NewJersey Resources Corporation

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, press star one again. Thank you. I would now like to turn the call over to Adam Pryor, Director of Investor Relations. Please go ahead.

Thank you. Welcome to New Jersey Resources Fiscal 2024 Second Quarter Conference Call and Webcast. I'm joined here today by Steve Westhoven, our President and CEO, Roberto Bell, our Senior Vice President and Chief Financial Officer, as well as other members of our Senior Management team. 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, assumptions, and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to differ materially from our expectations as found on slide one. These items can also be found in the forward-looking statements section of today's earnings release, furnished on form 8K, and in our most recent forms, 10-K and 10-Q, as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statements 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, net financial loss, utility gross margin, financial margin, adjusted funds from operations, and adjusted debt, provide a more complete understanding of our financial performance. However, these non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K. The slides accompanying today's presentation are available on our website and were furnished on our Form 8-K file this morning. Our agenda for today is found on Slide 4. Steve will begin with this year's highlights, followed by Roberto, who will review our financial results. Then we will open it up for your questions. With that said, I'll turn the call over to our president and CEO, Steve Westhoven.

Please go ahead, Steve. Thanks, Adam. Good morning, everyone. New Jersey Resources delivered a strong performance in the second quarter. We reported net financial earnings of $1.41 per share in the period, and we are reaffirming a fiscal 2024 NFEPS guidance range of $2.85 to $3 per share. I'll take you through the highlights, which are outlined on slide five in our presentations. We continue to see a trend of strong customer growth at New Jersey Natural Gas and achieved higher utility gross margin for the quarter. Throughout a relatively warm winter marked by periods of volatility, New Jersey Natural Gas once again demonstrated its ability to provide cost-effective and reliable service. New Jersey Natural Gas is decoupled, meaning the utility gross margin is insulated from changes due to weather and customer usage. We continue to remain aligned with all of our stakeholders to provide $850 million since the settlement of our last rate case in 2021, as well as a new SAVE Green program that represented the largest energy efficiency filing in our history. We remain active at Clean Energy Ventures with approximately 34 megawatts of projects under construction that will add to the 5 megawatts of capacity placed in the service thus far this year. And our project pipeline is expanding, allowing this growth to continue well into the future. We reported solid contributions from S&T, and as we announced in our last conference call, energy services outperformed in January, capitalizing on a brief period of pricing volatility. Moving to slide six, in November, we provided NFVPF's initial guidance range of $2.70 to $2.85 per share. As a result of our outperformance, we increased our fiscal 2024 NFVPF's guidance by 15 cents per share in February. growth rates. Slide 7 shows the expected NFEPS percentage contribution by business segment for fiscal 2024, as well as a general guide for what we expect in the future. 2024 is somewhat unique, as energy services will represent a higher portion due to the AMAs and outperformance in the quarter. However, in future years, we expect to return to a more normalized segment breakout with 60 to 70 percent coming from our utility business. With that, I'll turn the discussion over to our business units, beginning on slide 8 with New Jersey Natural Gas. We've invested $211 million at New Jersey Natural Gas through a variety of programs in fiscal 2024, with approximately 45% of that capex providing near real-time returns. Within that 45% is the Save Green program, which helps residential and commercial customers lower their energy usage. We have spent approximately $33 million thus far this year to help our customers save money and reduce their carbon footprint. We achieved solid new customer growth during the period through a combination of new construction and conversions throughout our service territories. Finally, we are continuing to pursue new innovations that further our decarbonization strategy. These units, which are in the initial phase of testing, are expected to reduce the emissions profile of our building while providing additional data as we pursue new decarbonization initiatives. By encouraging innovation in energy efficiency, clean fuels, renewables, and other emerging technologies like carbon capture, we are demonstrating our ability to achieve long-term emissions reductions goals. Turning to slide nine, I'll provide an update on our base rate case. On January 31st, we requested an increase of base rates of approximately $223 million, equivalent to an increase of $159 million in operating income. The rate case is progressing as expected, and we plan to update our filing to include nine months of actual results later this month. We will continue working with the New Jersey Board of Public Utilities towards a resolution that balances the interests of our customers and the company new rates expected to be in place for fiscal 2025. Moving to slide 10, Clean Energy Ventures has continued to add new solar capacity during the fiscal year with an additional 34 megawatts under construction. We are also growing our solar pipeline, which now includes over 870 megawatts of potential investment options. Over the past few years, we've expanded our portfolio geographically with 51% of our pipeline outside of New Jersey. Our focus is on developing solar investment opportunities that provide high, single-digit, unlevered returns. Finally, our S&T business performed to our expectations during the period. We continue to pursue organic growth opportunities to maximize those assets. At Leap River, we are initiating the capital investment process to expand the working capacity within our caverns by We recently initiated an open season to provide additional capacity to our customers in regions with considerable demand for reliable and affordable natural gas storage capabilities. With that, I'll turn the call over to Roberto for a review of our financial results.

