Maintenance 5,903 5,104

3 unchanged sentences

Operating Income 79,585 54,915

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

Other income, net 195 276

Interest charges 17,026 7,232

11 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

(in thousands)

4 unchanged sentences

Cash Flow Hedges, net of tax:

Net (loss) gain on commodity contract cash flow hedges, net of tax of $525, $(1,083), $(250) and $(246), respectively 1,385 ( 2,865 ) ( 660 ) ( 613 )

Reclassifications of net loss (gain) on commodity contract cash flow hedges, net of tax $124, $(28), $76 and $(869), respectively 328 ( 74 ) 202 ( 2,294 )

Net gain on interest rate swap cash flow hedges, net of tax of $112, $54, $325 and $54, respectively 316 153 928 153

Net gain on commodity contract cash flow hedges, net of tax of $ 534 and $ 7 , respectively

Reclassifications of net gain on commodity contract cash flow hedges, net of tax $( 293 ) and $( 166 ), respectively

( 791 ) ( 440 )

Net gain (loss) on interest rate swap cash flow hedges, net of tax of $ 143 and $( 52 ), respectively

Reclassifications of net (gain) on interest rate swap cash flow hedges, net of tax of $( 44 ) and $( 17 ), respectively

( 128 ) ( 48 )

Total Other Comprehensive Income (Loss), net of tax 952 ( 604 )

3 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Assets September 30,

Assets March 31,

2024 December 31,

(in thousands, except shares and per share data)

(in thousands, except per share data)

Property, Plant and Equipment

34 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities September 30,

Capitalization and Liabilities March 31,

2024 December 31,

(in thousands, except shares and per share data)

(in thousands, except per share data)

Capitalization

19 unchanged sentences

Regulatory liabilities 21,328 13,719

Income taxes payable 818 —

Derivative liabilities, at fair value 31 354

15 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

5 unchanged sentences

Deferred income taxes 11,905 2,453

Realized gain on commodity contracts and sale of assets ( 883 ) ( 7,247 )

Realized (loss) on commodity contracts and sale of assets ( 1,811 ) ( 284 )

Unrealized (gain) loss on investments/commodity contracts ( 830 ) ( 551 )

10 unchanged sentences

Accrued compensation ( 9,480 ) ( 8,436 )

Accrued interest 10,127 1,500

Other assets and liabilities, net 1,195 38

15 unchanged sentences

Net cash used in financing activities ( 25,780 ) ( 42,152 )

Net Increase (Decrease) in Cash and Cash Equivalents ( 4,411 ) ( 2,496 )

Net Decrease in Cash and Cash Equivalents ( 3,209 ) ( 3,139 )

Cash and Cash Equivalents—Beginning of Period 4,904 6,204

4 unchanged sentences

Common Stock (1)

(in thousands, except shares and per share data)

(in thousands, except per share data)

Value Additional Paid-In

4 unchanged sentences

Compensation Treasury

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

Other comprehensive loss — — — — ( 2,768 ) — — ( 2,768 )

Dividend declared ($0.535 per share) — — — ( 9,554 ) — — — ( 9,554 )

Issuance under various plans (3)

2,939 1 364 — — — — 365

Share-based compensation and tax benefit (4) (5)

1,052 1 1,031 — — — — 1,032

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

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, 2022 17,741 $ 8,635 $ 380,036 $ 445,509 $ ( 1,379 ) $ 7,060 $ ( 7,060 ) $ 832,801

2 unchanged sentences

Dividends declared ($ 0.535 per share)

Issuance under various plans (3)

— — — ( 9,644 ) — — — ( 9,644 )

Share-based compensation and tax benefit (4) (5)

46,590 23 2,122 — — — — 2,145

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

Net income — — — 9,407 — — — 9,407

Other comprehensive loss — — — — 1,922 — — 1,922

Dividend declared ($0.590 per share) — — — ( 10,601 ) — — — ( 10,601 )

Issuance under various plans (3)

3 unchanged sentences

Treasury stock activities (2)

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

— — — — — 1,756 ( 1,756 ) —

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

Balance at December 31, 2023 (6)

22,235 $ 10,823 $ 749,356 $ 488,663 $ ( 2,738 ) $ 9,050 $ ( 9,050 ) $ 1,246,104

Net income — — — 46,168 — — — 46,168

Other comprehensive loss — — — — 242 — — 242

Other comprehensive income — — — — 952 — — 952

Dividends declared ($ 0.590 per share)

— — — ( 13,142 ) — — — ( 13,142 )

Issuance under various plans (3)

3 unchanged sentences

Treasury stock activities (2)

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.

— — — — — 512 ( 512 ) —

Balance at March 31, 2024 22,267 $ 10,838 $ 750,162 $ 521,689 $ ( 1,786 ) $ 9,562 $ ( 9,562 ) $ 1,280,903

(1) 2.0 million shares of preferred stock at $ 0.01 par value have been authorized.

No shares have been issued or are outstanding;

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

(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.

accordingly, no information has been included in the Condensed Consolidated Statements of Stockholders’ Equity.

(2) Includes 111 thousand, 108 thousand, 110 thousand, and 108 thousand shares at March 31, 2024, December 31, 2023, March 31, 2023 and December 31, 2022, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(3) Includes shares issued under the Retirement Savings Plan and DRIP and/or ATM as applicable.

(4) Includes amounts for shares issued for directors’ compensation.

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

For the three months ended March 31, 2024 and 2023, we withheld 14 thousand and 20 thousand shares, respectively, for employee taxes.

(6) Includes 4.4 million shares issued during 2023 related to the acquisition of FCG.

See Notes 3 and 9 for details associated with the FCG acquisition and related financing.

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

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Revenue and earnings are typically greater during the first and fourth quarters, when consumption of energy is highest due to colder temperatures.

