RGC Resources Inc (RGCO) 2022 Q4 法說會逐字稿

Good morning, everyone. I'm Paul Nester, President and CEO of RGC Resources, Inc. Thank you for joining us as we discuss RGC Resources' 2022 4th quarter results. We do have a few administrative items to cover. One of a technical nature. Apparently, the conference call service has not allowed us to mute all lines. So we do ask if you're participating today, if you can mute your line individually, we would greatly appreciate that.

大家早安。我是 RGC Resources, Inc. 總裁兼執行長 Paul Nester。我們確實有一些行政事項需要討論。技術性質之一。顯然，電話會議服務不允許我們將所有線路靜音。因此，我們確實詢問您今天是否參加，如果您可以單獨將線路靜音，我們將不勝感激。

Let's review a few other administrative items. At the conclusion of the presentation and our remarks, we will take questions. The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com.

讓我們回顧一下其他一些管理項目。在演講和發言結束時，我們將回答問題。今天示範的連結可在我們網站 www.rgcresources.com 的投資者和財務資訊頁面上找到。

Jason Field, our CFO; and Tommy Oliver, our Vice President of Regulatory Affairs and Strategy as well as Kelsey Davenport, our Director of Finance, are with me on the call this morning. All right. Moving over to Slide 1. We do have forecasts and projections in today's presentation and our forward-looking statement disclaimer can be found on the first slide.

Jason Field，我們的財務長；今天早上，我們的監管事務和策略副總裁湯米·奧利弗 (Tommy Oliver) 以及財務總監凱爾西·達文波特 (Kelsey Davenport) 與我一起參加了電話會議。好的。轉到投影片 1。

Moving on to Slide 2, the agenda. We'll start with a review and update of some of our operational results and financial highlights for fiscal 2022 as well as the fourth quarter. And Jason will then cover especially delivered volumes and financial results. Tommy will give us an update on the RNG project and our base rate case that we just filed last week and I will conclude with a discussion of the outlook for fiscal 2023.

轉到投影片 2，即議程。我們將首先回顧和更新 2022 財年以及第四季度的一些營運業績和財務亮點。然後傑森將介紹特別交付的數量和財務表現。 Tommy 將為我們介紹 RNG 專案的最新情況以及我們上週剛提交的基本利率案例，最後我將討論 2023 財年的前景。

Moving to Slide 3. We just had another outstanding year in our Reno Gas subsidiary operationally. Our customer additions are up 11% compared to last year. And we added 6.9 new miles of main in the fiscal year. You notice our customer count may appear to be lower than last year, and I believe we've talked about this in previous calls, but that is due to the service disconnect moratorium which started in the spring of 2020 with the pandemic and lasted until the late summer of 2021, we did not reinstitute our processes of turning off delinquent customers until March of this year.

轉向幻燈片 3。與去年相比，我們的客戶增加量增加了 11%。我們在本財年增加了 6.9 英里的新里程。您注意到我們的客戶數量可能似乎低於去年，我相信我們在之前的電話中已經討論過這一點，但這是由於從 2020 年春季大流行開始並一直持續到 2020 年春季的服務中斷暫停。 2021 年夏末，我們直到今年3 月才重新啟動關閉拖欠客戶的流程。

So as we went through the summer, we were able to reestablish those disconnect processes. And now that we're into colder weather here in December, early December, a lot of those customers, as we've seen in the past have started to pay their bills and seek service reconnection. We certainly expect our first quarter 2023 customer count number to reflect that change. I would also like to mention a few other operational highlights that are not on the slide.

因此，當我們度過夏天時，我們能夠重新建立那些斷開連接的流程。現在，我們在 12 月、12 月初進入了寒冷的天氣，正如我們過去所看到的那樣，許多客戶已經開始支付賬單並尋求服務重新連接。我們當然預計 2023 年第一季的客戶數量將反映這一變化。我還想提一下幻燈片上沒有的其他一些營運亮點。

We talk about our SAVE capital spending, but just want to give you a couple of stats from 2022. We renewed 8.3 miles of main and 605 services on the heels of doing 7.8 miles of main in fiscal '21 and 620 service. So in total, in the last 24 months ended September 30, we've renewed over 16 miles of main and 1,225 services, just an outstanding result. A couple of the other initiatives that we undertook this year, we did a really thorough safety culture survey in our operation Safety is our #1 priority, and that survey produced good results and has given us some action plans to incorporate throughout our operation.

