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Operator
Hello, my name is Ellie and I will be your operator for today. I would like to welcome everyone to New Jersey Resources Fiscal 2024 Third Quarter Conference Call. For those of you listening on the live call, all participants will be on listen mode only. After today's participation and presentation, there will be an opportunity to ask for questions. If you'd like to ask a question during that time, please press star 1. Thank you. I'd now like to hand over to Adam Pryor, head of investor relations. He may now be...
Adam Pryor
Thank you. Welcome to New Jersey Resources Fiscal 2024 Third 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 law. We wish to caution listeners of this call that the current expectations, assumptions, and beliefs forming the basis of our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to materially differ from our expectations as found on slide 1. These items can also be found in the forward-looking statement section of today's earnings release furnished on form 8K and in our most recent forms 10K and 10Q 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, 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 financial measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in item 7 of our 10K. The slides accompanying today's presentation are available on our website and were furnished on our form 8K file this morning. Our agenda for today is found on slide 4. We will begin with this year's highlights followed by Roberto who will review our financial results. Then we will open up for your questions. With that said, I will turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve.
Steve
Thanks, Adam, and good morning, everyone. We had a solid quarter at NJR as our complementary portfolio of businesses performed in line with our expectations. And we remain on track to achieve our fiscal 2024 NFEPS guidance of $285 to $3 per share. I'll take you through the highlights as shown on slide 5. At New Jersey Natural Gas, our rate case is proceeding as expected and we anticipate a resolution before the end of 2024. Clean Energy Ventures reported a solid -over-year revenue growth while continuing to expand our robust project pipeline. This provides a long runway of investment options that deliver a minimum of high single-digit unlevered returns for each project along with upside potential from increases in power demand. This quarter, we also saw solid contributions from SMT and performance from energy services that was in line with expectations. Moving to slide 6, in November, we provided an initial NFEPS guidance range of $2.70 to $2.85 per share. In February, due to our outperformance in energy services, we increased this guidance by $0.15 per share to $2.85 to $3 per share. As discussed in prior calls, we expect our fiscal 2024 to exceed our long-term growth rate of 7 to 9%. Slide 7 outlines the expected NFEPS percentage contribution by business segment for fiscal 2024 and beyond. This year, energy services will represent a higher percentage than prior years due to the AMAs and recent outperformance. However, in future years, we expect to return to a more normalized segment breakout with over 60% of our NFEPS coming from our utility business. Now, let's discuss our business units, starting with New Jersey Natural Gas on slide E. We have invested $345 million -to-date at New Jersey Natural Gas from fiscal 2024, with 43% of that capex providing near real-time returns. This includes the Save Green program, which helps customers lower their energy usage. In June, Save Green reached a milestone, serving our 100,000th customer since its inception in 2009. Over the lifetime of this program, participating customers have significantly cut their energy bills and reduced their carbon emissions by over 312 million pounds, equal to the energy use of over 18,000 homes. Congrats to the entire Save Green team on this accomplishment. Customer growth has remained steady all year, driven by a combination of both new construction and conversions. We also see unique business opportunities. This should help drive growth well into the future, such as the redevelopment project in Monmouth County to transform a mall into multifamily units, along with retail, commercial, and medical spaces. Turning to slide 9, our base rate case is progressing as planned. In May, we adjusted our filing to include nine months of actual results and aimed to reach a resolution that balances our customers' and companies' interests by the end of 2024. Moving to slide 10, clean energy ventures continue to add new solar capacity during this fiscal year. We are also growing our solar pipeline, which now includes over 870 megawatts of potential investment options, with an additional 51 megawatts under construction. Finally, on slide 11, our S&T business met expectations this period. Last quarter, we announced the start of a capital investment project at Leaf River to expand working capacity within our caverns. We completed an open season and contracted a portion of that capacity in terms that will pay back the full cost of that investment in less than four years. And with that, I'll turn the call over to Roberto to review our financial results.
