Q1 2024 RGC Resources Inc Earnings Call
Participants
Tommy Oliver; Senior Vice President, Regulatory and External Affairs; RGC Resources Inc
Timothy J. Mulvaney; Chief Financial Officer, Vice President, Treasurer; RGC Resources Inc
Paul Nester; President and Chief Executive Officer; RGC Resources Inc
Presentation
Tommy Oliver
Good morning and thank you for joining us as we discuss RGC Resources, Inc's 2024 first-quarter results. I am Tommy Oliver, Senior Vice President, Regulatory and External Affairs for RGC Resources. I'm joined this morning by Paul Nester, President and CEO of RGC Resources, and Tim Mulvaney, our Treasurer and Chief Financial Officer.
Let me review a few administrative administrative items before we get started, we have needed all lines and ask that all participants remain muted Alenco. Today's presentation is available on the Investor and Financial Information page on our website at w.ww.rgcresources.com.
At the conclusion of the presentation, in our remarks, we will take questions.
So let's transition to Slide 1. This presentation contains forecasts and projections on slide 1 has information about risks and uncertainties, including forward-looking statements that should be understood in the context of our public filings transition details.
Slide 2 contains our agenda. We will review our quarterly operational financial results and discuss the outlook for full year fiscal 2024. We have time allotted for questions at the end.
Turning to slide 3, main extensions for the quarter totaled just under a mile and we connected 185 service lines. Total customers were 63,219 at the end of the first quarter. As we discussed in prior earnings call, the customer count for 2021, 2022 were impacted by a state mandated service disconnection moratorium that occurred during parts of 2020, 2021 when factoring this into our customer counts for the prior four years, shown in the graph on the right side of the slide, we have experienced steady growth over this period.
Transition to Slide 4, where our delivered gas volumes for the quarter, which were 9% lower compared to last fiscal year. And this is attributable to warmer weather in the first quarter of the 2024 fiscal year. As shown on the slide, gas volumes were down and total residential and commercial volumes were lower as a result of fewer heating degree days, but that was offset by a nice year-over-year industrial utilization increase as natural gas prices remain low.
So let's turn to Slide 5. Our CapEx spending totaled $5.3 million in the current quarter compared to $7.5 million last year. At this time, the decline is attributable to spending for the R&D facility last year that became operational in March of 2023 when one removes the effects of the R&D spending year over year variances, approximately $500,000 spread across all categories Paul will discuss the full year capital spending projection shortly.
I'm now going to turn it over to Tim Mulvaney, our Treasurer and CFO, who will discuss our financial results. Tim?
Timothy J. Mulvaney
Thank you, Tammy.
Moving to Slide 6. We had a strong quarter. First quarter operating income increased $1.1 million or 20% to $6.7 million compared to the first quarter of 2023. The increase was primarily driven by interim base rates that were implemented on January first of 2023. Equity and net earnings of unconsolidated affiliates was $1.5 million pretax due to non-cash AFUDC, which resulted from our investments in ANZPAFUDC. will taper off as the construction of various sections is complete and will cease as the pipeline goes into service.
Interest expense increased $268,000 due to higher the higher interest rate environment, which is impacting our floating rate debt, supporting the investment in the Mountain Valley pipeline as well as our Roanoke Gas lineup.
Our net income for the quarter was $5 million. And for in the first quarter of this year compared to $3.3 million during the same quarter a year ago. The combination of the rate case and the presence of the AFUDC from the MVP. drove the strong results. Eps was $0.5 per share for the first quarter of this year compared to $0.33 per share in the quarter. A year ago.
I will now turn the presentation over to Paul Nester, RGC Resources, President and CEO, for an outlook on 2024.
Paul Nester
Thank you, Tim and Adam. I would like to just take a minute, and Tom have you join me in congratulating Tim. The Board appointed him as our permanent Treasurer and Chief Financial Officer last week and after serving in the interim role for about five months. So we're just delighted to have had him with us. And we are on slide 7, our plan to touch on our capital spending projection for fiscal 2020 for the status of the MVP project and our earnings forecast for the full fiscal year. But before we get to those items, I'm going to ask Tommy to come back on and provide us a regulatory update timing during the call.
Tommy Oliver
As I mentioned on the last earnings call, we settled our then pending rate case with the Virginia staff, and we're awaiting a final order from the commission. We received the final order in December of this year of last year, in which the Commission accepted the settlement and for refunds to customers will be made in the second quarter of 2024 with no income statement impact. So we made an accrual for the refunds in fiscal 2023. Unfortunately, like most consumers and businesses, we continue to experience upward expense pressure as such, on February second, we filed a general rate case with the Commission in which we are seeking an increase of $4.3 million or approximately 5% increase in total revenues. The increase includes the projected rate base and an increase in the authorized ROE, which reflects current capital markets, $4.3 million does not include any roll in of seed capital as the new sales plan became effective October 2023. Since this case was filed as a general rate case, we expect the commission to suspend the implementation date for interim rates until July 1, 2024. We'll know more about the schedule when the Commission issued its order for notice and hearing for this case in early March. I'll turn it over to Paul now.
Paul Nester
Yes, thank you, Tommy, for review and added some a little unusual as you know, much about our history to so quickly file, certainly a general rate case after just completing an expedited case. But again, the overall inflationary environment, as Tommy said, we certainly know our customers and our vendors are feeling that as well has led us to that. So that action thanks to Tom and Nick and the regulatory department for all their their efforts on that.
We're on slide 8, the 2024 run, I guess, Renault gas capital plan. It's still holding at about $21 million, which is again down from last year due to the aforementioned RNG project. The projection right now is very similar to what we shared with you on the December earnings call.
