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To Our Shareholders:
2017 was a tumultuous year for the Company. We substantially integrated Pike into our operations and successfully prosecuted a full rate case at Corning. Leatherstocking Gas was awarded a grant by the state of Pennsylvania to help finance a major main extension into a new community. All three of our utility subsidiaries have thus established foundations for customer and earnings growth through the end of the decade. Establishing those foundations were both difficult and costly. The New York rate case cost around three quarters of a million dollars in incremental expenses, and the Pike integration cost around one million dollars in capital expenditure (mostly software).
In addition, we incurred a full Pennsylvania Commission management audit of both Pike and Leatherstocking – costly in both personnel time and legal expense. A warm winter and cool summer further added to financial pressure and personnel stress.
Now the good news...we have solidified our financial condition by refinancing Corning’s long-term debt and issuing preferred stock. Pike has been integrated, and all aspects of Corning and Leatherstocking operations have significantly improved. New rates at Corning are in place and significantly increasing revenue. We are gaining customers, loads, revenues, and margins at all three of our utilities. In 2017, we executed our business plan, succeeded in achieving all our major goals, and positioned ourselves for both growth and major new initiatives.
So what’s next? First, we anticipate significant financial improvement in 2018. We won’t have the one-time items that impacted 2017 results. We will also have higher rates and more customers, and therefore, higher margins and revenues. Second, and foremost from an operations perspective, we will continue to block and tackle well. We must focus on core operations. We must do what we do well and seek to constantly improve. Third, we must continue to be uniquely innovative.
As an innovative company, we were the first gas utility to connect directly into the Marcellus Shale fields, first to build a compressor station to feed shale gas into the interstate pipeline system, first in 40 years to create a new Pennsylvania gas utility (geographically on top of some of the best gas fields in the country), a first mover in connecting our pipeline network directly to gas storage, a national leader in building new gas franchises, a leader in systematic replacement and upgrades of older pipes, and of course, a company that distinguishes itself as providing “old style,” local customer service. Given our DNA and history, expect us to continue to focus on running a good utility, and simultaneously creating more firsts in utility innovation.
Finally, our vice president of administration and corporate secretary, Jerry Sleve, is retiring in early 2018. He has served the company loyally and well for two decades. I know you join me in wishing him a wonderful retirement.
Michael I. German
President and CEO