FINANCIAL AND STRATEGIC UPDATE
May 7, 2024
Forward-Looking Statements and Use of Non-GAAP Measures
This presentation contains "forward-looking statements" including within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included in this presentation are forward-looking statements. These forward-looking statements include statements regarding Unitil Corporation and its subsidiaries' financial condition, results of operations, capital expenditures, business strategy, regulatory strategy, market opportunities, and other plans and objectives. In some cases, forward-looking statements can be identified by words such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue", the negative of such terms, or other comparable terminology. In this presentation, "Unitil," the "Company", "we", "us", "our" and similar terms refer to Unitil Corporation and its subsidiaries, unless the context requires otherwise.
These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that could cause the actual results to differ materially from those set forth in the forward-looking statements. Those risks and uncertainties include: Unitil's regulatory and legislative environment (including laws and regulations relating to climate change, greenhouse gas emissions and other environmental matters); fluctuations in the supply of, demand for, and the prices of energy commodities and transmission capacity and Unitil's ability to recover energy commodity costs in its rates; customers' preferred energy sources; severe storms and Unitil's ability to recover storm costs in its rates; declines in the valuation of capital markets, which could require Unitil to make substantial cash contributions to cover its pension obligations, and Unitil's ability to recover pension obligation costs in its rates; general economic conditions, which could adversely affect (i) Unitil's customers and, consequently, the demand for Unitil's distribution services, (ii) the availability of credit and liquidity resources and (iii) certain of Unitil's counterparty's obligations (including those of its insurers and lenders);86,600Unitil's ability to obtain debt or equity financing on acceptable terms; increases in interest rates, which could increase Unitil's interest expense; restrictive covenants contained in the terms of Unitil's and its subsidiaries' indebtedness, which restrict certain aspects of Unitil's business operations; variations in weather, which could cause unanticipated changes in demand for Unitil's distribution services; long-term global climate change, which could cause unanticipated changes in customer demand or cause extreme weather events that could disrupt Unitil's electric and
Natural Gas Customers
natural gas distribution services; cyber-attacks, acts of terrorism, acts of war, severe weather, a solar event, an electromagnetic event, a natural disaster, the age and condition of information technology assets, human error, or other factors could disrupt Unitil's operations and cause Unitil to incur unanticipated losses and expense; outsourcing of services to third parties, which could expose Unitil to substandard quality of service delivery or substandard deliverables, which may result in missed deadlines or other timeliness issues, non-compliance (including with applicable legal requirements and industry standards) or reputational harm, which could negatively impact our results of operations; catastrophic events; numerous hazards and operating risks relating to Unitil's electric and natural gas distribution activities; Unitil's ability to retain its existing customers and attract new customers; increased competition; unforeseen or changing circumstances, which could adversely impact the reduction of company-wide greenhouse gas emissions; employee workforce factors, including the ability to attract and retain key personnel; other presently known or unforeseen factors; and other risks detailed in Unitil Corporation's filings with the Securities and Exchange Commission, including those appearing under the caption "Risk Factors" in Unitil Corporation's most recently filed Annual Report on Form 10-K.
Readers should not place undue reliance on any forward looking statements, which speak only as of the date they are made. Except as may be required by law, Unitil undertakes no obligation to update any forward-looking statements to reflect any change in Unitil's expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
This presentation contains Non-GAAP measures. The Company's management believes these measures are useful in evaluating its performance. Reconciliations of Non-GAAP financial measures to the most directly comparable GAAP financial measures can be found herein.
