NewJersey Resources Corporation

and I will be your conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources Fiscal 2025 First Quarter Conference Call. For those of you listening on the live call, all participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. Thank you. I would now like to introduce your Speaker for today, Adam Fryer, Director of Investor Relations. You may begin.

Thank you. Welcome to New Jersey Resources Fiscal 2025 First 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 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 two. These items can also be found in the forward-looking statement section of yesterday's earnings release furnished on form 8K and in our most recent forms 10K and 10Q as filed with the FCC. 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 referencing the 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 seven of our 10-K. The slides accompanying today's presentation are available on our website and were furnished on our form 8-K filed yesterday. Steve will begin with this quarter's highlights beginning on slide four, followed by Roberta, who will review our financial results. Then we will open the call 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, and good morning, everyone. Fiscal 2025 is off to a strong start. During the first quarter, we continue to execute on our strategic initiatives, driving growth across our business segments. At New Jersey Natural Gas, we achieved a significant milestone with the implementation of new rates following the approval of our base rate case. This was supportive of our ability to recover the $850 million of investments made since our last rate case and results in a rate base of $3.2 billion. We launched the next iteration of Save Green, our $386 million energy efficiency program, which is the largest in New Jersey natural gas history and runs through June of 2027. Investments in Save Green are incremental to our rate base and earn a near real-time return to a rider that is updated annually. Green Energy Ventures continues to advance its commercial solar strategy. With a project pipeline of over one gigawatt, we remain well-positioned to drive growth At storage and transportation, we continue to move forward on our capacity recovery project at Leaf River. And at Delphia Gateway, Section 4 rate case is progressing with an expected resolution later this year. And finally, at energy services, we continue to derive significant value from our portfolio of strategically located storage and transportation assets, as well as continued contribution from the asset management agreements announced in 2020. These achievements reinforce our commitment to delivering shareholder value discipline capital allocation. As we review our strong first quarter performance, it's clear that NJR is not only delivering on its commitments, but it's strategically positioned to capitalize on emerging growth opportunities. Now let's turn to our guidance for fiscal 2025 on slide five. This reflects the strength of our diversified portfolio and our ability to navigate current opportunities and long-term objectives. Our fiscal 2025 NAPPS guidance $3.05 a share to $3.20 per share, which exceeds our long-term growth rate of 79% and incorporates the one-time gain from our sale of our residential solar portfolio. We are encouraged by the recent operating performance across all of our businesses, and we will carefully monitor and assess our financial outlook as we move forward through the winter season. On slide six, we break out our fiscal year 2025 NFVPS by segments. We slightly narrowed the contribution ranges of our business units in the first quarter and will continue to do so as the year progresses. The majority of our NFVPS is expected to come from our utility operations. Now let's discuss our complementary business units, starting with New Jersey Natural Gas on slide seven. During the quarter, we invested $127 million at New Jersey Natural Gas, with 43% of that capex providing near real-time returns. We are leveraging investments to enhance reliability and drive consistent customer growth through our new construction and conversions, as well as expansion into new locations. Moving to slide 8, at Clean Energy Ventures, we successfully placed approximately 11 megawatts of commercial solar projects into service during the period, with an additional 63 megawatts currently under construction. Looking ahead, we are well positioned to continue growing our capacity by leveraging a robust and steadily expanding project pipeline of over one gigawatt. Furthermore, the sale of our residential solar portfolio enhances our balance sheet and recycles capital to support the future growth opportunities. Moving to slide nine, our storage and transportation business continues to deliver stable returns through fee-based revenues. Our infrastructure investments, including pipelines and storage facilities, are strategically positioned to serve constrained energy markets. The Delta Gateway continues to work through its FERC rate case, which reflects the investments made to enhance and modernize our pipeline system. We anticipate the conclusion to the process later in 2025. We are also actively advancing our capacity recovery project at Leaf River, focusing on restoring and enhancing storage capabilities to meet growing energy demand. Overall, we have made excellent progress throughout the quarter on several fronts. With that, I'll turn the call over to Roberta for review of the financial results.

