NewJersey Resources Corporation

Ladies and gentlemen, good morning, good afternoon, good evening. My name is Zaid and I'll be your conference operator today. At this time, I would like to welcome everyone to the NJ Resources Q3 FY21 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. I now invite Jay Puma, Head of Investor Relations. You may please begin the conference, sir.

Jay Puma, Head of Investor Relations, Thank you, Jay. Good morning, everyone. Welcome to New Jersey Resources' third quarter fiscal 21 conference call and webcast. I'm joined here today by Steve Westhoven, our President and CEO, Pat Migliacci, our Senior Vice President and Chief Financial Officer, as well as other members of our senior management team. As you know, certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities laws. We wish to caution listeners of this call that the current expectations and beliefs forming basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to maturely differ from our expectations as explained on slide one. These items can also be found in the forward-looking statement section of today's earnings release, first on Form 8K and in our most recent Forms 10K and Q as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures, such as net financial earnings, or NFE. We believe that NFE or net financial loss provide a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in this presentation, in today's earnings release, and in item seven of our 10-K. Our agenda for today is found on slide two. Steve will begin today's call with highlights from the quarter, followed by Pat, who will review our financial results. We'll then open the call up to your questions. The slides accompanying today's presentation are available on our website and were furnished on our Form 8-K filed with the SEC this morning. With that said, I'll turn the call over to our President and CEO, Steve Westover. Steve?

