Unitil (UTL) Q3 2026 Earnings Call: Guidance Reaffirmed as Utility Margins Rise

Key Takeaways

• Unitil Corporation reported adjusted net income of $38.3 million, or $2.12 per share, for the first nine months of 2026. Adjusted EPS increased $0.09, or 4.4%, from the same period in 2025.
• Management reaffirmed 2026 EPS guidance of $3.20 to $3.36, with a midpoint of $3.28, and maintained its long-term earnings growth target of 5% to 7%.
• Electric adjusted gross margin rose 11.1% to $96.0 million, primarily reflecting higher distribution rates.
• Gas adjusted gross margin increased 12.8% to $151.9 million, supported by higher rates, customer growth, colder winter weather and the contribution from Maine Natural Gas.
• Unitil completed permanent financing for the Maine Natural Gas and New Hampshire water acquisitions and fully repaid the related term loans in October.
• The company’s five-year capital investment plan through 2030 remains approximately $1.2 billion, 24% above the previous five-year plan.

Core Financial Data

Business and Operating Performance

Electric adjusted gross margin benefited from $10.3 million of higher rates, partly offset by a $0.7 million nonrecurring reduction in FERC transmission revenue. The higher rates included support from Unitil Energy Systems’ $13 million permanent rate award effective May 1, 2026, a Fitchburg performance-based rate adjustment and higher capital tracker revenue. All electric customers operate under decoupled rates.

Gas adjusted gross margin reflected $15.8 million from higher rates and customer growth, plus $1.4 million from colder winter weather. Maine Natural Gas contributed $10.5 million during the first nine months. Unitil added approximately 6,500 gas customers year over year, mainly through the Maine Natural Gas acquisition. About 52% of gas customers were under decoupled rates as of September 30, 2026.

Operation and maintenance expense increased by $8.2 million, including $5.1 million of higher utility operating costs and $3.8 million of higher labor and other costs, partly offset by $0.7 million of lower acquisition costs. Maine Natural Gas and the Aquarion New Hampshire companies accounted for $3.9 million and $1.2 million of the increase, respectively.

The acquisitions of Aquarion Water Company of New Hampshire and Abenaki Water Company closed on June 30, adding nearly 11,000 customers at approximately 1.2 times rate base. Management said the acquisition is expected to be earnings-neutral in 2026. Unitil also completed the integration of Maine Natural Gas and ended all remaining transition services.

Unitil’s advanced metering infrastructure deployment remains on schedule. The company expects to complete meter replacement in New Hampshire by the end of 2027 after completing implementation in Massachusetts in 2025.

Management Guidance

Management reaffirmed 2026 EPS guidance of $3.20 to $3.36, with a midpoint of $3.28. The company also maintained its long-term earnings growth target of 5% to 7% and long-term rate base growth guidance of 6.5% to 8.5%.

The current capital investment plan through 2030 totals approximately $1.2 billion. It includes about $65 million for Bangor Natural Gas and Maine Natural Gas combined and approximately $33 million for the Aquarion New Hampshire companies. Management expects operating cash flow to fund most of the plan, with the balance financed through a mix of debt and equity.

Risks and Items to Watch

Northern Utilities’ proposed permanent rate increases remain subject to regulatory proceedings. In New Hampshire, Unitil requested a $9.8 million permanent increase, while temporary rates of $5.5 million took effect on June 1, 2026. Management expects permanent rates to take effect on April 1, 2027 following technical sessions, intervenor testimony and settlement conferences.

In Maine, Northern Utilities requested a $10.4 million rate increase. The company submitted rebuttal testimony on October 27, and the proceeding remains ongoing.

Unitil’s potential purchase of Aquarion Water Company of Massachusetts is governed by a nonbinding letter of intent. Management said the transaction could move forward only after the satisfactory conclusion of a Massachusetts base rate case, with a final order potentially arriving in the second half of 2027.

Higher operating expenses, depreciation, amortization and taxes partly offset the benefit of acquisitions, higher rates, customer growth and colder weather during the first nine months of 2026.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good day, and thank you for standing by. Welcome to the Q3 2026 Unitil Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Christopher Goulding, Vice President of Finance and Regulatory. Please go ahead.

