What changed in this filing

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Item 1A. Risk Factors

2020-12-03 compared with 2019-12-03 · 72 added, 50 removed, 100 unchanged (55% of the section changed)

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In such case, the trading price of the Company’s common stock could decline and investors could lose all or part of their investment.

The risk factors below are categorized by operational, regulatory and financial:

The risk factors below are categorized by operational, regulatory, financial and general:

OPERATIONAL RISKS

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Supply disruptions due to weather or other forces.

Hurricanes, floods and other natural or man-made disasters could damage or inhibit production and/or pipeline transportation facilities, which could result in decreased natural gas supplies.

Decreased supplies could result in an inability to meet customer demand or lead to higher prices and/or service disruptions.

Disasters could also lead to additional governmental regulations that may limit production activity and/or increase production and transportation costs.

General downturn in the economy or prolonged period of slow economic recovery.

A weak or poorly performing economy can negatively affect the Company’s profitability.

An economic downturn can result in loss of commercial and industrial customers due to plant closings, a loss of residential customers as well as slow or declining growth in new customer additions, all of which would result in reduced sales volumes and lower revenues.

An economic downturn could also result in rising unemployment and other factors that could lead to a loss of customers and an increase in customer delinquencies and bad debt expense.

Hurricanes, floods, fires and other natural or man-made disasters could damage or inhibit production and/or pipeline transportation facilities, which could result in decreased natural gas supplies.

Decreased supplies could result in an inability to meet customer demand, service new franchise areas or lead to higher prices and/or service disruptions.

Disasters could increase costs to repair damaged facilities and result in delays to restore service to interrupted customers as well as lead to additional governmental regulations that may limit production activity and/or increase production and transportation costs.

Security incident or cyber-attacks on the Company’s computer or information technology systems.

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In the event of a successful attack, the Company could be exposed to material financial and reputational risks, possible disruptions in natural gas deliveries or a compromise of the safety of the natural gas distribution system, as well as be exposed to claims by persons harmed by such an attack, all of which could materially increase the Company's costs to protect against such risks.

Inability to attract and retain professional and technical employees.

The ability to implement the Company’s business strategy and serve customers is dependent upon employing talented professionals and attracting, training, developing and retaining a skilled workforce.

As the Company will be facing retirements of key personnel over the next several years, the failure to replace those departing employees with skilled and qualified employees could increase operating costs and expose the Company to other operational and financial risks.

Geographic concentration of business activities.

The Company's business activities are concentrated in the Roanoke Valley.

Changes in the local economy, politics, regulations and weather patterns could negatively impact the Company's existing customer base, leading to declining usage patterns and financial condition of customers, both of which could adversely affect earnings.

Impact of weather conditions and related regulatory mechanisms.

The Company’s revenues and earnings are dependent upon weather conditions.

The Company’s rate structure currently has a WNA factor that results in either a recovery or refund of revenues due to any variation from the 30-year average for heating degree-days.

If the provision for the WNA were removed from its rate structure, the Company would be exposed to a much greater risk related to weather variability resulting in earnings volatility.

A colder than normal winter could cause the Company to incur higher than normal operating and maintenance costs.

Resources maintains cyber-insurance coverage, which does not protect the Company from cyber incidents but does provide some level of protection to mitigate the financial impacts resulting from such attacks.

Volatility in the price and availability of natural gas.

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Increasing natural gas prices could result in declining sales as well as increases in bad debt expense and increased competition from other energy providers.

Inability to complete necessary or desirable pipeline expansion or infrastructure development projects.

Inability to attract and retain professional and technical employees.

As the Company is facing retirements of key personnel over the next several years, the failure to transition the skills and knowledge of the

departing employees to qualified existing or new employees could increase operating costs and expose the Company to other operational, reputational and financial risks.

Geographic concentration of business activities.

The Company's business activities are concentrated in the Roanoke Valley and surrounding areas.

