Chesapeake Util (CPK) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Lucia Dempsey
• Chair of the Board, President, and Chief Executive Officer - Jeffry Householder
• Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer - James F. Moriarty
• Senior Vice President and Chief Financial Officer - Jeffrey S. Sylvester

TAKEAWAYS

• Adjusted Earnings Per Share -- $0.89, representing a 9% increase driven by natural gas transmission expansion projects and regulated infrastructure programs.
• Adjusted Net Income -- $21.6 million, growing 11% due to regulatory initiatives and continued demand for natural gas distribution.
• Capital Investment -- $151.2 million for the third quarter, bringing the nine-month total to $412.8 million as the company remains on track for its annual target of $550 million to $600 million.
• Adjusted Gross Margin -- $148.7 million, up 9% reflecting transmission expansions and improved contributions from unregulated businesses.
• Transmission and Distribution Incremental Margin -- $4.8 million, resulting from system growth and reliability investments.
• Infrastructure Program Margin -- $2.8 million, driven by programs focused on strengthening the safety and resilience of utility systems.
• Florida City Gas Interim Rates -- $2.7 million contribution in the third quarter, following the implementation of approved rates in August.
• Delmarva Residential Customer Growth -- 2.7%, supported by 18 new project agreements signed in 2026 across Delaware.
• Florida Public Utilities Customer Growth -- 2.0%, reflecting sustained demand for natural gas distribution in the region.
• Florida Energy Pathway Capacity -- 250,000 dekatherms per day, contracted by anchor shippers NextEra Energy Resources, Florida Power & Light, and company-owned distribution businesses.
• Worcester Resiliency Upgrade Investment -- $125 million, an increase of $25 million over prior estimates due to updated project timelines.
• Projected Gas Transmission Margin -- $33 million for 2026, expected to exceed $50 million in 2027 as distribution demand increases.
• Five-Year Capital Guidance -- over $2.2 billion through 2028, focused on regulated infrastructure and transmission expansion.
• 2028 EPS Guidance -- $7.75 to $8.00, reaffirmed as management anticipates long-term growth from disciplined capital deployment.
• Payroll and Benefit Costs -- $0.12 per share negative impact, primarily due to healthcare claim expenses that exceeded historical levels.
• Operations and Maintenance Expenses -- $0.09 per share negative impact, reflecting business transformation costs and system maintenance.
• Depreciation and Amortization -- $0.06 per share negative impact, driven by increased levels of capital investment in utility infrastructure.
• Equity Capitalization -- 49%, with $37 million of equity issued during the first nine months of the year to support the growth program.
• Funding Capacity -- 67% available, supported by a revolving credit facility recently expanded to $650 million.
• Dividend Payout -- $0.74 per share for the next payment, aligning with a target range of 45% to 50% of earnings.
• Equity Issuance Program -- $225 million, established as a new at-the-market program to support strategic growth initiatives in future years.

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RISKS

• Sylvester stated, "we encountered costs associated with healthcare claims that were much higher than we had typically experienced," which reduced quarterly earnings by $0.12 per share.
• Householder noted that the Worcester Resiliency Upgrade project now requires a total capital investment of $125 million, representing "an increase of $25 million over prior estimates."

SUMMARY

Chesapeake Utilities Corporation (NYSE:CPK) management emphasized the advancement of major regulated infrastructure projects and the execution of key regulatory initiatives as primary drivers of long-term earnings growth. The company reported progress on the Florida Energy Pathway transmission project while integrating Florida City Gas and preparing for final rate case decisions. Operations were supported by sustained customer growth across the Delmarva and Florida regions alongside internal business transformation efforts focused on system modernization. Management indicated that capital deployment remains concentrated on strengthening utility reliability and expanding capacity to meet rising energy demand in fast-growing markets.

• The company entered the testing phase of its multiyear Enterprise Resource Planning implementation and remains on schedule for a second quarter 2027 go-live.
• Management announced NextEra Energy Resources as the strategic joint venture partner for the Florida Energy Pathway project, with the company retaining 51% ownership.
• Chesapeake Utilities was selected to serve the Sussex Technical High School campus in Delaware, converting the facility from oil and propane to natural gas.
• During the Q&A session, Householder stated the company is monitoring steel pricing to determine the timing of substantive obligations for the Florida Energy Pathway project.
• Management expects a final commission order for the Florida City Gas rate case in early January 2027 following revenue requirement conferences in December.

