Chesapeake Utilities (CPK) 8-K Financial Statements as of and for the Deloitte & Touche LLP

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information of Chesapeake Utilities Corporation (“Chesapeake Utilities”, or the “Company”) consists of a condensed combined balance sheet at September 30, 2023, and condensed combined statements of income for the nine months ended September 30, 2023 and the year ended December 31, 2022, all of which reflect the Company’s anticipated acquisition of Pivotal Utility Holdings, Inc. doing business as Florida City Gas (“FCG”). The unaudited pro forma condensed combined financial statements included herein have been derived from the following historical financial statements:

• the audited financial statements of Chesapeake Utilities as of and for the year ended December 31, 2022;

• the unaudited interim financial statements of Chesapeake Utilities as of and for the nine months ended September 30, 2023;

• the audited financial statements of FCG as of and for the year ended December 31, 2022; and

• the unaudited interim financial statements of FCG as of and for the nine months ended September 30, 2023.

The pro forma adjustments have been prepared as if the acquisition of FCG occurred on September 30, 2023 in the case of the unaudited pro forma condensed combined balance sheet and on January 1, 2022 in the case of the unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2023 and for the year ended December 31, 2022. The unaudited pro forma condensed combined financial statements should be read in conjunction with the related notes, which are included herein, the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed February 22, 2023, and Quarterly Report on Form 10-Q for the nine months ended September 30, 2023, as filed November 2, 2023 and the financial statements and notes of FCG attached as Exhibits 99.1 and 99.2 in the Company’s Current Report on Form 8-K filed by the Company on November 9, 2023.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not necessarily reflect what the combined financial condition and results of operations would have reflected had the Acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of the operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The unaudited pro forma information and adjustments, including the preliminary allocation of purchase price, are based upon preliminary estimates of fair values of assets acquired and liabilities assumed, current available information and certain assumptions that we believe are reasonable in the circumstances, as described in the notes to the unaudited pro forma condensed combined financial statements. The actual adjustments to the Company’s consolidated financial statements as of the closing date of the Acquisition will depend on a number of factors, including, among others, additional information available and the net assets of FCG on the closing date of the Acquisition. As a result, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.

CHESAPEAKE UTILITIES CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET AT SEPTEMBER 30, 2023