Changes in the local economy, politics, regulations and weather patterns or other factors limiting demand for natural gas could negatively impact the Company's existing customer base, leading to declining usage patterns and financial condition of customers.

Furthermore, these changes could also limit the Company's ability to serve its customers or add new customers within its service territory.

Any of these factors could adversely affect earnings.

Inability to complete necessary or desirable pipeline expansion or infrastructure improvement projects.

In order to serve new customers or expand service to existing customers, the Company needs to install new pipeline and maintain, expand or upgrade its existing distribution, transmission and/or storage infrastructure.

Various factors may prevent or delay the completion of such projects or make them more costly, such as the inability to obtain required approval from local, state and/or federal regulatory and governmental bodies, public opposition to the projects, inability to obtain adequate financing, competition for labor and materials, construction delays, cost overruns,

and an inability to negotiate acceptable agreements relating to rights-of-way, construction or other material development components.

As a result, the Company may not be able to adequately serve existing customers or expand its distribution system to support customer growth.

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Any of these factors could negatively impact earnings.

Impact of weather conditions and related regulatory mechanisms.

The Company’s revenues and earnings are dependent upon weather conditions.

The Company’s rate structure currently has a WNA factor that results in either a recovery or refund of revenues due to any variation from the 30-year average for heating degree-days.

If the provision for the WNA were removed from its rate structure, the Company would be exposed to a much greater risk related to weather variability resulting in earnings volatility.

A colder than normal winter could cause the Company to incur higher than normal operating and maintenance costs without the additional revenues to offset the increased costs, as well as higher bad debt expenses, particularly in the context of the

current pandemic-related restrictions.

Competition from other energy providers.

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Price is a significant competitive factor.

Higher natural gas costs or decreases in the price of other energy sources may enhance competition and encourage customers to convert their natural gas-fueled equipment to systems that use alternative energy sources, thus lowering natural gas deliveries and earnings.

Higher natural gas costs or decreases in the price of other energy sources may enhance competition and encourage customers to switch to alternative energy sources, thus lowering natural gas deliveries and earnings.

Price considerations could also inhibit customer and revenue growth if builders and developers do not perceive natural gas to be a better value than other energy options and elect to install heating systems that use an energy source other than natural gas.

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Regulations restricting or prohibiting the use of coal as a fuel for electric power generation has increased the demand for natural gas, and could at some point potentially result in natural gas supply concerns and higher costs for natural gas.

Legislation or regulations could limit the exploration and development of natural gas reserves, making the price of natural gas less competitive and less attractive as a fuel source for consumers, resulting in reduced deliveries and earnings.

The current Presidential administration is de-emphasizing climate change initiatives;

however, future administrations might prioritize climate change and greenhouse gas emissions, which could lead to new and stricter environmental laws.

Legislation or regulations could limit the exploration and development of natural gas reserves, making the price of natural gas less competitive and less attractive as a fuel source for consumers.

Future legislation could also place limitations on the amount of natural gas used by businesses and homeowners to reduce the level of emissions, resulting in reduced deliveries and earnings.

Increased compliance and pipeline safety requirements and fines.

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Any significant delay, cost over-run or the failure to receive the requisite approvals on a timely basis, or at all, could have a significant effect on the Company's earnings and financial position.

Although the LLC initially received the necessary federal and state permits to construct the pipeline, progress on the MVP has been hindered by several legal and regulatory obstacles as both the Fourth Circuit and FERC have issued stays or stop orders affecting portions or all of the project pending resolution of issues or concerns raised as the project has progressed.

Actions taken or imposed by the Fourth Circuit or FERC that are currently impeding the completion of the pipeline include the following:

In July 2018, the Fourth Circuit rescinded permits allowing the pipeline to cross a 3.6 mile section of the Jefferson National Forest.

In October 2018, the same court vacated the West Virginia water crossing permits with the Army Corp of Engineers subsequently rescinding the permits in Virginia.