INDUSTRY GLOSSARY

• Dekatherm: A unit of heating value equivalent to 10 therms or 1 million British thermal units (Btu).
• ERP: Enterprise Resource Planning, a software system used to manage and integrate core business processes.
• FEP: Florida Energy Pathway, a $1.2 billion natural gas transmission project in South Florida.
• SAFE: Strategic Infrastructure Development and Enhancement, a regulatory program for replacing aging natural gas infrastructure.
• GRIP: Gas Reliability Infrastructure Program, a Florida-based initiative for replacing older gas distribution mains.
• WRU: Worcester Resiliency Upgrade, an LNG storage and resiliency facility project on the Delmarva Peninsula.
• RNG: Renewable Natural Gas, a pipeline-quality gas produced from the decomposition of organic matter.

Full Conference Call Transcript

Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Welcome to Chesapeake Utilities Corporation's Third Quarter 26 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. And the floor will be open for your questions following the presentation. So others can hear your questions clearly, Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations.

Lucia Dempsey: Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. On Slide 2, we show our typical disclaimers while I remind you that matters discussed on this conference call may include forward-looking statements that involve risks and uncertainties. Forward looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of our 2025 annual report on Form 10-K and in our third quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results.

Additionally, the company evaluates its performance based on certain non GAAP measures including adjusted gross margin, adjusted net income and adjusted earnings per share. And the information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non GAAP measures to the related GAAP measures has been provided in the appendix of this presentation Our earnings release and in our third quarter Form 10-Q. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we will do so here, as highlighted on slide 3. With colder weather approaching, today's moment focuses on winter preparedness.

Taking a few simple steps now can help keep ourselves, our families, and our communities safe. Remember to test, smoke and carbon monoxide detectors, inspect heating equipment, clean fireplaces, prepare vehicles for winter conditions, and winterize your vehicle emergency kit. These preparations can help reduce risk and ensure we are ready when winter weather arrives. I will now introduce our presenters today. Jeffry Householder, Chair of the Board, President, and Chief Executive Officer will provide an update on this quarter's key accomplishments and our capital growth program. James F. Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer will discuss the Florida City Gas rate case and stakeholder engagement. Finally, Jeffrey S.

Sylvester, Senior Vice President and Chief Financial Officer will then discuss our business transformation efforts and financial results in more detail. With that, it is my pleasure to turn the call over to Jeffry Householder.

Jeffry Householder: Thank you, Lucia, and good morning, everyone. I will start with Slide 5. I am pleased that our growth trajectory has continued through the third quarter. Enabling us to report a 12% increase in adjusted net income and an 8% increase in adjusted earnings per share through the first 9 months of this year relative to the same period last year. Our system growth and reliability investments continue to drive returns. In the third quarter, we generated an incremental $4.8 million from transmission and distribution systems and an incremental $2.8 million of margin related to our infrastructure programs that strengthen the safety and resilience of our systems.

We recognized $2.7 million of interim rates for our FCG rate case in the third quarter, and look forward to a final rate decision by the end of this year. Also invested $151 million of capital in the third quarter, bringing our year-to-date investment to $413 million, on track to meet our full year guidance of $550 million to $600 million of capital investment. Moving to Slide 6. Customer demand for natural gas remains core to our long term growth strategy. We have had another quarter of solid customer growth across all customer classes, including year to date residential customer growth of 2.7% in Delmarva, 2% for Florida Public Utilities and 1.7% for Florida City Gas.

To highlight our Delmarva region in particular this quarter, we continue to execute developer and builder agreements for new residential communities. Thus far in 2026,, our sales teams have signed 18 new projects across Sussex, New Castle and Kent Counties expected to receive service over the next several years. We are also seeing opportunities to support larger community projects that are choosing natural gas. As 1 example, in Sussex County, Delaware, we were selected to serve the Sussex Technical High School, the largest local school project in the state's history. We are converting the campus from oil and propane to natural gas. Which will reduce emissions while providing a cost effective and reliable energy solution.

This project is a great example of how our natural gas infrastructure investments support the growing needs of the communities we serve. Now let's shift to Slide 7, which summarizes our 2020 capital program. Last quarter, we increased our full year 2020 capital guidance by $100 million resulting in an updated range of $550 million to $600 million Our year-to-date investment of $413 million keeps us firmly on track to achieve our annual capital guidance. We continue to execute with discipline, strategically deploying capital to strengthen the business, and support our long term growth objectives. Slide 8 highlights the Florida Energy Pathway project, or FEP, our $1.2 billion gas transmission project in South Florida.

