NewJersey Resources Corporation

Hello everyone. Thank you for joining us and welcome to the New Jersey Resources Fiscal 2026 Quarter 3 and Year to Date Webcast and Conference Call. My name is Matthew and I will be your moderator today. Please note that today's call will be recorded. Adam, please go ahead.

Thank you. Welcome to New Jersey Resources fiscal 2026 third quarter and year-to-date conference call and webcast. I am joined here today by Steve Westhoven, our president and CEO, Roberto Bel, 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 materially differ from our expectations as found on slide two. These items can also be found in the forward-looking statements section of yesterday'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 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 EBITDA, 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 for today's presentation are available on our website and were furnished on our form 8K filed yesterday. Steve will start with this quarter's highlights and a business unit overview, beginning on slide five. Roberto will then review our financial results. Then we'll 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.

NJR delivered a solid performance for this have taken important steps to balance affordability for our customers while continuing to invest in the reliability of our system. We reached a key regulatory milestone at S&T, receiving the first certificate for our expansion at Weave River ahead of schedule, allowing us to advance the project and support the growth opportunities we see ahead. At Clean Energy Ventures, we continue to add in-service capacity and advance a deep pipeline of investment options. while maintaining the flexibility to deploy capital where it generates the best returns. Overall, the consistent execution you're seeing across our businesses supports our outlook for the year and positions us well for continued growth. With that, I'll turn to New Jersey Natural Gas. As we think about our role as a utility, our objective is to deliver the most affordable That philosophy is reflected in the filings we submitted to the BPU on June 1. Taken together, these filings are designed to provide our customers with meaningful bill relief ahead of this upcoming winter, while also supporting the long-term investments necessary to serve our customers safely and reliably. Importantly, we structured these filings as a cohesive package, combining adjustments to our gas supply, alongside our base rate case. From an overall bill perspective, the goal is straightforward, providing stability for our customers with bills expected to remain nearly flat once all elements of the filings are implemented. So when you step back, this is all about balance, delivering affordability today while continuing to make investments required to serve our customers over the long term. From there, I'll turn to storage and transportation on the next slide. At S&T, the drivers of the business remain consistent with what we've discussed previously. In the near term, S&T's performance is supported by favorable recontracting, which provides strong visibility into earnings and reinforces the stability of the business. Looking ahead, we expect this uplift to support a doubling of earnings from fiscal 2025 to 2027. At the same time, we are making progress on future growth opportunities at Leaf River. Our capacity expansion project remains on track. We recently received our FERC certificate, a significant regulatory milestone that supports our expected development timeline. Overall, this is a business where we see a combination of near-term certainty and long-term growth, supported by both strong market fundamentals and disciplined execution through the investment in organic growth opportunities. With that, I'll turn to Clean Energy Ventures on slide eight. At CEB, we continue to make steady progress with additional capacity being placed into service. At the same time, we're focused on maintaining a portfolio that maximizes the value of our existing interconnections. Position us well to help address growing capacity needs. Our project pipeline provides a broad set of investment opportunities with multiple ways to deploy capital, whether through new project development or by enhancing and optimizing existing sites. That flexibility is intentional. that allows us to remain disciplined in how we invest while maintaining the ability to adapt to evolving market conditions, regulatory changes, and opportunities. So overall, we feel very good about both the progress we've made and the strength of the platform we're continuing to build. I'll turn the call over to Roberto for a financial review and then return for a few closing remarks.