In October 2019, FERC issued a project-wide order halting forward-construction progress in response to the October 11, 2019, Fourth Circuit order granting a stay of Mountain Valley Pipeline's Biological Opinion and Incidental Take Statement issued by the U.S.

Fish and Wildlife Service in November 2017.

The LLC continues to respond to the issues and concerns raised;

however, the ongoing obstacles have caused delays in construction and resulted in significantly higher projected costs and an extended targeted in-service date for the pipeline.

Although the LLC initially received the necessary federal and state permits to construct the pipeline, progress on the MVP has been hindered by several legal and regulatory obstacles as the Fourth Circuit, FERC and other governmental agencies have issued stays, stop orders or delayed authorizations affecting portions or all of the project pending resolution of issues or concerns raised as the project has progressed.

The LLC is currently waiting on resolution of the Fourth Circuit's stay of the Nationwide Permit 12 imposed in October 2020 preventing the pipeline from crossing streams and wetlands.

FERC has not yet granted a revised authorization to complete construction work in a 25 mile section of the pipeline route.

The LLC also needs authorizations from the Bureau of Land Management and the United States Forest Service and resolution of challenges to the Biological Opinion and Incidental Take Statement issued by the U.S.

Fish and Wildlife Service.

Several of the prior issues have been resolved;

however, the ongoing obstacles as discussed above continue to cause delays in construction and have resulted in significantly higher projected costs and an extended targeted in-service date for the pipeline.

These cost overruns may not be approved for recovery or be recovered through other regulatory mechanisms, and the LLC could be obligated to make delay or termination payments or be responsible for other contractual damages.

The LLC could also experience the loss of tax credits or tax incentives, or delayed or diminished returns, and could be required to write-off all or a portion of its investment in the project.

New or extended regulatory, legislative or judicial actions could lead to additional delays and even higher costs, which could affect future returns for the LLC and materially impact Resources consolidated financial position and results of operation.

The LLC could also experience the loss of tax incentives, or delayed or diminished returns, and could be required to write-off all or a portion of its investment in the project.

New or extended regulatory, legislative or judicial actions or challenges could lead to additional delays and even higher costs, which could affect future returns for the LLC and materially impact Resources consolidated financial position and results of operation.

In addition, there are numerous risks facing the LLC, which can adversely affect the Company's earnings and financial performance through its investment.

The LLC's ability to retain contract crews to complete construction of the pipeline, the inability to obtain or renew ancillary licenses, rights-of-way, permits or other approvals and opposition from pipeline opponents and environmental groups could all influence the successful completion of the pipeline.

Should the LLC be unable to adequately address these issues, the LLC’s business, financial condition, results of operations and prospects could be materially adversely affected, which could materially impact the financial condition and results of operations of the Company.

Should the LLC be unable to adequately address these issues, the LLC’s business, financial condition, results of operations and prospects could be adversely affected, which could materially impact the financial condition and results of operations of the Company.

Any failure to negotiate successful project development agreements for new facilities with third parties could have similar results.

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Threats of terrorism and catastrophic events resulting from terrorism, cyber-attacks, or individuals and/or groups attempting to disrupt the LLC’s business, or the businesses of third parties, may materially adversely affect the LLC’s business, financial condition, results of operations and prospects.

Pandemic Outbreak.

A pandemic event such as COVID-19 or other similar diseases could cause a significant economic restriction or recession negatively impacting the Company’s financial position, results of operations and cash flows.

Depending on the duration of these impacts, the liquidity of the Company could be strained, reducing the Company’s ability to complete infrastructure investments and its ability to safely and reliably serve its customers.

Impact from commercial customers:

In an effort to reduce the spread of disease, businesses, either on their own or by government mandates, may close or reduce operations to limit contact with the contagion.

A reduction in business activity could result in lower natural gas consumption for both production activities as well as space heating, thereby reducing revenues and gross profit.

The closing or reduction in operations by businesses, whether temporary or prolonged, could result in a permanent loss of some commercial customers.

