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Chesapeake Utilities hikes spending plans as it bets on compressed gas business

Chesapeake Utilities Corp. increased its guidance for 2019 capital spending as it aims to expand its recently acquired compressed natural gas business and push into the emerging gas-for-transportation segment.

The Dover, Del., utility and energy distribution company now plans to devote $178 million to capital expenditures this year, a 6% increase from earlier capex guidance of $168 million. Roughly $9 million of the added spending will go toward growth projects linked to Marlin CNG Services, the Florida-based compressed natural gas company Chesapeake acquired in 2018.

Marlin primarily provides so-called virtual pipeline services to distribution companies and pipeline operators during gas outages. Chesapeake Utilities wants to grow beyond the business of trucking gas supplies in the form of compressed natural gas to those existing customers and use Marlin's patented delivery technology to transport renewable natural gas, or RNG, and LNG, including to natural gas vehicle fueling stations.

"We see those as significant emerging markets, and we want to pursue them aggressively," Chesapeake Utilities President and CEO Jeffry Householder said during the call.

While most of the $9 million in incremental capex will go toward growing Marlin's fleet of tankers and adding compression capacity, executives said they also plan to purchase equipment and explore ways to pursue opportunities in the RNG and LNG markets.

Harnessing RNG — gas captured from landfills, agriculture and other waste sources — is part of Chesapeake's strategy to achieve environmental, social and governance targets at a time when gas utilities are facing pressure to offset their contribution to greenhouse gas emissions.

Despite the planned capex increase for Marlin growth initiatives, more than three-quarters of Chesapeake's 2019 capital spending is allocated to projects in its core natural gas and electric power distribution businesses. The company left in place its guidance for $750 million to $1 billion in total spending for the five years through 2022.

Chesapeake on Aug. 8 reported second-quarter earnings of $8.3 million, or 50 cents per share, up from $7.6 million in the year-ago period. The S&P Global Market Intelligence consensus normalized EPS estimate was 56 cents.

Chesapeake's stock price was trading about 1.5% higher around $91.50 per share after the conference call.