Christopher Goulding

Good afternoon, and thank you for joining us to discuss Unitil Corporation's Third Quarter 2026 Financial Results. Speaking on the call today will be Tom Meissner, Chairman and Chief Executive Officer; and Dan Hurstak, Senior Vice President, Chief Financial Officer and Treasurer. Also with us today are Bob Hevert, President and Chief Administrative Officer; and Todd Diggins, Chief Accounting Officer and Controller.

We will discuss financial and other information on this call. As we mentioned in the press release announcing today's call, we have posted information, including a presentation, to the Investors section of our website at unitil.com. We will refer to that information during this call.

Moving to Slide 2. Some of the statements made during this call may be forward-looking. These statements are based on management's current expectations and are subject to risk and uncertainty, which may cause the actual results to differ materially from forecasts and projections. We undertake no obligation to update or revise any of these statements. Additional information about the various factors that may cause actual results to differ and our explanation of non-GAAP measures and how they reconcile to GAAP measures is contained within our news release, the slides we posted for this call, and in our most recent 10-Q and 10-K.

With that, I will now turn the call over to Chairman and CEO, Tom Meissner.

Tom Meissner

Great. Thanks, Chris. Good afternoon, everyone, and thanks for joining us today.

Beginning on Slide 3. Today, we announced adjusted net income of $38.3 million or $2.12 per share for the first 9 months of the year. Year-to-date, results increased $0.09 per share or 4.4% compared to the first 9 months of 2025, reflecting disciplined execution of our operating and strategic priorities and our long-standing commitment to delivering safe, reliable and affordable service to our customers.

The June 30 closing of our acquisitions of Aquarion Water Company of New Hampshire and Abenaki Water Company marked a key strategic milestone, diversifying our regulated utility portfolio and expanding our customer footprint across the state. I'm pleased to share that the transition has been seamless. Our customers continue to receive the same high level of service and reliability that they did before the change in ownership.

More recently, we completed our integration of Maine Natural Gas just last week and have ended all remaining transition services. We've now fully integrated Maine Natural Gas into our existing utility operations as we did with Bangor Natural Gas last year. As Dan will cover in greater detail, we also completed the permanent financing for our acquisitions of Maine Natural Gas and the New Hampshire water companies and repaid the term loans that have been used to finance those transactions.

Shifting now to our regulatory agenda. We continue to make steady progress on our Northern Utilities gas rate cases in both Maine and New Hampshire, which are moving forward as expected. Dan will walk through the details of those cases later in the call. On the electric side, our implementation of a new advanced metering infrastructure, or AMI system, remains firmly on track. This new metering system incorporates state-of-the-art smart meters that can provide near real-time information to customers, enabling improved decision-making and grid optimization. We completed the implementation of this technology in Massachusetts last year and expect to complete the meter replacement in New Hampshire by the end of 2027.

Looking ahead, we are reaffirming our 2026 guidance of $3.20 to $3.36 per share, with a midpoint of $3.28. We also reaffirm our long-term earnings growth of 5% to 7%.

Turning now to Slide 4. We recently released our 2026 corporate responsibility report and remain on track to reduce company-wide direct greenhouse gas emissions by 50% by 2030 and to be net zero by 2050. Through 2025, we have reduced our Scope 1 emissions by approximately 19%. An element of the report I'd like to highlight is the direct measurement of fugitive methane emissions. These emissions historically accounted for over 80% of our Scope 1 emissions when estimated using the EPA Subpart W emission factors. These represented our largest source of direct operational emissions.

To improve accuracy, we are implementing a measurement informed inventory methodology that uses direct site-specific measurements to develop a more reliable and actionable accounting of our greenhouse gas footprint. As part of this, we are now directly measuring our natural gas emissions using advanced mobile leak detection technology and have found that our pipeline emissions are 91% lower than previously estimated. In addition to providing a more accurate accounting of our greenhouse gas footprint, this technology allows us to identify, prioritize and eliminate the remaining sources of fugitive emissions.