Roberta? Thank you, Steve, and good morning, everyone. As noted earlier, fiscal 2025 is off to a good start. In the first quarter, we reported NFVPS of $1.29 per share compared with NFVPS of 74 cents per share last year. NG&G reported higher NFV as a result of new rates being in place on November 21st following the successful conclusion of our rate case. And clean energy ventures reported higher energy as a result of the sale of our residential solar portfolio. Our storage and transportation and energy services businesses also delivered higher energy compared to the prior year period. Now, let's move to slide 12, where we will discuss in-year capital plan. For fiscal 2025 and fiscal 2026, we're planning capital expenditures ranging from $1.3 to $1.6 billion. which aligns with our long-term and FAPS growth target of 7% to 9%. We did not make any changes to our capital plan compared to our prior disclosure and continue to expect spending between $610 and $719 million in capital investments during fiscal 2025. Over the next several years, we expect to deploy capital to enhance our utility infrastructure, expand our clean energy portfolio, and optimize our storage and transportation assets. As highlighted on slide 13, our strong balance sheet and liquidity position enable us to execute on our strategic priorities while maintaining financial flexibility. Our adjusted funds from operations adjusted debt ratio is projected to range between 18% and 20% for fiscal 2025, which reflects our ability to generate solid operating cash flows and manage debt effectively. These levels are consistent with maintaining our investment grade credit rating at NJNG and a strong balance sheet at NJAR. We expect our cash flow from operations to be between $460 and $500 million in fiscal 2025, providing a solid foundation for our capital plan, dividends, and other corporate needs. In summary, our first quarter performance reflects the strength of our diversified portfolio and disciplined financial strategy. We remain on track to deliver on our long-term growth objectives, supported by a solid balance sheet and steady cash flows. With that, I'll turn the call back to Steve for a discussion on our carbonization initiatives on slide 14.

Thanks, Roberto. Last month, This reflects our commitment to transparency with our stakeholders in the evolving energy landscape. In the report, we detailed our leadership and accomplishments in emissions reduction and renewable energy, as well as our long-term vision for the role of existing pipeline infrastructure. Our sustainability initiatives remain business-driven, as highlighted by notable achievements such as record investments in energy efficiency and the advancement of new innovations such as carbon capture. During the year, New Jersey Natural Gas became the first natural gas utility in New Jersey to install and operate distributed carbon capture technology at our headquarters. And we are also fueling a portion of our fleet operations with renewable diesel. This work underscores our leadership in driving a more sustainable energy future and our commitment to pursuing innovative, reliable, clean energy solutions. To conclude, NJR is well positioned for sustained long-term growth across our diversified businesses, as we highlight on the next slide. NJR's diversified business model supports an industry-leading long-term NFEPS growth rate of 79%. Key drivers include continued customer growth at New Jersey Natural Gas, solar investments at CED, and enhanced asset utilization at Leaf River and Adelphia Gateway. As we progress through the winter season, we are pleased with the strong operating performance across all of our businesses. Our results highlight the resilience, of our physical infrastructure and equally important, the talent and dedication of our team. I'd like to recognize and thank our employees for all their hard work. And with that, let's open up the call for questions.

All right, thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press the star followed by the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press the star one again. One moment, please, for your first question. And the first question comes from the line of Char Perez with Guggenheim Securities. Please go ahead.

Hey, guys. Good morning.

Hey, Char.

Good morning. I just want to get a sense on how you feel about the guide for 25 to 283 that's out there. You know, if we strip out that gain from the residential sale, add back a couple of pennies from lost earnings. We get to about 92 cents for Q1 on a more recurring basis, which is slightly below expectations. I guess, how are you trending within the EPS range you have out there for 25? I know winter matters a lot, and you highlighted you're going to be monitoring it, but just curious how you're trending for 25. Thanks.

Sure. This is Roberto. So we have our guidance out there, 305 to 320. We're not changing that. at this point in time.

Understood. But any sense on how you're trending within that range?

We're well in our range. That's all I can tell you right now.

Okay. That's perfect. And then just on CEV, I mean, obviously good growth. You're seeing slightly larger opportunities outside your footprint versus a year ago. I guess what's driving that? Should we assume more of that mix will continue to shift outside of New Jersey. And any sense on whether any of the uncertainties around maybe IRA are impacting the discussions, especially as we think about the pull forward of demand? Thanks.

Yeah, you know, Shar, we've, you know, purposely diversified that portfolio. And that strategy has been in place, you know, for many years. And, you know, really focused on jurisdictions that are friendly towards solar and supportive, you know, in the solar landscape. So, you know, that has basically, you know, when you look at the portfolio, we've got, you know, 11 megawatts are in service. You've got 63 megawatts are under construction. You've got about a gigawatt in our project pipeline. So, you know, robust and certainly quite a bit of investment, you know, more than we need for what we've projected as CapEx over the next few years. You know, as far as, you know, kind of the, you know, IRA, you know, Currently, based on our past safe harbor provisions, we don't see any impacts in the near term project pipeline as we move forward. So it's really as business as usual and all the metrics that you referenced supporting the business. So we're in a good place.

Fantastic. Thanks, guys. Appreciate it. And see you soon. Appreciate it. All right. Thanks, Sean.

And your next question comes from the line of Richard Sunderland with JP Morgan. Please go ahead.

