DOVER, Del., June 26, 2012 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake") announced today that it has entered into an agreement to purchase the operating assets of Eastern Shore Gas Company ("Eastern Shore Gas") and its affiliate, Eastern Shore Propane Company ("Eastern Shore Propane"), both of which are indirect, wholly-owned subsidiaries of Energy Equity Partners, L.P.
Based in Worcester County, Maryland, Eastern Shore Gas provides propane distribution service to approximately 11,000 residential and commercial customers in Worcester County, Maryland, primarily in Ocean City, West Ocean City, Ocean Pines, Berlin, Pocomoke and Snow Hill. The propane distribution services are provided from central storage facilities through underground gas distribution mains and services very similar to a natural gas distribution system. These systems are under the jurisdiction of the Maryland Public Service Commission. Eastern Shore Propane provides propane bulk delivery service via individual propane tanks to over 500 customers throughout Worcester County. "Chesapeake is in the process of evaluating the potential conversion of some of the facilities of Eastern Shore Gas from propane to natural gas. Where economical and feasible, Chesapeake expects to undertake such conversions. Chesapeake is also in the process of developing programs to assist customers in the conversion to natural gas in those areas where it becomes available," noted Jeffrey R. Tietbohl, Vice President of Chesapeake and senior leader responsible for Chesapeake's natural gas distribution operating division in Maryland.
The transaction significantly expands Chesapeake Utilities' distribution system operations on the Eastern Shore of Maryland; increases Chesapeake's platform for natural gas expansion efforts in Worcester County; and adds over 11,500 new customers, almost doubling Chesapeake Utilities' current 12,800 natural gas distribution system customers served in Maryland. "Chesapeake has been meeting the energy needs of the Delmarva Peninsula for more than 150 years. This acquisition further highlights Chesapeake's commitment to grow our natural gas and propane operations on the Eastern Shore of Maryland. We believe this acquisition will enable us to grow our natural gas distribution business in Worcester County more quickly," said Michael P. McMasters, President and Chief Executive Officer of Chesapeake Utilities Corporation.
In 2011, Chesapeake announced plans to initially extend its natural gas transmission pipeline through its subsidiary Eastern Shore Natural Gas Company ("ESNG") to parts of Worcester County, MD. ESNG's construction of the natural gas transmission pipeline in Worcester County is proceeding as planned and is expected to be completed later this summer. Chesapeake's Maryland Division currently provides natural gas distribution service to customers in Wicomico, Dorchester and Caroline Counties.
Chesapeake expects to finance the purchase of the Eastern Shore Gas and Eastern Shore Propane operating assets using unsecured short-term debt. Management expects the transaction to be earnings accretive in 2013 and thereafter. Terms of the transaction have not been publicly disclosed. The transaction is subject to the approval of the Maryland Public Service Commission and the consents of certain local jurisdictions. The acquisition is expected to be completed in the fourth quarter of 2012.
Chesapeake Utilities Corporation is a diversified utility company engaged in natural gas distribution, transmission and marketing; electric distribution; propane gas distribution and wholesale marketing; advanced information services and other related services. Today, Chesapeake, through several divisions and subsidiaries, provides natural gas and propane distribution service to approximately 86,000 customers on the Delmarva Peninsula. Chesapeake owns and operates a 402-mile interstate pipeline that transports natural gas from various points in Pennsylvania to customers in Delaware, Maryland and Pennsylvania through ESNG, their pipeline transmission subsidiary. Information about Chesapeake's businesses is available on the World Wide Web at www.chpk.com.
This document includes statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements regarding the anticipated successful closing of the transaction and timing of the closing, benefits of the proposed transaction, including growth expected to arise out of the acquisition, and anticipated future financial operating performance and results, including an expectation that earnings will be accretive in 2013 and thereafter. These statements are based on the current expectations of Chesapeake management. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this document. These risks and uncertainties include the following: regulatory approvals required for the transaction may not be obtained, or may delay the transaction or result in the imposition of conditions that could have a material adverse effect or cause the companies to abandon the transaction; conditions to the closing of the transaction may not be satisfied in the time periods expected or at all; problems may arise in successfully integrating Eastern Shore Gas and Eastern Shore Propane; the conversion of Eastern Shore Gas facilities from propane to natural gas may not be feasible, economically or otherwise; synergies may take longer than expected to achieve; the transaction may involve unexpected costs or unexpected liabilities, or accounting for the transaction may be different from the companies' expectations; results of the companies may suffer as a result of uncertainty surrounding the transaction; and other economic, business, and/or competitive factors could adversely impact the purchase.
For more information, contact:
Beth W. Cooper
Senior Vice President & Chief Financial Officer
Jeffrey R. Tietbohl
SOURCE Chesapeake Utilities Corporation