我們談論我們的節省資本支出，但只想給您一些2022 年以來的統計數據。 。因此，總的來說，在截至 9 月 30 日的過去 24 個月中，我們更新了超過 16 英里的主線和 1,225 條服務線，這是一個出色的結果。我們今年採取的其他一些舉措，我們在運營中進行了一次非常徹底的安全文化調查，安全是我們的第一要務，該調查產生了良好的結果，並為我們提供了一些行動計劃，以納入我們的整個運作中。

I'll now hand it over to Jason, who will discuss our delivered volumes, financial statements and capital spending.

我現在將其交給傑森，他將討論我們的交付量、財務報表和資本支出。

Thank you, Paul. We are on Slide 4, our fourth quarter delivered volumes were up approximately 181,000 dekatherms compared to the fourth quarter of 2021, which was a 14% increase. This increase was largely due to the same industrial customer we've highlighted in the past. This customer has the ability to fuel switch between their natural gas and coal in its construction materials manufacturing process.

謝謝你，保羅。在投影片 4 上，我們第四季的交付量比 2021 年第四季增加了約 181,000 個十卡熱值，增幅為 14%。這一成長主要歸功於我們過去強調過的同一工業客戶。該客戶能夠在其建築材料製造過程中在天然氣和煤炭之間進行燃料轉換。

Their natural gas usage has continued into the first quarter of 2023. Let's move on to Slide #5. We ended our year with total delivered volumes that were approximately 4% higher than fiscal 2021 in spite of a 6% decline in heating degree days, the decline in weather-related deliveries to our residential customers was offset by the increase in our industrial transportation volumes. In fact, 6 of our top 7 customers by volumes delivered increased their usage over 2021.

他們的天然氣使用量一直持續到 2023 年第一季。儘管供暖天數下降了 6%，但我們年末的總交付量仍比 2021 財年高出約 4%，但向住宅客戶提供的天氣相關交付量的下降被工業運輸量的增加所抵消。事實上，以交付量計算，我們排名前 7 位的客戶中有 6 位的使用量在 2021 年有所增加。

If we move on to Slide #6. Our financial results reflect an additional impairment that was recorded in the fourth quarter in our midstream subsidiary. This second impairment, and as you recall, the first impairment was taken in March was a result of a reassessment of the fair value of our investment in the Mountain Valley pipeline as of September 30, 2022. The 10-K provides all of the details, but the most recent hearing in the U.S. Fourth Circuit of Appeals and the timing of permit reissuances drove this assessment.

如果我們繼續看投影片 #6。我們的財務表現反映了我們的中游子公司第四季度記錄的額外減損。正如您所記得的，第二次減損是在3 月進行的第一次減損，是對截至2022 年9 月30 日我們對Mountain Valley 管道投資的公允價值進行重新評估的結果。提供了所有詳細信息，但美國第四巡迴上訴法院最近的聽證會和許可證重新頒發的時機推動了這一評估。

For the fourth quarter of 2022, our operating income of $455,000 was approximately $100,000 less than the fourth quarter of 2021. Non-gas operating expenses for the quarter exceeded the prior year due to higher balances of bad debt expense, professional fees and general inflationary increases and other costs. Other income for the quarter was higher than the prior year due to the transfer of natural gas distribution assets from a local housing authority.

2022 年第四季，我們的營業收入為 45.5 萬美元，比 2021 年第四季減少約 10 萬美元。其他費用。由於從當地住房管理局轉讓天然氣分銷資產，該季度的其他收入高於去年。

In exchange for the renewed assets, Roanoke Gas assumed responsibility for their operation. For the year, we are pleased to report our operating income of $14,916,000 which is $137,000 higher than 2021. We have experienced increasing costs related to bad debt, professional fees and other higher operating and maintenance expenses. Our teams continue to do a great job managing these expenses in an overall inflationary environment.

作為更新資產的交換，羅阿諾克天然氣公司承擔了其營運責任。我們很高興地報告今年的營業收入為 14,916,000 美元，比 2021 年高出 137,000 美元。在整體通膨環境下，我們的團隊繼續出色地管理這些費用。

Interest expense increased approximately $466,000 due to a combination of higher overall debt balances and an increase in the interest rate on our variable rate debt. Additionally, with no construction on the MVP since November of 2021, there was a significant reduction in equity earnings in our midstream affiliate, which is reflected in our fourth quarter and full year operating results.

