Florida City Gas (CPK) Earnings Call Transcript & Summary

Good day, everyone, and thank you for joining today's call to discuss Chesapeake Utilities acquisition of Florida City Gas. [Operator Instructions] I would now like to turn the call over to Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary. Please go ahead.

Thank you, Todd, and good morning, everyone. Thank you all for joining us today to discuss Chesapeake Utilities' acquisition of Florida City Gas. I'm here with Jeff Householder, our Chairman, President and CEO; and Jim Moriarty, our Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer. Before we begin, I would like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. These forward-looking statements are detailed on Slide 2, and I would note that projections are based on our current intentions, plans, expectations, assumptions and beliefs and could materially differ from our actual results. The safe harbor for forward-looking statements section of the company's 2022 Form 10-K also provides further information on the factors that could cause such statements to differ from our actual results. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on any forward-looking statements. Now we'll take a look at the transaction. So turning to Slide 3 which summarizes the transaction. As you all know, last night, we announced that we signed a definitive agreement to acquire Florida City Gas for $923 million in cash. We're very excited about this acquisition and the opportunities it unlocks for us. Florida City Gas will immediately more than double our natural gas business in Florida. As you may know, Florida is the second fastest-growing state in the U.S. and our expanded presence will provide us with additional opportunities across all 5 of our growth platforms. The transaction supports and extends our EPS growth rate of at least 8%, and we're increasing our capital investment plan to $1.5 billion to $1.8 billion for the 5 years ended 2028, an increase of approximately 65% over our previous guidance. This is due to the scale and investment opportunities that this acquisition brings. Our financing plan will include a balanced mix of equity and debt. Maintaining our strong balance sheet remains a key priority for us. The transaction is expected to close in the fourth quarter of this year, after which Florida City Gas will become a wholly owned subsidiary. The transaction will be structured with the 338 H10 election for tax purposes, allowing Chesapeake to step up the tax basis of Florida City Gas. Notably, this transaction is aligned with the acquisition criteria that we have previously identified. On the financial side, it will enable capital investment opportunities, position us to capture additional value across all of our platforms, support long-term earnings growth and deliver efficiencies due to the complementary nature of Florida City Gas' operations with our existing Florida footprint. On the strategic side, we believe that Florida City Gas' values are aligned with ours, especially their commitment to prioritize the safety of local communities and employees. Their business model is consistent with ours with a shared commitment to operational excellence. Further, we have supportive constructive regulatory relationships and expertise in Florida, where we have operated for decades. Now I'll turn the call over to Jeff to cover the rationale and growth opportunities in greater detail. Jeff?

