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Note 5 - Other Investments

6 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

5.	Other Investments

Midstream owns a less than 1% equity investment in the LLC constructing the MVP. Midstream is also a less than 1% investor, accounted for under the cost method, in Southgate. Since inception, the MVP has encountered various legal and regulatory issues that have substantially delayed the completion of the project. With the passage of the FRA and certain judicial rulings in mid-2023, construction work was restarted.

While under construction, AFUDC has provided the majority of the income recognized by Midstream. The LLC temporarily suspended accruing AFUDC on the project for portions of prior periods. AFUDC accruals resumed in June 2023 when construction activities restarted. The amount of AFUDC recognized during the current and prior year is included in the equity in earnings of unconsolidated affiliate in the tables below. On April 22, 2024, the LLC filed its in service request for MVP with FERC, with an expectation that gas will begin to flow during the second calendar quarter and the long-term firm contracts will become effective. As the MVP project nears completion, AFUDC on completed segments will cease and will only be recorded on areas still under construction.

Midstream reassesses the value of its investment in the LLC on at least a quarterly basis, and no impairment indicators were identified in fiscal 2023 or during the first half of fiscal 2024. As noted above, developments in 2023 on the legislative and legal fronts were favorable. The MVP project is not yet completed and adverse developments, as well as potential macroeconomic factors related to interest rates, cost increases, or other unanticipated events could erode fair value leading to new indicators or impairment.

Funding for Midstream's investments has been provided through equity contributions from Resources and unsecured promissory notes as detailed in Note 7.

The Company will participate in the earnings generated from the transportation of natural gas through both pipelines proportionate to its level of investment once the pipelines are placed in service.

Investment balances of MVP and Southgate, as of March 31, 2024 and September 30, 2023, are reflected in the table below:

Balance Sheet location:		March 31, 2024				September 30, 2023
Other Assets:
MVP		$	19,793,695			$	17,096,476
Southgate			93,998				90,617
Investment in unconsolidated affiliates		$	19,887,693			$	17,187,093

		Three Months Ended March 31,								Six Months Ended March 31,
Income Statement location:			2024				2023				2024				2023
Equity in earnings of unconsolidated affiliate		$	1,229,384			$	2,867			$	2,697,219			$	4,099

		March 31, 2024				September 30, 2023
Undistributed earnings, net of income taxes, of MVP in retained earnings, excluding impairment		$	11,686,753			$	9,683,797

The undistributed earnings does not include the impairment of the investment in the LLC.

RGC RESOURCES, INC. AND SUBSIDIARIES

The change in the investment in unconsolidated affiliates is provided below:

		Six Months Ended March 31,
		2024				2023
Cash investment		$	3,381			$	1,499,337
Change in accrued capital calls			—				(179,436	)
Equity in earnings of unconsolidated affiliate			2,697,219				4,099
Change in investment in unconsolidated affiliates		$	2,700,600			$	1,324,000

Summary unaudited financial statements of MVP are presented below. Southgate financial statements, which are accounted for under the cost method, are not included.

		Income Statements
		Three Months Ended March 31,								Six Months Ended March 31,
		2024				2023				2024				2023
AFUDC		$	146,538,660			$	—			$	305,100,801			$	—
Other income, net			3,236,493				259,240				5,900,062				419,712
Net income		$	149,775,153			$	259,240			$	311,000,863			$	419,712

		Balance Sheets
		March 31, 2024				September 30, 2023
Assets:
Current assets		$	228,561,994			$	795,787,358
Construction work in progress			9,087,392,726				7,499,128,254
Other assets			12,421,629				11,639,586
Total assets		$	9,328,376,349			$	8,306,555,198

Liabilities and Equity:
Current liabilities		$	238,854,774			$	236,947,158
Noncurrent liabilities			34,000				—
Capital			9,089,487,575				8,069,608,040
Total liabilities and equity		$	9,328,376,349			$	8,306,555,198

RGC RESOURCES, INC. AND SUBSIDIARIES