South Jersey Industries, Inc.

At SJI, a lot has changed since our company started more than 100 years ago. But one thing that remains the same is our mission to deliver safe, reliable, affordable, clean energy for a better today and tomorrow.

SJI is an energy services holding company, home to South Jersey Gas and Elizabethtown Gas, serving over 700,000 families and businesses across New Jersey.

At SJI, we promise to be our community's trusted partner, delivering energy solutions that fit their life. Our customers depend on us to be there for them. Our dedication to this isn't new. That's why we're best in class.

Our values are core to who we are. SJI values safety, service, community, and inclusion. Together, we make every day a safe day. We deliver exceptional service to our customers. We invest in the communities where we live and work, and we foster a culture that values differences.

As an extension of serving our communities, SJI is part of the solution in New Jersey's clean energy future. SJI is a leading partner and investor in green technologies to support New Jersey's efforts to meet mid-century decarbonization goals.

At our core, we're an infrastructure company. We will continue to meet the needs of all of our stakeholders long into the future. Our employees, customers, shareholders, and regulators are looking to us for the cleanest energy solutions we can deliver. To do just that, we're leveraging our existing infrastructure and investing in innovative technologies.

At SAI, we've identified three main ways to support a clean energy future in New Jersey. First, we're announcing company-wide sustainability goals to reduce our operational emissions and consumption by 70% by the year 2030 and 100% by 2040. We're also committing to dedicate at least 25% of all future capital expenditures towards sustainability projects. This means replacing older pipelines in our distribution system and modernizing our fleet of service vehicles. We're also equipping all of our SGI facilities in New Jersey with solar power.

Second, we're going to help our customers consume less energy by investing in more energy efficiency programs. We plan to significantly expand our energy efficiency program this year, providing increased energy and cost-saving opportunities for all customers. This program has the potential to help South Jersey Gas and Elizabethtown Gas customers reduce enough consumption that equates to preventing the release of over 950,000 tons of carbon dioxide into the atmosphere. The same as removing over 185,000 cars from New Jersey roadways for a year. We're also launching Conserve, an online resource on the South Jersey Gas and Elizabethtown Gas websites. Conserve offers great tips for using less energy and lowering your bills.

Third, we're investing in more green energy technologies. SJI partnered with Kaptona to launch Catamaran Renewables, a joint venture that will develop, own, and operate renewable energy projects. In the last few months, we've announced new fuel cell investments that will not only help the environment, but increase reliability. Fuel cells help reduce pollution by using an electrochemical process to convert small amounts of fuel into large amounts of heat and electricity.

Another clean energy we're investing in is green hydrogen. We started a partnership with Atlantic Shores Offshore Wind to explore the feasibility of blending hydrogen with our gas supply to lower the carbon content of the energy we provide. As offshore wind development continues to accelerate along the New Jersey coast, this partnership will support the use of renewable electricity to help advance our clean energy goals.

We're also investing in renewable natural gas. SGI just acquired minority ownership in a company called RevLNG. Rev is a national leader in producing renewable natural gas. With this investment, we can use cutting-edge technology to capture methane from dairy farms and convert it into clean fuel.

In the decades to come, all these steps will help our state and region meet their clean energy goals. More importantly, they're good for the planet and help preserve the incredible natural resources we have right in our home state of New Jersey.

While we focus on these important issues, our company's future is built around the efficient and effective deployment of clean energy technologies. Advancements in the production of these energy sources will help us to decarbonize our gas supply while continuing to achieve our core mission of providing safe, reliable, affordable, clean energy for the customers and communities we serve.

SJI, driving innovation, delivering affordable energy, powering New Jersey's clean energy future.