FASB Statements and Other Authoritative Pronouncements

There are no pending or recently effective accounting standards which have had, or are expected to have, a material impact to our consolidated financial statements or disclosures.

Recent Accounting Standards Yet to be Adopted

Segment Reporting (ASC 280) - In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures , which modifies required disclosures about a public entity’s reportable segments and addresses requests from investors for more detailed information about a reportable segment’s expenses and a more comprehensive reconciliation of each segment's reported profit or loss.

ASU 2023-07 will be effective for our annual financial statements beginning January 1, 2024 and our interim financial statements beginning January 1, 2025.

ASU 2023-07 only impacts disclosures, and as a result, will not have a material impact on our financial position or results of operations.

Income Taxes (ASC 740) - In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which modifies required income tax disclosures primarily related to an entity's rate reconciliation and information pertaining to income taxes paid.

These enhancements have been made to address requests from investors related to transparency and usefulness of income tax disclosures.

ASU 2023-09 will be effective for our annual financial statements beginning January 1, 2024.

ASU 2023-09 only impacts disclosures, and as a result, will not have a material impact on our financial position or results of operations.

Climate-Related Disclosures - In March 2024, the SEC issued a final rule that requires a public entity to provide disclosures surrounding material Scope 1 and Scope 2 emissions, climate-related risks and the material impact of those risks and material climate targets and goals.

In April 2024, the SEC issued a stay on the final rule as a result of various petitions being filed and that sought review of the final ruling in multiple courts of appeals.

At this time, it is uncertain when the review will be completed, the final outcome of the review, and the ultimate disclosure requirements.

Calculation of Earnings Per Share

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

(in thousands, except shares and per share data)

Three Months Ended

(in thousands, except per share data)

Calculation of Basic Earnings Per Share:

1 unchanged sentence

Weighted average shares outstanding (1)

22,250 17,760

Basic Earnings Per Share $ 2.07 $ 2.05

3 unchanged sentences

Weighted shares outstanding—Basic (1)

22,250 17,760

Effect of dilutive securities—Share-based compensation 56 72

1 unchanged sentence

Diluted Earnings Per Share $ 2.07 $ 2.04

(1) Weighted average shares for the quarter ended March 31, 2024 reflect the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG.

See Notes 3 and 9 for additional details on the acquisition and related equity offering.

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.

On November 30, 2023, we completed the acquisition of FCG for $ 922.8 million in cash, which included working capital adjustments as defined in the agreement that were settled during the first quarter of 2024, pursuant to the stock purchase agreement with Florida Power & Light Company.

Upon completion of the acquisition, FCG became a wholly-owned subsidiary of the Company and is 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.

1 unchanged sentence

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 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 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 purchase price of the acquisition was funded with $ 366.4 million of net proceeds from the issuance of 4.4 million shares of our common stock, the issuance of approximately $ 550.0 million principal amount of uncollateralized senior notes, and borrowings under the Company's Revolver.

See Note 14, Long-Term Debt , and Note 9, Stockholders' Equity, for additional details on these financing activities .

We accounted for the acquisition of FCG using the acquisition method.

As FCG is a regulated utility, the measurement of the fair value of most of the assets acquired and liabilities assumed were determined using the predecessor’s carrying value.

In certain other instances where assets and liabilities are not subject to regulation, we determined the fair value in accordance with the principles of ASC Topic 820, Fair Value Measurements.

The excess of the purchase price for FCG over the fair value of the assets acquired and liabilities assumed has been reflected as goodwill within the Regulated Energy segment.

Goodwill resulting from the acquisition is largely attributable to expansion opportunities provided within our existing regulated operations in Florida, including planned customer growth and growth in rate base through continued investment in our utility infrastructure, as well as natural gas transmission infrastructure supporting the distribution operations.

The goodwill recognized in connection with the acquisition of FCG will be deductible for income tax purposes.

The components of the preliminary purchase price allocation are as follows:

(in thousands)

Assets acquired:

Acquisition Date Fair Value

Accounts receivable, net 14,456

Regulatory assets - current 2,983

Other current assets 2,082

Property, plant and equipment 454,410

Goodwill 460,592

Regulatory assets - non-current 3,381

Other deferred charges and other assets 18,309

Total assets acquired 958,483

Liabilities assumed:

Current liabilities ( 20,978 )

Regulatory liabilities ( 14,137 )

Other deferred credits and other liabilities ( 548 )

Total liabilities assumed ( 35,663 )

Net purchase price $ 922,820

Direct transaction costs of $ 10.4 million associated with the FCG acquisition were reflected in “FCG transaction-related expenses” on our consolidated statement of income for the year ended December 31, 2023.

In addition, interest charges included $ 4.1 million related to fees and expenses associated with the Bridge Facility, which was terminated without any funds drawn, for the year ended December 31, 2023.

Other transaction costs of $ 15.9 million, related primarily to the debt and equity financings executed in connection with the acquisition, were deferred on the consolidated balance sheet or recorded in equity as an offset to proceeds received, as appropriate, as of December 31, 2023.

For the three months ended March 31, 2024, the Company’s consolidated results include $ 35.9 million of operating revenue and net income of $ 4.2 million attributable to FCG which includes $ 0.9 million of transaction and transition-related expenses.

Acquisition of J.T.

Lee and Son's

In December 2023, Sharp acquired the propane operating assets of J.T.

Lee and Son's in Cape Fear, North Carolina for $ 3.9 million.

In connection with this acquisition, we recorded a $ 0.3 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.

Through this acquisition, we expanded our operating footprint in North Carolina, where customers are served by Diversified Energy.

Sharp added approximately 3,000 customers and distribution of approximately 800,000 gallons of propane annually.

The transaction also includes a bulk plant with 60,000 gallons of propane storage, enabling the Company to realize efficiencies with additional storage capacity and overlapping delivery territories.