SLIDE 2
Financial Results and Strategic Update
Strong financial results and continued strategic execution
Achieving Strong Financial Results
- 2024 Net Income of $27.2 million or $1.69 per share, through the first quarter
- $0.18 per share increase compared to the first quarter of 2023 supported by regulatory initiatives and customer growth
- 11.9% year-over-year EPS growth
- Minimal O&M expense increase of $0.1 million year-over-year
- GAAP ROE of 9.7%
Delivering on Long-term Goals | 86,600 |
• Reaffirming long-term EPS growth rate of 5% - 7% | Natural Gas Customers |
- Payout ratio firmly within target range of 55% - 65%
Executing Corporate Strategy and Operational Excellence
- Strong regulatory outcomes across jurisdictions
- Best-in-classoperational performance and top-tier customer service
- 2024 Climate and Energy Sustainability Award Winner(1)
Solid Capital Investment Outlook
- Long-terminvestment requirements in system modernization and expansion
- Expected long-term rate base growth of 6.5% - 8.5%
- Utility-ScaleSolar project progressing as planned
(1) Awarded by New Hampshire Businesses for Social Responsibility | SLIDE 3 |
Utility Scale Project in New Hampshire
Site work and construction underway for 5 MW Solar Facility in Kingston, NH
Project Summary and Update
- Site work began in Q1 and is progressing as expected
- PV Facility electrical design nearing completion
- Nominated for Project of the Year Energy Champion Award by Clean Energy New Hampshire
- Estimated capital cost of $14 million will be included in Rate Base
NH Statute RSA 374-G
- Enables utility ownership of DER, limited to 6% of utility's total distribution peak load (approximately 18 MW for Unitil)
- Individual generation projects limited to 5 MW
- Continue to evaluate and investigate additional solar opportunities
Timeline
Site | | Initial | | Intervenor | | Joint Letter | | Order | | Site Work | | Expected In | Seek Cost |
Selection | Filing | Testimony | of Support | Received | Begun | Service | Recovery | ||||||
August 25, 2022 | October 31, 2022 | March 9, 2023 | March 23, 2023 | May 1, 2023 | Q1 2024 | 1H 2025 | Shortly after | ||||||
Completion | |||||||||||||
SLIDE 4
First Quarter 2024 Financial Results
Net Income and Earnings Per Share
Net Income of $27.2 million in the first quarter, or $1.69 per share
- Net Income increase of $3.1 million, or $0.18 per share, relative to the first quarter of 2023
- Earnings growth reflects higher Electric and Gas Adjusted Gross Margins, partially offset by higher operating expenses
- Warmer weather in the quarter affected earnings by approximately ($0.02) relative to the prior year and approximately ($0.10) relative to normal weather conditions
Three Months Ended March 31 | ||
2024 | 2023 | |
Net Income ($ millions) | $27.2 | $24.1 |
Earnings Per Share | $1.69 | $1.51 |
SLIDE 5
Volume and Adjusted Gross Margin Variances
Year-to-Date variances in units, customers, and adjusted gross margin
Electric Operations | Unit Sales and Customers | |||
• | Electric distribution revenue substantially decoupled (2) | |||
Adjusted Gross Margin(1) | Weather Normalized Unit | Customers | • | Weather normalized Residential and C&I sales increased 0.5% |
Sales | and 0.8%, respectively | |||
• | Approximately 500 additional customers | |||
Adjusted Gross Margin(1) Increased $0.4 Million | ||||
1.5% Increase | 0.7% Increase | 0.5% Increase | • | Reflects higher rates and customer growth |
• | Decoupling adjusted revenue by $1.1 million or $0.05 EPS | |||
Unit Sales and Customers | ||||
Gas Operations | ||||
• | 60% of gas customers decoupled(2) | |||
Adjusted Gross Margin(1) | Weather Normalized Unit | Customers | • | Weather normalized sales in Maine, our only non-decoupled |
Sales | service area, increased 0.3% | |||
• | Approximately 1,100 additional customers | |||
Adjusted Gross Margin(1) Increased $6.1 Million | ||||
11.1% Increase | 0.5% Increase | 1.2% Increase | • | Higher rates and customer growth, partially offset by weather |
• | Decoupling adjusted revenue by $2.3 million or $0.11 EPS |
- Adjusted gross margin is a non-GAAP financial measure. Reconciliations from non-GAAP financial measures to GAAP financial measures are provided at the end of the presentation
- Calculation based on customer counts as of March 31, 2024
SLIDE 6
First Quarter Earnings Reconciliation
Variances to prior period Net Income
- Adjusted Gross Margin(1) increased $6.5 million as a result of higher rates and customer growth, partially offset by warmer winter weather in 2024.
- Operation and Maintenance Expenses increased $0.1 million due to higher utility operating costs.
- Depreciation and Amortization increased $1.3 million reflecting higher levels of utility plant in service, higher amortization of storm and other deferred costs.
- Taxes Other Than Income Taxes increased $0.4 million due to higher local property taxes on higher utility plant in service and higher payroll taxes.
- Interest Expense, Net increased $0.2 million reflecting higher interest expense on short-term borrowings and higher levels of long-term debt, partially offset by higher interest income on regulatory assets.
