Chesapeake Utilities senior notes win Fitch A- rating as refinancing supports capital plan

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Chesapeake Utilities Fitch A- notes

Highlights

Fitch assigned Chesapeake Utilities an 'A-' rating on its 2026 series A, B, and C senior notes, supporting refinancing of 6.39% notes due December 2026 and general corporate purposes.
Chesapeake Utilities expects $1.4 billion capex over 2026–2028, with investment focused on regulated assets including the $1.2 billion Florida Energy Pathway pipeline, targeting service by 2030.
Customer growth added 11,000 in 2025, and Chesapeake Utilities seeks a $47 million revenue increase from the Florida Public Service Commission with new rates effective January 1, 2027.

Note issuance backs refinancing and utility investment

As reported by Fitch Ratings, Chesapeake Utilities Corporation has received an 'A-' rating on its 2026 series A senior notes due 2032, 2026 series B senior notes due 2029 and 2026 series C senior notes due 2036. The notes rank pari passu with the company's existing unsecured debt, and net proceeds are set to repay part of its short-term borrowings, refinance 6.39% senior notes due in December 2026 and support general corporate purposes.

Chesapeake Utilities' Long-Term Issuer Default Rating stands at 'BBB+' with a Stable Outlook. Fitch applies a one-notch uplift to the senior unsecured notes from the issuer rating, citing above-average recovery prospects for utilities, the company's policy of issuing debt only at the parent level and expectations that its operations will remain predominantly regulated.

Fitch says Chesapeake Utilities' business profile is anchored by regulated gas and electric distribution operations that generate stable earnings and benefit from customer growth across multiple jurisdictions. Regulated operations, including quasi-regulated gas pipeline businesses, accounted for about 86% of consolidated EBITDA in the year ended Dec. 31, 2025, while cost-recovery mechanisms help support cash flow stability and limit regulatory lag.

The agency views Florida and Delaware as more supportive regulatory environments than Maryland, where longer-term policy is less favorable for gas utilities because of a push toward electrification. Fitch considers that risk manageable because Maryland represents less than 10% of Chesapeake Utilities' asset base and is expected to remain around that level over the forecast period.

Florida pipeline project raises growth, leverage focus

Fitch says the proposed Florida Energy Pathway project fits Chesapeake Utilities' lower-risk profile because the intrastate natural gas pipeline is expected to be backed by long-term contracts with investment-grade offtakers. Through Peninsula Pipeline Company, Chesapeake Utilities is expected to hold a 51% stake in the project, implying about $600 million of its share of the estimated $1.2 billion cost, while NextEra Energy Resources is expected to own the remaining 49%; the pipeline is targeted to enter service in 2030.

The ratings agency expects the project to lift capital spending through 2028. Chesapeake Utilities' 2026 capital expenditure guidance of $550 million to $600 million includes an initial investment in Florida Energy Pathway, and Fitch now projects roughly $1.4 billion of capex over 2026 to 2028, with most spending directed to regulated and quasi-regulated assets.

That spending is expected to pressure credit metrics, with FFO leverage at 4.5x for the last 12 months ended Sept. 30, 2026, against Fitch's 4.8x negative rating sensitivity. Fitch says continued rate base growth and positive free cash flow from the unregulated segment should help fund capex and limit additional borrowing, although headroom remains limited during the investment period.

Outside the regulated core, Chesapeake Utilities' propane business generated about 8% of consolidated EBITDA in fiscal 2025, modestly above Fitch's prior expectations, while the unregulated gas pipeline business continues to operate under long-term contracts with predictable earnings and cash flow. Fitch expects propane to represent 6% to 8% of consolidated EBITDA over the forecast period and says a materially higher share could weaken the company's business risk profile.

Customer growth remains another support for the credit story. In 2025, Chesapeake Utilities added about 11,000 new customers, including residential growth of 4.1% at Delmarva, 3.6% at Florida Public Utilities and 2.2% at Florida City Gas, while the company is also seeking a $47 million revenue increase from the Florida Public Service Commission based on an 11.25% return on equity and a projected 2027 test year; new rates are requested from Jan. 1, 2027, after an interim $16 million increase was authorized in July 2026.

We recently wrote about Hainan Rubber securities that Fitch rated BBB- as part of an offshore debt refinancing plan.

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