UNITIL CORP - Quarter Report: 2022 June (Form 10-Q)

 

 

 

 

 

 

For the transition period from to

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

 

This report and the documents incorporated by reference into this report contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included or incorporated by reference into this report, including, without limitation, statements regarding the financial position, business strategy and other plans and objectives for the Company’s future operations, are forward-looking statements.

These statements include declarations regarding the Company’s beliefs and current expectations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. Some, but not all, of the risks and uncertainties include those described in Part II, Item 1A (Risk Factors) and the following:

 

 

 

 

 

 

 

 

 

 

 

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Many of these risks are beyond the Company’s control. Any forward-looking statements speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict all such factors, nor can the Company assess the effect of any such factor on its business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

10-K

Unitil Corporation (Unitil or the Company) is a public utility holding company headquartered in Hampton, New Hampshire. Unitil and its subsidiaries are subject to regulation as a holding company system by the Federal Energy Regulatory Commission (FERC) under the Energy Policy Act of 2005.

Unitil’s principal business is the local distribution of electricity and gas throughout its service territory in the states of New Hampshire, Massachusetts and Maine. Unitil is the parent company of three wholly-owned distribution utilities:

 

 

 

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Unitil Energy, Fitchburg and Northern Utilities are collectively referred to as the “distribution utilities.” Together, the distribution utilities serve approximately 107,700 electric customers and 86,600 gas customers.

In addition, Unitil is the parent company of Granite State Gas Transmission, Inc. (Granite State), an interstate gas transmission pipeline company, operating 86 miles of underground gas transmission pipeline primarily located in Maine and New Hampshire. Granite State provides Northern Utilities with interconnection to major gas pipelines and access to domestic gas supplies in the south and Canadian gas supplies in the north.

Unitil had an investment in Net Utility Plant of $1,279.1 million at June 30, 2022. Earnings from Unitil’s utility operations are derived primarily from the return on investment in the utility assets of the three distribution utilities and Granite State. Unitil’s total operating revenue includes revenue to recover the approved cost of purchased electricity and gas in rates on a fully reconciling basis. As a result of this reconciling rate structure, the Company’s earnings are not directly affected by changes in the cost of purchased electricity and gas.

non-regulated

Unitil is subject to comprehensive regulation by federal and state regulatory authorities. Unitil and its subsidiaries are subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005 with regard to certain bookkeeping, accounting and reporting requirements. Unitil’s utility operations related to wholesale and interstate energy business activities are also regulated by the FERC. Unitil’s distribution utilities are subject to regulation by the applicable state public utility commissions with regard to their rates, issuance of securities and other accounting and operational matters: Unitil Energy is subject to regulation by the New Hampshire Public Utilities Commission (NHPUC); Fitchburg is subject to regulation by the Massachusetts Department of Public Utilities (MDPU); and Northern Utilities is regulated by the NHPUC and the Maine Public Utilities Commission (MPUC). Granite State, Unitil’s interstate gas transmission pipeline, is subject to regulation by FERC with regard to its rates and operations. Because Unitil’s primary operations are subject to rate regulation, the regulatory treatment of various matters could significantly affect the Company’s operations and financial position.

Unitil’s distribution utilities deliver electricity and/or gas to all customers in their service territory, at rates established under cost of service regulation. Under this regulatory structure, Unitil’s distribution utilities recover the cost of providing distribution service to their customers based on a historical test year, and earn a return on their capital investment in utility assets. The Company’s distribution utilities and its gas transmission pipeline company also may recover certain base rate costs, including capital project spending and enhanced reliability and vegetation management programs, through annual step adjustments or cost tracking rate mechanisms.

