Chesapeake Utilities Corporation (CPK) recently held their first-quarter 2024 earnings call, and while the 8.5% dividend increase and continued customer growth were celebrated, a subtle shift is happening that could redefine their future. Chesapeake is quietly, but aggressively, positioning themselves as a major player in the renewable natural gas (RNG) space, centered around their Florida City Gas (FCG) acquisition.

While RNG has been around for years, Chesapeake's strategy goes beyond mere adoption. By finalizing regulatory filings for *three* RNG transmission projects, they're aiming to potentially *control* a significant portion of RNG production and distribution in Florida. These projects will link landfill gas production sites directly to FCG's system, eliminating intermediaries and positioning Chesapeake as a gatekeeper in the Florida RNG market.

This vertical integration offers several advantages: greater control over supply and pricing, and capturing a larger share of the rapidly growing RNG market, fueled by tightening environmental regulations and increasing demand for sustainable fuels.

"Chesapeake's CEO, Jeff Householder, emphasized the "scale benefits" of their expanded organization and the "magnitude of future growth opportunities in Florida," highlighting these as key drivers behind the FCG acquisition. Connecting the dots, it's clear that Chesapeake sees RNG as a cornerstone of this future growth."

Potential Financial Impact of RNG Projects

Although the earnings call doesn't explicitly state expected margins for these projects, we can use publicly available data to formulate a hypothesis. Assuming each RNG project has a similar scale to the recently approved Newberry expansion project (including propane community gas system conversions), which is projected to generate $2.3 million in adjusted gross margin in 2024, the three RNG projects could bring an additional $6.9 million in potential gross margin. This estimate is conservative, considering RNG's premium pricing due to its environmental benefits.

Chesapeake's Infrastructure Investment in Florida

Chesapeake is also planning to expand its SAFE and GUARD infrastructure replacement programs in Florida, totaling a $460 million investment over the next ten years. These regulator-approved programs ensure stable margin growth, providing a strong financial foundation for their RNG expansion.

Projected Adjusted Gross Margin Growth

Chesapeake's strategic focus on RNG represents a significant shift towards sustainable energy. They are not just participating in the RNG revolution, but positioning themselves to lead it, potentially dominating the Florida market for years to come. This development, largely overlooked by other analysts, signifies a fundamental change for Chesapeake, transforming Florida City Gas into an RNG powerhouse and positioning the entire company as a leader in the sustainable energy transition.

"**Fun Fact:** Landfills are a significant source of methane, a potent greenhouse gas. By capturing and converting landfill gas into RNG, Chesapeake is not only creating a sustainable fuel source but also helping to mitigate climate change."