We are also continuing to reduce methane emissions by aggressively replacing all leak-prone pipe in our system. I'm pleased to highlight that over 98% of our gas systems are now constructed of plastic or cathodically protected steel pipe, and we expect to complete the replacement of all remaining leak-prone pipe by 2035.

Turning to Slide 5. As I already mentioned, our acquisitions of Aquarion Water Company of New Hampshire and Abenaki Water Company closed on June 30. Upon closing, we added almost 11,000 customers at an attractive multiple of approximately 1.2x rate base. As part of the transaction, we entered into a 5-year operating and transition services agreement with the Aquarion Water Authority to ensure a seamless transition to Unitil's ownership and operation. Integration efforts are well underway, and we expect to assume responsibility for most operating and corporate services prior to the agreement's expiration date. As noted previously, we expect this acquisition to be earnings neutral in 2026.

Also, as we mentioned on our last call, we've entered into a nonbinding letter of intent with Eversource Energy to purchase the Aquarion Water Company of Massachusetts. That transaction can move forward after the satisfactory conclusion of a base rate case in Massachusetts, which is expected to be filed around or after mid-November. Based on this time line, there could be a final order in that case in the second half of 2027.

With that, I'll now pass the call over to Dan, who will provide greater detail on the quarterly and year-to-date results.

Daniel Hurstak

Thank you, Tom. Good afternoon, everyone. I'll begin on Slide 6. As Tom mentioned, we announced adjusted net income of $38.3 million or $2.12 per share for the 9 months -- for the first 9 months of 2026, representing an increase of $4.8 million in adjusted net income or $0.09 per share compared to the same period in 2025. We are reporting adjusted earnings that exclude transaction costs related to our gas and water acquisitions as those costs are not indicative of the company's ongoing costs and operations. These results for the first 9 months were supported by the earnings contributions from our recently acquired companies in addition to higher distribution rates and customer growth, partially offset by higher operating expenses.

Turning to Slide 7. I will discuss our electric and gas adjusted gross margins and water revenues. Beginning with our electric operations, for the first 9 months -- for the 9 months ended September 30, 2026, electric adjusted gross margin was $96 million, an increase of $9.6 million or 11.1% as compared to the same period in 2025. This increase was driven by higher rates of $10.3 million, partially offset by a nonrecurring reduction of FERC transmission revenue of $0.7 million. Higher rates were primarily supported by the Unitil Energy Systems permanent rate award of $13 million, which took effect May 1, 2026, as well as a Fitchburg performance-based rate adjustment and higher capital tracker revenue. As noted during prior calls, all electric customers are under decoupled rates, which eliminates the dependency of distribution revenue on the volume of electricity sales.

Moving to gas operations. For the 9 months ended September 30, 2026, gas adjusted gross margin was $151.9 million, an increase of $17.2 million or 12.8% compared to the same period in 2025. This increase reflects higher rates and customer growth of $15.8 million and colder winter weather of $1.4 million. Maine Natural Gas contributed $10.5 million to gas adjusted gross margin through the first 9 months of 2026. The temporary rate award of $5.5 million for Northern Utilities New Hampshire division, which took effect June 1, 2026, also contributed to the higher margin. The company added approximately 6,500 new gas customers compared to the same period in 2025, with the majority of these new customers being attributable to the acquisition of Maine Natural Gas. As of September 30, 2026, approximately 52% of the company's gas customers were under decoupled rates.

Moving to water operations. For the 9 months ended September 30, 2026, the Aquarion New Hampshire companies contributed $3.1 million to operating revenue.

Moving to Slide 8. We provide an earnings bridge comparing the results of the first 9 months of 2026 to the same period in 2025. As I just discussed, the combined adjusted gross margin for our electric and gas divisions and water revenues increased $29.9 million and reflect the contributions of Maine Natural Gas and the Aquarion New Hampshire companies, higher rates, colder winter weather and customer growth.