Roberto
Roberto? Thank you, Steve, and good morning, everyone. Slide 13 highlights the main drivers of our NFE for fiscal 2024 third quarter and year to date. We reported a net financial loss of $8.9 million, or $0.09 per share, compared with NFE of $9.7 million, or $0.10 per share last year. The quarterly results of our business segments were consistent with our expectations. We steady margin contributions at NG&G and energy services and higher revenues at CEB and S&T compared to the prior period, offset by increased depreciation and interest expenses. Clean Energy Ventures reported a net financial loss for the period of $6.7 million. A difference from the prior year period was due to the resolution of an income tax valuation allowance last year that did not reoccur. Looking ahead, we expect a significant -over-year increase in NFE for the upcoming fourth quarter, as energy services will recognize a substantial portion of the asset management agreement's total revenue during the period. Turning to our capital plan in slide 14, over the next two years, we expect to invest between $1.2 and $1.5 billion across the company. For fiscal 2024, we have tightened our overall capex range with slight increases at NG&G and S&T, offset by a reduction in the top end at CEB. For NGR as a whole, the midpoint of our total capex remained largely the same for the year. In November, we'll update our capex expectations for fiscal year 2025 and provide fiscal 2026. Our capital projections are anchored by strong cash flow from operations. On slide 15, we expect cash flow from operations to range between $420 and $450 million in fiscal 2024. Slide 16 displays 10-year credit metrics. We project 10-year suggested FFO to adjusted debt to be between 17 and 18 percent each year. And while we have no plans to issue block equity, our existing Deer Reinvestment Program includes a waiver discount feature that allows us to raise equity on an opportunistic basis. Slide 17 provides a break out of our long-term debt, which is fixed rate with no significant majorities in any particular year. We don't have any debt majorities for the rest of fiscal 2024 and maintain substantial equity at both NGR and NJNG. With that, I'll turn it back to Steve for concluding remarks on slide 18.
Steve
Thanks, Roberto. In conclusion, NJR continues to deliver long-term value for its shareholders anchored by our regulated utility and the infrastructure investment opportunities provided by the other business segments. Our rate case is progressing on schedule and we look forward to a resolution later this year. To summarize, we offer investors an attractive 11 to 13 percent expected total return based on our long-term NFVPS growth rate of 7 to 9 percent and a current dividend yield of approximately 4 percent. We expect to grow our dividend to our shareholders in line with our earnings as NJR has raised a dividend every year for the last 28 years. Our next dividend announcement will come in September. We appreciate that you took the time to join us today and I'd like to recognize and thank our employees for all their hard work and dedication that drives our performance. So let's now open up the call for questions.
Operator
Thank you so much. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star 1. Our first question comes from Richard Sunderland from JP Morgan. Your line is now open.
Richard Sunderland
Hi, good morning. Thank you for the time today. Hey, Rich. Starting with the rate case, is everything still progressing as expected towards the settlement? I'm just looking at the slide language here on settlement discussions. I'm curious if we should expect an announcement, I guess, either this month or next under that timeline. Hey, Rich. This is Steve. I'm going to ask Pat Nipigachi to
Steve
take that question. Hey, Rich. You know, just as a reminder, this is a plain mill rate case. Investments around safety, reliability and some IT investments with the filing of our 10Q today that will pave the way for us to file a 12 and 0 with the Board of Public Utilities in the next couple of days. But as far as some of the discussions, they're progressing as we would expect them to and no change to our previously communicated timing guidance, which is we expect to finalize a rate case with rates effective sometime in our first fiscal quarter of 25.
Richard Sunderland
Got it. Thank you for that. And then turning to CEV, can you quantify your open megawatts and if power prices could be a tailwind of 4Q or even put 20-25 earnings above the 7 to 9% outlook range?
Steve
So we've got a little bit of this fiscal year left and a little bit of, I guess, megawatt pricing to do for the rest of the season. You can, I guess, look to your past to determine how that could impact our earnings going forward. But, you know, I would expect to characterize it should be relatively minor contribution for this year, depending on where power prices
Richard Sunderland
go. Great. Thank you for the color there. I'll leave it there. Thank you. Thanks Rich.