The project represents a significant regulated infrastructure investment designed to address supply constraints, expand natural gas transportation capacity, and enhance energy reliability as we serve growing demand across the South Florida region. We most recently announced NextEra Energy Resources or NEAR as our strategic joint venture partner. Under the agreement, PPC will retain a 51% ownership, with NIR acquiring the remaining 49% minority interest. We believe their project execution expertise and strong local relationships will drive value through the design, permitting and construction phases of the project. 3 anchor shippers, FP&L and our natural gas distribution businesses Florida Public Utilities and Florida City Gas. Have contracted for capacity quantities of 250 thousand dekatherms per day.

The opportunity exists to explore further expansion beyond the current contract quantities to meet any additional shipper demand that may arise. We have made substantial progress on the engineering and design work for the project to date and have begun preparations for the permitting phase. We expect permitting to take 12 to 18 months with construction to begin directly after. We continue to expect the project to come online in 2030, and we will provide incremental updates each quarter. Slide 9 summarizes the latest updates on Worcester Resiliency upgrade, our LNG storage facility on the Eastern Shore of Maryland. Mechanical and electrical systems construction is now essentially complete. And pre commissioning work is underway.

Recent FERC inspections have gone well and we are preparing to file for the first of a series of commissioning related notice to proceed permits. Based on the updates of the project timeline during this year, we now expect total capital investment to be approximately $125 million, an increase of $25 million over prior estimates. To address our updated capital expectations, we requested FERC approval of updated rates. And are pleased to receive approval just this week Therefore, we now expect WRU's full-year margin contribution to be $19.7 million. We continue to expect WRU to come online within the first quarter of next year subject to the completion of all FERC commissioning work.

Our margin expectation for 2027 remains relatively consistent. At $17.2 million. Turning to Slide 10, we provide a summarization of gas transmission projects. Collectively, these projects represent nearly $33 million of adjusted gross margin this year, and over $50 million in 2027, demonstrating the growing transmission related earnings contribution resulting in large part from the continued demand increases in our distribution businesses. I will now shift to Slide 11, which addresses our longer term capital program.

For our current 5-year capital guidance program, we continue to expect capital expenditures to exceed $2.2 billion We also intend to provide the following metrics on our fourth quarter and full year earnings call in February of next year: 2027 capital guidance, 2027 through 2031 capital guidance and a 2027 through 2031 EPS growth rate. With that, I will turn it to Jim.

James F. Moriarty: Thank you, Jeffry. And good to be with all of you today. I will start with Slide 12. We are in the final stages of our rate case for Florida City Gas. Which seeks recovery of our investments in infrastructure and technology, that are enhancing safety, reliability, and service for customers. Interim rates were approved in July, and became effective in August. Contributing $2.7 million of margin in the third quarter. We continue to work through the remaining steps in the regulatory process. Florida PSC staff recommendations, are expected on November 18, followed by revenue requirement and rate conferences in early to mid December.

We remain focused on achieving a constructive outcome and expect a final commission order in early January 2027. I will now turn to Slide 13 to provide an update on our stakeholder engagement initiatives. Through the first 9 months of the year, over 600 team members have participated in a volunteer event and the company has contributed nearly $1.2 million in charitable donations, community partnerships, and sponsorships. For the seventh consecutive year, Sharp Energy has been recognized by the Stars of Delaware Awards, This recognition is especially meaningful because it comes directly from the communities we serve.

And reflects our teammates, continued commitment to providing safe reliable, and affordable energy while delivering exceptional service to our communities and customers every day. As our people remain at the heart of who we are, we are thrilled to recognize 4 teammates as the inaugural recipients of the Spirit of Chesapeake Award, our highest recognition for values driven excellence. Amy Shea, Juan Roman, Rick Shelby, and Eddie McGowan were honored for demonstrating our values of care, integrity, and excellence. And for putting these values into action through their commitment to customers, colleagues, and communities. This recognition celebrates not only their individual contributions, but also the culture we continue to build across Chesapeake Utilities, as 1 company.