In connection with this acquisition, we recorded $ 2.7 million in property plant and equipment, $ 0.9 million in goodwill, $ 0.2 million in working capital, and less than $ 0.1 million in intangible assets associated primarily with non-compete agreements, 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.

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

The operating revenues and net income of this acquisition were not material to our consolidated results for the three months ended March 31, 2024.

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 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

Energy distribution

Delaware natural gas division $ 9,793 $ — $ — $ 9,793 $ 8,741 $ — $ — $ 8,741

Florida natural gas distribution (1)

38,323 — — 38,323 35,834 — — 35,834

FPU electric distribution 32,683 — — 32,683 25,199 — — 25,199

Maryland natural gas division 3,447 — — 3,447 2,881 — — 2,881

Sandpiper natural gas/propane operations 3,748 — — 3,748 3,893 — — 3,893

Elkton Gas 1,011 — — 1,011 1,168 — — 1,168

Total energy distribution 89,005 — — 89,005 77,716 — — 77,716

Energy transmission

Aspire Energy — 4,798 — 4,798 — 10,022 — 10,022

Aspire Energy Express 373 — — 373 373 — — 373

Eastern Shore 19,228 — — 19,228 18,804 — — 18,804

Peninsula Pipeline 7,904 — — 7,904 6,813 — — 6,813

Total energy transmission 27,505 4,798 — 32,303 25,990 10,022 — 36,012

Energy generation

Eight Flags — 4,437 — 4,437 — 7,414 — 7,414

Propane operations

Propane delivery operations — 23,197 — 23,197 — 27,923 — 27,923

Compressed Natural Gas Services

Marlin Gas Services — 2,595 — 2,595 — 2,642 — 2,642

Other and eliminations

Eliminations ( 14,099 ) ( 57 ) ( 5,879 ) ( 20,035 ) ( 12,726 ) ( 87 ) ( 7,886 ) ( 20,699 )

Other — — 45 45 — — 45 45

Total other and eliminations ( 14,099 ) ( 57 ) ( 5,834 ) ( 19,990 ) ( 12,726 ) ( 87 ) ( 7,841 ) ( 20,654 )

Total operating revenues (2)

$ 102,411 $ 34,970 $ ( 5,834 ) $ 131,547 $ 90,980 $ 47,914 $ ( 7,841 ) $ 131,053

(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 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.

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

The following tables display our revenue by major source based on product and service type for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

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

3 unchanged sentences

47,956 — — 47,956 46,358 — — 46,358

Florida City Gas 35,877 — — 35,877 — — — —

FPU electric distribution 19,964 — — 19,964 22,737 — — 22,737

21 unchanged sentences

$ 168,426 $ 83,103 $ ( 5,785 ) $ 245,744 $ 142,270 $ 83,166 $ ( 7,307 ) $ 218,129

(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.

(1 ) Total operating revenues for the three months ended March 31, 2024 and 2023 both include other revenue (revenues from sources other than contracts with customers) of $ 0.6 million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively.

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 September 30, 2023 and December 31, 2022 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of March 31, 2024 and December 31, 2023 were as follows:

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

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At times, we receive advances or deposits from our customers before we satisfy our performance obligation, resulting in contract liabilities.

Contract liabilities are included in other accrued liabilities in the condensed consolidated balance sheets and relate to non-refundable prepaid fixed fees for our Mid-Atlantic and North Carolina propane delivery operation's retail offerings.

Contract liabilities are included in other accrued liabilities in the condensed consolidated balance sheets and relate to non-refundable prepaid fixed fees for our propane distribution operation's retail offerings.

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

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.

For the three months ended March 31, 2024 and 2023, the amounts recognized in revenue were not material.

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 September 30, 2023, are expected to be recognized as follows:

Certain of 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 March 31, 2024, are expected to be recognized as follows:

(in thousands) 2024 2025 2026 2027 2028 2029 2030 and thereafter

7 unchanged sentences

and Peninsula Pipeline and Aspire Energy Express, our intrastate pipeline subsidiaries, are subject to regulation (excluding cost of service) by the Florida PSC and Public Utilities Commission of Ohio, respectively.

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:

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.

In September 2023, the Delaware Division submitted the 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 was the first in the state and included four programs including, Home Energy Counseling, Home Performance with Energy Star, Assisted Home Performance with Energy Star, and a standard Offer Program in which customers can participate and allow for recovery.

The evidentiary hearing on this matter was held in April 2024 with all programs, with the exception of the Offer Program, approved by the PSC and rates became effective May 1, 2024.

Maryland Natural Gas Rate Case:

In January 2024, our natural gas distribution businesses in Maryland, CUC-Maryland Division, Sandpiper Energy, Inc., and Elkton Gas Company (collectively, “Maryland natural gas distribution businesses”), filed a joint application for a natural gas rate case with the Maryland PSC.

In connection with the application, we are seeking approval of the following:

(i) permanent rate relief of approximately $ 6.9 million;

(ii) authorization to make certain changes to tariffs to include a unified rate structure and to consolidate the Maryland natural gas distribution businesses which we anticipate will be called Chesapeake Utilities of Maryland, Inc.;

and (iii) authorization to establish a rider for recovery of the costs associated with our new technology systems.

The outcome of the application is subject to review and approval by the Maryland PSC.

Rate changes are suspended until December 2024.

Maryland Natural Gas Depreciation Study:

In January 2024, our Maryland natural gas distribution businesses filed a joint petition for approval of their proposed unified depreciation rates with the Maryland PSC.

The outcome of the filing is subject to review by the Maryland PSC which is expected to be completed in the third quarter of 2024.

Wildlight Expansion:

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

Natural Gas Rate Case:

In May 2022, our natural gas distribution businesses in Florida filed a consolidated natural gas rate case with the Florida PSC.

The application included a request for the following:

(i) permanent rate relief of approximately $ 24.1 million, effective January 1, 2023, (ii) a depreciation study also submitted with filing;

(iii) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida natural gas distribution businesses under FPU;

(iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement;

and (v) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites.

