Sharp Energy acquires Diversified Energy Co.

Sharp Energy, a subsidiary of Chesapeake Utilities Corp., acquired the propane operating assets of Diversified Energy Co., expanding its operating footprint into North Carolina and South Carolina.

Diversified Energy, based in Boone, North Carolina, ranked 32nd on LP Gas’ 2021 Top Propane Retailers list with about 10.3 million gallons in annual propane sales.

“Sharp Energy has driven significant growth for Chesapeake Utilities as a market leader in residential, commercial, wholesale and autogas propane services. Propane remains a core part of our unregulated energy operations given its high demand, especially in more rural areas where natural gas pipelines cannot or have not yet reached,” says Jeff Householder, president and CEO of Chesapeake Utilities, in a press release. “The addition of Diversified Energy’s propane business expands Sharp’s footprint into the Carolinas, adding to our growing presence along the East Coast. We are pleased to welcome our new employees to the Chesapeake Utilities family and are committed to serving Sharp’s new customers with a continued commitment to excellence, integrity and care.”

“We believe the two organizations align culturally, and we are excited to integrate the Diversified Energy business into Sharp Energy,” adds Andy Hesson, vice president of Sharp Energy. “With this transaction, our propane business will add approximately 19,000 residential, commercial and agricultural customers, along with distribution of approximately 10 million gallons of propane annually.”

Diversified Energy was founded in 2000 by 19 of North Carolina’s Electric Membership Cooperatives (EMCs). The EMCs made the investment in pursuit of an alternative energy source to market to its customer base, and to gain exposure to fuel cell technology for their core electricity businesses.

The original three companies acquired and brought under the Diversified Energy banner were Farm & Home Gas in northeastern North Carolina; Tart Gas in central North Carolina; and Collier Gas in southeastern North Carolina. Each had more than 50 years of experience in retail propane operations, providing delivery and service to thousands of customers. In the fall of 2000, Diversified Energy also acquired JF Energy Corp., located in southeastern Pennsylvania. JF Energy’s Mid-Atlantic hybrid business model of wholesale supply/distribution, bulk plant construction and repair services helped expand both the operational footprint and customer count for Diversified Energy.

In 2005, the company hired Kirk Bailey as the new president and CEO. Bailey began his career with one of the industry majors, and later headed up operations as vice president for a regional propane company prior to accepting the lead position with Diversified Energy. With a focus on residential customer market share expansion and high-end product offerings, the company continued to mature under his leadership.

After a strategic review with the executive committee board of Diversified Energy, the full board of directors made the decision to monetize their respective investments in Diversified Energy to redeploy capital into their individual (EMC) electricity businesses.

“After much deliberation, the board of Diversified Energy made the difficult decision to divest itself of its propane company assets in favor of its electric cooperative owners,” says Stephen Hamlin, chairman of the board of Diversified Energy and president and general manager of Piedmont Electric Cooperative.

Matrix Capital Markets Group Inc., an independent investment bank, advised Diversified Energy on the sale. Matrix provided merger and acquisition advisory services, which included valuation advisory, marketing of the company through a confidential, structured sale process and negotiation of the sale. The transaction was managed by Sean Dooley, managing director; Spencer Cavalier, co-head of Matrix’s Downstream Energy & Convenience Retail Investment Banking Group; and John Mickelinc, associate. 

Adam Beaudoin, Joseph DelPapa and Michael Kohagen of Ward and Smith, P.A. served as legal counsel for Diversified Energy.

Sharp Energy, headquartered in Georgetown, Delaware, distributes propane to residential, commercial and industrial customers in Maryland, Delaware, Virginia and Pennsylvania. The company has multiple rail facilities and several millions of gallons of propane storage. It also partners with Alliance AutoGas, a national network of companies delivering an alternative fueling solution, including EPA-certified propane autogas vehicle conversions, on-site fueling infrastructure, fuel supply, safety and operational training, and ongoing technical support.

Chesapeake Utilities Corp. is a diversified energy delivery company, listed on the New York Stock Exchange, which is engaged in natural gas transmission and distribution; electricity generation and distribution; propane gas distribution; mobile compressed natural gas utility services and solutions; and other businesses.

The deal is expected to be accretive to Chesapeake Utilities’ 2022 earnings, adding about $11.3 million in gross margin for 2022, according to the company.

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