We are also very proud that Cheryl Martin, Senior Vice President of Regulatory and External Affairs, was recently honored as a distinguished woman in Florida at the 26 Above and Beyond Awards. Throughout her 4 decades of service, Cheryl has demonstrated outstanding leadership across our business and the energy industry while remaining deeply committed to mentoring and developing teammates and supporting the communities we serve. Her recognition reflects the impact of her leadership and the values that continue to define who we are at Chesapeake Utilities. With that, I am pleased to turn the call to Jeffrey S. Sylvester, who will discuss our business transformation progress and financial results in more detail.

Jeffrey S. Sylvester: Thanks, Jim, and good morning, everyone. Slide 14 provides an overview of our business transformation. We are building a stronger foundation for growth, with our ERP implementation serving as a critical enabler of that strategy. Last month, we successfully transitioned into the testing phase and we remain on track for our planned Q2 2027 go-live. I am proud of what the team has accomplished to reach this important milestone and look forward to their commitment to transforming our operating processes as we enter the final stages of the project Now shifting to Slide 15, to discuss our financial results for the quarter. We continue to demonstrate strong performance and growth across all metrics.

Adjusted gross margin was approximately $149 million, up 9%, and adjusted net income was approximately $22 million, up 11% from the third quarter of 2025. Adjusted earnings per share were $0.89 this quarter, representing a strong 9% increase over the third quarter of 2025. Slide 16 provides additional detail on the key drivers of our third quarter performance. Our natural gas transmission expansion projects contributed an additional $0.09 of adjusted earnings per share this quarter. The Florida City Gas interim rates that went into effect in August along with minor increases from last year's rate cases, added $0.09 per share this quarter Margin from our infrastructure program investments accounted for an additional $0.08 per share this quarter.

Continued demand for natural gas distribution drove $0.06 of incremental earnings per share and we benefited from an additional $0.03 of improved propane margins and fees. Changes in consumption and other miscellaneous items contributed $0.02, along with another $0.02 of increased other unregulated performance. These gains were partially offset by a few factors. Including $0.12 of increased payroll and benefit costs, and $0.09 of higher O&M expenses We also had $0.06 of increased depreciation, amortization and property tax expenses driven by increased levels of capital investment. Lastly, financing activity included debt and equity issuances over the last 12 months. Reduced adjusted earnings per share by $0.05 Shifting to Slide 17.

Adjusted gross margin for our regulated segment was approximately $126 million this quarter, up 10% from the third quarter of last year. Regulated operating income saw similar growth, up 13% to approximately $56 million in the third quarter of 2026. Our unregulated energy segment also demonstrated strong performance with adjusted gross margin of approximately $22 million in the third quarter of 2026. Our overall growth is supported by our sustained focus on managing expenses, Although we encountered costs associated with healthcare claims that were much higher than we had typically experienced, We remain focused on managing our costs across the business to drive sustained bottom line growth.

I will now move to Slide 18 to review our capital structure and financing activities. As of September 30, we have maintained equity capitalization of 49%, and have issued nearly $37 million of equity through the first 9 months of the year. We also continue to maintain financial flexibility to support our capital growth program with 67% of our total funding capacity available as of 9/30/2026. In August, we amended our revolving credit agreement. Bringing the total borrowing capacity under the revolver to $650 million, an increase of $200 million This includes $250 million available [inaudible] a $400 million available under a 5 year tranche expiring August 2031.

In the fourth quarter, we expect to issue $250 million in long term debt with a portion of the proceeds being used to refinance $100 million of debt maturing this December. Moving to Slide 19. Alongside our equity and debt plans, our dividend continues to be a key component of our capital allocation strategy as we fund growth investments to drive overall total shareholder return. Our most recent annual dividend increase of 7.3%, and our next dividend payment of $0.74 per share aligned with our dividend payout target range of 45% to 50%. This enables us to retain 50% to 55% of earnings to support our robust capital program. And reduce our external financing needs.

Slide 20 demonstrates our track record of strong and consistent earnings growth over the last 19 years. We remain committed to delivering industry leading long term earnings per share growth. By reaffirming our 2028 earnings per share guidance of $7.75 to $8.00 I would like to end by summarizing our value proposition, which is shown on Slide 21. Our history of consistent performance our ability to execute with discipline navigate changing conditions and deliver on our commitments. That track record provides a strong foundation for the future and reinforces our confidence in our ability to continue creating long term value. Our strategy remains centered on 3 core growth pillars: disciplined capital investment, effective regulatory engagement and continuous improvement.