In August 2022, interim rates were approved by the Florida PSC in the amount of approximately $ 7.7 million on an annualized basis, effective for all meter readings in September 2022.

The discovery process and subsequent hearings were concluded during the fourth quarter of 2022 and briefs were submitted during the same quarter of 2022.

In January 2023, the Florida PSC approved the application for consolidation and permanent rate relief of approximately $ 17.2 million on an annual basis.

Actual rates in connection with the rate relief were approved by the Florida PSC in February 2023 with an effective date of March 1, 2023.

Beachside Pipeline Extension:

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.

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.

Cloud, Florida area.

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

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.

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

FCG Natural Gas Rate Case:

In May 2022, FCG filed a general base rate increase with the Florida PSC based on a projected 2023 test year.

In June 2023, the Florida PSC issued an order approving a single total base revenue increase of $ 23.3 million (which included an incremental increase of $ 14.1 million, a previously approved increase of $ 3.8 million for a liquefied natural gas facility, and $ 5.3 million to transfer the SAFE investments from a rider clause to base rates), with new rates becoming effective as of May 1, 2023.

The Commission also approved FCG's proposed RSAM with a $ 25.0 million reserve amount, continuation and expansion of the capital SAFE program, implementation of an automated metering infrastructure pilot, and continuation of the storm damage reserve with a target reserve of $ 0.8 million.

On June 23, 2023, the Florida OPC filed a motion for reconsideration of the PSC’s approval of RSAM, which was denied on September 12, 2023.

On July 7, 2023, the Florida OPC filed a notice of appeal with the Florida Supreme Court, which is pending.

The Florida OPC filed their initial brief on January 31, 2024.

The RSAM is recorded as either an increase or decrease to accrued removal costs which is reflected on the Company’s balance sheets and a corresponding increase or decrease to depreciation and amortization expense.

In order to earn the targeted regulatory return on equity ("ROE") in each reporting period subject to the conditions of the effective rate agreement, RSAM is calculated using a trailing thirteen-month average of rate base and capital structure in conjunction with the trailing twelve-month regulatory base net operating income, which primarily includes the base portion of rates and other revenues, net of operations and maintenance expenses, depreciation and amortization, interest and tax expenses.

In general, the net impact of these income statement line items is adjusted, in part, by RSAM or its reversal to earn the targeted regulatory ROE.

For the three months ended March 31, 2024, the Company recorded decreases to asset removal costs and depreciation expense of $ 3.4 million as a result of the RSAM adjustment.

Storm Protection Plan:

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Rates associated with this initiative were effective in January 2023.

Lake Wales Pipeline Acquisition :

In February 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 9,000 Dt/d of firm service in the Lake Wales, Florida area.

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 both current and new natural gas customers.

The Commission voted to approve the projections in November 2023.

FPU projects to spend $ 13.6 million on the program in 2024.

GUARD Program :

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

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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.

SAFE Program :

In June 2023, the Florida PSC issued the approval order for the continuation of the SAFE program beyond its 2025 expiration date and inclusion of 150 miles of additional mains and services located in rear property easements.

The SAFE program is designed to relocate certain mains and facilities associated with rear lot easements to street front locations to improve FCG's ability to inspect and maintain the facilities and reduce opportunities for damage and theft.

In the same order, the Commission approved a replacement of 160 miles of pipe that was used in the 1970s and 1980s and shown through industry research to exhibit premature failure in the form of cracking.

The program includes projected capital expenditures of $ 205.0 million over a 10-year period.

In April 2024, FCG filed a petition with the Florida PSC to more closely align the SAFE Program with FPU's GUARD program.

Specifically, the requested modifications will enable FCG to accelerate remediation related to problematic pipe and facilities consisting of obsolete and exposed pipe.

If approved, these efforts will serve to improve the safety and reliability of service to FCG's customers.

These modifications, if approved, result in an estimated additional $ 50.0 million in capital expenditures associated with the SAFE Program which would increase the total projected capital expenditures to $ 255.0 million 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.

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.

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 Dts/d of firm service in the Newberry, Florida area.

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

Amendment to Escambia County Agreement :

In April of 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of an amendment to an existing contract with FPU.

This amendment will allow Peninsula Pipeline to construct an additional delivery point on a pipeline located in Escambia County.

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

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 its proposed depreciation rates.

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

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.

A filing to address the acquisition and conversion of existing Company owned propane community gas systems in Newberry was made in November 2023.

The Florida PSC approved it in April 2024.

The Company anticipates beginning the conversions of the community gas systems in the second quarter of 2024.

East Coast Reinforcement Projects:

In December 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities on the East Coast of Florida.

The projects are driven by the need for increased supply to coastal portions of the state that are experiencing significant population growth.

Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000 Dts/d and 3,400 Dts/d, respectively.

The Florida PSC approved the projects in March 2024.

Central Florida Reinforcement Projects :

In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its Transportation Service Agreements with FPU for projects that will support additional supply to communities located in Central Florida.

The projects are driven by the need for increased supply to communities in central Florida that are experiencing significant population growth.

Peninsula Pipeline will construct several pipeline extensions which will support FPU's distribution system around Plant City and Lake Mattie with an additional 5,000 Dts/d and 8,700 Dts/d, respectively.

The Florida PSC approved the projects in May 2024.

Alternative Natural Gas Projects :

In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of its Transportation Service Agreements with FCG for projects that will support the transportation of additional supply into FCG’s distribution system.

The projects are driven by continued growth in the regions and will facilitate additional transportation capacity, including the transportation of pipeline quality gas produced from landfills through FCG's system.

Peninsula Pipeline will construct several pipeline extensions which will support FCG's distribution system in Brevard County, Indian-River County, and Miami-Dade County.

Cloud Project Amendment :

In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of an amendment to its Transportation Service Agreement with FPU for a project that will support additional supply to communities in St.

