CHESAPEAKE UTILITIES CORP

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•the impact of significant changes to current tax regulations and rates;

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•the impact of significant changes to current tax regulations and rates, including the impact they may have on our financial positions, results of operations and/or cash flows;

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Our focus on sustainability is supported and shared across the organization by the dedication and efforts of our Board of Directors and its Committees, as well as the entrepreneurship and dedication of our team. As stewards of long-term enterprise value, our Board of Directors is committed to overseeing the sustainability of the Company, its environmental stewardship initiatives, its safety and operational compliance practices.

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Our focus on sustainability is supported and shared across the organization by the dedication and efforts of our BOD and its Committees, as well as the entrepreneurship and dedication of our team. As stewards of long-term enterprise value, our BOD is committed to overseeing the sustainability of the Company, its environmental stewardship initiatives, its safety and operational compliance practices.

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The following tables reconcile Gross Margin, Net Income, and EPS, all as defined under GAAP, to our non-GAAP financial measures of Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for the three and six months ended June 30, 2025 and 2024:

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The following tables reconcile Gross Margin, Net Income, and EPS, all as defined under GAAP, to our non-GAAP financial measures of Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for the three and nine months ended September 30, 2025 and 2024:

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Gross Margin (GAAP) for the Regulated Energy segment for the quarter ended June 30, 2025 was $86.3 million, an increase of $10.0 million, or 13.1 percent, compared to the same period in 2024. The increase in gross margin largely reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, and organic growth in our natural gas distribution businesses.

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Gross Margin (GAAP) for the Regulated Energy segment for the quarter ended September 30, 2025 was $83.9 million, an increase of $4.7 million, or 5.9 percent, compared to the same period in 2024. The increase in gross margin largely reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, and organic growth in our natural gas distribution businesses.

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Gross Margin (GAAP) for the Regulated Energy segment for the six months ended June 30, 2025 was $183.5 million, an increase of $13.9 million, or 8.2 percent, compared to the same period in 2024. The increase in gross margin largely reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, organic growth in our natural gas distribution businesses, and increased customer consumption.

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Gross Margin (GAAP) for the Regulated Energy segment for the nine months ended September 30, 2025 was $267.4 million, an increase of $18.6 million, or 7.5 percent, compared to the same period in 2024. The increase in gross margin largely reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, and organic growth in our natural gas distribution businesses.

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Gross Margin (GAAP) for the Unregulated Energy segment for the quarter ended June 30, 2025 was $10.1 million, a decrease of $2.2 million, or 17.9 percent, compared to the same period in 2024. The decrease in gross margin was primarily attributable to a decreased level of customer consumption in our propane distribution business and lower propane margins and service fees, partially offset by higher CNG, RNG, and LNG services compared to the prior-year period.

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Gross Margin (GAAP) for the Unregulated Energy segment for the quarter ended September 30, 2025 was $7.8 million, an increase of $0.6 million, or 8.3 percent, compared to the same period in 2024. The increase in gross margin was primarily attributable to higher CNG, RNG, and LNG services compared to the prior-year period and increased performance from Aspire Energy, partially offset by lower results from our propane distribution business.

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Gross Margin (GAAP) for the Unregulated Energy segment for the six months ended June 30, 2025 was $50.0 million, an increase of $4.6 million, or 10.1 percent, compared to the same period in 2024. The increase in gross margin was primarily attributable to greater demand for CNG, RNG and LNG services and an increased level of customer consumption in our propane distribution business earlier in the year primarily from colder year-over-year weather in our Delmarva service territory.

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Gross Margin (GAAP) for the Unregulated Energy segment for the nine months ended September 30, 2025 was $57.8 million, an increase of $5.2 million, or 9.9 percent, compared to the same period in 2024. The increase in gross margin was primarily attributable to greater demand for CNG, RNG and LNG services, higher results from our propane distribution business largely attributable to increased customer consumption from colder year-over-year weather in our Delmarva service territory, and increased performance from Aspire Energy.

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Net income (GAAP) for the quarter ended June 30, 2025 was $23.9 million, or $1.02 per share, compared to $18.2 million, or $0.82 per share, for the same quarter of 2024. Net income for the three months ended June 30, 2025 and 2024, included $0.4 million and $1.1 million, respectively, of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $5.0 million or 25.9 percent compared to the prior-year period.

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Net income (GAAP) for the quarter ended September 30, 2025 was $19.4 million, or $0.82 per share, compared to $17.5 million, or $0.78 per share, for the same quarter of 2024. Net income for the three months ended September 30, 2025 and 2024, included $0.1 million and $0.6 million, respectively, of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $1.4 million or 7.7 percent compared to the prior-year period.

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Net income (GAAP) for the six months ended June 30, 2025 was $74.8 million, or $3.22 per share, compared to $64.4 million, or $2.89 per share, for the same quarter of 2024. Net income for the six months ended June 30, 2025 and 2024, included $0.6 million and $1.7 million, respectively, of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $9.3 million or 14.1 percent compared to the prior-year period.