Together, these priorities strengthen our business support our growth objectives, and position us to deliver sustainable results over the long term. As Jim highlighted, we are powered by our people. The dedication of our teammates drives the service we provide to our customers, the partnerships we build within our communities and the value we deliver to our shareholders. With that, we will take your questions.

Operator: Operator, Thank you. The floor is now open for questions. Our first question today comes from Alexis Kania with U. S. Bancorp. BTIG. Your line is now open.

Alexis Kania: Hi there. Good morning. I just have 1 question just Lucia talked about on the prepared remarks was just any opportunities for incremental contracting on the pipeline announced. Just kind of wondering, maybe potentially where those demand centers might be Would it just be with the existing shippers? Could it be at tie in with some of the other projects that Chesapeake is working on in Florida. I am just kind of curious where that direction might be.

Jeffry Householder: Good morning. This is Jeffry Householder. it is probably all of those things. I mean, we built this pipe with the view that South Florida and that regional area is going to continue to grow. And I think you will see that with manufacturers moving back in the residential construction that continues to astound us in some respects down in that area. And I think there is always the opportunity long term for additional electric load growth. So it is all of those things. We, I think, are in a good position or will be when the pipe goes into service. To expand the capacity capabilities on that pipeline with compression.

And so we could ultimately expand it without a substantial amount of additional capital and certainly not too much additional pipe. that is always, I think, a good thing. So again, we are putting this pipe in the ground with the idea that there will be additional upstream resources at some point. And that we would be able to deliver those into South Florida as needed.

Alexis Kania: Great. Thanks for that. And then maybe just some thoughts on kind of the propane markets and kind of what impacts I guess propane prices are up a little bit. So far this fall, just what that might mean for, kind of margin dynamics on your side?

Jeffry Householder: You are right. They are up a little bit. We have not seen any substantive margin erosion on our systems at this point. I mean, we watch, as you might imagine, the fluctuation in wholesale pricing pretty carefully. And we have especially in our Delmarva operating regions, a substantial amount of storage, millions of gallons up there. And so we have a little bit of a natural hedge with our storage volumes on pricing fluctuations going into the winter. We also have a significant amount of volumes that are hedged with customers. Even our residential customers through the price cap programs that we offer.

And so we are not completely insulated from volatility in the market but we do our best to be marginally impacted by that, which I think we are at this point. Great.

Alexis Kania: Thanks very much.

Operator: Thank you. We will go next to Juan Carlos Vidales with Ladenburg Thalmann. Your line is now open.

Juan Carlos Vidales: Hey, good morning team. How are you doing? Good morning. Just quick on kind of the further growth opportunities. Could you give us sort of an update on SpaceX filings to construct the pipeline for their operations? And I guess, what would be the path for you all to potentially either be included on a deal or sort of a joint developer on that project?

Jeffry Householder: Well, as you know, SpaceX or at least a subsidiary company had filed for approval with the Public Service Commission and received that approval to construct an intrastate pipeline. I will be blunt, we have never considered SpaceX to be a principal customer opportunity for us in moving into the spaceport in Florida. And certainly, does not have much of an impact on our interest in trying to serve cruise ships out of Port Canaveral. SpaceX is clearly capable of building pipeline if they want to do that. They have done it in other places. But I do not think it has a lot of bearing on what we are trying to do over there.

We have an existing pipeline as you know, that runs into the spaceport We are in the process of upgrading that pipeline and building a little bit of additional pipe on the front side of that pipe that would allow us to meet the capacity requirements that we think make sense without SpaceX. And so if we can provide service to SpaceX somewhere along the way, that is great. We would love to do it. But they were not a principal part of our thinking going over toward either the Port of Canaveral certainly, but at the Spaceport either.

Juan Carlos Vidales: All right. And I mean, is there any, I guess, way that the Florida Commission would potentially look at you all's pipeline being relatively close, if not, I believe, almost parallel to the proposed 1. Given you already have rights of way.

Jeffry Householder: Well, it is an interesting question. I think they probably at least considered that in the approval process. At this point, SpaceX is talking about serving just SpaceX. Which again is certainly possible and there are other large industrial users in Florida that do the same thing with pipelines that they have constructed themselves. The right of way that you mentioned, coming across the Causeway into the NASA property, is not a state issue. that is a federal right of way.