Cloud Florida.

The project is driven by the need to expand gas service to future communities that are expected in that area.

Peninsula Pipeline will construct pipeline expansions that will allow FPU to serve the expected new growth.

The expansion will provide FPU with an additional 10,000 Dts/d.

The Florida PSC approved the projects in May 2024.

Pioneer Supply Header Pipeline Project :

In March 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of Firm Transportation Service Agreements with both FCG and FPU for a project that will support greater supply growth of natural gas service in southeast Florida.

The project consists of the transfer of a pipeline asset from FCG to Peninsula Pipeline.

Peninsula Pipeline will proceed to provide transportation service to both FCG and FPU using the pipeline asset, which provides opportunities for additional project development.

Eastern Shore

Southern Expansion Project:

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 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.

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

In conjunction with the filing of this surcharge, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included.

The FERC issued an order approving the surcharge as filed on December 19, 2022.

The combined revised surcharge became effective January 1, 2023.

Worcester Resiliency Upgrade:

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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

In July 2022, we filed a joint petition for our natural gas divisions in Maryland (Maryland Division, Sandpiper, and Elkton Gas) for the approval to establish a regulatory asset for non-capitalizable expenses related to the initial development and implementation of our new Customer Information System ("CIS") system.

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, 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.

We have completed the system selection process and the CIS implementation began during the first quarter of 2023.

COVID-19 Impact

In March 2020, the CDC declared a national emergency due to the rapidly growing outbreak of COVID-19.

In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.

These restrictions significantly impacted economic conditions in the United States in 2020 and continued to impact economic conditions, to a lesser extent, through 2021 and 2022.

Chesapeake Utilities is considered an “essential business,” which allowed us to continue operational activities and construction projects with appropriate safety precautions and personal protective equipment, while being mindful of the social distancing restrictions that were in place.

In response to the COVID-19 pandemic and related restrictions, we experienced reduced consumption of energy largely in the commercial and industrial sectors, higher bad debt expenses and incremental expenses associated with COVID-19, including expenditures associated with personal protective equipment and premium pay for field personnel.

The additional operating expenses we incurred supported the ongoing delivery of our essential services during the height of the pandemic.

In April and May 2020, we were authorized by the Maryland and Delaware PSCs, respectively, to record regulatory assets for COVID-19 related costs which offered us the ability to seek recovery of those costs.

In July 2021, the Florida PSC issued an order that approved incremental expenses we incurred due to COVID-19.

The order allowed us to establish a regulatory asset in a total amount of $ 2.1 million as of June 30, 2021 for natural gas and electric distribution operations.

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 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 September 30, 2023 and December 31, 2022:

Amount (in thousands)

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.

Chesapeake Delaware natural gas division (Delaware PSC) $ 12,086 $ 12,230 PSC approved amortization of ADIT in January 2019.

Chesapeake Maryland natural gas division (Maryland PSC) $ 3,614 $ 3,703 PSC approved amortization of ADIT in May 2018.

Sandpiper Energy (Maryland PSC) $ 3,515 $ 3,597 PSC approved amortization of ADIT in May 2018.

Florida natural gas distribution (Florida PSC) (1)

$ 26,788 $ 27,179 PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU electric division (Florida PSC) $ 4,818 $ 4,993 In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

Elkton Gas (Maryland PSC) $ 1,035 $ 1,059 PSC approved amortization of ADIT in March 2018.

(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 have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

In December 2023, FERC issued its schedule for preparation of the Environmental Assessment.

In April 2024, the FERC issued their environmental assessment with no significant impacts noted.

In connection with the TCJA, which was signed into law in December 2017, our customer rates for our regulated businesses were adjusted as applicable as approved by the regulators.

Regulatory liabilities related to accumulated deferred income taxes (“ADIT”) associated with the TCJA amounted to $ 85.5 million and $ 85.8 million at March 31, 2024 and December 31, 2023, respectively.

With the exception of the ADIT balance of $ 34.2 million attributable to Eastern Shore, such amounts are being amortized in accordance with approvals received from the Delaware, Maryland, and Florida PSCs in 2018 and 2019.

The ADIT balance attributable to Eastern Shore will be addressed in its next rate case filing.

Environmental Commitments and Contingencies

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

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.

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 September 30, 2023.

As of March 31, 2024 and December 31, 2023, we had approximately $ 3.5 million and $ 3.6 million, respectively, in environmental liabilities related to the former MGP sites, and related regulatory assets of approximately $ 0.5 million at the respective balance sheet dates 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.

We continue to expect that all costs related to environmental remediation and related activities, including any potential future remediation costs for which we do not currently have approval for regulatory recovery, will be recoverable from customers through rates.

Remediation is ongoing for the MGPs in Winter Haven and Key West in Florida and in Seaford, Delaware and the remaining clean-up costs are estimated to be between $ 0.3 million to $ 0.9 million for these three sites.

Remediation is ongoing for the MGPs in Winter Haven and Key West in Florida and in Seaford, Delaware.

The remaining clean-up costs are estimated to range from $ 0.3 million to $ 0.8 million for these three sites.

The Environmental Protection Agency has approved a "site-wide ready for anticipated use" status for the Sanford, Florida MGP site, which is the final step before delisting a site.

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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.

Remaining remedial costs for West Palm Beach, including completion of the construction of the system on the West Parcel, are estimated to take between five and fifteen years of operation, maintenance and monitoring, and final site work for closeout of the property is estimated to be between $ 3.3 million and $ 5.7 million.

Other Commitments and Contingencies

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The agreements were effective as of April 1, 2023 and expire in March 2026.

Our Florida natural gas distribution operations and Eight Flags generation facility have separate asset management agreements with Emera Energy Services, Inc.

FPU natural gas distribution operations and Eight Flags have separate asset management agreements with Emera Energy Services, Inc.

to manage their natural gas transportation capacity.