Roberto? Thanks, Steve. Turning to slide 10, based on performance for the first nine months, for tightening our fiscal 2026 NFPS guidance range to $3.52 to $3.62 per share, narrowing the range while increasing the midpoint. This update reflects greater visibility into full year results and the ongoing benefit of our diversified model. Without context, let me walk through the quarter in more detail on slide 11. Fiscal 2026 third quarter consolidated net financial earnings were $11.3 million, or $0.11 per share, an increase over the $6.2 million, or $0.06 per share reported in the third quarter of fiscal 2025. Results for the quarter reflect improved contributions across several businesses, with higher earnings at clean energy ventures as additional projects have been placed into service, along with continued uplift at storage and transportation, driven by favorable recontracting activity. For the year-to-date period, the higher net loss at CEV simply reflects last year's one-time gain resulting from the sale of our residential solar business. With that, let's turn to our capital plan on the next slide. We deployed approximately $630 million across our businesses year-to-date. New Jersey natural gas represented roughly two-thirds of total capital spend, with increased investment focused on core infrastructure, particularly in safety and reliability as we continue to support system resiliency and customer growth. For fiscal 2026, we have increased our capital investment expectations to a range of $815 million to $950 million, up from our prior outlook of $775 million to $930 million. This increase is primarily driven by additional investment at the utility. reflecting our focus on safety and reliability initiatives. At Clean Energy Ventures, we're maintaining our current investment range, reflecting the depth of opportunities in our project pipeline and the flexibility we have in deploying capital. Based on projects already underway, we remain confident in achieving the lower end of that range with project optionality that could move us toward the top end. We do not have any change to our estimates for fiscal 2027 and we're reaffirming our five-year capex outlook of 4.8 to 5.2 billion dollars through fiscal 2030. This level of investment supports our seven to nine percent long-term NFVP growth target while remaining consistent with strong credit metrics. Our capital plan remains highly visible and originate from a diverse set of investment opportunities across our complementary businesses, rather than being dependent on any single project or outcome. We expect to provide further clarity as we roll our outlook forward in November. Turning to our balance sheet on slide 13, the cash generation prevalent throughout our businesses is a main source of funding for our capital plan. We expect our adjusted FFO to adjust the debt ratio to exceed 20% in fiscal 2026, reflecting the stability of our earnings and our disciplined approach to capital allocation. From a liquidity standpoint, we have substantial available capacity and maintain a well-ladder debt maturity profile that limits near-term refinancing risk and positions as well across different market environments. Together, These factors reinforce the strength of our financial position and our ability to execute on our long-term plan. Turning to slide 14, we're tightening our fiscal 2026 NFAPS guidance range to $3.52 to $3.62 per share, reflecting improved performance through the year and raising the midpoint of our range. We tighten our expected segment contribution ranges with relatively minor changes compared to our second quarter conference goal. As we look ahead, we expect to revisit our segment mix in November as we roll our fiscal 2027 outlook forward and normalize expectations consistent with our approach each year. With that, I'll turn to Steve for concluding remarks on slide 15.

Thanks Roberto. Overall, NJR is executing well and remains on track to achieve our long-term growth objectives. Our outlook remains anchored by our regulated utility with continued capital investment at New Jersey Natural Gas, helping to ensure safe and reliable operations while supporting long-term growth. At the same time, natural gas remains one of the lowest cost ways to heat a home, reinforcing its value proposition for customers. Storage and transportation is well positioned, supported by near-term earnings visibility and additional upside as expansion opportunities progress. At Clean Energy Ventures, our portfolio is scaling as expected, driven by a secure development pipeline and disciplined capital deployment. This consistent execution reflects the strength and durability of our business model and gives us confidence in the path ahead. Finally, I want to take a moment to thank our employees across NJR. Over the past year, we've talked a lot about our performance during a demanding winter, speaking to the reliability of our system. And more recently, we were tested again by the extreme heat and severe storms. During these moments, the commitment of our people truly shines, such as our home services employees working through extreme heat to ensure customers remain comfortable and safe. When we perform through conditions like this, it reflects the strength of our infrastructure and the dedication of our people. and that's something we're incredibly proud of and thankful for. With that, let's open up the line for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset closer to your mouth when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. and an addendum. Please do not feel the need to limit yourself to one question and one follow up. Ask as many as you'd like. Your first question comes from the line of Eli Josen of JP Morgan. Eli, your line is now open. Please go ahead. Hey, good morning.

Thanks for the question. Just wanted to start on the Ray Case in New Jersey, just thinking about some of the backdrops on affordability and some of the EO1 legislation that we've seen and the report from the BPU. How should we think about that filing in the context of the broader climate, recognizing that you guys have had pretty strong outcomes in the past and obviously gas is in a different position than electric, but just curious thoughts there. Thanks.

Hey, Eli, thanks for the question. So, you know, you saw our filing back in June where we, you know, combined our rate case with a number of other filings to, you know, really, you know, protect, you know, costs, you know, for consumers. Obviously, that was done, you know, purposely so, you know, we're well aware of, you know, the cost issues, you know, for consumers. So, you know moving forward uh you know the process to date you know has been you know normal um and you know you're going to see you know as we uh as we move you know through this process um you know hopefully just a you know normal cycle going forward um just one other note to there to add to that you know natural gas cheapest way and you know we look forward to just working through the process.

Awesome and then you know maybe just thinking about some of the recent strengths in the context of your guidance you know obviously you guys are tracking well above you know where we would think 27 would be can you just remind us how you think about rebasing and obviously You know, just in the context of what implied 20 summer numbers would be and, you know, when you might think about updating that, rebasing. Thanks.