Good morning, and welcome to SGI's 2021 Investor Day. I'm Mike Renna, President and CEO of SGI, and we're pleased to have you join us today. The SGI management team, many of whom you've just seen in our introductory video, will be joining me today to share our plans to deliver strong long-term growth and value for our shareholders. While COVID has certainly presented an unprecedented series of challenges, one thing the past 14 months has taught us to be a bit more patient and not to take every child cameo and dog bark quite so seriously. So here's to turning the corner into a future where we can all be together again, in person, healthy and safe. As we begin, please be aware that certain statements in today's webcast contain estimates and other forward-looking statements within the meaning of the securities laws. And we wish to caution persons watching this webcast that current expectations, assumptions, and beliefs forming the basis of our forward-looking statements are beyond our ability to control or estimate precisely, which could cause results to differ materially from our expectations. We would urge you to review these important disclosures as provided in our presentation and in our SEC filings. Our agenda for today's meeting includes a comprehensive review of our operations led by members of our senior team. After our prepared remarks, we'll take a short break and continue with question and answer period. Today represents an important moment for SJI. It's a chance for us to lay out our vision, our priorities, and the strategies that support our purpose, delivering safe, reliable, and affordable clean energy. We are an infrastructure company, delivering energy to more than 700,000 families and businesses, energy that supports the economic prosperity and environmental goals of New Jersey. Today, you'll hear about the strength of our utilities and how our modernized infrastructure is paving the way to a clean energy future. We will show you how our sustainability investments translate into a competitive advantage for SGI. We'll lay out strategic decarbonization initiatives that position SGI as a leader in the clean energy economy. Finally, we'll discuss our commitment to maintain solid financial and credit metrics, supporting our plan to deliver predictable, sustainable growth and value to our shareholders through 2025 and beyond. Our strategic plan calls for approximately $3.5 billion in total investments, with roughly 60% dedicated to sustainability initiatives. South Jersey Gas and Elizabethtown Gas, our core utility businesses, operate one of the country's most modern and efficient systems, supporting double-digit rate-based carriers through 2025. Investments we've made under our infrastructure programs not only significantly reduce fugitive methane emissions, but they support next-generation clean energy like RNG and hydrogen. non-utility energy production investments including our recent investment in rev lng leading rng developer are uniquely positioned to accelerate this transition and our growth and our wholesale retail energy operations are well positioned for steady contributions following steps we've taken in recent years to de-risk our business all of these actions strengthen our ability to deliver highly predictable economic earnings per share growth of five to eight percent over the next five years Longer term, we anticipate our utilities to continue to represent the lion's share of our earnings and continued rate-based growth. Fueled by decarbonization investments, we'll support strong economic earnings per share well into the future. At our core, SAI is a utility company with a $3.4 billion rate base spanning across New Jersey. Our roots trace back to 1910, originally supplying natural gas to Atlantic City, which led to the creation of South Jersey Gas in 1947, and more recently, the acquisition of Elizabethtown Gas in 2018. Over the years, we have successfully operated our infrastructure to meet the energy needs of our customers, always acting responsibly and in partnership with our regulators and suppliers. Our organization includes complementary businesses that leverage our core utility experience across the energy value chain. Every day, the dedicated and talented employees of South Jersey Gas and Elizabethtown Gas deliver energy to more than 700,000 customers in a safe, reliable, and environmentally responsible way. SGI Midstream, which includes our 20% equity ownership of Penny's Pipeline, was formed to invest in long-term contracted energy infrastructure that will enhance utility reliability, promote a more sustainable environment, and support regional economic development. And our non-utility businesses are largely comprised of low-risk investments that support higher returns than our utility businesses. These businesses seek to enhance the value of our infrastructure through innovative energy technologies that produce