These agreements are for a 10 -year term that commenced in November 2020 and expire in October 2030.

Additionally, our Florida natural gas distribution operations have firm transportation service contracts with FGT and Gulfstream.

These agreements commenced in November 2020 and expire in October 2030.

Florida Natural Gas has firm transportation service contracts with FGT and Gulfstream.

Pursuant to a capacity release program approved by the Florida PSC, all of the capacity under these agreements has been released to various third parties.

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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.

As of March 31, 2024, 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 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.

The maximum authorized liability under such guarantees and letters of credit as of March 31, 2024 was $ 35.0 million.

The aggregate amount guaranteed related to our subsidiaries at March 31, 2024 was approximately $ 24.4 million with the guarantees expiring on various dates through March 2025.

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

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.

The amount of specific purpose guarantees outstanding at March 31, 2024 was $ 4.0 million.

As of March 31, 2024, we have issued letters of credit totaling approximately $ 7.0 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, the storage agreement between Bay Gas Storage Company and FCG as well as our primary insurance carriers.

These letters of credit have various expiration dates through February 2025 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.

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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 President and Chief Executive Officer, in order to make decisions about resources and to assess performance.

We organize our business around differences in regulatory environment and/or products or services, 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:

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• Unregulated Energy.

Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane distribution operations, mobile compressed natural gas distribution and pipeline solutions operations, and project development activities related to our sustainable energy initiatives.

Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane distribution operations, mobile compressed natural gas distribution and pipeline solutions operations, and sustainable energy investments including renewable natural gas.

Also included in this segment are other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services.

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The following table presents financial information about our reportable segments:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

(in thousands)

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Total intersegment revenues $ 5,830 $ 7,351

Operating Income (Loss)

Operating Income

Regulated Energy $ 58,109 $ 37,625

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Operating income 79,585 54,915

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

Other income, net 195 276

Interest charges 17,026 7,232

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

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

(in thousands) March 31, 2024 December 31, 2023

Identifiable Assets

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Common Stock Issuances

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

In November 2023, in connection with our acquisition of FCG, we completed an equity offering resulting in the issuance of approximately 4.4 million shares of our common stock at a price per share of $ 82.72 (net of underwriter discounts and commissions).

We received net proceeds of $ 366.4 million which were used to partially finance the acquisition.

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

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

For the three months ended March 31, 2024, we received net proceeds of $ 0.1 million under the DRIP.

There were no issuances under DRIP during 2023.

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 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 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.

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of accumulated other comprehensive loss components as of March 31, 2024 and 2023.

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

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As of December 31, 2023 $ ( 2,584 ) $ ( 274 ) $ 120 $ ( 2,738 )

Other comprehensive income (loss) before reclassifications — ( 660 ) 928 268

Other comprehensive income before reclassifications — 1,441 417 1,858

Amounts reclassified from accumulated other comprehensive income (loss) 13 ( 791 ) ( 128 ) ( 906 )

Net current-period other comprehensive income (loss) 13 650 289 952

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

As of March 31, 2024 $ ( 2,571 ) $ 376 $ 409 $ ( 1,786 )

As of December 31, 2022 $ ( 2,506 ) $ 1,092 $ 35 $ ( 1,379 )

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Net prior-period other comprehensive income (loss) 10 ( 418 ) ( 196 ) ( 604 )

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).

See Note 10, Employee Benefit Plans , for additional details.

Gains on commodity contracts classified as cash flow hedges related to our propane swaps are included in the effects of gains and losses from derivative instruments.

As of March 31, 2023 $ ( 2,496 ) $ 674 $ ( 161 ) $ ( 1,983 )

Deferred gains or losses for our commodity contract and interest rate swap cash flow hedges are recognized in earnings upon settlement and are included in the effects of gains and losses from derivative instruments.

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 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.

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

See Note 10, Employee Benefit Plans , for additional details.

Employee Benefit Plans

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

Net periodic (benefit) cost for the FPU Pension Plan for the three months ended March 31, 2024 and 2023 is set forth in the following table:

Three Months Ended

(in thousands)

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Amortization of net loss 69 110

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 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)

Recognized from accumulated other comprehensive (income) loss (1)

$ 21 $ 24 $ 63 $ 72

Recognized from regulatory asset 89 100 267 300

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

(1) See Note 9 , Stockholders' Equity .

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.

Total periodic (benefit) cost $ ( 56 ) $ 75

Amounts reclassified from accumulated other comprehensive income (loss) and regulatory assets were not material during the three months ended March 31, 2024 and 2023.

Net periodic benefit costs for our other pension and postretirement benefit plans were not material for the three months ended March 31, 2024 and 2023.

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 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.

During the three months ended March 31, 2024, there were no contributions to the FPU Pension Plan and we do not expect to contribute to the FPU Pension Plan during 2024.

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 postretirement benefit plans for the three and nine months ended September 30, 2023 were approximately $ 0.2 million and $ 0.5 million, respectively.

Cash benefits paid under these other postretirement benefit plans for the three months ended March 31, 2024 were immaterial.

We expect to pay total cash benefits of less than $ 1.0 million for these other postretirement benefit plans in 2024.

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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 $ 11.1 million at September 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 $ 13.2 million at March 31, 2024 and $ 12.3 million at December 31, 2023.

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 nine months ended September 30, 2023 and 2022:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

The table below presents the amounts included in net income related to share-based compensation expense for the three months ended March 31, 2024 and 2023:

Three Months Ended

(in thousands)

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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 nine months ended September 30, 2023:

Number of Shares Weighted Average

The table below presents the summary of the stock activity for awards to key employees for the three months ended March 31, 2024:

(in thousands, except per share data) Number of Shares Weighted Average

Outstanding—December 31, 2023 213 $ 117.74

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Forfeited — $ —

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.