Hey Eli, this is Roberto. Thanks for the question. So we're going to provide our guidance in November for the next year, but as we usually do, we base our guidance on the 7 to 9% from the starting point and that's not changing. If you remember, that starting point was $2.73 for 2025. So from there on, you can draw your 79% and that's kind of what you should expect.

Got it. All right. I'll leave it there. Thanks, guys.

Thank you.

Your next question comes from the line of Konstantin Lednev of Wells Fargo. Your line is now open. Please go ahead.

Hi, good morning team. Congrats on a solid quarter. Maybe just a good morning. Maybe just a quick follow up on kind of some of the rate case questions. Any feedback that you have been receiving from kind of the bill mitigation proposals? And do you see any structural differences with this cycle versus prior cycles? I guess maybe another way to ask is there kind of opportunities to settle similar to prior cases?

So, I mean, this hasn't, you know, been any different than any other, you know, rate case, just as a little extra color. You know, this is a normal, you know, kind of plain vanilla, you know, rate case like we've had before. So, really, you know, no differences, and we've just started the process. So, you know, not a lot of color, but I guess, if anything, you know, not any differences to point out, you know, at this point.

Okay. Small follow-up to the EL1 utility business strategy review. The recommendations obviously came out a couple of months earlier, but do you see any core sticking points? I guess, is there opportunities for more certainty through this process, through anything like a multi-year formulaic rate-making process? Does that kind of... create some considerations for the BPU in the near term?

Yeah, I think that needs to play out a little bit more. To date, those executive orders have really been focused on electric companies. We have not been closely involved in it. that would kind of be an opportunity with this process at this point.

Okay, understood. And then maybe a short kind of housekeeping follow-up just on the kind of incremental SMT capacity kind of moving up and even kind of going beyond the 55 BCF. Do you kind of anticipate the same capital intensity kind of going forward through time and maybe any color on kind of the for re-contracting, contracting the incremental capacity. Any kind of pricing data points that you're seeing?

I mean, there's certainly strong demand for the services that our midstream facilities provide. As far as moving forward, I'd expect that expansions would continue and that capital intensity would continue. So I think there is opportunities We've got the ability to expand Delta Gateway, add compression, and do other things. None of these are in our capital plan currently, but we would expect to continue to invest in those assets because they are a very valuable market and those services are being sought after. And you can see that reflected in the recontracting rates and the increases that we're seeing there.

Right. And would that be covered kind of by the roll forward update next quarter or is that there's some more kind of, I guess, contemplation embedded in there?

I mean, you know, when we do, you know, our next year's earnings in November and our capital plan, you know, will be, you know, you'll see that, you know, I guess in the next call and we'll provide for more detail. But I don't really expect it to deviate, you know, far from what I've just described.

Excellent. Really appreciate taking the questions. Take care. Thanks.

Your next question comes from the line of Gabe Maureen with Mizuho. Gabe, your line is now open. Please go ahead.

Hey everyone, this is Dylan Lippert on for Gabe. I grew up in a good quarter. I want to pivot to a little stuff on CEV here. How do you expect the ongoing debate around capacity markets, resource adequacy, and interconnection reform to impact CEV's project pipeline and long-term returns?

So, you know, we see opportunity with CEV. We've talked about it before, you know, the ability to use, you know, our existing interconnect and existing infrastructure. Thank you for joining us. and all of that, you know, should be, you know, the next, you know, best cost to the grid. So we're working at ways, we're looking at ways to do that. You know, this CapEx, you know, really isn't in our plan at this point in time. It's just, you know, new solar build and CEV at this point. So it would be additive to the plan. And when we, you know, come up with a structure and have some more firmness around how we invest capital, stated this market at longer term.

Gotcha, and are you guys garnering a lot more interest given how much of a topic of debate this has become for CEV?

Yeah, I mean, there's interest, right? There's interest in adding capacity to the market. And, you know, the load factor on our interconnects, you know, is not 100%. So there's room to be able to use existing infrastructure to do so. It's just a matter of coming up with the right structure and the right investment, get the right returns and the right risk profile. And it'll work for us to make an investment. And rest assured that that's something we're working very hard on.

Patrick, is this something we can potentially see on the next quarter call with the guidance revamp?

I mean, it's hard to predict exactly when you're going to break through. It'd be nice to see it on the next call, but I can't make that prediction at this point.

All right. I appreciate the call, guys. Have a great rest of your day. All right. Thank you.

There are no further questions at this time. I will now turn the call back to Adam Prior for closing remarks.

Well, thank you. I'd like to thank all of you for joining us. As always, we appreciate your interest and investment in NJR and have a good rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.