Thank you, Beth. Good morning, everyone, and thank you for joining us. Now that Beth has covered some of the details around the transaction terms, let me start by saying that this is an incredibly compelling transaction for us. As you would expect, we regularly review the strategic landscape across our service territories, and I've personally spent much of my career working in natural gas distribution in Florida, including Florida City Gas so I know the players and the systems and the consumers. From a strategic and an operational perspective, I can tell you that this transaction is a hand-in-glove fit. We're confident that we can grow the utility business we are acquiring today and that we can do a whole lot more over time with our expanded footprint. On Slide 4, we've summarized this rationale. Simply put, we are more than doubling our presence in Florida, enhancing our scale and efficiency and advancing our financial objectives. Florida is a premier state for utility operations for many reasons. First, the rapid population and GDP growth. Florida has a long history of being among the fastest growing U.S. states, and we'll talk about this more shortly. In addition, natural gas continues to be a preferred energy source there as it is in the other regions where we operate. Importantly for us, natural gas distribution customer growth in Florida has significantly exceeded national averages. In fact, Florida public utilities operations have achieved 4% annual residential customer growth over the last 4 years. We will be positioned to expand our regulated business into unserved and underserved communities throughout our broader service territory. We also see opportunities to invest in related businesses such as gas transmission to support the larger utility footprint we will have in the state. The acquisition will increase our regulated utility customers by more than 50% and our net plant by 30%, bringing significant scale benefits and efficiencies. We will be well positioned to deploy our operational expertise and constructive relationships on a much broader scale. Finally, there are also substantial financial benefits: extending our earnings growth track record, increasing CapEx opportunities, supporting our continued dividend growth and maintaining a strong balance sheet. Turning to Slide 5. In the past, we've talked about our drivers of superior performance, and this transaction hits each of them. We have a disciplined approach to M&A. And with Florida City Gas, we're building on our track record of success. We've proven that we can generate meaningful earnings growth by acquiring businesses in the states where we already operate and then developing and executing on significant incremental investment opportunities. We did this with Florida Public Utilities, Sandpiper Energy, and Elkton Gas. Elkton and Sandpiper Energy expanded our footprint in our core Maryland territories and extended public access to our energy services. Florida Public Utilities demonstrated our commitment to meeting consumer demand for natural gas in Florida, expanding our total investment in net income by more than 10%. FPU provides a strong road map for success, and we see a similar pathway with Florida City Gas. We each have excellent energized teams. Florida City Gas shares our commitment to operational excellence and providing with the safety of our communities and employees so that no one is left behind. We will be stronger together. The acquisition of Florida City Gas also reflects our financial discipline, building on our history of disciplined capital investments that position us to deliver an 8% or greater EPS growth rate. And finally, this acquisition provides us with an expanded and enhanced platform for growth. We expect this transition to drive about $500 million in incremental investment opportunities across our growth platforms over the next 5 years. On Slide 6, we have a snapshot of Florida City Gas. They serve about 120,000 residential, commercial and industrial natural gas customers in 8 counties across Florida. Their natural gas system encompasses approximately 3,800 miles of distribution main and 80 miles of transmission pipeline. Florida City Gas also recently completed a liquefied natural gas facility in Homestead, Florida that provides 270,000 gallons of storage capacity and delivery capability of 10,000 dekatherms a day. On a pro forma basis, our consolidated operations in Florida will comprise approximately 60% of our consolidated operating income, utility net plant and 5-year future capital investment plan. I also want to point out that Florida City Gas and FPU both recently completed rate cases with a combined rate increase of $40.5 million. 2024 will be the first full year that the new rates will be in effect. After the acquisition closes, our regulated businesses will represent 87% of our operations, up from 81% pre-acquisition. This larger utility base provides a strong, stable regulated business foundation, and we'll continue to build on this foundation with higher return opportunities in our nonregulated businesses. Slide 7 shows more detail regarding our combined natural gas distribution footprint. As you can see, we're more than doubling our rate base, customer count and miles of pipe and will now serve 31 Florida counties. On Slide 8, we take a closer look at what makes Florida such an attractive state for infrastructure investment. Let me mention just a few of the many statistics that illustrate the significant growth that we've all heard so much about. Florida's annual GDP growth since 2011 is about 5.7%, which significantly outpaces the rest of the United States. Florida's GDP is close to $1 trillion, making it larger than all of the 15 countries. According to the U.S. Census Bureau, Florida was the nation's fastest-growing state in 2022 with over 3% growth since 2020. And the forecasted population growth is 24% between now and 2050, which is second in the country behind only Texas. More importantly for us, gas distribution customer growth in Florida has significantly exceeded national average. Following the closing of the transaction, Chesapeake Utilities will be in 5 new counties and will serve half of the top 10 most populous counties in the state, offering us even higher growth potential. Moving to Slide 9. We've shown a map overlaying our service areas with Florida City Gas. On a pro forma basis, we expect to have approximately 211,000 customers combined. You can see it's a highly complementary acquisition from a geographic perspective and one that gives us opportunities beyond our existing footprint to service even more customers. We have several exciting opportunities to expand into unserved and underserved communities throughout our larger service territory. In the past, we've talked about our 5 platforms for growth, which are shown on Slide 10. We see significant opportunities across all 5 platforms, but in particular, I want to focus on organic utility growth and gas transmission platforms. This is where we're planning the largest investment dollars out of the gate. For example, we're excited about the backlog of homes that are in contracted developments in Florida City Gas' service area as well as several residential developments that will be constructed. There are also a number of opportunities for programmatic [ bonds ]. For one, Florida City Gas has an improved cost recovery mechanism for system replacement developments under its SAFE program, SAFE stands for safety, access and facility enhancement. This is a 10-year program to replace and relocate natural gas pipes with newer, better pipes and a longer life span. We'll invest approximately $205 million over the next 10 years with this program. We have proven experience developing and executing programs focusing on proactively improving safety and reliability, including FPU's recently completed GRIP, our gas reliability infrastructure program, This 10-year program accelerated the replacement of bare steel lines with over $200 million of invested capital. In addition, in February 2023, the Florida PSC approved our GUARD program which is similar to Florida City Gas' SAFE program. On the gas transmission side, we see several opportunities. Given the demand for natural gas throughout the expanded service territory, we have identified a series of potential pipeline infrastructure projects that we'll be working on. We also see commercial opportunities with companies that are looking for ways to reduce carbon emissions, like companies in the space launch industry which has a large presence in Florida. Natural gas is the fuel of choice for these companies. Lastly, I want to remind everyone that we're currently pursuing our first RNG project in Florida, Full Circle Barry. We're building out the infrastructure to support future RNG projects and we plan to add projects through our acquisition of Florida City Gas that will expand our RNG activities. With that, I'll turn the call over to Jim.