Fitchburg has been subject to revenue decoupling since 2011. Unitil Energy is subject to revenue decoupling as of June 1, 2022. Revenue decoupling is the term given to the elimination of the

 

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dependency of a utility’s distribution revenue on the volume of electricity or gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recognized as an increase or a decrease in Accrued Revenue, which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases and other authorized adjustments that the Company files with the MDPU and NHPUC. The Company estimates that the revenue decoupling for Fitchburg applied to approximately 27% and 11% of Unitil’s total annual electric and gas sales volumes, respectively. As a result of Unitil Energy now being subject to revenue decoupling, as of June 1, 2022, revenue decoupling now applies to substantially all of Unitil’s total annual electric sales volumes and approximately 11% of Unitil’s total annual gas sales volumes. As a result of the recently received final order in Northern Utilities’ base rate case in New Hampshire, substantially all of Northern Utilities’ gas sales volumes in New Hampshire will be subject to decoupling as of August 1, 2022. Accordingly, as of August 1, 2022, the Company estimates that revenue decoupling will apply to approximately 43% of Unitil’s total annual gas sales volumes.

The following section of MD&A compares the results of operations for each of the two fiscal periods ended June 30, 2022 and June 30, 2021 and should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and the accompanying Notes to unaudited Consolidated Financial Statements included in Part I, Item 1 of this report, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The Company continues to respond to the coronavirus pandemic by taking steps to mitigate the potential risks posed by its spread. The Company’s electric and gas utility distribution operating systems have continued to provide service to customers without disruption due to the coronavirus pandemic through the date of this filing. The Company has implemented its Crisis Response Plan to address specific aspects of the coronavirus pandemic. The Crisis Response Plan guides emergency response, business continuity, and the precautionary measures being taken on behalf of employees and the public. The Company has initiated extra precautions to protect employees who work in the field and for employees who continue to work in operations, distribution and corporate facilities. The Company has implemented social distancing and work from home policies, where appropriate. The Company continues to implement strong physical and cyber-security measures to ensure that its systems remain functional in order to serve both operational needs with a remote workforce and to help ensure uninterrupted service to customers.

The extent to which the coronavirus pandemic affects the Company’s financial condition, results of operations, and cash flows will depend on future developments, that are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus pandemic, and the actions to contain the coronavirus pandemic or treat its effect, among others. In particular, the continued spread of the coronavirus could adversely affect the Company’s business, by (i) disrupting the Company’s employees and contractors ability to provide ongoing services to the Company, (ii) reducing customer demand for electricity or gas, or (iii) reducing the supply of electricity or gas, each of which could have an adverse effect on the Company’s financial condition, results of operations, and cash flows.

non-GAAP

 

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gross margin. As a result of the recently received final order in Northern Utilities’ base rate case in New Hampshire, substantially all of Northern Utilities’ gas sales volumes in New Hampshire will be subject to decoupling as of August 1, 2022. Accordingly, as of August 1, 2022, the Company estimates that revenue decoupling will apply to approximately 43% of Unitil’s total annual gas sales volumes.

On August 6, 2021, the Company issued and sold 800,000 shares of its common stock at a price of $50.80 per share in a registered public offering (Offering). The Company’s net increase to Common Equity and Cash proceeds from the Offering was approximately $38.6 million. The proceeds were used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.

30-day

non-GAAP

In the following tables the Company has reconciled Electric and Gas Adjusted Gross Margin to GAAP Gross Margin, which we believe to be the most comparable GAAP financial measure. GAAP Gross Margin is calculated as Revenue less Cost of Sales, and Depreciation and Amortization. The Company calculates Electric and Gas Adjusted Gross Margin as Revenue less Cost of Sales. The Company believes excluding Depreciation and Amortization, which are period costs and not related to volumetric sales, is a meaningful measure to inform investors of the Company’s profitability from electric and gas sales in the period.

 

 

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Electric GAAP Gross Margin was $17.9 million in the three months ended June 30, 2022, essentially unchanged compared to the same period in 2021. For the six months ended June 30, 2022, Electric GAAP Gross Margin was $35.8 million, an increase of $0.7 million compared to the same period in 2021. For the three month period, lower depreciation and amortization expense of $0.7 million was offset primarily by the unfavorable effect on sales from cooler late spring weather. The increase in the six month period was driven by higher rates of $0.5 million and lower depreciation and amortization expense of $0.5 million, partially offset by the unfavorable effect on sales from cooler weather of $0.3 million.