Operation and maintenance expenses increased $8.2 million due to higher utility operating costs of $5.1 million and higher labor and other costs of $3.8 million, partially offset by lower acquisition costs of $0.7 million. This increase included $3.9 million and $1.2 million related to Maine Natural Gas and the Aquarion New Hampshire companies, respectively.

The increase in depreciation and amortization expense and taxes other than income taxes reflect higher levels of utility plant in service and higher amortization of recoverable storm costs as well as expenses associated with Maine Natural Gas and the Aquarion New Hampshire companies.

Moving to Slide 9. As Tom noted earlier, our Northern Utilities rate cases are progressing well in both New Hampshire and Maine. Starting with New Hampshire, on April 1, 2026, we filed a petition for a permanent rate increase of $9.8 million. And on June 1, 2026, temporary rates of $5.5 million took effect. We have proposed a multiyear rate plan with 2-step adjustments to recover all 2026 and 2027 system investments. The rate proposal includes the continuation of revenue decoupling, but similar to our New Hampshire electric case, we have proposed a decoupling methodology change from a revenue per customer model to a total authorized revenue target. The first round of technical sessions has concluded and intervenor testimony is due November 19. Settlement conferences are scheduled in early 2027, with permanent rates taking effect April 1, 2027.

Turning to Slide 10. The Northern Utilities Maine rate case, which was filed on June 1, 2026, includes a proposed rate increase of $10.4 million. The revenue requirement in this case is based on a historical test year with adjustments to forecast rate base, revenues and expenses through the rate effective year. This approach is designed to reduce earnings attrition and is consistent with the revenue requirement approach approved in the company's prior case. We submitted rebuttal testimony on October 27. We look forward to working with all stakeholders through these proceedings, and we'll provide additional details regarding the progress of these cases on future calls.

Moving to Slide 11. As noted during our previous earnings call, our current 5-year capital investment plan through 2030 totaled approximately $1.2 billion which is an increase of 24% over the previous 5-year plan. This plan includes approximately $65 million for Bangor Natural Gas and Maine Natural Gas collectively and approximately $33 million for the Aquarion New Hampshire companies. Rate base increased $0.2 billion or 14.9% compared to the same period in 2025, and supported by the acquisition of Maine Natural Gas and the Aquarion New Hampshire companies. Over the past 5 years, rate base growth has averaged 9.5%, which is above our long-term guidance of 6.5% to 8.5%. As we have in the past, we intend to discuss our updated 5-year investment plan during the fourth quarter earnings call.

Turning to Slide 12. Our financial profile is strong and balance sheet strength remains a top priority. Our dividend payout ratio target range remains at 55% to 65% and our most recent FFO to debt ratio according to S&P was 17%, which is squarely in the middle of our long-term FFO to debt target range and well above our downgrade thresholds. We have successfully executed our 2026 financing plan, including the issuance of $200 million of long-term debt in the private placement market at a weighted average interest rate of 5.76%. In addition, to date, we have issued $27.3 million of equity through our ATM program.

I'm also pleased to report that in October, we fully repaid both tranches of the term loan utilized to finance the acquisitions of Maine Natural Gas and the Aquarion New Hampshire companies. The repayment was primarily funded through proceeds from equity issuances and long-term debt. With the term loan now fully repaid, we consider these operating companies to be fully financed with permanent capital.

Moving forward, we continue to expect cash flow from operations to fund the majority of our investment plan, with the remaining amount coming from a balanced mix of debt and equity.

I will now turn the call back over to Tom.

Tom Meissner

Great. Thanks, Dan. Ending now on Slide 13. We are on pace for another year of successful execution of our strategic priorities. Our value proposition remains the same: investing in low-risk regulated assets that generate stable cash flows while ensuring our customers receive outstanding service and reliability. We look forward to sharing more about our progress and our longer-term outlook during our year-end earnings call.

With that, I'll pass the call back to Chris. Thank you.

Christopher Goulding

Thanks, Tom. That wraps up the prepared material for this call. Thank you for attending. I'll now turn the call over to the operator, who will coordinate questions.

Operator

[Operator Instructions] I'm showing no questions at this time. This concludes our question-and-answer session and today's conference call. Thank you for participating. You may now disconnect.