Well, thank you, Jeff, and good morning, everyone. It is great to be with you today and very exciting to discuss this compelling transaction. I'll turn now to Slide 11. Another reason that Florida is an attractive state is the constructive and supportive regulatory environment. Notably, it is one of 4 states in the nation rated above average to the S&P RRA rankings. Florida has a balanced state energy policy with no anti-customer choice policies and with timely cost recovery mechanisms. Timely cost recovery for our capital investment is a critical component of our continued earnings growth. Our strong regulatory team has worked hard to recover costs related to our infrastructure modernization, safety and reliability programs as well as our distribution system expansion programs. This has allowed us to provide reliable, domestic and affordable natural gas service to consumers across our service areas. We deeply value our relationships with regulators, legislators, communities and customers in Florida. We are committed to these relationships, which help us to deliver energy solutions that promote a better future so that no one is left behind. Turning to Slide 12. As Jeff mentioned, we have a proven track record of capitalizing on growth opportunities in Florida across our regulated utility operations as well as our other platforms for growth. A key example of our success is our 2009 acquisition of Florida Public Utilities, or FPU. The acquisition drove 13.8% investment growth and 11% organic net income growth from 2010 to 2022. We see a similar path forward with Florida City Gas, and we'll be striving to emulate this successful track record. On Slide 13, we show how we delivered growth with FPU. From $125 million investment in 2009, our merger paved the way for a successful growth from natural gas distribution expansion as well as other new business opportunities. We significantly increased our earnings power with investments in a number of areas such as natural gas, midstream natural gas, electric distribution, virtual pipeline solutions, combined heat and power, propane and sustainable investments. In just 12 years, we have invested $580 million. We are excited about similar opportunities in Florida City Gas service territories. With that, I'd like to turn the call over to Beth to provide further details on the financial benefits and structure of this transaction.