And so that is a conversation for someone other than the Florida Public Service Commission. it is certainly potentially congested and they are not that many more pipes that are going to be able to go in that right away and maybe only space SpaceX and us would be there ultimately. So, yeah, we are certainly aware of that and have looked at it and I think the regulators also understand that.

Juan Carlos Vidales: Awesome, great. And then kind of going off that region, in regards to the LNG project that you have sort of mentioned, for both the space exploration and cruise ships out of Cape Canaveral. If that project goes through, how many mcf/d are expected of production on an annual basis? I believe, like, the really large ones are about 2 to 4 million. Would this be sort of in that range, or would it be a much smaller project? And I guess what would be the time frame on construction for a facility like this to go from sort of an FID to commercial operation?

Jeffry Householder: Well, I will probably hold off being specific on the volume projections, probably a little smaller than the 1 that you just talked about. I think if we can gather together what we are trying to get together, which is the load from either space and or the cruise ships which is our principal interest here. We would hopefully be able to put a facility on the ground in the same kind of timeframe that we have been looking at with the WRU facility.

Analyst: And again, we are not liquefying at WRU And so there is a little bit of additional time required there.

Juan Carlos Vidales: But I think somewhere in the 2 to 3-year time period is about right. Great. And then just 1 quick follow-up. In regards to the WRU project, what is the O&M associated with LNG storage facility?

Jeffry Householder: Like that? Let me get back to you with that. I am trying to think if I can even. Let me get back to you on that. I will check their number. I can spit out a number that is in my head, but probably. And it is probably pretty close. But I can I can tie that out for you specifically?

Juan Carlos Vidales: Great and then just to. I can, 1 last quick 1. In regards to siting in Florida, where do you all stand? I believe before you had mentioned that there was 1 site that was looking promising, and then I think there was. Probably something got derailed. But as of now, where do you stand?

Jeffry Householder: This is on the LNG facility at Cape Canaveral. Yes. Correct. Yes, we have--we have looked now, I think we are on site 15 that we have looked up and down the intercoastal there are a number of sites that are attractive if you are trucking the LNG or railing it. If you are trying to put it on a fueling barge, and you need access to the intercoastal, especially to get into the Port of Canaveral, then you have got to find a place on the water that is big enough and the water is deep enough to allow you to do that. And so that narrows the field quite significantly.

There are some parcels of property actually on the very large NASA property area down there around the Space Port. That would be quite useful both for providing services to some of the rocket launches and to the Port Of Canaveral. So we are still quite interested in those. We had identified as you mentioned a parcel of land that we frankly did not hold out a whole lot of hope for. Because the Port Of Canaveral wanted to turn it into a cruise ship parking lot, which you can understand. And it was literally within less than a mile on a barge canal to access the port.

That would have been a certainly an ideal low cost project for us. So, but, you know, they wanted to use the property for something else. And so we continue to work with the port and with the Space Florida folks to try to identify appropriate places that we could locate the facility.

Juan Carlos Vidales: Great. Well, thank you. See you guys in a couple of days here.

Jeffry Householder: Yes. Good.

Operator: Thank you. We will go next to Alex Kania with Mizuho. Your line is now open.

Analyst: Hey, good morning everyone. Congrats on a good quarter Just had 1 quick 1. And you guys called out $0.12 in increased payroll and benefits. On the earnings waterfall. And you guys mentioned in the March cost of healthcare claims were higher than normal in the quarter. Is this something that was more onetime in nature? Or it can kind of bleed into 4Q and potentially into next year?

Jeffry Householder: Yes. Thank you, Alex. This is as we indicated, there was some additional expenses that showed up were that were not really predicted. And we are taking a hard look at those to see if there is either 1, ways to deal with them or 2, are they something that we should be kind of baking into the go forward case I would probably lean towards this is an anomaly in that quarter. And we are always looking to manage our costs and certainly prudently.

This 1, I think, is a little bit provides a little bit more interest in terms of thinking about the folks that we are insuring and making sure that we are healthy and, you know, getting beyond sort of the cost elements. But yeah, it was a little bit of little bit of a surprise there in the third quarter that we are going to manage through Got you.

Analyst: Okay, cool. And then just quick 1 on the multiyear ERP project. Just wondering how that is progressing, if we are going see any more O&M as you go into 4Q and into 1Q as a plans go live in Q2 of 27?