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Net income (GAAP) for the nine months ended September 30, 2025 was $94.2 million, or $4.03 per share, compared to $81.9 million, or $3.66 per share, for the same quarter of 2024. Net income for the nine months ended September 30, 2025 and 2024, included $0.7 million and $2.3 million, respectively, of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $10.7 million or 12.7 percent compared to the prior-year period.

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Results of Operations for the Three and Six Months Ended June 30, 2025

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Results of Operations for the Three and Nine Months Ended September 30, 2025

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Our adjusted net income for the three months ended June 30, 2025 was $24.3 million, or $1.04 per share, compared to $19.3 million, or $0.86 per share, for the same quarter of 2024. Operating income for the second quarter of 2025 was $50.3 million, an increase of $9.5 million compared to the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $8.6 million or 20.4 percent compared to the prior-year period. The increase in adjusted gross margin in the second quarter of 2025 was driven by incremental margin from regulatory initiatives and infrastructure programs, natural gas growth and transmission expansion projects, and increased demand for CNG, RNG, and LNG services. The increase in operating expenses was driven largely by the absence of a RSAM adjustment from FCG (representing $2.3 million in the second quarter of 2024), higher depreciation attributable to growth projects and expenses associated with facilities, maintenance and outside services. These increases were partially offset by reduced payroll, benefits and other employee-related expenses during the quarter.

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Our adjusted net income for the three months ended September 30, 2025 was $19.5 million, or $0.82 per share, compared to $18.1 million, or $0.80 per share, for the same quarter of 2024. Operating income for the third quarter of 2025 was $45.0 million, an increase of $4.1 million compared to the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $3.5 million or 8.4 percent compared to the prior-year period. The increase in adjusted gross margin in the third quarter of 2025 was driven by incremental margin from regulatory initiatives and infrastructure programs, natural gas growth and transmission expansion projects, and increased demand for CNG, RNG, and LNG services. The increase in operating expenses was driven largely by higher depreciation attributable to growth projects and the absence of an RSAM adjustment from FCG (which represented a $3.2 million benefit in the third quarter of 2024). Higher expenses associated with facilities, maintenance and outside services also contributed to the increase.

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Key variances between the second quarter of 2024 and 2025 included:

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Key variances between the third quarter of 2024 and 2025 included:

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Our adjusted net income for the six months ended June 30, 2025 was $75.4 million, or $3.25 per share, compared to $66.1 million, or $2.96 per share, for the same period of 2024. Operating income for the first half of 2025 was $137.1 million, an increase of $16.7 million compared to the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $15.2 million or 12.4 percent compared to the prior-year period. The increase in adjusted gross margin in the first half of 2025 was driven by incremental margin from regulatory initiatives and infrastructure programs, natural gas organic growth, increased customer consumption resulting from year-over-year colder temperatures in our Mid-Atlantic and Ohio service territories, and increased CNG, RNG and LNG services. These increases were partially offset by reduced margin per gallon and related fees in our propane distribution business and a reduced volume of off system sales and service fees. Higher operating expenses were driven largely by the absence of a RSAM adjustment from FCG (representing $5.7 million during the first half of 2024), higher depreciation attributable to growth projects, increased facilities, maintenance and outside services, and increased payroll, benefits and other employee-related expenses. Additional expenses associated with vehicle and insurance related costs also contributed to the increase compared to the prior-year period.

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Our adjusted net income for the nine months ended September 30, 2025 was $94.9 million, or $4.06 per share, compared to $84.2 million, or $3.76 per share, for the same period of 2024. Operating income for the first nine months of 2025 was $182.1 million, an increase of $20.8 million compared to the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $18.7 million or 11.4 percent compared to the prior-year period. The increase in adjusted gross margin in the first nine months of 2025 was driven by incremental margin from regulatory initiatives and infrastructure programs, natural gas growth and transmission expansion projects, increased CNG, RNG and LNG services, and increased customer consumption resulting from year-over-year colder temperatures in our Mid-Atlantic and Ohio service territories. These increases were partially offset by reduced margin per gallon and related fees in our propane distribution business and a reduced volume of off-system sales and service fees. Higher operating expenses were driven largely by the absence of an RSAM adjustment from FCG (which represented an $8.9 million benefit during the first nine months of 2024) and higher depreciation attributable to growth projects. Higher facilities, maintenance and outside services, insurance, and payroll, benefits and other employee-related expenses compared to the prior-year period also contributed to the increase.

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Key variances between the six months ended June 30, 2024 and June 30, 2025 included:

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Key variances between the nine months ended September 30, 2024 and September 30, 2025 included:

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In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 2,400 Dts/d of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline constructed a pipeline extension and regulator station for FPU. The extension supports new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion also improves reliability and provides operational benefits to FPU’s existing distribution system in the area, supporting future growth. This project was placed into service during July 2023 and generated additional adjusted gross margin of $0.6 million for the three and six months ended June 30, 2025. We expect this extension to generate annual adjusted gross margin of approximately $0.6 million in 2025 and annually thereafter.