Hi, good morning. Thank you for the time today. Hey, Rich. Maybe starting on winter and energy services, any color on the market opportunities for energy services upside during last month's cold snaps? I don't know if there's any way to frame this on an order of magnitude basis versus what you're able to realize last year. Just any thoughts there. Thank you.

Yeah, you know, the weather was, you know, constructive across all of our businesses. You know, not only energy services, but just all of our infrastructure business really shows the value of existing infrastructure in these peak periods of need. You know, as the market grows, you know, we just see our infrastructure becoming more valuable and certainly the ability to organically expand that as a key driver, you know, for our business. As far as how to think about that in reference to the event that happened, we've got quite a bit of winter left. And as we look forward to the next quarter, we'll update the market as appropriate. And that's about all that we'll say at this point in time.

Understood. Well, thank you for the color there. And then turning to the Adelphia rate case process, I realize it's early, but are there any key dates in the procedural schedule we should watch for? I guess I'm curious what the typical settlement window is.

Yeah, you know, it's a typical rate case. You know, it's really just, you know, verifying, you know, quite a bit of the money that we spent during the initial construction, you know, which was several years ago. So a regular Section 4 rate case, and we said we expect this to proceed forward and be settled sometime in 2025. So we haven't changed from any of that. So that's about all the color that we can give right now since we're in the regulatory proceeding.

Great. Thank you. I'll leave it there.

All right. Thanks, Rich.

And your next question comes from the line of Gabe Boreen with Mizuho. Please go ahead.

Good morning, everyone. If I could just ask a question on CEV TAPEX relative to what you spent year to date and the target range. Was this kind of what you intended, I guess, to spend and we should expect maybe a potential acceleration to kind of get you to the midpoint of the range or is there still just, I guess, uncertainty around the timing and spend as to whether you're going to get to that midpoint of the TAPEX range for CEV this year?

Yeah, so this is what Roberto gave. So for this year, you see what our guidance range for CAPEX for CV is out there. This is higher than what we did last year. So from that perspective, yeah, you can consider that an acceleration, but we expect to be well within our guidance range for the year as stated in our presentation.

Thanks, Roberto. And I know I think we asked about this last quarter about a potential follow-on to the IIP. Any additional thoughts as far as renewing the IIP now that the rate case is in the rearview?

Again, it's Pat Migliaccio. Thanks for the question. You know, just as a reminder, we do have the current IIP that has spending forecasted through fiscal year 25. That'll close out with rates effective in 2026. Really constructive energy efficiency filing, record level of approved investment of $386 million. That ramps up over time. As far as a successor or follow on IEP, we'll evaluate that and update you when we have something to report. Thanks, Pat. Appreciate it.

Thanks, Gabe.

Thank you. And once again, if you would like to ask a question, simply press the star followed by the number one on your telephone keypad. Your next question comes from the line of Travis Miller with Morningstar. Please go ahead.

Good morning. Thank you.

Hey, Travis.

I think Richard asked my question on the January operations of your midstream business. So I look forward to hearing about that next quarter. But Save Green, I'm wondering if you could remind us of the regulatory treatment. Was any of that included in the rate case and then If not, what's the recovery of the capital side of that program?

Hey, Travis. It's Pat Migliaccio. So Save Green Spend is not included in our base rate case filings. It is a separate filing that operates a little like our infrastructure riders. So we recover annual investment each year as we make that investment. So when we consider... our complexion of our capital investment that's as near real-time recovery as we can possibly get.

Okay, perfect.

And then a broader question. Someone asked, do you have tariffs? Is that going to have any impact either on getting the equipment that you need to execute the capital investment program or even more directly possibly on the solar buildup?

Hey, Travis, this is Steve. You know, we talked about, you know, just general, you know, impacts from before. You know, at this point in time, you know, due to the construct of our business and, you know, safe harbor provisions and things like that, you know, we don't expect any impacts, you know, from what's going on out in the, I guess, the regulatory world.

Okay. And no impact on just your regular need for equipment or, you know, supplies and stuff like that for your utility operations, aside from the solar stuff?

No, I don't think there's anything that, you know, is significant at this point in time. You know, when you look at our overall makeup, you know, especially if you look at the utility, you know, most of it's labor. So, you know, materials is a smaller portion of it. And, yeah, I would expect that, you know, any issues we'd have would be kind of quickly, you know, worked through. So not seeing it as a big issue, you know. to be fluid you know we'll uh we'll monitor this as it moves forward but you know we have no expectation of any impacts at this point okay great thanks so much all right thanks travis all right thank you and i'm showing no further questions at this time i would like to turn it back to adam prior for closing remarks

Thanks so much, and thanks to all of you for joining us. As always, we appreciate your investment and interest in NJR, and have a good rest of your day. Thanks again.

Thank you. And this concludes today's conference call. You may now disconnect.