Thanks, Dennis, and good morning, everyone. Thank you for joining us today. This morning, we reported a third quarter gap loss of $1.16 per share and a net financial loss of $0.15 per share. During the quarter, we incurred a one-time after-tax impairment charge of $72.7 million related to our investment in the Pennies project. While this is included in our net income for the quarter, it is excluded from and does not impact our net financial earnings. It remains our belief that pennies is an important and needed project to serve energy demands in the Northeast. The impairment we've taken reflects the ongoing uncertainty around the project's in-service date and the regulatory milestones needed to achieve it. As a reminder, in November, we removed pennies from our forecasts, and the impairment has no bearing on our long-term growth targets. Moving on to the highlights of the quarter, we are increasing our fiscal 2021 NFVPS guidance to a range of 210 to 220 per share. This guidance increase, the third one for this year, is driven by better than expected results at energy services and our BGSS incentive program at New Jersey Natural Gas. We're also pleased to report that construction and final testing on the southern reliability link are complete with an expected in-service date later this month. At Clean Energy Ventures, despite delays for some of the in-service dates of some of our investments, our project pipeline remains robust. We now have more than 70% of our original $315 million CapEx target for fiscal years 21 and 22, either operational, under construction, or under contract. Leaf River, our natural gas storage facility in Mississippi, increased the long-term commitments of new and existing customers, significantly de-risking our future revenues. And finally, Adelphi Gateway received a FERC notice to proceed for construction of laterals and interconnects in the south zone of the project. We expect to place a number of Adelphia's project facilities into service by the end of this year. Turning to slide four, we wanted to provide an update on the progress made on some of the initiatives we discussed during our analyst day last November. At New Jersey Natural Gas, we completed the construction of SRL and filed a rate case. We're also excited to report that construction has begun on our first green hydrogen project. This is an important step in the decarbonization strategy laid out during our analyst day. It furthers our ongoing efforts to decarbonize our business as we move toward a future that includes more low and zero carbon fuel sources. As promised, we began to diversify our CEB project pipeline. Nearly 25% of our fiscal year 21 and 22 capacity target is expected to come from projects outside of New Jersey. We also took steps to reduce the volatility of CEB's earnings by adopting the deferral method of accounting for ITCs. And we're improving our cash returns by utilizing tax equity financing for our solar projects, helping to accelerate the monetization of our tax attributes. As I mentioned earlier, our storage and transportation business has de-risked future revenue streams by increasing Leaf River's long-term contracted revenues with high-quality customers. And as we'll discuss later, our progress continues in the Delphia Gateways construction despite some regulatory delays. Our energy services business ventured into a series of asset management agreements that will significantly increase the predictability of that segment's earnings while still allowing them to retain the potential upside associated with our long-option strategy. These accomplishments have led to solid financial results and strong cash flows that provide a clear pathway for achieving our long-term earnings growth target of 6% to 10%. Turning to slide five, I'll provide an update on our rate case. Last month, we adjusted our filing to include nine months of actual results. Also, since we expect SRL to be in service by the end of this month, it will no longer be treated as a post-test year adjustment. In total, we are now requesting an increase to base rates of almost $164 million. The rate case is progressing as scheduled, and we hope that the BPU's review will be completed before the end of 2021. We will continue to work with them toward a resolution that balances the interests of our customers and the company. Turning to the business unit results, on slide six, New Jersey Natural Gas has invested $365 million so far this year, with about 25% of the capex providing a near real-time return. And despite the pandemic, we added over 5,400 customers so far this fiscal year. Turning to slide seven, as part of the decarbonization strategy outlined at our analyst day, we discussed the important role hydrogen will play in our energy future. Our first power-to-gas project is now under construction. It will enable the blending of hydrogen into our distribution system. This will create awareness with our regulators and policymakers to build expertise to allow it to scale as the market continues to develop. Using an electricity source from an adjacent solar facility, water will be separated into hydrogen and oxygen, and the carbon-free hydrogen will be blended into our distribution system. We expect the project to be in service this fall, and once completed, we'll be the first utility on the East Coast directly injecting green hydrogen into an existing natural gas distribution system. Green hydrogen isn't the only alternative fuel opportunity that New Jersey Natural Gas is pursuing. And on slide eight, you see that we are working toward a broader sustainability strategy focused on decarbonizing of our core infrastructure. In addition to our hydrogen project, we are exploring investment opportunities in renewable natural gas within our service territory. As RNG and hydrogen technologies continue to scale, we expect that our existing natural gas distribution system will deliver more decarbonized fuel, dramatically reducing emissions without the need for a massive build-out of costly infrastructure required for full electrification. By maximizing the benefit of our existing infrastructure, which is best in class, we see a practical path towards decarbonization for both New Jersey and ratepayers. Our team is focused on putting our strategy into action through new investments and will provide updates as we progress. Turning to CEV on slide 9, through the first nine months of the fiscal year, we added 8.4 megawatts of incremental capacity, which is lower than originally anticipated. The in-service dates of several of our commercial projects have shifted to fiscal 2022 due to pandemic-related permitting and interconnection issues. And while these challenges have significantly impacted project completion in fiscal 2021, we view these industry-wide impacts as short-term. Moving to slide 10, you'll see our commercial CapEx target remains at $315 million for fiscal years 21 and 22. And as mentioned earlier, more than 70% of this CapEx target is already operational, under construction, or under contract. We will continue to monitor any potential ongoing pandemic factors as our pipeline of projects progresses. And in addition, CEB continues to diversify and grow its project pipeline through expansion efforts outside of New Jersey. Turning to slide 11, on July 28, the BPU approved the initial phase of the New Jersey Solar Successor Program, announcing incentives for landfilled and net metered solar projects under 5 megawatts in size. The second phase of the Successor Program will be based on a competitive bid process for projects greater than 5 megawatts. Both phases will be independent of the SREC and TREC programs. The current TREC program will close to new applications on August 27th, and the new program, SREC 2, will open to new applications on August 28th. We are pleased to report that more than half of our fiscal 21 and 22 New Jersey projects have been secured under the TREC program, and that percentage may increase based on pending applications. New Jersey is committed to its solar industry, targeting 750 megawatts per year of new capacity through 2030. And as part of the new program rollout, the state is committed to assess progress after 12 months to ensure New Jersey is on track to meet its solar targets. The successor program will provide CEV with investment opportunities that combined with out-of-state diversification will allow us to achieve the goal of doubling our installed capacity by 2024. Now let's talk about our storage and transportation business, beginning on slide 12. Critical federal and state approvals have been obtained for both Phases 1 and 2 of the Adelphi Gateway Project. During the quarter, the project received its first notice to proceed for Phase 2 of the construction on the South Zone, which includes key laterals and interconnects with Columbia, Transco, and PECO. As you may recall, construction on Phase 1 began last October. We expect a number of Adelphi Gateway's facilities to be operational by the end of this year, and our expectation is the project will be fully in service by the end of 2022. S&T remains on track to achieve a four-year adjusted EBITDA KGAR of 20%, as we discussed at our analyst day. Slide 13 details the progress that we have made towards de-risking storage and transportation's future revenue streams. The team has done an excellent job of increasing the percentage of long-term contracted revenue associated with our storage and transportation assets. And at Leaf River, we've secured $45 million of additional contracts through fiscal 2024 with new and existing credit-worthy customers. I'll now turn the call over to Pat for some details on the financials. Pat.