Current wording

In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 2,400 Dts/d of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline constructed a pipeline extension and regulator station for FPU. The extension supports new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion also improves reliability and provides operational benefits to FPU’s existing distribution system in the area, supporting future growth. This project was placed into service during July 2023 and generated additional adjusted gross margin of $0.9 million and $1.5 million for the three and nine months ended September 30, 2025. We expect this extension to generate annual adjusted gross margin of approximately $0.6 million in 2025 and annually thereafter.

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In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of its Transportation Service Agreement associated with the Wildlight planned community located in Nassau County, Florida. The petition was approved by the Florida PSC in November 2022. The project enables us to meet the significant growing demand for service in Yulee, Florida. The agreement enables us to construct the project during the build-out of the community and charge the reservation rate as each phase of the project goes into service. Construction of the pipeline facilities will occur in two separate phases. Phase one consists of three extensions with associated facilities, and a gas injection interconnect with associated facilities. Phase two will consist of two additional pipeline extensions. The various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025. The project generated additional adjusted gross margin of $0.3 million and $0.6 million for the three and six months ended June 30, 2025, respectively, and is expected to contribute adjusted gross margin of approximately $3.0 million in 2025 and $4.3 million annually thereafter.

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In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of its Transportation Service Agreement associated with the Wildlight planned community located in Nassau County, Florida. The petition was approved by the Florida PSC in November 2022. The project enables us to meet the significant growing demand for service in Yulee, Florida. The agreement enables us to construct the project during the build-out of the community and charge the reservation rate as each phase of the project goes into service. Construction of the pipeline facilities will occur in two separate phases. Phase one consists of three extensions with associated facilities, and a gas injection interconnect with associated facilities. Phase two will consist of two additional pipeline extensions. The various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025. The project generated gross margin of $0.5 million for the three months ended September 30, 2025 and additional adjusted gross margin of $0.5 million for the nine months ended September 30, 2025. It is expected to contribute adjusted gross margin of approximately $3.0 million in 2025 and $4.3 million annually thereafter.

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In April 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 8,000 Dts/d of firm service in the Newberry, Florida area. The petition was approved by the Florida PSC in the third quarter of 2023. Peninsula Pipeline will construct a pipeline extension, which will be used by FPU to support the development of a natural gas distribution system to provide gas service to the City of Newberry. A filing to address the acquisition and conversion of existing Company-owned propane community gas systems in Newberry was made in November 2023. The Florida PSC approved it in April 2024. Conversions of the community gas systems commenced in the second quarter of 2024 and are projected to be complete in the third quarter of 2025. The project generated additional adjusted gross margin of $0.5 million and $1.1 million for the three and six months ended June 30, 2025, respectively, and is expected to contribute adjusted gross margin of approximately $2.6 million in 2025 and annually thereafter.

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In April 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 8,000 Dts/d of firm service in the Newberry, Florida area. The petition was approved by the Florida PSC in the third quarter of 2023. Peninsula Pipeline will construct a pipeline extension, which will be used by FPU to support the development of a natural gas distribution system to provide gas service to the City of Newberry. A filing to address the acquisition and conversion of existing Company-owned propane community gas systems in Newberry was made in November 2023. The Florida PSC approved it in April 2024. Conversions of the community gas systems commenced in the second quarter of 2024 and are projected to be complete in the fourth quarter of 2025. The project generated gross margin of $0.6 million for the three months ended September 30, 2025 and additional adjusted gross margin of $1.1 million for the nine months ended September 30, 2025. It is expected to contribute adjusted gross margin of approximately $2.6 million in 2025 and annually thereafter.

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In August 2023, Eastern Shore filed an application with the FERC requesting authorization to construct the Worcester Resiliency Upgrade, which consists of a mixture of storage and transmission facilities in Sussex County, Delaware and Wicomico, Worcester, and Somerset Counties in Maryland. The project will provide long-term incremental supply necessary to support the growing demand of the participating shippers. In January 2025, the FERC approved the project, and construction is expected to be complete in the second quarter of 2026.

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In August 2023, Eastern Shore filed an application with the FERC requesting authorization to construct the Worcester Resiliency Upgrade, which consists of a mixture of storage and transmission facilities in Sussex County, Delaware and Wicomico, Worcester, and Somerset Counties in Maryland. The project will provide long-term incremental supply necessary to support the growing demand of the participating shippers. In January 2025, the FERC approved the project. Construction has commenced and the project is expected to be placed into service in mid-2026 dependent on final FERC approval.

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In June 2025, Eastern Shore filed a limited amended application with the FERC requesting that it issue an order authorizing revised initial transportation rates for the project. The revised rates were requested to address increased capital costs being incurred related to unanticipated changes in global markets and supply chains. Eastern Shore requested expedited action by the FERC in relation to this matter and an approved order was issued in July 2025. The project is expected to generate $10.2 million in adjusted gross margin in 2026 and $17.6 million in 2027 and thereafter.

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In June 2025, Eastern Shore filed a limited amended application with the FERC requesting revised initial transportation rates for the project. The revised rates reflected increased capital costs associated with unanticipated changes in global markets and supply chains, including the availability of skilled laborers with the requisite certifications to work on this project. Eastern Shore requested expedited action by the FERC in relation to this matter and an approved order was issued in July 2025. The project is expected to generate $10.2 million in adjusted gross margin in 2026 and $17.6 million in 2027 and thereafter.