由於整體債務餘額增加和可變利率債務利率上升，利息支出增加了約 466,000 美元。此外，由於自 2021 年 11 月以來沒有建造 MVP，我們中游附屬公司的股本收益大幅減少，這反映在我們第四季度和全年的營運業績中。

We move on to Slide #7. SAVE, in the comparison of our financial performance attributed to operations for the quarter and the year ended 9/30, we've adjusted our GAAP results for the noncash impairment loss on our MVP investment that were recorded in the second and fourth fiscal quarters. Our underlying net income for the 3 and 12 months ending September 30, adjusting for the impairment was a $75,000 net loss for the quarter and $9,179,000 of net income for the year. The decline for both periods was largely the result of the limited growth construction activity of the MVP in the current year compared to 2021.

我們繼續看投影片#7。 SAVE，在比較本季和截至 9 月 30 日的年度營運財務表現時，我們針對第二和第四財季記錄的 MVP 投資的非現金減損損失調整了 GAAP 結果。截至 9 月 30 日的 3 個月和 12 個月的基本淨利潤，根據減損調整，該季度淨虧損為 75,000 美元，全年淨利潤為 9,179,000 美元。這兩個時期的下降主要是由於與 2021 年相比，本年度 MVP 建設活動增長有限。

In the prior year, we recognized noncash AFUDC of approximately $181,000 in the fourth quarter and $1.7 million for the 12 months ending September 30, 2021. Let's move on to Slide #8. We experienced strong investments made by the Roanoke Gas for utility property for the 12 months of fiscal year 2021 and which totaled $25,461,000, an increase of approximately 27.5% over the prior year. The fourth quarter was a robust capital spending quarter due to the RNG project, which Tommy will review in a minute, as well as execution by our teams and favorable construction conditions.

去年，我們在第四季度確認了約 181,000 美元的非現金 AFUDC，在截至 2021 年 9 月 30 日的 12 個月內確認了約 170 萬美元。我們經歷了羅阿諾克天然氣公司在 2021 財年的 12 個月內對公用事業房地產的大力投資，投資總額為 25,461,000 美元，比上一年增長約 27.5%。第四季是一個強勁的資本支出季度，這得益於 RNG 專案（Tommy 稍後將對其進行審查）、我們團隊的執行力和有利的施工條件。

For the year, capital expenditures were up primarily in SAVE customer growth and system expansion along with approximately $3.4 million invested on the RNG project. Paul will now discuss the outlook for fiscal 2023.

今年，資本支出成長主要用於 SAVE 客戶成長和系統擴展，以及 RNG 專案投資約 340 萬美元。 Paul 現在將討論 2023 財年的前景。

Yes. Thank you, Jason, and we are on Slide 9. Before we review our fiscal 2023 capital spending forecast and our EPS forecast, Tommy will provide a brief overview and update of the RNG project and discuss the recently filed rate case, which will increase the non-gas base rates our customers pay for natural gas service. Tommy?

是的。謝謝 Jason，我們正在看幻燈片 9。為天然氣服務支付的非天然氣基本費率。湯米？

Thank you, Paul, and good morning, everybody. We are planning how the project is progressing, both from a construction and regulatory perspective. Type work on the RNG project is expected to be completed over the next couple of weeks, at which point we'll start moving the components over to the site, and those components have already been constructed.

謝謝你，保羅，大家早安。我們正在從建設和監管的角度規劃該項目的進度。 RNG 專案的型式工作預計將在接下來的幾週內完成，屆時我們將開始將組件移至現場，並且這些組件已經建造完成。

Operationally, we expect it to go into service in the second quarter of our fiscal year. From a regulatory perspective, the hearing was held the week of Thanksgiving so the record is closed, and it's in the hands of the hearing examiner or the administrative law judge. We expect a ruling from the hearing examiner in late December and a final order from the commission in late January of next year.

在營運上，我們預計它將在本財年第二季投入使用。從監管角度來看，聽證會是在感恩節那一周舉行的，因此記錄已關閉，並由聽證審查員或行政法法官負責。我們預計聽證會審查員將在 12 月底做出裁決，委員會將在明年 1 月底做出最終命令。

As discussed in prior earnings calls, the RNG project should add about $7.7 million to our rate base, which is going to be recovered through a rate adjustment clause. And this rate base, the $7.7 million, which includes APDC and a G&A drawn is eligible for an enhanced return on equity of 100 basis points or 10.44%. Turning to the rate case. We did file that rate case and expedited case with the SEC last Friday, December 2, we will be rolling in the revenues that are currently being recovered through our SAVE rider though you'll see the SAVE rider get reset.

