Eastern Shore Natural Gas Company to Provide Natural Gas Transportation Service to Calpine's Garrison Energy Center

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Dec 12, 2014, 09:05 ET

DOVER, Del., Dec. 12, 2014 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake") announced today that its natural gas transmission subsidiary Eastern Shore Natural Gas Company ("ESNG") has entered into a Precedent Agreement with Calpine Energy Services, L.P., whereby Calpine is committed to enter into a 20-year service agreement with ESNG to provide natural gas transportation service for Calpine's new, state-of-the-art electric generating facility located in Dover, Delaware, upon the satisfaction of certain conditions. The agreement calls for ESNG to transport 45,000 dekatherms per day (dt/d) of natural gas along ESNG's mainline to a pipeline that will service Calpine's Garrison Energy Center, a 309 MW combined cycle power plant currently under construction in the Garrison Oak Technical Park.

The transportation service will be provided under ESNG's new Off Peak ≤90 Firm Transportation ("OPT") Rate Schedule. The new OPT service was approved by the Federal Energy Regulatory Commission ("FERC") on September 5, 2014. ESNG estimates that it will generate at least $5.8 million of margin annually from providing the OPT service to Calpine. The OPT is a firm service that enables customers to save money by forgoing service for up to ninety days each year. By the customers forgoing the service on the peak days ESNG is able to reduce its investment and rates to the customer. Calpine's Garrison Energy Center will have dual fuel capability to help mitigate the effects of any potential gas interruption during those ninety days.

"This agreement reflects our extensive work with Calpine to develop a solution that meets its needs and provides us the opportunity to expand our pipeline infrastructure to the area," said Michael P. McMasters, President and CEO of Chesapeake Utilities Corporation. "The expansion supports our efforts to meet the energy needs of the region as demand for economic and environmentally friendly natural gas increases on the Delmarva Peninsula. Building pipelines to bring natural gas to electric generation plants is one of our identified strategies for future growth."

As a result of the agreement, ESNG recently submitted an application for a Certificate of Public Convenience and Necessity to the FERC. ESNG plans to expand its facilities with the installation of over seven miles of 16-inch pipeline looping and 3,550 horsepower of new compression in Delaware. These new facilities are estimated to cost approximately $30 million. ESNG anticipates receiving FERC's authorization in 2015. Service is targeted to commence in the fourth quarter of 2015, following FERC authorization.

In addition, ESNG recently completed a pipeline project pursuant to a separate previously executed agreement, which consisted of approximately five and a half miles of new pipeline that connects its existing mainline near Cheswold, Delaware to the Calpine Garrison Energy Center. Service was initiated in October of 2014. As a result of constructing this pipeline and commencing service, ESNG expects to generate approximately $463,000 in gross margin during 2014 and approximately $1.5 million in gross margin on an annual basis from Calpine.

About Chesapeake Utilities Corporation

Chesapeake Utilities Corporation is a diversified energy company engaged in natural gas distribution, transmission and marketing; electricity distribution; propane gas distribution and wholesale marketing; and other related services. Information about Chesapeake Utilities Corporation and the Chesapeake family of businesses is available at www.chpk.com.

About Eastern Shore Natural Gas Company

Eastern Shore Natural Gas Company, a subsidiary of Chesapeake Utilities Corporation, owns and operates a 437-mile interstate pipeline that transports natural gas from various points in Pennsylvania to customers in Delaware, Maryland and Pennsylvania. For more information, visit www.esng.com.

Cautionary Note Regarding Forward-Looking Statements: Statements in this release that are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "expect," "likely," "outlook," "forecast," "would," "could," "should," "can," "will," "project," "intend," "plan," "goal," "target," "continue," "sustain," "believe," "seek," "estimate," "anticipate," "may," "possible," "assume," variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that could cause actual results to vary materially from those indicated, including the factors described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each of which is incorporated herein by reference, and in other documents that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, the Company does not undertake, and expressly disclaims, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

For more information, contact:
Beth W. Cooper
Senior Vice President, Chief Financial Officer and Corporate Secretary
Chesapeake Utilities Corporation
302.734.6799
[email protected]

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SOURCE Chesapeake Utilities Corporation