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In December 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities on the East Coast of Florida. The projects are driven by the need for increased supply to coastal portions of the state that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000 Dts/d and 3,400 Dts/d, respectively. The Florida PSC approved the projects in March 2024. New Smyrna Beach was placed into service during May 2025 and construction is projected to be complete for Boynton Beach in the fourth quarter of 2025. The projects generated adjusted gross margin of $1.2 million and $1.7 million for the three and six months ended June 30, 2025, respectively, and are expected to contribute adjusted gross margin of approximately $4.6 million in 2025 and $6.0 million annually thereafter.

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In December 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will provide additional supply to coastal communities on the East Coast of Florida, which are experiencing significant population growth. Peninsula Pipeline proposed several pipeline extensions to support FPU’s distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000 Dts/d and 3,400 Dts/d, respectively. The Florida PSC approved the projects in March 2024. New Smyrna Beach was placed into service during May 2025 and construction is projected to be complete for Boynton Beach in the fourth quarter of 2025. The projects generated adjusted gross margin of $1.5 million and $3.2 million for the three and nine months ended September 30, 2025, respectively, and are expected to contribute adjusted gross margin of approximately $4.6 million in 2025 and $6.0 million annually thereafter.

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In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities located in Central Florida. The projects are driven by the need for increased supply to communities in central Florida that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system around the Plant City and Lake Mattie areas of Florida with an additional 5,000 Dts/d and 8,700 Dts/d, respectively. The Florida PSC approved the projects in May 2024. The Plant City project was completed in the fourth quarter of 2024, and the Lake Mattie project went into service in July 2025. The project generated additional adjusted gross margin of $0.3 million and $0.6 million for the three and six months ended June 30, 2025, respectively, and both projects are expected to contribute total adjusted gross margin of approximately $2.6 million in 2025 and $4.3 million annually thereafter.

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In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities located in Central Florida which are also experiencing significant population growth. Peninsula Pipeline proposed to construct several pipeline extensions which will support FPU’s distribution system around the Plant City and Lake Mattie areas of Florida with an additional 5,000 Dts/d and 8,700 Dts/d, respectively. The Florida PSC approved the projects in May 2024. The Plant City project was completed in the fourth quarter of 2024, and the Lake Mattie project went into service in July 2025. The project generated additional adjusted gross margin of $0.9 million and $1.5 million for the three and nine months ended September 30, 2025, respectively, and both projects are expected to contribute total adjusted gross margin of approximately $2.6 million in 2025 and $4.3 million annually thereafter.

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In July 2024, we announced plans to extend Eastern Shore's transmission deliverability by constructing an additional 4.4 miles of six inch steel pipeline. The project will reinforce the supply and growth for our Delaware division distribution system and expand natural gas service further into Maryland for anticipated future growth. This project was placed into service during the fourth quarter of 2024, generated additional adjusted gross margin of $0.5 million and $1.0 million for the three and six months ended June 30, 2025, respectively, and is expected to contribute adjusted gross margin of approximately $1.9 million in 2025 and annually thereafter.

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In July 2024, we announced plans to extend Eastern Shore's transmission deliverability by constructing an additional 4.4 miles of six inch steel pipeline. The project will reinforce the supply and growth for our Delaware division distribution system and expand natural gas service further into Maryland for anticipated future growth. This project was placed into service during the fourth quarter of 2024, generated additional adjusted gross margin of $0.5 million and $1.5 million for the three and nine months ended September 30, 2025, respectively, and is expected to contribute adjusted gross margin of approximately $1.9 million in 2025 and annually thereafter.

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In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of its Transportation Service Agreements with FCG for projects that will support the transportation of additional renewable energy supply to FCG. The projects, located in Florida’s Brevard, Indian River and Miami-Dade counties, will bring renewable natural gas produced from local landfills into FCG’s natural gas distribution system. Peninsula Pipeline will construct several pipeline extensions which will support FCG's distribution system in Brevard County, Indian River County, and Miami-Dade County. Benefits of these projects include increased gas supply to serve expected FCG growth, strengthened system reliability and additional system flexibility. The Florida PSC approved the petition at its July 2024 meeting with the projects estimated to be completed in the first half of 2026. These three renewable projects generated adjusted gross margin of $0.5 million for the three and six months ended June 30, 2025 and are projected to generate total adjusted gross margin of approximately $2.5 million in 2025 and $4.6 million annually thereafter.

Current wording

In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of Transportation Service Agreements with FCG for projects that will support the transportation of additional renewable energy supply to FCG. The projects, located in Florida’s Brevard, Indian River and Miami-Dade counties, will bring renewable natural gas produced from local landfills into FCG’s natural gas distribution system. Peninsula Pipeline will construct several pipeline extensions which will support FCG's distribution system in Brevard County, Indian River County, and Miami-Dade County. Benefits of these projects include increased gas supply to serve expected FCG growth, strengthened system reliability and additional system flexibility. The Florida PSC approved the petition at its July 2024 meeting with the projects estimated to be completed in the first half of 2026. In October 2025, the Florida PSC approved amendments to the Transportation Service Agreements that were filed to include Peninsula Pipeline as a party to the related interconnection agreements. These three renewable projects generated adjusted gross margin of $1.0 million and $1.5 million for the three and nine months ended September 30, 2025, respectively, and are projected to generate total adjusted gross margin of approximately $2.5 million in 2025 and $5.4 million annually thereafter.