Assets	CPK			FCG			Transaction Adjustments				Pro Forma Combined
(in thousands)
Property, Plant and Equipment
Regulated energy	$	1,916,585		$	663,047		$	(11,882	)	4[a]	$	2,567,750
Unregulated energy		404,924			—							404,924
Other businesses and eliminations		28,802			—							28,802
Total property, plant and equipment		2,350,311			663,047			(11,882	)			3,001,476
Less: Accumulated depreciation and amortization		(503,897	)		(179,367	)		2,411		4[a]		(680,853	)
Plus: Construction work in progress		61,843			18,183							80,026
Net property, plant and equipment		1,908,257			501,863			(9,472	)			2,400,648
Current Assets
Cash and cash equivalents		1,793			24,306			(22,306	)	4[b]		3,793
Trade and other receivables		47,397			14,355			(187	)	4[c]		61,565
Less: Allowance for credit losses		(2,405	)		(451	)						(2,856	)
Trade receivables, net		44,992			13,904			(187	)			58,709
Accrued revenue		15,229			—							15,229
Propane inventory, at average cost		7,001			—							7,001
Other inventory, at average cost		17,593			1,324							18,917
Natural gas for sale		—			1,373							1,373
Regulatory assets		19,111			2,833							21,944
Storage gas prepayments		5,063			—							5,063
Income taxes receivable		5,340			—							5,340
Prepaid expenses		17,179			1,006							18,185
Derivative assets, at fair value		2,328			—							2,328
Other current assets		1,837			436							2,273
Total current assets		137,466			45,182			(22,493	)			160,155
Deferred Charges and Other Assets
Goodwill		46,213			—			467,689 (868	)	4[d] 4[e]		513,034
Other intangible assets, net		16,518			—							16,518
Investments, at fair value		11,084			—							11,084
Derivative assets, at fair value		425			—							425
Operating lease right-of-use assets		12,842			43,828			(43,828	)	4[f]		12,842
Regulatory assets		91,678			3,636							95,314
Receivables and other deferred charges
Prepaid pension asset					4,869			(4,869	)	4[g]		—
Prepaid software service costs					9,551							9,551
Deferred software implementation costs					4,812							4,812
Miscellaneous deferred debits					4,427			(154	)	4[h]		4,273
Deferred rate case expenses					1,136							1,136
Other receivables and other deferred charges		16,263			15							16,278
Total deferred charges and other assets		195,023			72,274			417,970				685,267
Total Assets	$	2,240,746		$	619,319		$	386,005			$	3,246,070
Capitalization and Liabilities
Stockholders’ equity
Preferred stock, par value $0.01 per share (authorized 2,000,000 shares)	$	—		$	—		$	—			$	—
Common stock, par value $0.4867 per share (authorized 50,000,000 shares)		8,662			—			1,824		4[i]		10,486
Additional paid-in capital		382,551			256,081			(10,725	)	4[j]		700,002
								328,176 (256,081)		4[i] 4[k]
Retained earnings		476,601			38,187			(38,187) (18,750) 4,818		4[k] 4[l] 4[l]		462,669
Accumulated other comprehensive loss		(1,137	)		—							(1,137	)
Deferred compensation obligation		8,987			—							8,987
Treasury stock		(8,987	)		—							(8,987	)
Total stockholders’ equity		866,677			294,268			11,075				1,172,020
Long-term debt, net of current maturities		643,801			136,763			(4,125 (136,763 550,000	)  )	4[m] 4[n] 4[i]		1,189,677
Total capitalization		1,510,478			431,031			420,188				2,361,697
Current Liabilities
Current portion of long-term debt		20,000			19,538			(19,538	)	4[n]		20,001
Short-term borrowing		118,570			—			77,000 (868	)	4[i] 4[e]		194,702
Due to affiliates		—			3,317			(3,317	)	4[o]		—
Accounts payable		53,729			5,937							59,666
Customer deposits and refunds		40,228			5,149							45,377
Accrued interest		4,985			—							4,985
Dividends payable		10,500			—							10,500
Income taxes payable		—			5,285							5,285
Other accrued taxes		—			4,243							4,243
Accrued compensation		9,831			1,959							11,790
Regulatory liabilities		9,092			3,083							12,175
Derivative liabilities, at fair value		828			—							828
Construction accruals		—			2,274							2,274
Other accrued liabilities		20,647			3,684			(1,281	)	4[f]		23,050
Total current liabilities		288,410			54,469			51,997				394,876
Deferred Credits and Other Liabilities
Deferred income taxes		264,541			38,814			(38,814 (4,818	)  )	4[p] 4[l]		259,723
Accrued removal costs		—			33,605							33,605
Regulatory liabilities		145,092			18,512							163,604
Environmental liabilities		2,562			—							2,562
Other pension and benefit costs		17,133			—							17,133
Derivative liabilities, at fair value		101			—							101
Lease liabilities		11,040			42,547			(42,547	)	4[f]		11,040
Other liabilities		1,389			341							1,730
Total deferred credits and other liabilities		441,858			133,819			(86,179	)			489,498
Other commitments and contingencies
Total Capitalization and Liabilities	$	2,240,746		$	619,319		$	386,005			$	3,246,070

CHESAPEAKE UTILITIES CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

	CPK		FCG		Transaction Adjustments				Pro Forma Combined
(in thousands, except shares and per share data)
Operating Revenues
Regulated Energy	$	345,822	$	98,078	$	(862	)	4[q]	$	442,063
						(975	)	4[r]
Unregulated Energy and Other		139,447		—						139,447
Total operating revenues		485,269		98,078		(1,837	)			581,510
Operating Expenses
Natural gas and electricity costs		105,692		23,856						129,548
Propane and natural gas costs		55,786		—						55,786
Operations		128,147		28,604		(369	)	4[s]		156,382
Transaction-related expenses		3,899		—						3,899
Maintenance		15,487		—						15,487
Depreciation and amortization		52,096		6,020		(732	)	4[t]		56,409
						(975	)	4[r]
Other taxes		20,674		9,089						29,763
Total operating expenses		381,781		67,569		(2,076	)			447,274
Operating Income		103,488		30,509		239				134,236
Other income, net		1,036		376						1,412
Interest charges, net		21,272		6,533		(862	)	4[q]		51,979
						(5,505	)	4[u]
						26,978		4[v]
						3,563		4[w]
Income Before Income Taxes		83,252		24,352		(23,935	)			83,669
Income Taxes		21,368		5,791		(6,143	)	4[x]		21,016
Net Income	$	61,884	$	18,561	$	(17,792	)		$	62,653
Weighted Average Common Shares Outstanding:
Basic		17,783,787				3,746,828		4[y]		21,530,615
Diluted		17,847,288				3,746,828		4[y]		21,594,116
Earnings Per Share of Common Stock:
Basic Earnings Per Share of Common Stock	$	3.48							$	2.91
Diluted Earnings Per Share of Common Stock	$	3.47							$	2.90