- Other Expenses increased $0.3 million reflecting higher retirement benefit costs.
- Income Taxes increased $1.1 million reflecting higher pre-tax earnings in 2024.
$6.5 | $0.1 | $1.3 | $0.4 | $0.2 | $0.3 | $1.1 |
$24.1 | $27.2 | ||||||||
2023 NI | Adjusted Gross | O&M | Depreciation & | Taxes Other Than Interest Expense, | Other | Income | 2024 NI | ||
$ millions | Margin(1) | Amortization | Income Taxes | Net | Taxes | ||||
(1) Adjusted gross margin is a non-GAAP financial measure, reconciliations from non-GAAP financial measures to GAAP financial measures are provided at the end of the presentation | SLIDE 7 |
Fitchburg Rate Case Overview (Electric and Gas)
FG&E rate cases progressing on schedule and nearing conclusion
Rate Case Filing Details (1)
Docket Number | 23-80 (electric) and 23-81 (gas) |
Test Year | 2022 |
Requested Common Equity Ratio | 52.26% (Current Authorized: 52.50%) |
Requested Rate of Return | Electric - 10.5%, Gas - 10.75% |
Requested Electric Revenue Increase | $6.8 million |
Requested Gas Revenue Increase | $11.2 million |
Requested Rate Base | Electric $90.3 million, Gas $121.7 Million |
(1) Rate case details reflect most recent filing on 05/01/2024, which may differ slightly from initial filing
Key Elements
- Five-yearPerformance Based Ratemaking plans with annual inflation-based adjustments to revenue
- K-Barmechanism taking place of Capital Cost Adjustment Mechanism to recover base electric capital investments
- Gas System Enhancement Program, Grid Modernization (electric) capital recovery mechanisms remain in place
- Roll-inof capital tracker revenues offsets revenue deficiency requests
- Electric tracker transfer of $2.7 million
- Gas tracker transfer of $4.2 million
- Maintains revenue decoupling
Evidentiary hearings concluded; anticipate new base distribution rates to take effect July 1, 2024
Supports Stakeholder Interests
Provides cost mitigation | Aligned with | ||||
and efficiency incentives | regulatory precedent | ||||
Supports decarbonization | Promotes customer bill |
policy initiatives | stability |
SLIDE 8
Massachusetts Electric Sector Modernization Plan (ESMP)
Capital investments to optimize electric system capacity and technological improvements
ESMP Summary
- Comprehensive distribution and technology investment plan to:
- Improve reliability and resiliency
- Increase timely adoption of renewable energy resources
- Promote energy storage and electrification technologies
- Prepare for future climate-driven impacts on the electric system
- Accommodate increased electrification from transportation, building and other potential demands
- Minimize or mitigate the impact to ratepayers while helping the Commonwealth realize its greenhouse gas emission limits
- Includes capital investment totaling $43 million through 2028
- Timely recovery through proposed capital tracker mechanism
- Strategies and frameworks to ensure community engagement and transparency
- Filed January 29, 2024
Currently Approved Programs
- Grid Modernization - $24.1 million authorized investment from 2022 - 2025
- EV Make Ready - $1.0 million authorized 2023 - 2027
Plan supports
Commonwealth's goal of achieving economy-wide net zero greenhouse gas emissions by
2050
SLIDE 9
Significant Investment Opportunities
Anticipate long-term rate base growth of 6.5% to 8.5%
Historical Rate Base Growth
$s in Millions
$1,200 Five-year CAGR of 7.3% approximates mid-point of long-range guidance $1,000
$800 $600 $400 $200 $0
2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
Long-Term Financing Sources
Equity, 13%
Debt, 25%
CFFO, Less
Dividends, 62%
Equity includes internally
generated funds such as the
Dividend Reinvestment Program
Actual and Forecast Capital Investment(1)
$s in Millions | Five-year projected capital investment of approximately $910 million, 47% higher than prior five years | ||||||
$200 | |||||||
$176 | $180 | $187 | |||||
$168 | |||||||
$122 | $141 | ||||||
2022 | 2023 | 2024F | 2025F | 2026F | 2027F | 2028F | |
(1) | Forecast investment includes capitalized non-service retirement benefit costs which aren't reflected as investing activity for GAAP | SLIDE 10 |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
UNITIL Corporation published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2024 11:28:06 UTC.