正如先前的財報電話會議中所討論的，RNG 項目應該為我們的費率基礎增加約 770 萬美元，這將透過費率調整條款來收回。這個利率基礎，即 770 萬美元，包括 APDC 和提取的 G&A，有資格獲得 100 個基點或 10.44% 的增強股本回報率。轉向利率案例。我們確實於上週五（12 月 2 日）向 SEC 提交了費率案件和加急案件，我們將滾動目前透過我們的 SAVE 附加條款收回的收入，儘管您會看到 SAVE 附加條款被重置。

We're requesting an incremental revenues net of SAVE of about $4.4 million. We're not requesting a change in our authorized ROE of 9.4%. We have requested that the rates go into effect on an interim basis with billings beginning in January of 2023. We expect the review process to take anywhere from 6 to 12 months, just depending on what parties intervene. I'll turn it back over to Paul now.

我們要求扣除 SAVE 後的淨增量收入約為 440 萬美元。我們不要求更改 9.4% 的授權 ROE。我們已要求費率臨時生效，並從 2023 年 1 月開始計費。我現在會把它轉回給保羅。

Thank you, Tommy. We continue to be excited with the RNG project and our partnership with the Western Virginia Water Authority and really looking forward to that project coming online. We are on Slide 11. And you can see the RNG project in green there. We have approximately $3.2 million of capital slated in fiscal 2023 to wrap up that project and move to that $7.7 million number that Tommy mentioned.

謝謝你，湯米。我們仍然對 RNG 計畫以及我們與西維吉尼亞州水務局的合作感到興奮，並非常期待該計畫上線。我們在投影片 11 上。我們計劃在 2023 財年提供約 320 萬美元的資金來完成該項目，並轉向湯米提到的 770 萬美元的數字。

We're going to continue, of course, moving on down the track with our SAVE infrastructure rider investments, renewing that pre-73-adalate plastic and related services as well as some coated steel main services. And we also continue to have steady customer growth and system expansion in 2023. Let's conclude by reviewing our EPS estimate for fiscal 2023 on Slide 12. We've adjusted 2022 to the underlying numbers that Jason presented previously.

當然，我們將繼續沿著我們的 SAVE 基礎設施騎手投資前進，更新 73 之前的塑膠和相關服務以及一些塗層鋼主要服務。 2023 年，我們也將繼續保持穩定的客戶成長和系統擴展。

Our 2023 forecast does show a loss in our midstream subsidiary as a result of the financing costs. I mean, in particular, interest expense related to the higher interest rate environment, while we await the Mountain Valley project to get completed. Our fiscal year ending September 30, we don't expect any operating income from Mountain Valley in our fiscal year. We are, of course, forecasting a strong result from Roanoke Gas with the rate case, helping starting in January with January billings and offsetting the inflationary cost pressures that we're still seeing in the utility.

我們對 2023 年的預測確實顯示我們的中游子公司因融資成本而虧損。我的意思是，特別是與較高利率環境相關的利息支出，同時我們等待山谷工程完成。我們的財年截至 9 月 30 日，我們預計本財年不會從 Mountain Valley 獲得任何營業收入。當然，我們預測羅阿諾克天然氣公司在費率情況下將取得強勁的業績，有助於從一月份開始提供一月份的賬單，並抵消我們在公用事業公司中仍然看到的通脹成本壓力。

We would like to note the dilution effect in fiscal 2023 from the March 2022 equity offering, that's approximately $0.07 per share. And finally, we're pleased to remind everyone about our slightly increased dividend to an implied annual rate of $0.79 per share. The payout ratio, again, on that 2023 forecast is in the 85% to 95% range, and we're pleased with that. That concludes our prepared remarks. If you have any questions, please unmute your individual line and we'll be happy to entertain those.

我們希望注意到 2022 年 3 月股票發行對 2023 財年的稀釋效應，約為每股 0.07 美元。最後，我們很高興地提醒大家，我們的股利略有增加，隱含年利率為每股 0.79 美元。同樣，2023 年預測的派息率在 85% 至 95% 範圍內，我們對此感到滿意。我們準備好的演講到此結束。如果您有任何疑問，請取消您的個人線路靜音，我們將很樂意為您解答。

I take it's cold in Roanoke?