CHESAPEAKE UTILITIES CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2022

	CPK			FCG		Transaction Adjustments				Pro Forma Combined
(in thousands, except shares and per share data)
Operating Revenues
Regulated Energy	$	429,424		$	118,491	$	(297	)	4[z]	$	547,075
							(543	)	4[aa]
Unregulated Energy		280,750			—						280,750
Other businesses and eliminations		(29,470	)		—						(29,470	)
Total operating revenues		680,704			118,491		(840	)			798,355
Operating Expenses
Natural gas and electricity costs		127,172			33,414						160,586
Propane and natural gas costs		133,334			—						133,334
Operations		164,505			33,868		(1,015	)	4[ab]		197,358
Maintenance		18,176			—						18,176
Depreciation and amortization		68,973			17,959		(840	)	4[ac]		85,549
							(543	)	4[aa]
Other taxes		25,611			10,328						35,939
Total operating expenses		537,771			95,569		(2,398	)			630,942
Operating Income		142,933			22,922		1,558				167,413
Other income, net		5,051			35						5,086
Interest charges, net		24,356			6,584		(297	)	4[z]		65,681
							(6,176	)	4[ad]
							35,970		4[ae]
							5,245		4[af]
Income Before Income Taxes		123,628			16,373		(33,183	)			106,818
Income Taxes		33,832			3,636		(9,081	)	4[ag]		28,387
Net Income	$	89,796		$	12,737	$	(24,102	)		$	78,431
Weighted Average Common Shares Outstanding:
Basic		17,722,227					3,746,828		4[ah]		21,469,055
Diluted		17,804,294					3,746,828		4[ah]		21,551,122
Earnings Per Share of Common Stock:
Basic Earnings Per Share of Common Stock	$	5.07								$	3.65
Diluted Earnings Per Share of Common Stock	$	5.04								$	3.64

NOTE 1. BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and Article 11 of Regulation S-X, and have been derived from the following historical financial statements:

• the audited financial statements of Chesapeake Utilities as of and for the year ended December 31, 2022;

• the unaudited interim financial statements of Chesapeake Utilities as of and for the nine months ended September 30, 2023;

• the audited financial statements of FCG as of and for the year ended December 31, 2022; and

• the unaudited interim financial statements of FCG as of and for the nine months ended September 30, 2023.

On September 26, 2023, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with Florida Power & Light Company (“FPL”), to acquire all of the outstanding common shares of FCG, a wholly-owned subsidiary of FPL, for approximately $923.4 million in cash, subject to customary purchase price adjustments (the “Acquisition”). The Purchase Agreement is subject to the satisfaction of customary closing conditions and certain regulatory approvals in various jurisdictions, which have been received as of the date hereof. Subject to the satisfaction or waiver of the remaining conditions and the other terms and conditions of the Purchase Agreement, the Acquisition is expected to close in the fourth quarter of 2023.

The Acquisition has been accounted for in the unaudited pro forma condensed combined financial statements as an acquisition of all of the outstanding common shares of FCG using the acquisition method of accounting for business combinations. The assets acquired and liabilities assumed have been measured at estimated fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company expects to make a 338(h)(10) tax election under the Internal Revenue Code, which recharacterizes the stock purchase as an asset purchase for federal tax purposes. The Company expects to receive a tax basis in the acquired assets equal to the purchase price, and depreciate such basis over a 15-year period.

The accompanying unaudited pro forma condensed combined financial statements are not necessarily indicative of the results that would have been achieved if the transactions reflected herein had been completed on the dates indicated or the results which may be obtained in the future. While the underlying pro forma adjustments are intended to provide a reasonable basis for presenting the significant financial effects directly attributable to the Acquisition, they are preliminary and are based on currently available financial information and certain estimates and assumptions which we believe to be reasonable. The actual adjustments to our consolidated financial statements will be determined as of and subsequent to the closing date. Therefore, it is expected that the actual adjustments will differ from the pro forma adjustments, and the differences may be material.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed in preparing the unaudited pro forma condensed combined financial statements are those used by Chesapeake Utilities as set forth in the audited historical financial statements and notes of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2022, as filed February 22, 2023, and in the unaudited historical interim financial statements and notes of the Company included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2023. The unaudited pro forma condensed combined financial statements reflect any adjustments known at this time to conform FCG’s historical financial information to the Company’s significant accounting policies based on the Company’s review of FCG’s summary of significant accounting policies, as disclosed in the FCG historical financial statements attached as Exhibits 99.1 and 99.2 to the Company’s Current Report on Form 8-K filed on November 9, 2023 and preliminary discussions with FCG’s management. Upon completion of a more comprehensive comparison and assessment, additional differences may be identified.