Outstanding—March 31, 2024 253 $ 117.89

During the three months ended March 31, 2024, we granted awards of 110 thousand shares of common stock to officers and key employees under the SICP, including awards granted in February 2024.

The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, 2026.

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.

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

In March 2023, upon the election by certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in March 2023 for the performance period ended December 31, 2022.

In March 2024, upon the election by certain of our executive officers and key employees, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in March 2024 for the performance period ended December 31, 2023.

We paid the balance of such awarded shares to each such executive officer and remitted cash equivalent to the withheld shares to the appropriate taxing authorities.

We withheld 19,859 shares, based on the value of the shares on their award date.

We withheld 14 thousand shares, based on the value of the shares on their award date.

Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $ 1.5 million.

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.

At March 31, 2024, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 27.2 million.

At March 31, 2024, there was approximately $ 14.2 million of unrecognized compensation cost related to these awards, which will be recognized through 2026.

Non-employee Directors

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Our directors receive an annual retainer of shares of common stock under the SICP for services rendered through the subsequent Annual Meeting of Shareholders.

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

Accordingly, our directors that served on the Board as of May 2023 each received approximately 1 thousand shares of common stock, respectively, with a weighted average fair value of $ 124.12 per share.

At March 31, 2024, there was less than $ 0.1 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 September 30, 2023, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

As of March 31, 2024, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

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

As of March 31, 2024, 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 8.8 Cash flow hedges June 2026

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 September 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 March 2024 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.

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

We 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 $ 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.

We expect to reclassify unrealized gains of approximately $ 0.5 million from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the 12 -month period ended March 31, 2025.

Interest Rate Swap Activities

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In September 2022, we entered into an interest rate swap with a notional amount of $ 50.0 million through September 2025, with pricing of 3.98 percent.

Prior to August 2022, our short-term borrowing was based on the 30-day LIBOR rate.

In August 2022, we amended and restated our revolver and transitioned the benchmark interest rate to the 30-day SOFR as a result of the expiration of LIBOR.

Our prior interest rate swaps were cash settled monthly as the counter-party paid us the 30-day LIBOR rate less the fixed rate.

Our interest rate swap is cash settled monthly as the counter-party pays us the 30-day SOFR rate less the fixed rate.

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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 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.

We currently maintain a broker margin account for Sharp included within other current assets on the consolidated balance sheet with a balance of $ 2.8 million and $ 2.1 million as of March 31, 2024 and December 31, 2023, respectively.

Financial Statements Presentation

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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 condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, are as follows:

Fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, are as follows:

Derivative Assets

Fair Value As Of

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

(in thousands) Balance Sheet Location March 31, 2024 December 31, 2023

Derivatives designated as cash flow hedges

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$ 1,138 $ 1,067

(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.

(1) Derivative assets, at fair value, include $ 1.0 million in current assets in the condensed consolidated balance sheet at both March 31, 2024 and December 31, 2023, with the remainder of the balance classified as long-term.

Derivative Liabilities

Fair Value As Of

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

(in thousands) Balance Sheet Location March 31, 2024 December 31, 2023

Derivatives designated as cash flow hedges

2 unchanged sentences

Total Derivative Liabilities (1)

$ 929 $ 2,215

(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.

(1) Derivative liabilities, at fair value, were not material at March 31, 2024, and included $ 0.4 million in current liabilities in the condensed consolidated balance sheet at December 31, 2023, 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 September 30, For the Nine Months Ended September 30,

Location of Gain For the Three Months Ended March 31,

(in thousands) (Loss) on Derivatives 2024 2023

Derivatives not designated as hedging instruments

Propane swap agreements Unregulated propane and natural gas costs $ — $ — $ — $ 56

Derivatives designated as cash flow hedges

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Propane swap agreements Unregulated propane and natural gas costs 1,391 ( 127 )

Propane swap agreements Other comprehensive income (loss) 2,362 ( 4,050 ) ( 632 ) ( 4,022 )

Interest rate swap agreements

Interest expense 172 65

Interest rate swap agreements Other comprehensive income (loss) 268 207 901 207

Total $ 1,256 $ 671

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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 September 30, 2023 and December 31, 2022:

Fair Value Measurements Using:

As of September 30, 2023 Fair Value Quoted Prices in

As of March 31, 2024 Fair Value Quoted Prices in

Active Markets

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Derivative liabilities $ 1,281 $ — $ 1,281 $ —

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)

Beginning Balance $ 1,853 $ 2,036

Purchases and adjustments — 133

Transfers — —

Distribution ( 397 ) ( 347 )

Investment income 25 24

Ending Balance $ 1,481 $ 1,846

The changes in the fair value of Level 3 investments for the three months ended March 31, 2024 and 2023 were immaterial.

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

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

At March 31, 2024, 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 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.

At March 31, 2024, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 1.2 billion, compared to the estimated fair value of $ 1.1 billion.

At December 31, 2023, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately $ 1.2 billion, compared to a fair value of approximately $ 1.2 billion.

The fair value was calculated using a discounted cash flow methodology that incorporates a market interest rate based on published corporate borrowing rates for debt instruments with similar terms and average maturities, and with adjustments for duration, optionality, and risk profile.