Moving on to slide 9 on it has been an exciting several months on the MVP project, whether in the fall period and into December was excellent in this region and it enabled a really outstanding construction progress on the picture on Slide nine of our some of you interconnect, actually, that feature was taken in mid December and we are working on both our Lafayette and some of the new interconnect sites simultaneously, we are on track for both of those sites and stations to be complete when Mountain Valley is complete and growing natural gas, Mon Valley still have some work to be done, of course on. But we are we are genuinely happy to be nearing the end of this long.
What's turning to be a very long journey with the project on, I think related to this, and Tim mentioned it a little bit in his comments on the interest expense down. He might have taken a moment and providing a brief update on our financing activities for our RGC midstream subsidiary.
Timothy J. Mulvaney
As you recall, we have two facilities related to RGC midstream that come due this year totaling approximately $33 million and with this, we've begun discussions with our banks and those discussions have been very positive. We fully expect to renew the facilities in the coming weeks.
Paul Nester
Yes, fantastic. Again, a lot of good effort there, and I'll just make a comment for those of you that are in project work or construction work or partnership. You know that sometimes the secret to success is good partners are great partners. And I will tell you that not only the joint venture been a group of great partners, but our financing partners now over many years have been excellent, too. And our consolidated earnings guidance on slide 10 for 2024 is also unchanged from what we shared with you in December. Again, we talked on that call about inflationary pressures weighing on the year over year earnings per share. And as Tommy just updated us, we're addressing that to the the most expedient extent possible through the General Rate Case piling on.
Maybe just in summary, we're off to a great start. We've had a fantastic first quarter. I'm really happy about the direction and trajectory of the company right now. We continue to work safely and do everything we can to meet the customers' needs. And I'm just so happy about that.
With that, that concludes our prepared remarks. If you have questions please dial pound pound one to unmute your line pound pound one to unmute your line.
Question and Answer Session
Yes, good morning, everyone.
Paul Nester
And then Morning, Mike, how are you doing?
Fine.
Paul Nester
We are doing very well.
Beautiful, a cool, sunny morning here in the greater Toronto Valley. I saw that I was looking at your weather. There was first a warm up, but it looks like it's going to that seems to be changing a little bit anyway. On your rate case filing, you're in good company. I've never seen so many rate cases filed by utilities in my entire career, and they're all they're all come in relatively close together.
So you're in good company. I don't think it's going to be a surprise for the commission I'm seeing it on the water side, the gas and the electric side. I'm just wondering when do you think that might be finalized?
So Willem, can it's over November time?
Paul Nester
Yes. Mike, I'll let Tom answer the specifics of the timing there, but I'll just make a comment. I know we share this with our Board and our employees, and in fact, some of our customers. But the inflationary pressures over the last 24 months are unlike any I've seen in my professional career.
So your comment about the other companies also have having to be at the table rate-making does make complete sense with that timing. Maybe want to talk about the schedule a little bit.
Tommy Oliver
Sure, Mike. Unlike the prior case that we filed as an expedited cases, the general case or the scope is a little broader on. So we're expecting the process to play out over a 12 to 15 month period from term final resolution until first quarter 2020 fiber, first calendar quarter 2025, and then the Western Mountain Valley coming online.
So Paul, just wondering what you're thinking in terms of how much of your actual gas supply for Roanoke cash you're actually going to pull from that line?
Paul Nester
Yes, Mike, presently on and this is public knowledge or were signed up for 10,000 decatherms a day, and that represents approximately 15% of our firm supply. And again, that's just a starting point on. So it is it is meaningful and I know it's a natural gas supply and natural gas distribution at those incremental decatherms that are especially a meaningful.
So Tom, we're really looking forward to the 10,000 a day coming online and coming into the system with. We've discussed this in our filings and hearings and support letters over the years to park and the courts and others, the ability to have Marcellus and Utica Basin gas flowing through Mountain Valley into our system is just a wonderful opportunity. It is and as you know, approximately the cheapest natural gas in the world and the ability to bring that into this region. And what that means for economic development is is truly something that we're on excited about.
Is there an upper limit kind of a capital as to how much you would actually take off that line of your total supply?
Paul Nester
Yes, that's a good question, Mike. As you know, it, it's going to transport two Bcf a day have the capacity to transport that much gas ultimately on that entire two Bcf is spoken for or reserved, if you will, at this time?
Certainly if we had economic development that require more natural gas. We would do everything in our power to make that happen, but it would that would require some some contract work presently.
Okay. And then last question South Gate noticed the size of the pipe was increased. Wondering where that process stands on in terms of timing and when that really gets going?
Paul Nester
Yes, I think the on the joint venture partners that are part of South Gate. We made an announcement in December in that regard. That included a change in the scoping of the project and and I believe if I remember correctly, Mike, I think the timing of that was late 2027, early 2028 calendar years, I believe. So certainly looking forward to the main line getting completed and in-service and hopefully some of the process for Southgate, we'll more ramp up at that point.
All right. That's all I had, gentlemen.
Paul Nester
Thank you.
Well, thank you. Do we have any other questions from anyone on the lines?
Pound-for-pound one per unmute, your line?
Yes, they relate to three month lag in some cases.
Another question, Zima, anybody have a question. Countdown want to unmute your line.
All right. Well, if there are no more questions, this concludes our first quarter earnings call. We do appreciate everyone taking time out of their busy schedule to join us, and we are looking forward to speaking with you again in the same timeframe as we discuss our physical second quarter results. Have a great day.
Thank you.