NOTE 3. PURCHASE PRICE AND PRELIMINARY PURCHASE PRICE ALLOCATION

The expected purchase price for the Acquisition is as follows:

(in thousands, except offer price)
Total shares of Chesapeake Utilities common stock issued		3,746.8
Offer price of Chesapeake Utilities common stock on November 3, 2023	$	92.71
Equity portion of purchase price	$	330,000
Issuance of long-term debt		550,000
Short-term borrowings under the existing Revolver		43,400
Total purchase price	$	923,400

Preliminary Purchase Price Allocation

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of FCG are recorded at fair value on the acquisition date and added to those of the Company. The pro forma adjustments included herein are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effects of the acquisition between the Company and FCG. Significant portions of FCG’s operations are subject to the rate regulation by the Florida Public Service Commission. The carrying values of the assets and liabilities subject to regulatory accounting under U.S. GAAP, including property, plant and equipment, are considered to approximate the fair values.

The final determination of the preliminary purchase price allocation will be based on the net assets acquired as of the acquisition date and will depend on a number of factors, which cannot be predicted with any certainty at this time. The preliminary purchase price allocation may change based on the receipt of more detailed information. Accordingly, this allocation is preliminary and subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurance that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The following table provides a summary of the preliminary allocation of the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed of FCG, based on FCG’s balance sheet at September 30, 2023, with all excess value over consideration paid recorded as goodwill.

(in thousands)
Total current assets	$	22,689
Property, plant and equipment		492,391
Goodwill		467,689
Regulatory assets		3,636
Other deferred charges and other assets, including intangible assets		19,787
Total assets		1,006,192
Total current liabilities		30,334
Regulatory liabilities		52,117
Deferred credits and other liabilities		341
Total liabilities		82,792
Total purchase price	$	923,400

NOTE 4. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

The following pro forma adjustments were based on the historical financial information and preliminary estimates and assumptions, both as described above and which are subject to change as additional information is obtained:

a Reflects property, plant and equipment with a net book value of $9.5 million related to software that is excluded from the Acquisition and being retained by FPL.

b Reflects a reduction in FCG’s cash balance to the minimum cash amount of $2.0 million as defined in the Purchase Agreement.

c Reflects $0.2 million of affiliated accounts receivable at September 30, 2023 which is an asset excluded from the Acquisition and being retained by FPL.

d Represents the excess of the Company’s purchase price of approximately $923.4 million over the estimated fair values of assets acquired and liabilities assumed.

e Reflects approximately $0.9 million of estimated working capital adjustments that in accordance with the Purchase Agreement are treated as an adjustment to the Acquisition purchase price.

f Reflects $43.8 million in right of use assets and lease liabilities associated with long-term transportation service agreements between FCG and PPC, a wholly owned subsidiary of the Company. Upon closing of the Acquisition, these agreements will be classified as affiliate transactions and the associated assets and liabilities will be eliminated in the Company’s consolidated balance sheet.

g Reflects $4.9 million of prepaid pension expenses that are excluded from the Acquisition.

h Reflects FCG’s $0.2 million unamortized loss on reacquired debt which is excluded from the Acquisition.

i Reflects the financing needs of the Acquisition and the associated transaction-related costs including: $550.0 million of new long-term debt, the issuance of 3.7 million shares of Chesapeake Utilities Corporation common stock, and $77.0 million of new short-term borrowings under the Company’s Revolver.

j Represents approximately $10.7 million of fees associated with the issuance of 3.7 million shares of the Company’s common stock to finance the Acquisition. The number of common shares assumed to be issued is estimated based on the Company’s closing price of $92.71 on November 3, 2023, net of a 5.0% underwriting discount.

k Reflects the elimination of FCG’s stockholder’s equity.

l Represents $18.8 million of non-recurring direct incremental transaction-related expenses expected to be incurred and would reduce deferred income tax liabilities by $4.8 million, including but not limited to, legal, consulting, audit and financing fees. These expenses are reflected as an adjustment to retained earnings of $18.8 million, less income tax effects of $4.8 million on the unaudited pro forma condensed combined balance sheet at September 30, 2023.