Roberto? Thank you, Steve, and good morning, everyone. Slide 13 shows the main drivers of our NFP for our fiscal 2024 second quarter and first half. In the second quarter, we reported NFE of $138.6 million, or $1.41 per share, compared with NFE of $112.3 million, or $1.16 per share last year. New Jersey National Gas reported NFE in line with expectations, as higher utility growth margin was partially offset by higher depreciation and operating expenses. Clean energy ventures, NFE, improved for the period by $3.8 million, largely due to an increase in earnings related to the recognition of investment tax credits associated with solar sail leaseback financing transactions. Storage and transportation NFE remained largely flat for the period, while energy services reported NFE of $37.6 million, compared to $21.1 million in the second quarter of the prior year. This outperformance was driven by energy services capturing additional financial margin during brief periods of volatility in the winter. As we look to the remainder of fiscal 2024, it's important to note that we expect to recognize a significant portion of the asset management agreement's total revenues during our fiscal fourth quarter. I'll move through the next few slides quickly as our capital plan, cash flows, and balance sheet projections remain largely unchanged from our previous goal. Turn to our capital plan in slide 14. For the next few years, we expect to invest between $1.2 and $1.5 billion across the company. As Steve mentioned earlier, we began a new capital project at Leaf River and amended a capital plan to account for approximately $11 million of additional investment at S&T in fiscal 2024. Our capital projections, are anchored by strong cash flows from operations. On slide 15, we expect cash flows from operations to range between $450 and $419 million in both fiscal 2024 and fiscal 2025. Slide 16 shows NGR's credit metrics. We continue to project NGR's adjusted FFO to adjusted debt to be between 17% and 18% for the year. While we have no plans to issue block equity, Our existing dividend reinvestment program includes a waiver discount feature that allows us to raise equity on an opportunistic basis. Finally, on slide 17, we provide a breakout of our long-term debt. As you can see, most of our debt is fixed rate in nature, and we do not have significant maturities in any particular year. For the remainder of fiscal 2024, we do not have any debt maturities. Our NFVPS guidance for fiscal 2024 and our long-term NFVPS growth guidance assume higher interest rates for longer, and we have substantial liquidity at both NGR and NGNG. With that, I will turn the call back to Steve.

Thanks, Roberto. In conclusion, thanks to higher NFV contributions from energy services and steady performance from our core businesses, fiscal 2024 is outperforming our initial expectations. NJR benefits from operating a complementary portfolio of businesses that are essential for sustained growth. These assets are dependable cash generators and difficult to replicate. We continue to pursue organic expansion to maximize NJR's earning potential and support our peer-leading growth rate. As always, I want to thank all of our employees for their hard work. And with that, let's open the call for any questions.

At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. We'll pause for just a moment to compile the Q&A roster. Thank you. The first question comes from the Lion of Richard Sunderland from JP Morgan. Please go ahead.

Hi, good morning. Can you hear me? Yeah, we can hear you, Rich. How are you doing? Great. Thanks, and thanks for the time today. Maybe starting with Leaf River, the capacity recovery project, could you speak a little bit more to this in terms of if this is a precursor to a larger expansion of Leaf River, you know, how should we think about the financial impact and timing of contributions from the incremental capacity? Any other key details here would be helpful. Certainly, we've got nothing to announce as far as the larger expansion goes, but for the work that's being done there now, it certainly could be helpful in a future expansion in some pumps and some deep grinding, deep watering capability. But I think the thing to focus on is projects like these and these sizes that help

The open season, it concluded at the beginning of May, and we haven't analyzed all the details yet. We've got some contracts to do, but just to speak to the economics, you know, we're very optimistic about the project, you know, and fully believe that we'll be moving forward with this. So, enough said on that until we get to, you know, final contracts and details associated with it.

Understood. Thank you for the commentary there, though. And then turning to CEV, just curious about how you're thinking of New Jersey at this point. I believe the most recent solicitation selected one of your projects. Any thoughts on pricing, future expectations to deploy more megawatts through this process, any other learnings?

So, yeah, we were happy to see that, you know, New Jersey's you know, projects that are five megawatts and greater. So good to see that go forward. And you're right, we did have one project that was on our own in there. You know, as far as, you know, further comments about it, you know, we do have relationships with a number of other developers. So, you know, we expect that, you know, we'll be certainly active in the New Jersey solar market. But I think from an investor standpoint, to look at this from a project pipeline point of view. We've got 874 megawatts in our project pipeline in CEB, and that's more than enough to give us investment opportunities in the near future. As far as returns go, we're still targeting the high single-digit return for projects moving forward, and Overall, you know, constructive that New Jersey is moving forward, and, you know, we're optimistic about our pipeline project moving forward as well.

Understood. That's very helpful. And maybe just a quick follow-up on the CEV front. Given data centers are so topical these days, curious how you think about data center demand and the state's efforts there, and if that might impact the CEV outlook, either New Jersey or, I guess, your regional efforts.

Yeah, I think more broadly, it just really points to the amount of infrastructure that we're going to need in order to supply all the energy that we have for all the endeavors moving forward, whether it's data centers or electric cars or just reliability in general. So as energy demand grows, bringing all our infrastructure into the picture and using that in the longer term is going to be extremely important. So extremely constructive for the assets that we hold and the infrastructure business in general.

Understood. I'll leave it there. Thank you. All right. Thanks, Rich.

Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Thank you. As there are no further questions at this time, this concludes our Q&A session. I would like to turn the call over back to Adam for closing remarks.

Well, thanks, everyone, for joining us this morning. As a reminder, a recording of this call is available for replay on our website. Later this month, we are attending the American Gas Association, or AGA, Financial Forum, and hope to see many of you there. As always, we appreciate your interest and investment in NJR. Have a good morning.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Appreciate your interest and investment in NJR.

Have a good morning.