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Our outstanding long-term debt is shown below:

September 30, December 31,

March 31, December 31,

(in thousands) 2024 2023

Uncollateralized senior notes:

5.93% note, due October 31, 2023 $ 1,500 $ 3,000

5.68% note, due June 30, 2026 8,700 11,600

6.43% note, due May 2, 2028 3,500 4,200

3.73% note, due December 16, 2028 12,000 12,000

3.88% note, due May 15, 2029 30,000 35,000

3.25% note, due April 30, 2032 61,250 66,500

3.48% note, due May 31, 2038 50,000 50,000

3.58% note, due November 30, 2038 50,000 50,000

3.98% note, due August 20, 2039 100,000 100,000

2.98% note, due December 20, 2034 70,000 70,000

3.00% note, due July 15, 2035 50,000 50,000

2.96% note, due August 15, 2035 40,000 40,000

5.68% notes, due June 30, 2026 $ 8,700 $ 8,700

6.43% notes, due May 2, 2028 3,500 3,500

3.73% notes, due December 16, 2028 10,000 10,000

3.88% notes, due May 15, 2029 30,000 30,000

3.25% notes, due April 30, 2032 57,750 59,500

3.48% notes, due May 31, 2038 50,000 50,000

3.58% notes, due November 30, 2038 50,000 50,000

3.98% notes, due August 20, 2039 100,000 100,000

2.98% notes, due December 20, 2034 70,000 70,000

3.00% notes, due July 15, 2035 50,000 50,000

2.96% notes, due August 15, 2035 40,000 40,000

2.49% notes, due January 25, 2037 50,000 50,000

1 unchanged sentence

5.43% notes, due March 14, 2038 80,000 80,000

6.39% notes, due December 2026 100,000 100,000

6.44% notes, due December 2027 100,000 100,000

6.45% notes, due December 2028 100,000 100,000

6.62% notes, due December 2030 100,000 100,000

6.71% notes, due December 2033 100,000 100,000

6.73% notes, due December 2038 50,000 50,000

Equipment security note

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Total long-term debt, net of current maturities $ 1,185,166 $ 1,187,075

Note Purchase Agreements

On March 14, 2023 we issued 5.43 percent Senior Notes due March 14, 2038 in the aggregate principal amount of $ 80.0 million and used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under our Revolver credit facility and to fund capital expenditures.

Terms of the Senior Notes

All of our outstanding Senior Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

On November 20, 2023, we issued Senior Notes in the aggregate principal amount of $ 550.0 million at an average interest rate of 6.54 percent that were used to partially finance our acquisition of FCG which closed during the fourth quarter of 2023.

These notes have varying maturity dates of between three and 15 years, and the outstanding principal balance of the notes will be due on their respective maturity dates with interest payments payable semiannually until the principal has been paid in full.

These Senior Notes have similar covenants and default provisions as our other Senior Notes.

On March 14, 2023 we issued 5.43 percent Senior Notes due in March 2038 in the aggregate principal amount of $ 80.0 million and used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under our Revolver credit facility and to fund capital expenditures.

These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the sixth year after the issuance.

Shelf Agreements

We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt.

In February 2023, we amended our Shelf Agreements with Prudential and MetLife.

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 September 30, 2023:

(in thousands) Total Borrowing Capacity Less:

Amount of Debt Issued Less:

Unfunded Commitments Remaining Borrowing Capacity

Shelf Agreements (1)

Prudential Shelf Agreement $ 405,000 $ ( 300,000 ) $ — $ 105,000

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

Total Shelf Agreements as of September 30, 2023

$ 605,000 $ ( 350,000 ) $ — $ 255,000

(1) The Prudential and MetLife Shelf Agreements both expire in February 2026.

The Uncollateralized Senior Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt, with terms that extend through February 2026.

At March 31, 2024, a total of $ 255.0 million of borrowing capacity was available under these agreements.

Short-Term Borrowings

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

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.

At March 31, 2024 and December 31, 2023, we had $ 170.4 million and $ 179.9 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 5.83 percent during each period.

There were no borrowings outstanding under the sustainable investment sublimit of the 364-day tranche at March 31, 2024.

We have entered into several amendments to our Revolver which resulted in modifications to both tranches of the facility.

The most recent amendment in October 2023 increased our funded indebtedness ratio from 65 percent to 70 percent during the quarter in which the acquisition of FCG was consummated and the quarter subsequent to the closing of the acquisition.

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

Additionally, the amendment under the 364-day tranche prescribed that borrowings would 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, solely at our discretion.

Further, the amendment provided that borrowings under the 364-day green loan sublimit would 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, solely at our discretion.

The amendment entered into in 2022 reset the benchmark interest rate to SOFR and eliminated 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.

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.

As of March 31, 2024, the pricing under the 364-day tranche of the Revolver included a commitment fee of 10 basis points on undrawn amounts and an interest rate of 80 basis points over SOFR plus a 10 -basis point SOFR adjustment on outstanding balances.

As of March 31, 2024, the pricing under the five-year tranche of the Revolver included a commitment fee of 10 -basis points on undrawn amounts and an interest rate of 100 -basis points over SOFR plus a 10 -basis point SOFR adjustment on outstanding balances.

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

These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in the Revolver's loan documents.

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 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.

We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio as described above.

As of March 31, 2024, we were in compliance with this covenant.

Our total available credit under the Revolver at March 31, 2024 was $ 197.6 million.

As of March 31, 2024, we had issued $ 7.0 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.

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

Upon closing of the FCG acquisition in November 2023, and with the completion of other financing activities as defined in the lending agreement, this facility was terminated with no funds drawn to finance the transaction.

For additional information regarding the acquisition and related financing, see Note 3, Acquisitions, Note 9, Stockholders Equity , and Note 14, Long-Term Debt .

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

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

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.

The amounts disclosed in our consolidated balance sheet at March 31, 2024, 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 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.

As of March 31, 2024, 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,

Three Months Ended

(in thousands) Classification 2024 2023

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 September 30, 2023 and December 31, 2022:

(in thousands) Balance sheet classification September 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 March 31, 2024 and December 31, 2023:

(in thousands) Balance sheet classification March 31, 2024 December 31, 2023

Operating lease assets Operating lease right-of-use assets $ 11,719 $ 12,426

2 unchanged sentences

Total lease liabilities $ 12,311 $ 13,004

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

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating leases at March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.5 % 3.5 %

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 September 30, 2023 and 2022:

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2024 2023

Operating cash flows from operating leases $ 724 $ 722

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:

The following table presents the future undiscounted maturities of our operating and financing leases at March 31, 2024 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