Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unitil Corp (UTL, Financial) reported a second-quarter net income increase to $4.3 million or $0.27 per share, up by $0.02 per share from the same period in 2023.
- The company reaffirmed its long-term earnings growth target of 5% to 7%, supported by rate base growth of 6.5% to 8.5% and a dividend payout ratio between 55% and 65%.
- Unitil Corp (UTL) announced a strategic acquisition of Bangor Natural Gas Company, which aligns with its strategic objectives and is expected to close by the end of the first quarter of 2025.
- The company's capital investment plan through 2028 totals approximately $910 million, with opportunities for additional investments, particularly in electric system modernization and grid resilience.
- Recent regulatory outcomes, including the approval of performance-based rate plans, are seen as constructive and support the company's growth and operational efficiency.
Negative Points
- Operating expenses increased, partially offsetting the higher adjusted electric and gas margins.
- Depreciation and amortization expenses rose by $2.8 million due to higher levels of utility plant in service and storm cost amortization.
- Interest expenses increased by $0.6 million, reflecting higher interest on short-term borrowings and long-term debt.
- The acquisition of Bangor Natural Gas Company, while strategic, is subject to regulatory approval and could face delays or additional costs.
- The company's earnings growth is partially dependent on regulatory approvals and maintaining favorable rate structures, which can be uncertain.
Q & A Highlights
Q: Can you provide more details on the recent acquisition of Bangor Natural Gas Company?
A: Thomas Meissner, Chairman and CEO, explained that Unitil Corp has reached an agreement to purchase Bangor Natural Gas Company, a fully regulated natural gas distribution utility. The transaction is expected to close by the end of the first quarter of 2025, subject to approval by the Maine Public Utilities Commission. Bangor Natural Gas is seen as a natural complement to Unitil's existing operations, with a strong customer growth rate and the lowest natural gas rates in Maine.
Q: How does the acquisition align with Unitil's strategic objectives?
A: Thomas Meissner, Chairman and CEO, stated that Bangor Natural Gas meets Unitil's criteria for acquisitions, including utility operations in constructive regulatory jurisdictions, proximity to existing service areas, and opportunities in colder climates where natural gas is a cleaner and more affordable energy choice. The acquisition is expected to be accretive over the long term and aligns with Unitil's strategic objectives.
Q: What are the financial highlights for the second quarter of 2024?
A: Daniel Hurstak, CFO, reported that Unitil's second-quarter net income was $4.3 million or $0.27 per share, an increase of $0.02 per share compared to the same period in 2023. For the first half of the year, net income was $31.5 million, an increase of $3.2 million or $0.20 per share compared to the corresponding period in 2023. Earnings growth was driven by higher adjusted electric and gas margins, partially offset by higher operating expenses.
Q: Can you elaborate on the recent rate case order in Massachusetts?
A: Daniel Hurstak, CFO, explained that the rate case order for Unitil's electric and gas divisions in Massachusetts was constructive, with many proposals approved. The order includes a return on equity of 9.4% for both divisions and maintains revenue decoupling. It also approved five-year performance-based rate plans, which support the clean energy transition and promote efficiencies in cost control.
Q: What is the outlook for Unitil's capital investment plan?
A: Thomas Meissner, Chairman and CEO, stated that Unitil's capital investment plan through 2028 totals approximately $910 million, with opportunities for additional investments. The plan includes electric system modernization investments to meet increasing demand for electrification and enhance grid resilience. The Bangor acquisition is expected to provide further opportunities for conversions and expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