Gas GAAP Gross Margin was $19.3 million and $62.8 million in the three and six months ended June 30, 2022, respectively, increases of $2.5 million and $6.4 million, respectively, compared to the same periods in 2021. The increase in the three month period was primarily driven by higher rates of $3.2 million, partially offset by higher depreciation and amortization expense of $0.7 million. The increase in the six month period was driven by higher rates of $5.9 million and the favorable effect on sales from customer growth and colder weather of $1.5 million, partially offset by higher depreciation and amortization expense of $1.0 million.

 

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non-GAAP

non-GAAP

The Company’s three and six months results, including Electric and Gas GAAP Gross Margins, reflect the effects of recently completed base rate cases in New Hampshire (See Note 6, Regulatory Matters, to the accompanying Consolidated Financial Statements).

non-GAAP

Total electric kilowatt-hour (kWh) sales decreased 1.6% in the three month period ended June 30, 2022 compared to the same period in 2021. Sales to Residential customers decreased 3.9% and sales to C&I customers were essentially unchanged in the three month period ended June 30, 2022 compared to the same period in 2021. For the six month period ended June 30, 2022, total electric kWh sales were essentially unchanged. Sales to Residential customers decreased 1.5% while sales to C&I customers increased 1.2% in the six month period ended June 30, 2022 compared to the same period in 2021. The changes in sales to Residential and C&I customers reflect cooler late spring weather in 2022 compared to 2021, partially offset by customer growth. Based on weather data collected in the Company’s electric service areas, on average there were 61.8% fewer Cooling Degree Days (CDD) in the second quarter of 2022 compared to the same period in 2021. As of June 30, 2022, the number of electric customers increased by 490 over the previous year.

non-GAAP

Gas therm sales increased 2.2% and 3.3% in the three and six month periods ended June 30, 2022, respectively, compared to the same periods in 2021. The increase in gas therm sales reflects colder winter weather in the first quarter of 2022 compared to the same period in 2021, and customer growth. Based on weather data collected in the Company’s gas service areas, on average there were 3.9% more Effective Degree Days (EDD) in the first six months of 2022 compared to the same period in 2021, although 2.4% fewer EDD compared to normal. The Company estimates weather-normalized gas therm sales, excluding decoupled sales, increased 0.9% in the first six months of 2022 compared to the same period in 2021. As of June 30, 2022, the number of gas customers increased by 858 over the previous year.

Operation and Maintenance (O&M) expenses increased $0.9 million and $2.4 million in three and six months ended June 30, 2022, respectively, compared to the same periods in 2021. The increase in the three month period reflects higher professional fees of $0.6 million and higher labor costs of $0.3 million. The increase in the six month period reflects higher labor costs of $1.7 million and higher professional fees of $1.2 million partially offset by lower utility operating costs of $0.5 million.

 

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Depreciation and Amortization expense was essentially unchanged in the three months ended June 30, 2022, compared to the same period in 2021, reflecting additional depreciation associated with higher levels of utility plant in service offset by lower depreciation rates resulting from the rate case order received for Unitil Energy. For the six months ended June 30, 2022, Depreciation and Amortization expense increased $0.6 million compared to the same period in 2021, reflecting additional depreciation associated with higher levels of utility plant in service, partially offset by lower depreciation rates resulting from the rate case order received for Unitil Energy.

Taxes Other Than Income Taxes increased $0.5 million and $1.1 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021. The increase in the three month period reflects higher local property taxes on higher utility plant in service. The increase in the six month period reflects higher local property taxes on higher utility plant in service and higher payroll taxes.

Interest Expense, Net was essentially unchanged in the three months ended June 30, 2022, compared to the same period in 2021, reflecting lower interest on long-term debt offset by higher interest on short-term borrowings. For the six months ended June 30, 2022, Interest Expense, Net decreased $0.5 million, compared to the same period in 2021, primarily reflecting lower interest on long-term debt, partially offset by higher interest on short-term borrowings.

Other Expense (Income), Net decreased $0.5 million and $1.1 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, reflecting lower retirement benefit costs.

pre-tax

At its January 2022, April 2022 and July 2022 meetings, the Unitil Corporation Board of Directors declared quarterly dividends on the Company’s common stock of $0.39 per share. These quarterly dividends result in a current effective annualized dividend rate of $1.56 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.