Operator
Before we move on to our next question, again, if you'd like to ask a question to our presenters, please press star 1. Again, that's star 1 on your telephone keypad. Our next question comes from Travis Miller from Morningstar. Your line is now open.
Travis Miller
Good morning, everyone. Thank you. Good job. I guess I was going to ask Richard's question, but I'll ask it kind of a different way or clarify if I didn't hear you correctly. The open megawatts and then the high level, what are you seeing in terms of pricing? Is it stronger, weaker than you expected? Not necessarily for earnings, but just in general in the market. How are you seeing solar pricing?
Steve
You can see the pricing as well as we can. If you look at P to M, daily liquidation, where pricing is occurring on a daily basis. I can't say it's been remarkable for the summer in comparison to previous summers, but like I just said to Rich, if you're looking at an indication on how it may impact us, you can look at years past. But I think all in all, not much is officially left for us. You have to see some extreme pricing to make significant change in our earnings
Travis Miller
this year. Okay. And about how much do you still have to price?
Steve
I don't have that number off the top of my head, but if you look at our portfolio and our ratings, I'm sure you can calculate it out on how much that would price on a daily basis, especially considering big portions of our portfolio are grid-connected.
Travis Miller
Okay. Okay, very good. And then staying on that subject cost side, what are you seeing in terms of your growth? Not necessarily capex, but just growth in solar costs. What are you seeing on the cost side for your new projects?
Steve
I think they've been pretty steady, characterized if you're talking about our costs and cost of development, just our normal construction. I think things have been steady for the, I guess, recent past. Nothing remarkable there either. The only thing I'd add there is that the states still have a pretty robust, in support of the renewable portfolio standard. So we're still able to make investments in the continued size of our portfolio and continues to grow as
Travis Miller
well. Okay, perfect. And then different subjects. Hi, Levon. Everybody's asking the electric utilities about data centers. From your perspective, I've understood that a lot of gas utilities are seeing demand or have had demand for a while from data centers in terms of either primary or backup generation. What does it look like in your service territory? Have you had data center customers for a while? Are you seeing demand for that either backup or primary on-site gas generation or service?
Steve
So we don't have, I don't believe we have any data centers within our service territory at this point. But I'd add to that that the increase in electric use, the increase in need for reliability, matches up nicely with our portfolio across really all of our companies. That reliability, the need for constant electricity in order to run those facilities, whether it's our utility and the infrastructure there, our S&T assets, supportive of power prices for our CEB portfolio, volatility that gets introduced for our energy services segment, all those business units should participate in this market as it becomes tighter and there's a greater demand for power and reliability.
Travis Miller
Okay, sure thing. Yep, appreciate it. That's all I had. Thanks, Travis.
Operator
Our next question comes from Michael Bogler from Jamie Montgomery Scott. Your line is now open. Morning, everyone.
Michael Bogler
Hey, Mike.
Mike
Steve, I've got one more power price question for you. So as you're looking forward, future planning for CAPEX, does it make you want to invest more in the sector given where power prices are going, given what you're saying, particularly in the, like you referenced, the high prices we're seeing in PJM?
Steve
Yeah, I think, like I just said to Travis, it supports all our infrastructure, infrastructure investment, and it really supports our general strategy in growing that infrastructure going forward. You saw the recent PJM capacity auction. That was 10 times what it was previous year. You know, that's a real market signal that's been put out there, and certainly there's a lot of anecdotal market signals that have been supported as well. So, you know, I answer yes. You know, it certainly supports, you know, our business and really the strategy that we've been talking about for quite some time.
Mike
Does it make sense to look at projects that are actually, that are already, sorry, already operating?
Steve
Yeah, I mean, you know, we've done that as a course of business in the past. You know, whether that's a portfolio at CEB or, you know, an operating asset at S&T, we've looked at those in the past. So, yeah, I'd say yes to that.
Mike
Okay, and then one last one. In the S&T segment, you know, beyond what you're doing at Leaf River to expand capacity, what areas are you focused on in terms of future expansion of that business?