low-carbon electricity, decarbonize the gas stream, and leverage our deep industry expertise and relationships to provide essential services to utilities, power generators, and industrial customers. As part of today's presentation, we are announcing a renaming of these non-utility segments to better align with the assets, investments, and mission of each entity. Energy services is now energy production, reflecting the renewable and decarbonization assets that we own, operate, and develop. Energy group is now energy management, reflecting our focus on fuel supply management, marketing, and consulting activities. The goal across our non-utility businesses is to generate stable, largely fee-based revenue from long-term commitments with high-quality customers. Our growth plan is highly disciplined, focused on infrastructure modernization and sustainability while enhancing cashflow and earnings. Our utility investments to assure safe and reliable service, reduce fugitive emissions, and improve energy efficiency support 10% rate-based growth over the next five years. Our sustainability investments in renewables and decarbonization are aligned with the clean energy goals of our region, are vital in achieving our region's aggressive decarbonization goals, and offer total returns above our authorized utility returns. Our wholesale businesses have been reshaped and de-risked in recent years, and our RNG investments are expected to generate significant cash flow and earnings. And finally, our plan supports improved cash flow and earnings quality given regulatory initiatives approved by our regulators. Our utilities are fully decoupled, and roughly half of our capital spending earns timely recovery either through an approved tracker program or through the addition of new customers. As I mentioned, SGI's strategic growth path will focus on significant growth at our regulated utilities. 70 to 80% of our consolidated earnings, 90 to 95% of our cash flow through 2025 is expected to come from our utilities. These projections exclude acquisition-related interest costs, which remains very similar to our current mix. As you know, in 2019, the Murphy administration updated the state's energy master plan with a focus on renewable energy and decarbonization. As a proud New Jersey company, we look forward to continuing to work with the administration and our regulators to set a course to achieve these important goals. As I mentioned earlier, our vision is rooted in delivering safe and reliable gas to our customers while investing in innovations that will lessen the carbon content of gas, reduce consumption, and lower costs for our customers. Our mission and values will continue to reflect strong alignment with ESG goals, just as they have for many years. As you'll hear from Melissa Worson in a few minutes, at SJI, safety, service, community, and inclusion are our core values. We remain fiercely committed to protecting the environment and assuring oversight and accountability as we pursue our goals, including the aggressive decarbonization targets we've established. Just last month, we announced an industry-leading commitment to decarbonization, setting an aggressive goal to voluntarily reduce our operational emissions and consumption 70% by 2030 and 100% by 2040. These targets surpass those of the Murphy administration's energy master plan. We also announced a commitment to deploy at least 25% of annual capital spending towards sustainability investments moving forward. One of the most promising technologies, renewable natural gas, can be blended directly into the gas stream, reducing carbon intensity and reducing emissions. On the road, as many of you know, hydrogen appears uniquely positioned to play a role, to play an expanding role in achieving a decarbonized future. And SGI, like many of our peers, has begun studying the concept. You'll hear more about our recent actions in this regard from other members of our team later today. Finally, I'm joined by our talented leadership team. Collectively, they bring many years of experience in utility operations, regulatory, and public service. Among the leaders you'll be hearing from directly today is Dave Roberts, who leads our utilities. He's a gas industry veteran with nearly 25-year career in SJI. Melissa Orson, who leads South Jersey Gas, joined SJI in 2017 on council and brings proven leadership, having previously served as CEO of the New Jersey Economic Development Authority. Steve Kochi, our CFO, brings tremendous vision and experience to his role, having served previously as SJI's legal director, head of rates and regulatory affairs, and chief strategy officer. Our team is highly talented, they're driven, and they're ready to execute on our vision we've been outlining for the future. Thank you again for your time and attention. We're excited about our future and look forward to sharing our story with you today.