 

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The following table details total kWh sales for the three and six months ended June 30, 2022 and 2021 by major customer class:

 

 

non-GAAP

Total Electric Operating Revenue decreased $2.3 million in the three months ended June 30, 2022, compared to the same period in 2021 reflecting lower costs of electric sales, which are tracked and reconciled to costs that are passed through directly to customers, and lower sales of electricity. Total Electric Operating Revenue increased $26.8 million in the six months ended June 30, 2022, compared to the same period in 2021 reflecting higher costs of electric sales, which are tracked and reconciled to costs that are passed through directly to customers.

 

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fewer EDD compared to normal. The Company estimates weather-normalized gas therm sales, excluding decoupled sales, increased 0.9% in the first six months of 2022 compared to the same period in 2021. As of June 30, 2022, the number of gas customers increased by 858 over the previous year. Sales margins derived from decoupled unit sales (currently representing approximately 11% of total annual therm sales volume) are not sensitive to changes in gas therm sales.

The following table details total firm therm sales for the three and six months ended June 30, 2022 and 2021, by major customer class:

 

 

non-GAAP

The increases in Total Gas Operating Revenue of $4.6 million and $29.3 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, reflect higher costs of gas sales, which are tracked and reconciled costs that are passed through directly to customers, and higher gas sales volumes.

 

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pre-tax

 

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Unitil’s utility subsidiaries operate a number of reconciling rate mechanisms to recover specifically identified costs on a pass-through basis. These reconciling rate mechanisms track costs and revenue on a monthly basis. In any given month, this tracking and reconciling process will produce either an under-collected or an over-collected position. In accordance with the distribution utilities’ rate tariffs, interest is accrued on these balances and will produce either interest income or interest expense. Consistent with regulatory precedent, interest income is recorded on an under-collection of costs which creates a regulatory asset to be recovered in future periods when rates are reset. Interest expense is recorded on an over-collection of costs, which creates a regulatory liability to be refunded in future periods when rates are reset.

 

 

Interest Expense, Net was essentially unchanged in the three months ended June 30, 2022, compared to the same period in 2021, reflecting lower interest on long-term debt offset by higher interest on short-term borrowings. For the six months ended June 30, 2022, Interest Expense, Net decreased $0.5 million, or 3.8%, compared to the same period in 2021, primarily reflecting lower interest on long-term debt, partially offset by higher interest on short-term borrowings.

Unitil requires capital to fund utility plant additions, working capital and other utility expenditures recovered in subsequent periods through regulated rates. The capital necessary to meet these requirements is derived primarily from internally generated funds, which consist of cash flows from operating activities. The Company initially supplements internally generated funds through short-term bank borrowings, as needed, under its unsecured revolving Credit Facility. Periodically, the Company replaces portions of its short-term debt with long-term debt financings more closely matched to the long-term nature of its utility assets. Additionally, from time to time the Company accesses the public capital markets through public offerings of equity securities. The Company’s utility operations are seasonal in nature and therefore are subject to seasonal fluctuations in cash flows. The amount, type and timing of any future financing will vary from year to year based on capital needs and maturity or redemptions of securities.

On August 6, 2021, the Company issued and sold 800,000 shares of its common stock at a price of $50.80 per share in a registered public offering (Offering). The Company’s net increase to Common Equity and Cash proceeds from the Offering was approximately $38.6 million and was used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.

 

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30-day

one-year

one-month

one-month

The Company uses the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $151.9 million for the six months ended June 30, 2022. Total gross repayments were $169.8 million for the six months ended June 30, 2022. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of June 30, 2022, June 31, 2021 and December 31, 2021:

 

The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, the Company’s and its subsidiaries’ ability to permit liens or incur indebtedness, and restrictions on the Company’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility apply until the Credit Facility terminates and all amounts borrowed under the Credit Facility are paid in full (or with respect to letters of credit, they are cash collateralized).

 

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The only financial covenant in the Credit Facility provides that Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis. At June 30, 2022, June 30, 2021 and December 31, 2021, the Company was in compliance with the covenants contained in the Credit Facility in effect on those dates.

The Company is monitoring the coronavirus pandemic, including any effect on planned capital expenditures. The Company does not believe the pandemic will adversely affect its access to capital and funding sources. The Company believes its future operating cash flows, its available borrowing capacity, and its access to private and public capital markets for the issuance of long-term debt and equity securities will be sufficient to meet its working capital and capital investment needs.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State currently are rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State currently are rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.