Steve
You know, anywhere that we can get, you know, a contract that's long-term that can support the expansion, whether it's Delphi Gateway or whether it's at Leaf River, and, you know, we can essentially grow organically, you know, making it easy to get permits. You're, you know, connecting to an existing asset. You know, anything that's supportive, you know, we'll look at. You know, we don't have anything to announce beyond what we've talked about already with some of our organic expansion, but, you know, know that we are, you know, pursuing that.
Mike
All right, that's all I have, gentlemen. Thank you. All right, thanks, Mike.
Operator
Our next question comes from Robert Mosca from Euro. Your line is now open.
Robert Mosca
Hey, good morning, everyone. Just wondering, hey, just wondering if you guys could talk about some of the business opportunities you referenced in your customer growth commentary. Just wondering how significant that is, and is this something that's already captured in your 7 to 9% growth outlook?
Steve
Hey, Rob, I'm going to ask Pat Higley-Otschka to take that question.
Steve
Hey, Rob. So, look, as we think about the customer growth, we're still in that, you know, .7% marker. Really included that just to illustrate that as you think about New Jersey, strategically, but more specifically our service territory, this is a growing environment and service territory. So we've got a lot of tailwinds both from the new construction market, because you continue to see people coming into both Monmouth, Ocean County specifically, but then also a very healthy conversion market, because there are a number of customers who are still on oil, propane, and the like, converting over. So I would characterize it as something that's generally supportive of the utilities growth rate.
Robert Mosca
Appreciate it, Pat. And maybe turning to Leaf River, looking at that request for authorization to use some of those leaching facilities for hydrogen storage. Just wondering what the latest on that is, and how does that, what's that interplay with this working capacity expansion that you seem to have FID'd on the gas side?
Steve
So, you know, we're keeping all our options open, you know, definitely for ever, and certainly exploring, you know, like I said at the mic before, you know, every option that was available to us in order to expand our S&T assets. There's been a lot of, you know, market, you know, pull in that area. You've seen that in contracts that have been executed out there, you know, certainly elevated in price. So I think the view on that at this point is that there's a marker that basically preserves our position in order to expand in that fashion. You know, we don't really have anything to announce just yet, but you can see how we're thinking about that asset and the many uses that it might be able to be applied to this market.
Robert Mosca
Got it. That's helpful. And maybe just a quick last one for me on the subject of power. Just wondering, does electricity sales become more of a factor in where you decide to locate some of these solar projects or are the economics still really going to be focused on, you know, what the solar credits look like in the space that you do construct?
Steve
Yeah,
Adam Pryor
I think,
Steve
you know, power prices and, you know, power moves so quickly, you know, it's pretty fun. I know there's certain areas that you've got, you know, constraints you can ask for price pops, but for the most part, you know, there's a hierarchy of areas that we need to clear in order to build a solar project, you know, having the land, having the interconnectability, you know, having the right, you know, transaction with the developer and so on and so forth. I think those would take more of a precedent. I believe that, you know, power, for the most part, as it increases, you know, will increase maybe not uniformly, but generally speaking, you know, that rising time lifts all boats in that way.
Roberto
Maybe just one thing to add there, Rob, to this, Roberto, is just keep in mind when you look at the process, right, that this type of revenues, the piece that comes from power is very minor, right, and the regular year is about 10 to 15 percent only. So we look at it in, you know, in that lens.
Robert Mosca
Understood. No, that's helpful. And all right. Have a great day,
spk01
everyone. All right. Thanks, Rob.
Operator
Again, if you'd like to ask a question, please press star one. That is star one. Thank you.
spk01
So
Operator
far we don't have any pending questions. I'd now like to hand back over to Adam Pryor for further remarks.
Adam Pryor
Thank you, Ellie. I'd like to thank everyone on the call here today for joining us. And as always, we appreciate your interest and investment in NJR. Thank you so much. Have a good rest of your morning.
Operator
Thank you, everyone, for attending today's call. You may now disconnect. Have a wonderful day.
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