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In September 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of the Transportation Service Agreement with FCG for a series of projects that will enhance the infrastructure in Miami-Dade county. The proposed expansion consists of the development of several pipeline projects to support growth and support FCG's distribution system in the area and also enhance FCG's ability to obtain gas from various access points in the Miami-Dade county area. The expansion was approved in February 2025 and the projects are expected to be in service in the third quarter of 2025. The expansion is expected to contribute adjusted gross margin of approximately $2.8 million in 2025 and $7.6 million annually thereafter.

Current wording

In September 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of the Transportation Service Agreement with FCG for a series of projects that will enhance the infrastructure in Miami-Dade County. The proposed expansion consists of the development of several pipeline projects to support growth and FCG's distribution system in the area, as well as enhance FCG's access to gas from various points in the Miami-Dade County area. The expansion was approved in February 2025 and interim services began in August 2025 with permanent facilities expected to be in service by the second quarter of 2026. The project generated adjusted gross margin of $0.9 million for the three and nine months ended September 30, 2025 and is expected to contribute adjusted gross margin of approximately $2.8 million in 2025 and $7.6 million annually thereafter.

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We estimate annual adjusted gross margin, including amounts attributable to the Full Circle Dairy and Noble Road projects described below, of approximately $22.0 million in 2025 and $22.7 million in 2026 for these transportation related services, with potential for additional growth in future years.

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We estimate annual adjusted gross margin, including amounts attributable to the Full Circle Dairy and Noble Road projects described below, of approximately $25.5 million in 2025 and $26.5 million in 2026 for these transportation related services, with potential for additional growth in future years.

Previous wording

In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program. GUARD is a ten-year program to enhance the safety, reliability, and accessibility of portions of our natural gas distribution system. We identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and maintenance and repair equipment and system reliability projects. In August 2023, the Florida PSC approved the GUARD program, which included $205.0 million of capital expenditures projected to be spent over a 10-year period. For the three and six months ended June 30, 2025, there was$0.8 million and $1.7 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $6.9 million of adjusted gross margin in 2025 and $9.9 million in 2026.

Current wording

In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program. GUARD is a ten-year program to enhance the safety, reliability, and accessibility of portions of our natural gas distribution system. We identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and maintenance and repair equipment and system reliability projects. In August 2023, the Florida PSC approved the GUARD program, which included $205.0 million of capital expenditures projected to be spent over a 10-year period. For the three and nine months ended September 30, 2025, there was$1.0 million and $2.7 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $6.9 million of adjusted gross margin in 2025 and $9.9 million in 2026.

Previous wording

In June 2023, the Florida PSC issued the approval order for the continuation of the SAFE program beyond its 2025 expiration date and inclusion of 150 miles of additional mains and services located in rear property easements. The SAFE program is designed to relocate certain mains and facilities associated with rear lot easements to street front locations to improve FCG's ability to inspect and maintain the facilities and reduce opportunities for damage and theft. In the same order, the Florida PSC approved a replacement of 160 miles of pipe that was used in the 1970s and 1980s and shown through industry research to exhibit premature failure in the form of cracking. The program includes projected capital expenditures of $205.0 million over a 10-year period. For the three and six months ended June 30, 2025, there was$1.5 million and $2.8 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $8.5 million of adjusted gross margin in 2025 and $12.0 million in 2026.

Current wording

In June 2023, the Florida PSC issued the approval order for the continuation of the SAFE program beyond its 2025 expiration date and inclusion of 150 miles of additional mains and services located in rear property easements. The SAFE program is designed to relocate certain mains and facilities associated with rear lot easements to street front locations to improve FCG's ability to inspect and maintain the facilities and reduce opportunities for damage and theft. In the same order, the Florida PSC approved a replacement of 160 miles of pipe that was used in the 1970s and 1980s and shown through industry research to exhibit premature failure in the form of cracking. The program includes projected capital expenditures of $205.0 million over a 10-year period. For the three and nine months ended September 30, 2025, there was$1.2 million and $4.0 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $8.5 million of adjusted gross margin in 2025 and $12.0 million in 2026.

Previous wording

In December 2024, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities because of mandated highway relocation projects as well as compliance with PHMSA regulation. The capital cost surcharge mechanism was approved in Eastern Shore's last rate case. In conjunction with the filing of this surcharge, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included. The FERC issued an order approving the surcharge as filed in December 2024. The combined revised surcharge became effective January 1, 2025. In March 2025, Eastern Shore submitted an annual true-up filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities because of mandated highway relocation projects as well as compliance with a PHMSA regulation. There was no impact to the currently effective surcharge as a result of this filing. The FERC issued an order approving the surcharge as filed effective April 1, 2025. For the three and six months ended June 30, 2025, there was$0.6 million and $1.3 million, respectively, of incremental adjusted gross margin generated pursuant to the program. Eastern Shore expects to generate adjusted gross margin of approximately $5.7 million in 2025 and $7.1 million in 2026 from relocation projects, which is ultimately dependent upon the timing of filings and the completion of construction.