Thank you, Jim. I'll first review our updates to guidance. Given this significant scale and investment opportunities related to this transaction, we have increased our capital expenditure guidance to a range of $1.5 billion to $1.8 billion for 2024 to 2028 as you can see on Slide 14. This again represents a 65% increase relative to our previous capital guidance for the 5 years ending 2025. In addition to increasing the guidance, we are also extending the guidance period an additional 3 years to 2028. As we have done in the past, our capital plan will continue to be comprised of a steady stream of programmatic investments. I note that the capital investment opportunities associated with Florida City Gas represent approximately $500 million of the total guidance range. The key drivers include investing in the distribution system to support material customer growth and ensure reliability as well as related gas transmission infrastructure investments. While we are excited about this step change in future investment due to the acquisition, we are also pleased that Chesapeake's legacy businesses are increasing our capital guidance through 2028 to $1 billion to $1.3 billion. On Slide 15, you can see our long track record of identifying and executing a capital investment plan driven by strategic investments for growth. For example, since our merger with Florida Public Utilities in 2009, we doubled our level of capital investment several times. Following the transaction close, we expect our capital investment run rate will grow by over 50% to a range of $300 million to $360 million annually. We are confident that our core regulated and unregulated businesses have and will continue to produce solid investment growth that drive incremental earnings growth. We're also extending our diluted earnings per share guidance to 2028, as shown on Slide 16. We are forecasting our 2028 diluted earnings per share to be in the range of $7.75 to $8, implying an EPS growth rate of approximately 8% on from the current 2025 EPS guidance range and an 8.5% annual growth rate over the last 10 years or since 2018. Concurrent with signing the purchase agreement, Chesapeake Utilities has also obtained committed financing from Barclays to fund the purchase. Our balanced financing plan will consist of equity and long-term debt to maintain our strong balance sheet. We expect the plan to comprise approximately $400 million of equity and approximately $550 million in new long-term debt. We have flexibility regarding the timing and form of capital that we will utilize. Again, we'll be working with Barclays to finalize and implement this plan. As you can see from our capital structure shown on Slide 17, as of June 30, we have a strong balance sheet that will support our future growth. And now I'd like to turn it back to Jeff for some closing remarks.

Thanks, Beth. Florida City Gas is an excellent strategic fit that significantly enhances our investment proposition. I'm confident we can execute on the integration and the many growth opportunities that this transaction unlocks. Let me reiterate the reasons we're so excited about this opportunity before we open the call for questions. The acquisition is aligned with our disciplined M&A approach and builds on our demonstrated track record of success. As a result of the acquisition, we will more than double our operations in Florida, a premier utility jurisdiction. With a larger regulated utility footprint in Florida, we're increasing our scale and enhancing opportunities for efficiencies. We also have attractive investment opportunities across our 5 growth platforms. The opportunities to serve unserved and underserved areas will drive both performance and shareholder value. And the transaction supports our earnings growth rate of 8% or greater and increases our 5-year capital investment plan by approximately 65%. Importantly, Florida City Gas shares and embraces the core values that are central to our success, and I look forward to working with their team. I'd also like to thank our entire team here at Chesapeake Utilities. This hard work and dedication have allowed us to be in a position to execute on the opportunities available in Florida and throughout our business. I'm confident that together we will deliver value for our teams, communities and broader stakeholders, which will help to drive value for shareholders over time. We hope you share in our excitement for this transaction and all the opportunities it presents. And with that, we'll open the line for questions. Operator?

[Operator Instructions] Our first question comes from Chris Ellinghaus with Siebert Williams.

Congratulations. Beth, can you talk about the permanent financing? Do you expect that to be fairly concurrent? Or is there going to be some time lag?

Well, Chris, as I mentioned a little bit, first off, we've secured a commitment from Barclays for the bridge financing. And we've already begun to work on what we think that long-term financing plan might look like, but as I mentioned, again, we have a lot of flexibility thinking about the types of different capital that we may utilize, the timing that we may undertake some of those options. And so really, we're going to look at all of our options before we finalize our overall plan. But we feel very good at what we see, and we'll be back with more details.

Okay. The sort of round about $400 million that you talked about for equity, how do you anticipate the commission reacting to that level of equity given sort of what the authorized capital structure is at Florida City already? And how do you imagine that sort of regulatory treatment going forward?