Jeffrey S. Sylvester: Yes. Thinking about if you are just thinking about O and M, probably will not see any additional O&M until 2028. We will get through in service there in the April, May time frame and will be in some sort of hyper care for pretty much the rest of 2027 And at that point in time, we will be up updating obviously the impacts to 2028 But we have been making investments like this for the last few years. We have not really talked a lot about the O&M benefits to those investments.

And so there would be a time here in the not too future that we will be able to give you a better view of what our O&M levels will look like really beyond ERP. But there are things that I think are coming to for fruition in terms of investments around our customer and obviously the ERP that are having impacts to how we are operating on a day to day So that is all in front of us. Again, probably a little bit more color beyond our February update that we will give you Gotcha.

Analyst: Cool. And then just last 1, if I could, for the rate case. Are prospects for settlement still in table or just looking like it is going to be fully litigated, through the end of December and new rates in January?

Jeffry Householder: Well, think we are always open to a discussion. I do not think that is likely here. My expectations are that we will see a staff recommendation coming I think, as Jeffry indicated, on the 18th, I believe it is, of this month. And then we will move toward a final commission decision in early December. And so we will see where that goes. We are still pretty optimistic that we will get a reasonable result with that case and be able to move forward. But I do not know that we will see any activity relative to settling the case here.

Operator: Great. I appreciate the call, guys. Thank you. Have a good 1. You too. Thank you. We will go next to Christopher Ellinghaus with Siebert Williams Shank. Your line is now open.

Christopher Ellinghaus: Hey, good morning, everybody. How are you? Hey, Jeffry, you referenced the FERC increase relative to the capital increase for Worcester. Was that what was filed yesterday? I did not get to look at that yet.

Jeffry Householder: that is what-- yeah. We filed it, but yesterday was the approval. Okay. Yes. And Jeff, you sort of talked about upside to Pathway in the future.

Christopher Ellinghaus: There are some data centers sort of in the at least vague vicinity of the pipe Is that 1 of the things that you are thinking about as potential?

Jeffry Householder: Actually, it is not. I cannot certainly cannot speak to the electric load requirements and how those will be met. But our relationship for that pipeline is with Florida Power and Light on the electric side with our distribution businesses that are not actually chasing data center loads. If a data center came to us looking for a gas service, then we would evaluate that in the same way that we would do any other industrial customer that is not really been a key part of either the pipeline design for us at this point or our thoughts on future load.

Christopher Ellinghaus: Okay. And lastly, the CapEx slide for this year sort of suggests a pretty substantial fourth quarter, sort of almost unprecedented levels What are some of the big items in there that leave you confident of making that sort of implied fourth quarter number?

Jeffrey S. Sylvester: Fourth quarter of this year? This year. Yes. Yes.

Jeffry Householder: I mean, obviously, the in service for WRU is 1 of those chunks. We have got a little bit of the FEP capital showing up there. I mean, actually feel pretty good about the range that we are in terms of [inaudible] some more, yeah. Just trying to get the some additional potential pipeline in Miami Loop investments, fairly robust effort in the last quarter on the pipeline replacement programs at SAFE and GRIP.

Jeffrey S. Sylvester: there is some electric storm protection investment. it is just an accumulation of a number of things that kind of add up to the number that we provided.

Christopher Ellinghaus: Okay. It kind of sounds like maybe that initial FEP piece might be fairly material.

Jeffry Householder: It could be. I mean, to be-- to be perfectly blunt, we are tracking steel prices and thinking about when we commit to the first substantive obligation on steel for that pipeline. Whether that is before the end of this year or sometime probably in Q1 of next year, I think it is still up in the air depending on what we see pricing going. Or where we see it going.

Christopher Ellinghaus: Okay. That helps. Appreciate it. See you next week.

Jeffry Householder: Yes. Take care.

Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Jeffry Householder for any additional or closing remarks.

Jeffry Householder: Well, thanks and thanks to all of you for joining us this morning. We hope to see many of you at the EEI Financial Forum out in Phoenix, next week. And as always, we appreciate your continued interest in Chesapeake Utilities. Goodbye.

Operator: Thank you. This concludes Chesapeake Utilities Corporation's third quarter 26 earnings conference call. Please disconnect your line at this time and have a wonderful day.

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