Current wording

In December 2024, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities because of mandated highway relocation projects as well as compliance with PHMSA regulation. The capital cost surcharge mechanism was approved in Eastern Shore's last rate case. In conjunction with the filing of this surcharge, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included. The FERC issued an order approving the surcharge as filed in December 2024. The combined revised surcharge became effective January 1, 2025. In March 2025, Eastern Shore submitted an annual true-up filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities because of mandated highway relocation projects as well as compliance with a PHMSA regulation. There was no impact to the currently effective surcharge as a result of this filing. The FERC issued an order approving the surcharge as filed effective April 1, 2025. For the three and nine months ended September 30, 2025, there was$0.6 million and $1.9 million, respectively, of incremental adjusted gross margin generated pursuant to the program. Eastern Shore expects to generate adjusted gross margin of approximately $5.7 million in 2025 and $7.1 million in 2026 from relocation projects, which is ultimately dependent upon the timing of filings and the completion of construction.

Previous wording

In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC"), which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years. The SPPCRC rules allow the utility to file for recovery of associated costs related to its SPP. Our Florida electric distribution operation's SPP and SPPCRC were filed during the first quarter of 2022 and approved in the fourth quarter of 2022, with modifications, by the Florida PSC. In October 2024, the Florida PSC approved the Company's projected 2025 SPP costs for both capital and operating expenses. For the three and six months ended June 30, 2025, this initiative generated additional adjusted gross margin of $0.8 million and$1.3 million, respectively, and is expected to generate$5.9 million of adjusted gross margin in 2025 and$8.8 million in 2026. We expect continued investment under the SPP going forward.

Current wording

In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC"), which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years. The SPPCRC rules allow the utility to file for recovery of associated costs related to its SPP. Our Florida electric distribution operation's SPP and SPPCRC were filed during the first quarter of 2022 and approved in the fourth quarter of 2022, with modifications, by the Florida PSC. In October 2024, the Florida PSC approved the Company's projected 2025 SPP costs for both capital and operating expenses. For the three and nine months ended September 30, 2025, this initiative generated additional adjusted gross margin of $1.1 million and$2.4 million, respectively, and is expected to generate$5.9 million of adjusted gross margin in 2025 and$8.8 million in 2026. We expect continued investment under the SPP going forward.

Previous wording

In January 2024, our natural gas distribution businesses in Maryland, CUC-Maryland Division, Sandpiper Energy, Inc., and Elkton Gas Company (collectively, the “Maryland natural gas distribution businesses”) filed a joint application for a natural gas rate case with the Maryland PSC. In connection with the application, we sought approval of the following: (i) permanent rate relief of approximately $6.9 million with a ROE of 11.5 percent; (ii) authorization to make certain changes to tariffs to include a unified rate structure and to consolidate the Maryland natural gas distribution businesses; and (iii) authorization to establish a rider for recovery of the costs associated with our new technology systems. In August 2024, the Maryland natural gas distribution businesses, the Maryland OPC and PSC staff reached a settlement which provided for, among other things, an increase in annual base rates of $2.6 million. In September 2024, the Maryland Public Utility Judge issued an order approving the related settlement agreement in part. The $2.6 million increase in annual base rates was approved and the Company filed a Phase II filing in November 2024 to determine rate design across the Maryland natural gas distribution businesses, consolidation of the applicable tariffs and recovery of technology costs. The hearing was held in March 2025, during which Phase II was approved, including an additional $0.9 million in revenue requirement, for a total cumulative increase of $3.5 million. A final order was issued in April 2025 and included approval of the consolidation of the operations and the assets of CUC-Maryland Division, Sandpiper Energy, and Elkton Gas into one entity which was renamed and will operate as Chesapeake Utilities of Maryland, Inc. For the three and six months ended June 30, 2025, there was$0.6 millionof incremental adjusted gross margin generated and the proceeding is expected to result in additional adjusted gross margin of approximately $2.0 million in 2025 and $3.5 million annually thereafter.