m Represents approximately $4.1M of debt issuance costs that have been reflected as a reduction to the Company’s issuance of long-term debt to finance the Acquisition. The Company expects to issue $550.0 million in new long-term notes at an interest rate of 6.54 percent.

n Reflects $156.3 million of affiliated debt of FCG that will be settled prior to the closing of the Acquisition.

o Reflects $3.3 million of affiliated accounts payable that will be settled prior to the closing of the Acquisition.

p As defined in the Purchase Agreement, the Company and FCG have elected to apply the provision of Section 338(h)(10) of the IRS Code, which recharacterizes the stock purchase as an asset purchase for federal tax purposes. The Company will receive a tax basis in the acquired assets equal to the purchase price and can depreciate the assets at their purchased value and record goodwill that will be amortized for tax purposes over the next 15 years. As a result, FCG’s deferred tax balances will not transfer to the Company.

q Represents $0.9 million of interest expense associated with long-term transportation service agreements between FCG and PPC, a wholly owned subsidiary of the Company. Upon closing of the Acquisition, these agreements will be classified as affiliate transactions and the associated revenues and expenses will be eliminated in the Company’s consolidated results.

r Represents $1.0 million of depreciation expense associated with long-term transportation service agreements between FCG and PPC, a wholly owned subsidiary of the Company. Upon closing of the Acquisition, these agreements will be classified as affiliate transactions and the associated revenues and expenses will be eliminated in the Company’s consolidated results.

s Reflects $0.4 million of pension expenses related to benefit plan obligations that are excluded from the Acquisition.

t Reflects $0.7 million of depreciation expense related to software that is excluded from the Acquisition and being retained by FPL.

u Reflects $5.5 million of interest expense related to outstanding debt of FCG that will be settled prior to the closing of the Acquisition.

v Reflects a $27.0 million net increase to interest expense resulting from the Company’s issuance of long-term debt to finance the Acquisition. The Company expects to issue $550.0 million in new long-term notes at an interest rate of 6.54 percent.

w Reflects a $3.6 million increase in interest expense resulting from incremental borrowings under the Company’s Revolver at an interest rate of 6.17 percent. Such incremental borrowings will be used to finance the Acquisition and pay certain transaction-related expenses in connection with the closing of the Acquisition and related financing activities.

x Reflects the income tax effects of pro forma adjustments based on the Company’s blended federal and state effective tax rate for the nine months ended September 30, 2023.

y Reflects the issuance of 3.7 million shares of the Company’s common stock to finance the Acquisition. The number of common shares assumed to be issued is estimated based on the $92.71 closing price of the Company’s common stock on November 3, 2023, net of a 5.0 percent underwriting discount.

z Represents $0.3 million of interest expense associated with long-term transportation service agreements between FCG and PPC, a wholly owned subsidiary of the Company. Upon closing of the Acquisition, these agreements will be classified as affiliate transactions and the associated revenues and expenses will be eliminated in the Company’s consolidated results.

aa Represents $0.5 million of depreciation expense associated with long-term transportation service agreements between FCG and PPC, a wholly owned subsidiary of the Company. Upon closing of the Acquisition, these agreements will be classified as affiliate transactions and the associated revenues and expenses will be eliminated in the Company’s consolidated results.

ab Reflects $1.0 million of pension expenses related to benefit plan obligations that are excluded from the Acquisition.

ac Reflects $0.8 million of depreciation expense related to software that is excluded from the Acquisition and being retained by FPL.

ad Reflects $6.2 million of interest expense related to outstanding debt of FCG that will be settled prior to the closing of the Acquisition.

ae Reflects a $36.0 million net increase to interest expense resulting from the Company’s issuance of long-term debt to finance the Acquisition. The Company expects to issue $550.0 million in new long-term notes at an interest rate of 6.54 percent.

af Reflects a $5.2 million increase in interest expense resulting from incremental borrowings under the Company’s Revolver at an interest rate of 6.17 percent. Such incremental borrowings will be used to finance the Acquisition and pay certain transaction-related expenses in connection with the closing of the Acquisition and related financing activities.

ag Reflects the income tax effects of pro forma adjustments based on the Company’s blended federal and state effective tax rate for the year ended December 31, 2022.

ah Reflects the issuance of 3.7 million shares of the Company’s common stock to finance the Acquisition. The number of common shares assumed to be issued is estimated based on the closing price of the Company’s common stock of $92.71 on November 3, 2023, net of a 5.0 percent underwriting discount.