我覺得羅阿諾克冷嗎？

It was a beautiful cold morning, about 25 degrees here today and the gas is flowing through the pipes and the meters are turning.

這是一個美麗而寒冷的早晨，今天這裡的氣溫約為 25 度，天然氣正在管道中流動，儀表也在轉動。

Two questions for you, gentlemen today. On MVP, do you have a range of what you would expect your carrying cost to be for 2023 or fiscal '23?

先生們，今天有兩個問題想問你們。關於 MVP，您對 2023 年或 23 財年的持有成本有何預期？

Yes. I think Jason can chime in here, too, if I'm slightly off. But I think, Mike, we're expecting those pretax costs to be in the $2 million to $2.2 million range for the fiscal year.

是的。我想如果我有點不對勁的話，傑森也可以插嘴。但我認為，麥克，我們預計本財年的稅前成本將在 200 萬至 220 萬美元之間。

Okay. And then I couldn't help but notice on one of the slides, the volumes, particularly the industrial customer that we've talked about in the past. Do you expect to have those volumes at least through the winter months?

好的。然後我忍不住注意到其中一張幻燈片上的捲，特別是我們過去討論過的工業客戶。您預計在冬季至少會有這些銷售嗎？

Yes. So that was -- you may have noticed we indicated that there are construction materials manufacturer and we did use that language intentionally, Mike, because obviously, construction materials are sensitive to the broader economy, even though this particular manufacturer by the nature of their materials, seems to be hanging on and doing quite fine.

是的。所以，你可能已經注意到，我們指出有建築材料製造商，我們確實故意使用了這種語言，邁克，因為顯然，建築材料對更廣泛的經濟很敏感，儘管這個特定的製造商就其材料的性質而言，似乎堅持了下來並且做得很好。

In other words, they're not building -- housing building materials specifically, it's more infrastructure type material. So they normally slow down a little bit in the winter, and that's regardless of economic conditions. They do some plant maintenance in January. But we do expect reasonable volumes from them in the fiscal first quarter. And then certainly, as we get back into the warmer construction months around March or April were there to be hopefully, reasonable volumes, probably not quite as high as this year based on what we're seeing, but probably still an okay year.

換句話說，他們不是在建造——具體來說是住房建築材料，而是更多的基礎設施類型材料。因此，他們通常會在冬天放慢一點，這與經濟狀況無關。他們在一月份進行一些工廠維護。但我們確實預期第一財季的銷售將會合理。當然，當我們回到三月或四月左右的溫暖施工月份時，預計會有合理的數量，根據我們所看到的情況，可能不會像今年那麼高，但可能仍然是一個不錯的一年。

Okay. Yes. I was just wondering, I know that they could switch between coal and gas and I was wondering how that dynamic is playing out at the moment in your market because it's different in every market.

好的。是的。我只是想知道，我知道他們可以在煤炭和天然氣之間切換，我想知道目前這種動態在您的市場上是如何發揮的，因為每個市場都不同。

Correct. Yes. Certainly, in our fiscal 2022, they made a pretty significant switch from coal to gas as those commodity prices have levelized and become a little more predictable going into calendar 2023, we think they're probably going to actually blend a little more coal in 2023.

正確的。是的。當然，在我們的 2022 財年，他們從煤炭轉向天然氣，因為這些大宗商品價格已經趨於平穩，並且進入 2023 年變得更加可預測，我們認為他們可能會在 2023 年實際上混合更多的煤炭。

All right. So I have to you -- gentlemen.

好的。所以我要請你們——先生們。

Thank you. Well, thank you, Mike. Do we have any other questions from anyone on the call today. Well, if we do not have any more questions, this does conclude our fourth quarter earnings call and we really appreciate you joining us and look forward to speaking with you again in February as we discuss the first quarter results of fiscal 2023.

謝謝。嗯，謝謝你，麥克。今天參加電話會議的人還有其他問題嗎？好吧，如果我們沒有其他問題，我們的第四季度財報電話會議就結束了，我們非常感謝您加入我們，並期待在 2 月份再次與您交談，討論 2023 財年第一季度的業績。

It is our prayer here that you and your families have a blessed and safe holiday season and a Merry Christmas. Thank you.

我們在此祈禱您和您的家人度過一個幸福安全的假期和聖誕快樂。謝謝。