Current wording

In January 2024, our natural gas distribution businesses in Maryland, CUC-Maryland Division, Sandpiper Energy, Inc., and Elkton Gas Company (collectively, the “Maryland natural gas distribution businesses”) filed a joint application for a natural gas rate case with the Maryland PSC. In connection with the application, we sought approval of the following: (i) permanent rate relief of approximately $6.9 million with a ROE of 11.5 percent; (ii) authorization to make certain changes to tariffs to include a unified rate structure and to consolidate the Maryland natural gas distribution businesses; and (iii) authorization to establish a rider for recovery of the costs associated with our new technology systems. In August 2024, the Maryland natural gas distribution businesses, the Maryland OPC and PSC staff reached a settlement which provided for, among other things, an increase in annual base rates of $2.6 million. In September 2024, the Maryland Public Utility Judge issued an order approving the related settlement agreement in part. The $2.6 million increase in annual base rates was approved and the Company filed a Phase II filing in November 2024 to determine rate design across the Maryland natural gas distribution businesses, consolidation of the applicable tariffs and recovery of technology costs. The hearing was held in March 2025, during which Phase II was approved, including an additional $0.9 million in revenue requirement, for a total cumulative increase of $3.5 million. A final order was issued in April 2025 and included approval of the consolidation of the operations and the assets of CUC-Maryland Division, Sandpiper Energy, and Elkton Gas into one entity which was renamed and operates as Chesapeake Utilities of Maryland, Inc. For the three and nine months ended September 30, 2025, there was$0.5 million and $1.1 million, respectively, of incremental adjusted gross margin generated and the proceeding is expected to result in additional adjusted gross margin of approximately $1.5 million in 2025 and $3.5 million annually thereafter.

Previous wording

In August 2024, our Delaware natural gas division filed an application for a natural gas rate case with the Delaware PSC seeking approval of the following: (i) permanent rate relief of approximately $12.1 million with a ROE of 11.5 percent; (ii) proposed changes to depreciation rates which were part of a depreciation study also submitted with the filing; and (iii) authorization to make certain changes to tariffs. Annualized interim rates were approved by the Delaware PSC in the amount of $2.5 million and became effective in October 2024. A settlement among the Company, PSC staff and the Delaware Division of the Public Advocate was reached and approved by the Delaware PSC in June 2025 providing an annual revenue increase of $6.1 million, as well as dividing the rate case into two phases. Rates set to recover the approved components of the increase were effective in March 2025. Phase II of the rate case which will address tariff-related changes including rate design began in July 2025. For the three and six months ended June 30, 2025, there was$1.4 million and $2.2 million, respectively, of incremental adjusted gross margin generated and final rates are expectedto generate approximately $4.0 million of adjusted gross margin in 2025 and $6.1 million in 2026.

Current wording

In August 2024, our Delaware natural gas division filed an application for a natural gas rate case with the Delaware PSC seeking approval of the following: (i) permanent rate relief of approximately $12.1 million with a ROE of 11.5 percent; (ii) proposed changes to depreciation rates which were part of a depreciation study also submitted with the filing; and (iii) authorization to make certain changes to tariffs. Annualized interim rates were approved by the Delaware PSC in the amount of $2.5 million and became effective in October 2024. A settlement among the Company, PSC staff and the Delaware Division of the Public Advocate was reached and approved by the Delaware PSC in June 2025 providing an annual revenue increase of $6.1 million, as well as dividing the rate case into two phases. Rates set to recover the approved components of the increase were effective in March 2025. In October 2025, a settlement among the Company, PSC staff and the Delaware Division of the Public Advocate was reached for Phase II of the rate case addressing tariff-related changes including rate design and approved by the Delaware Public Service Commission with rates effective as of October 15, 2025. For the three and nine months ended September 30, 2025, there was$0.7 million and $2.9 million, respectively, of incremental adjusted gross margin generated and final rates are expectedto generate approximately $4.5 million of adjusted gross margin in 2025 and $6.1 million in 2026.

Previous wording

In August 2024, our Florida Electric division filed a petition with the Florida PSC seeking a general base rate increase of $12.6 million with a ROE of 11.3 percent based on a 2025 projected test year. Annualized interim rates of approximately $1.8 million were approved with an effective date of November 1, 2024. In March 2025, the Florida PSC approved the permanent rate increase, but the order was subsequently protested. In May 2025, the Company reached a settlement agreement with the interested parties to resolve all outstanding issues in its current base rate case, which was filed as a joint motion for approval with the Florida PSC. This settlement which was approved by the Florida PSC in July 2025, provides for a total revenue increase of approximately $8.6 million on an annual basis, with $1.0 million of the increase deferred from the first year's base rate increase and recovered over three years. A step-up rate increase was also approved for up to $0.7 million, upon completion of the purchase and refurbishment of certain substations, which is expected in December 2026. The settlement was approved by the Florida PSC in July 2025. For the three and six months ended June 30, 2025, there was $2.1 million and $2.8 million, respectively, of incremental adjusted gross margin generatedand final rates are expectedto generate approximately $7.1 million of adjusted gross margin in 2025 and $8.6 million in 2026.

Current wording

In August 2024, our Florida Electric division filed a petition with the Florida PSC seeking a general base rate increase of $12.6 million with a ROE of 11.3 percent based on a 2025 projected test year. Annualized interim rates of approximately $1.8 million were approved with an effective date of November 1, 2024. In March 2025, the Florida PSC approved the permanent rate increase, but the order was subsequently protested. In May 2025, the Company reached a settlement agreement with the interested parties to resolve all outstanding issues in its current base rate case, which was filed as a joint motion for approval with the Florida PSC. This settlement which was approved by the Florida PSC in July 2025, provides for a total revenue increase of approximately $8.6 million on an annual basis, with $1.0 million of the increase deferred from the first year's base rate increase and recovered over three years. A step-up rate increase was also approved for up to $0.7 million, upon completion of the purchase and refurbishment of certain substations, which is expected in December 2026. The settlement was approved by the Florida PSC in July 2025. For the three and nine months ended September 30, 2025, there was $2.4 million and $5.2 million, respectively, of incremental adjusted gross margin generatedand final rates are expectedto generate approximately $7.1 million of adjusted gross margin in 2025 and $8.6 million in 2026.