The continued availability of various methods of financing, as well as the choice of a specific form of security for such financing, will depend on many factors, including, but not limited to: security market conditions; general economic climate; regulatory approvals; the ability to meet covenant issuance restrictions; the level of earnings, cash flows and financial position; and the competitive pricing offered by financing sources.

The Company provides limited guarantees on certain energy and gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of June 30, 2022, there were approximately $0.7 million of guarantees outstanding with a duration less than one year.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain gas pipeline and storage assets, sells to an asset manager and subsequently repurchases the gas over the course of the gas heating season at the same price at which it sold the gas to the asset manager. There was $12.6 million, $4.9 million and $8.3 million of gas obligations at June 30, 2022, June 30, 2021 and December 31, 2021, respectively, related to these asset management agreements. The amount of gas released in June 2022 and payable in July 2022 is $0.2 million and is recorded in Accounts Payable at June 30, 2022. The amount of gas released in June 2021 and payable in July 2021 was $0.1 million and was recorded in Accounts Payable at June 30, 2021. The amount of gas released in December 2021 and payable in January 2022 was $1.6 million and was recorded in Accounts Payable at December 31, 2021.

Sheet Arrangements

off-balance

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In making those estimates and assumptions, the Company sometimes is required to

 

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10-K

Unitil’s commitment to excellence begins with its employees. As of June 30, 2022, the Company and its subsidiaries had 513 employees. The Company considers its relationship with employees to be good and has not experienced any major labor disruptions. Unitil’s employees are focused on the Company’s mission to safely and reliably deliver “energy for life” and provide customers with affordable and sustainable energy solutions.

The Company strives to be the employer of choice in the communities it serves – regardless of race, religion, color, gender, or sexual orientation. The Company works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.

To attract and retain a talented workforce, Unitil provides employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. All employees are eligible for health insurance, paid and unpaid leave, educational assistance, retirement plan, and life and disability/accident coverage.

Employees at Unitil have the opportunity to be heard. Feedback from employees is collected annually in the Company’s Employee Opinion survey. This feedback helps create action plans to improve the engagement of employees consistent with the Company’s culture of continuous improvement.

As of June 30, 2022, a total of 170 employees of certain of the Company’s subsidiaries were represented by labor unions. The following table details by subsidiary the employees covered by a collective bargaining agreement (CBA) as of June 30, 2022:

 

The CBAs provide discrete salary adjustments, established work practices and uniform benefit packages. The Company expects to negotiate new agreements prior to their expiration dates.

Unitil meets its external financing needs by issuing short-term and long-term debt. The majority of debt outstanding represents long-term notes or bonds bearing fixed rates of interest. Changes in market

 

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interest rates do not affect interest expense resulting from these outstanding long-term debt securities. However, the Company periodically repays its short-term debt borrowings through the issuance of new long-term debt securities. Changes in market interest rates may affect the interest rate and corresponding interest expense on any new issuances of long-term debt securities. In addition, short-term debt borrowings bear a variable rate of interest. As a result, changes in short-term interest rates will increase or decrease interest expense in future periods. For example, if the average amount of short-term debt outstanding was $25 million for the period of one year, a change in interest rates of 1% would result in a change in annual interest expense of approximately $250,000. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the three months ended June 30, 2022 and June 30, 2021 were 2.1% and 1.2%, respectively. The average interest rates on the Company’s short-term borrowings for the six months ended June 30, 2022 and June 30, 2021 were 1.7% and 1.3%, respectively. The average interest rate on the Company’s short-term borrowings for the twelve months ended December 31, 2021 was 1.2%.

Although Unitil’s three distribution utilities are subject to commodity price variations as part of their traditional operations, the current regulatory framework within which these companies operate allows for full collection of electric power and natural gas supply costs in rates on a pass-through basis. Consequently, there is limited commodity price risk after consideration of the related rate-making. As discussed in Note 6 (Regulatory Matters), the Company has divested its long-term power supply contracts and therefore, further reduced its exposure to commodity risk.

 

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