Sure. So Chris, what I would say first off is we have 3 different regulatory jurisdictions where certainly we've received approval in Florida already. So we don't have any financing approval that's required in the state of Florida. And so one of the things that we'll certainly be doing is communicating to them what this business looks like as it's onboarded within Chesapeake. And ultimately, as we finance it and we prepare our surveillance reports, we'll be communicating with them. And then in the case of Delaware and Maryland, we're in the process of actually submitting applications for the additional financing needs that we have. We've got a long track record though, I will tell you, if you go all the way back to SPU when you look at when we did that transaction and we had to file that transaction at the time was about the size of this one. And so I believe that there will be an interim period where they know; number one, we have some bridge financing if we decide to maintain that and we work our way through at some point in time to the permanent financing. We'll be able to lay out a plan where they will see that we're moving back closer over time to a more historic run rate from our capital structure.

Okay. So basically, you're expecting of that growth capital to sort of grow into the authorized equity layer?

Keep in mind, Chris, those authorized capital levels are different in every state. Some states have short-term debt as part of the capital structure, some don't. So we have to -- we're looking at it across the whole company in each jurisdictions. And certainly, as you recall, we strategically -- we monitor our capital structure and looking at each jurisdiction. And so we'll continue to do that. Nothing is changing in how we're approaching it. Certainly, we'd expect to be an investment-grade company, continue to be that coming out of this financing, wherever that permanent financing lands. And so I think that will be the assurance that the PSC is looking for.

Okay. One last question.

Sure.

The $500 million that you talked about, can you give us any sense of the proportion that's Florida City versus transmission? And is that exclusive of maintenance capital at Florida City?

That $500 million is inclusive right now of our total projection for Florida City Gas. And Jeff talked a little bit today on the call about the SAFE program. And so you'll recall, he mentioned they have a new filing in that would represent about $200 million of the $500 million. And then the balance, Chris, that you were looking at of $300 million would represent the organic growth dollars that we've originally projected for that system, coupled with some pipeline opportunities that out of the gate we've identified as real potential. That said, certainly, as we close the transaction and onboard Florida City Gas, and we look at the consolidated operations, there may be additional opportunities. But our goal is always is to come out with what an investment level that we believe this organization can achieve. And then from there, we'll make adjustments as appropriate.

We'll go next to Shar Pourreza with Guggenheim Partners.

Just a real quick one here. Just on the incremental capital for FCG, the $500 million you guys identified over 5 years. I guess, I'm just trying to get a little bit of a better sense on how much of that is customer growth versus existing reliability needs and pipeline expansion. And just remind us, Beth, what's the spending profile for the $500 million over the 5-year period? I just want to get a better sense.

Sure. No problem. Great question. That seems kind of off of where Chris was going as well. So all the $500 million, we know that Florida City Gas has filed for $200 million under their SAFE program. So a little bit -- basically, about 40% of that $500 million, give or take, is going to be related to reliability improvement. There's also -- the balance of $300 million is for the organic growth. And keep in mind, there's a level in there based upon what we see sitting basically in their list of open developments where there's homes that have already -- can be hooked up to natural gas, so the backlog of homes. And there's about 12,000 of those. And so it's to serve distribution developments like that and then the balances for pipeline projects. And we've included in there an estimate based upon some of the potential pipeline projects that we see. I expect us to provide a little bit more clarity, certainly, as we come out of the fourth quarter, we'll be able to lay that out a little bit more, like we have done with our historical business. So you will see us while we are introducing our capital guidance for 2024, right now, of $300 million to $360 million in February, we will actually be discussing what the various buckets are. So there will be a little bit more clarity. We've got to dig in, but we're saying it's basically $500 million. And right now, for purposes of how you would factor that in, thinking about business, you'd be looking at approximately somewhere around $100 million a year for that business on an annual run rate.