Previous wording

Weather was not a significant factor to adjusted gross margin in the second quarter of 2025 compared to the same period in 2024.

Current wording

Weather was not a significant factor to adjusted gross margin in the third quarter of 2025 compared to the same period in 2024.

Previous wording

For the six months ended June 30, 2025, increased customer consumption, which includes the effects of colder weather conditions, largely in our Ohio and Delmarva service areas, compared to the prior-year period resulted in a$5.7 million increase in adjusted gross margin.

Current wording

For the nine months ended September 30, 2025, increased customer consumption, which includes the effects of colder weather conditions, largely in our Ohio and Delmarva service areas, compared to the prior-year period resulted in a$4.8 million increase in adjusted gross margin.

Previous wording

The following table summarizes HDD and CDD variances from the 10-year average HDD/CDD ("Normal") for the three and six months ended June 30, 2025 and 2024.

Current wording

The following table summarizes HDD and CDD variances from the 10-year average HDD/CDD ("Normal") for the three and nine months ended September 30, 2025 and 2024.

Previous wording

The average number of residential customers served on the Delmarva Peninsula increased by approximately 4.4 percent and 4.2 percent, for the three and six months ended June 30, 2025, respectively, while the Company's Florida natural gas distribution service territories increased by approximately 2.9 percent and 3.0 percent, for the three and six months ended June 30, 2025, respectively.

Current wording

The average number of residential customers served on the Delmarva Peninsula increased by approximately 4.3 percent for both the three and nine months ended September 30, 2025. The average number of residential customers served by Florida Public Utilities Company increased by approximately 3.5 percent and 3.9 percent for the three and nine months ended September 30, 2025, respectively, while the average number of residential customers served by Florida City Gas increased by approximately 2.2 percent and 2.1 percent for the three and nine months ended September 30, 2025, respectively.

Previous wording

Operating income for the Regulated Energy segment for the second quarter of 2025 was $51.8 million, an increase of $11.3 million, or 27.9 percent, over the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $10.4 million, or 24.8 percent, compared to the same period in 2024. Higher operating income reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, organic growth in our natural gas distribution businesses and increased customer consumption. Excluding the transaction and transition-related expenses described above, the increase in total operating expenses of $4.0 million was largely attributable to the absence of a $2.3 million RSAM adjustment from FCG, expenses associated with facilities, maintenance and outside services and higher depreciation attributable to growth projects. These increases were partially offset by reduced payroll, benefits and other employee-related expenses during the quarter.

Current wording

Operating income for the Regulated Energy segment for the third quarter of 2025 was $48.9 million, an increase of $4.9 million, or 11.1 percent, over the same period in 2024. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $4.3 million, or 9.6 percent, compared to the same period in 2024. Higher operating income reflects incremental margin from regulatory initiatives and infrastructure programs, pipeline expansion projects, and organic growth in our natural gas distribution businesses. Excluding the transaction and transition-related expenses described above, the increase in total operating expenses of $8.2 million was largely attributable to higher depreciation attributable to growth projects and the absence of a $3.2 million RSAM adjustment from FCG during the prior-year period and higher expenses associated with facilities, maintenance and outside services. These increases were partially offset by reduced payroll, benefits and other employee-related expenses during the quarter.

Previous wording

We generated increased adjusted gross margin of $3.9 million for the three months ended June 30, 2025 from natural gas transmission service expansions of Peninsula Pipeline and Eastern Shore.

Current wording

We generated increased adjusted gross margin of $5.6 million for the three months ended September 30, 2025 from natural gas transmission service expansions of Peninsula Pipeline and Eastern Shore.

Previous wording

Regulated infrastructure programs generated incremental adjusted gross margin of $3.7 million in the second quarter of 2025. The increase in adjusted gross margin was primarily related to FCG's SAFE program, Florida Natural Gas' GUARD program, Eastern Shore's Capital Cost Surcharge program, and FPU Electric's SPP. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.

Current wording

Regulated infrastructure programs generated incremental adjusted gross margin of $3.9 million in the third quarter of 2025. The increase in adjusted gross margin was primarily related to FCG's SAFE program, Florida Natural Gas' GUARD program, Eastern Shore's Capital Cost Surcharge program, and FPU Electric's SPP. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.

Previous wording

Rate changes associated with the Delaware and Maryland natural gas rate cases and Florida Electric base rate case contributed additional adjusted gross margin of $4.1 million for the three months ended June 30, 2025. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.

Current wording

Rate changes associated with the Delaware and Maryland natural gas rate cases and Florida Electric base rate case contributed additional adjusted gross margin of $3.6 million for the three months ended September 30, 2025. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.