Impact from residential customers:

The closing of businesses may result in job layoffs or other reductions in employee numbers and/or working hours, thus reducing or eliminating customers’ ability to pay their utility bills and resulting in increased bad debt expense.

Impact on suppliers:

A pandemic event could reduce the ability of the Company’s suppliers to supply a sufficient level of natural gas limiting our ability to meet customer demands.

Impact to the Company's employees:

Orders by government bodies could result in employees of the Company being required to limit contact with customers or work remotely, thus not allowing them to complete tasks normally requiring a physical presence.

Also, if a significant number of employees were to contract the virus or be quarantined, the Company may not be able to complete key or critical tasks, not limited to, but including key financial, reporting, and operational controls.

Impact from SCC actions:

The SCC could issue orders in response to a pandemic event that result in increased regulatory oversight, operational mandates or restrictions on normal business activities.

Any such action could result in increased operating costs or other financial or operational burdens that may negatively impact the Company's results of operations or financial position.

Impact on financing capabilities:

A prolonged economic shutdown due to a pandemic could stress the banking system, thereby limiting the Company’s ability to obtain financing on commercially reasonable terms, which could lead to higher interest costs.

Furthermore, a distressed equity market could limit the ability to raise capital through the issuance of Resources’ equity instruments due to depressed prices and low trading volumes.

Access to capital to maintain liquidity.

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Adverse market trends, market disruptions or deterioration in the financial condition of the Company could increase the cost of borrowing, restrict the Company's ability to issue additional shares of its common stock or otherwise limit the Company’s ability to secure adequate funding.

Insurance coverage may not be sufficient.

The Company currently has liability and property insurance to cover a variety of exposures and perils.

The insurance policies supporting said coverages are subject to certain limits and deductibles.

Insurance coverage for risks against which the Company and its industry peers typically insure may not be offered in the future or such policies may expand exclusions that limit the amount of coverage or remove certain risks completely as insured events.

Furthermore, litigation awards continue to increase and the limits of insurance may not keep pace accordingly.

The proceeds received from any such insurance may not be paid in a timely manner.

The occurrence of any of the foregoing could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

Post-retirement benefits and related funding of obligations.

The costs of providing defined benefit pension and retiree medical plans are dependent on a number of factors such as the rates of return on plan assets, discount rates used in determining plan liabilities, the level of interest rates used to measure the required minimum funding levels of the plan, future government regulation, changes in life expectancy, and required or voluntary contributions made to the plan.

Changes in actuarial assumptions and differences between the assumptions and actual results, as well as a significant decline in the value of investments that fund these plans, if not offset or mitigated by a decline in plan liabilities, could increase the expense of these plans and require significant additional funding.

Both funding obligations and increased expense could have a material impact on the Company's financial position, results of operation and cash flows.

Failure to comply with debt covenant requirements.

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In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements.

Any such acceleration would cause a material adverse change in our financial condition.

Any such acceleration would cause a material adverse change in the Company's financial condition.

Post-retirement benefits and related funding of obligations.

Although the Company has soft-frozen both plans to limit future growth in each plan's liabilities, ongoing funding obligations and expenses could have a material impact on the Company's financial position, results of operation and cash flows.

Exposure to market risks.

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However, increases in interest rates could adversely affect the Company’s future financial results.

GENERAL RISKS

General downturn in the economy or prolonged period of slow economic recovery.

A weak or poorly performing economy can negatively affect the Company’s profitability.

An economic downturn could also result in rising unemployment and other factors that could lead to a loss of customers and an increase in customer delinquencies and bad debt expense.

Insurance coverage may not be sufficient.

The Company currently has liability and property insurance to cover a variety of exposures and risks.

The insurance policies supporting said coverages are subject to certain limits and deductibles.

Furthermore, litigation awards continue to increase and the limits of insurance may not keep pace accordingly.

The proceeds received from any such insurance may not be paid in a timely manner.

The occurrence of any of the foregoing could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

Unresolved Staff Comments.

Not applicable.

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-K

Item 1A. Risk Factors