Let me add just a couple of things to that. It's probably useful to say that the Florida City Gas organic distribution system growth looks a lot to us like what we see at FPU. And so of that $500 million, a fairly good chunk of it, at least half, is sitting inside the utility for things like Beth was talking about. Part of that is their SAFE program pipeline replacement, part of it is their normal and typical expansion to serve new customer developments across the service area. And then we see a significant amount of pipeline expansion opportunities to accelerate some of that growth in the same way that we did at Florida Public Utilities. So we usually [indiscernible] a pipeline company and building a relatively small diameter, short-run transmission extensions, that the commission enables us to recover quickly, now inside a rate filing for City Gas or for Florida Public Utilities to spur the development of natural gas in places where that currently exist or to bolster the system capabilities. And certainly, there's a fair amount of that, that's required in South Florida. We see that area as being somewhat constrained and relative to the gas that's getting there, and that provides some fairly significant opportunities, we think, for some relatively small scale transmission expansions to increase the overall capacity -- gas capacity that's capable of being in South Florida. So when you put all that together, we think there's a basket of organic growth significantly based on the pipeline replacement program at City Gas, but also a substantial amount of new construction to serve new homes along with an upstream transmission opportunity to get additional gas down to that area and to reach areas of new development. And so that's exactly the model, frankly, that we've been implementing at Eastern Shore and [ B&G ] up in Delaware and Maryland for the last couple of decades, and it's exactly the model that we've been implementing at Florida Public Utilities where we've taken peninsula pipeline, small-scale transmission projects to enable growth at the utility. So hopefully, that's a little clearer.

Our next question will come from Tate Sullivan with Maxim Group.

Jeff, following up those comments, is it a similar customer growth profile between FPU and Florida City Gas? And then as part of your plans for Florida City Gas, I mean, do you -- including those plans, higher customer growth, the opportunity to increase the customer?

I think there is. I think the Florida City Gas customer growth has been a little under what we've seen at FPU in Florida. And part of that is they haven't been probably quite as aggressive as we've been in our Florida operations to seek out and build system expansions to serve all of the new service area that's possible to serve. And so I think we'll apply, we just mentioned, the same model of growth to City Gas that we have applied at Florida Public Utilities and again in Delaware natural gas or in the Maryland natural gas up in the Delmarva Peninsula.

And then can you comment on integration process and what you've seen from other acquisitions historically of natural gas distribution companies? I mean, is it mostly involve decoupling the billing system and transitioning employees? Or what will the process entail?

Yes. It's -- there are obviously a fair amount of just technology transfer issues here. One of the things that we are acquiring in this process is a billing system. And so we don't necessarily have to decouple any of that. Now eventually, we'll probably transition that over into the SAP project that we have ongoing in our other systems, but that's down the road a ways. There are a number of just operational transitional issues that we need to deal with. Most of those are just getting people familiar with each other across our systems and understanding that, as you might expect, the Chesapeake way of doing business. We've got to integrate the financial system into our financial system, all the usual sorts of things. The culture in these 2 utilities, I think, is very similar. We know these guys very well. As I said, I used to work there years ago. We've got 2 or 3 other folks in our company that worked there as well. And so we're very familiar with the assets, very familiar with the folks, and we think the integration process will be fairly -- I wouldn't call it simple, but I think it will be less cumbersome than it might be if we were going to Kansas or Missouri or some place like that. This is a system that we think we can integrate into our company pretty quickly. And I might mention, we have commitments from the NextEra Energy folks to be a working partner with us as we transition. So I don't anticipate that there will be any more problems that we would normally expect to encounter in this kind of a transaction.

[Operator Instructions] We'll take our next question from Brian Russo with Sidoti.

Can you talk about the historical rate base average annual growth that drives that $487 million 2023 Rate Base? And is that -- what I suspect is rather robust growth to be sustainable over the next few years given the $500 million of CapEx.

Well, most -- go ahead, Jeff.

No, go ahead, Beth. I'll jump on after you.

I was just going to say, Brian, you're absolutely right. Given that a large portion of that $500 million is focused really on the gas utility opportunities, both from a reliability standpoint as well as organic growth, when you think about that $200 million-plus, as Jeff talked about, $250 million, $300 million-plus, you're talking about the next 5 years from a rate base perspective a pretty substantial growth. And I think -- I don't have the numbers off the top of my head, Jeff may, but they had a prior SAFE program that they've been executing on. It's about half the size of the one that they filed for. So there has been some pretty high growth there over the last couple of years that they've owned the business. They've not owned it for a very long period of time. Recall they acquired that along with some other assets from Southern just a couple of years ago. So I think the runway is robust, like we're talking about, and I think there has been a growth in the rate base that they've experienced here recently. Jeff, I don't know if there's anything else you want to add.

No, I think that's -- I think that Beth said it. One of the things to keep in mind in Florida, the SAFE program, the pipeline replacement program investments don't actually show up in rate base until you go back in for a rate proceeding, and you can do that on a limited basis or you can do it in City Gas and FPU, just did a wonderful rate case. And so when I look at the opportunities for rate base growth at City Gas, they are even larger than what you might anticipate if you went from the forecasted $487 million at the end of this year, because that doesn't include already a fairly substantial investment in the SAFE program over the course of 2023. And so it's, I think, an interesting opportunity for us to drive organic growth at a very significant level that also includes those pipeline replacement investments that we've seen at FPU and other companies across Florida and across the country. If you look at rate base growth at FPU or if you look at rate base growth at Emera, for example, over the last decade, it has been very significant because this is a state that's growing, it's expanding, population continues to increase. And we're going to be the beneficiaries of that for the next many, many years.

Okay. Great. And then just...

I'm sorry, Brian, I was just going to add one last comment. Jeff talked about the $487 million of rate base as of the end of 2022. And some of the forecasts and projections that we see for where we think the rate base will be, that's really at the time that we're going to close the transaction. We're viewing that as somewhere probably close to about $560 million. And so when you think about the transaction value that we're paying here, I just want to be clear, I mean, we're talking about a probably 1.65 multiple on a projected rate base at the time of closing. So -- and given all the benefits in Florida, as Jeff talked about the strategic rationale, but that gives you a sense about $70 million of rate base growth, a transaction value here of about 1.65x.

Yes. Great. And just bigger picture, with the regulated operations pro forma now at 87% and the unreg at about 13%, is that kind of the optimal mix going forward and the CapEx profile will mirror kind of that mix?

Jeff, would you like to take that? Or you want me to kick that off?

I can start and you finish up. I think we're always looking for good opportunities to grow our nonregulated business. It's been a nice piece of the enterprise over a very long period of time. And so whether that's propane or gas gathering systems in Ohio or Eight Flags in Maryland or any of the other opportunities that we have, I think we continue to be very bullish on those. They support returns in our business that typically are higher than they would otherwise be if we were just looking at regulated businesses. The things that we invest in them are significantly linked and significantly attached to, if you want to use that term, our regulated businesses, much as we've used the example in Delmarva for years of our propane business, building underground propane systems for the last 10 or 12 years. And now we're finally getting our transmission pipelines down Florida on the peninsula building distribution systems that are capable than of converting those underground propane developments into natural gas customers. And then we mark on down the peninsula, doing that again with our propane system. So it's those kinds of unregulated opportunities that we're looking for and that we've been able to find many, many of over the last 20 years or so. So we'll continue to try to do that. There's no magic business mix number, I think, in our minds. If we find good opportunities, and they're profitable and they continue to help us drive returns to shareholders, then we'll take advantage of that. Beth?

Nothing to add.

And at this time, we have no further questions in queue. I'd like to turn the call back to Jeff Householder for any closing remarks.

Well, thank you all again for joining us this morning. We are very excited about this opportunity. We believe it is the most compelling strategic acquisition for us to undertake. And again, thank you for joining us. Have a good day, everyone, and we look forward to talking with you again very soon. Goodbye.

This does conclude today's call. We thank you for your participation. You may disconnect at any time.