Good morning, everyone. I'm Melissa Orson. I've been with SJI since joining in 2017 as general counsel, overseeing legal and government affairs. Previously, I was CEO to the New Jersey Economic Development Authority. And before that, served as chief of staff to the former lieutenant governor and secretary of state of New Jersey. I'm currently president of South Jersey Gas and deeply involved in our sustainability strategy, which will be the focus of my discussion with you today. Mike touched upon SGI's border sustainability and ESG agenda, as well as the fundamental beliefs we hold as a company about the future of the U.S. energy economy. Our mission and values align strongly with sustainability and a clean energy future for New Jersey and our regions. As the president of SGI's largest gas utility, let me assure you that safety, service to the community, and the promotion of diversity and inclusion initiatives are at the core of our values. We are also heavily committed to investing in initiatives that reduce the carbon content of natural gas and lower energy costs for customers. Throughout today's presentation, you will receive a lot of valuable information regarding SGI's financials. Of equal importance, How we maintain sustainability issues is central to our long-term value proposition. Long before many of our peers began to focus on sustainability, our company was being guided by ESG core principles. Environmental stewardship, corporate responsibility, sound governance, and caring for the communities we're honored to serve have been fundamental values for our company for decades, and this commitment remains unwavering in the plan we are announcing today and well beyond. On the environmental side, we have replaced more than 800 miles of vintage leak-prone pipeline. Our request for a much larger energy efficiency program for customers was approved by our regulators in April, and we continue to invest in renewables and decarbonization. The increased focus on social justice and racial equality over the past year is consistent with our commitment to diversity, equity, and inclusion amongst our employees and the communities that we serve. I can tell you that SJI has a strong record of engagement on these issues, and we are committed to continue to build on those efforts. SJI has taken multiple steps in this regard, including the creation of a Diversity and Inclusion Council to provide accountability and oversight. These most recent endeavors expand upon our historical efforts to support underserved communities, support policies that empower our employees, and provide enhanced opportunities and training for future leaders and employees at every level. And with regard to governance, we have an experienced board with diverse backgrounds and skill sets, one that is highly focused on aligning oversight and reporting with our corporate goals. We are currently preparing to publish our annual ESG report for the 12th consecutive year. This report is continuously being updated in real time on our website with new metrics and content, and we are proud of the reception it receives amongst our many stakeholders, including the ESG financial community. For SGI, as I mentioned, the concepts of sustainability and ESG are not new. Our company has been recognized for our efforts by many organizations over many years in support of infrastructure safety and reliability, board and leadership diversity, and investments in a variety of clean energy initiatives, including solar combined heat and power projects and landfill gas to power projects, just to name a few. As we look to the future, we see numerous growth opportunities, both on the utility and non-utility fronts. At our utilities, both SJG and ETG have a sizable inventory of infrastructure in need of replacement, energy efficiency improvements, and technology upgrades, such as smart meters that support reducing consumption and emissions. Among non-utility opportunities, we are focused on the acceleration of decarbonization through investments in RNG and hydrogen, as well as renewables investments, such as fuel cells and solar that produce low carbon electricity and support the clean energy goals of our state and region. Our commitment to sustainability is firm, and we are putting our money where our mouth is. Today, we are announcing the launch of a $3.5 billion capital spending plan for our company over the next five years, with approximately 60% targeted for sustainability investments. This investment level is well above our 25% targeted annual commitment that we communicated to you in April. At SJI, sustainability includes many different investments. Investments in support of renewable natural gas development, pipeline replacement, and other utility investments to modernize our infrastructure to reduce fugitive emissions, improve energy efficiency, and strengthen redundancy. Investments in traditional renewable investments such as solar and fuel cells. And investments in other clean energy initiatives such as smart meters and hydrogen technology. All these investments are critical for our state and region to achieve its clean energy goals. Now I'd like to speak to you about important legislation under discussion at both the New Jersey state and federal levels that would provide incentives for the development of renewable natural gas. Earlier this year, legislation was introduced in New Jersey to support RNG programs for utilities. Prior to joining the SJI, as I mentioned, I served in various roles assisting leaders in the New Jersey state government, and I can tell you that I am encouraged by the direction the state seems to be moving in this regard. The potential allowance of RNG investments and rate base would offer an opportunity to accelerate the deployment of RNG investment in our five-year plan and technologies, which would be a win-win for our customers and shareholders. And most importantly, would help the state meet its long-term environmental and clean energy goals. At the federal level, we are part of a coalition that is supporting efforts for the extension of investment tax credits, traditionally received by solar and wind developers. to developers of RNG and hydrogen projects. As you'll hear later today from Steve Kochi, our five-year growth plan includes strong cash flows and earnings from RNG investments, but does not include ITCs for RNG investments. Before I conclude, I want to take a moment to reiterate some of the key sustainability things we've discussed. As you've heard, we have a demonstrated record of commitment to sustainability. Our decarbonization goals targeting 100% emission reduction by 2040 is significant and exceeds the goals of New Jersey's Energy Master Plan. And we are backing up our words with actions, committing 60% of our five-year capital plan towards sustainability investments, well ahead of our 25% targeted annual commitment. To conclude, since I joined SJI, I've seen firsthand how deeply rooted the values of corporate responsibility and sustainability are within this company. I am proud to be part of what we're building here, and I look forward to executing this exciting plan that I know will improve the lives of our customers and drive value for all of our stakeholders. Thank you.

Good morning, everyone. I'm Dave Robbins, and I serve as SJI's president of our utilities. It's a pleasure to be with you today. Today, I will spend time talking about the value created at each of our utilities. Our utilities are and will continue to be the foundation of SJI. SGI is the largest standalone natural gas provider in New Jersey, serving more than 700,000 residential, commercial, and industrial customers via 10,000 miles of distribution and transmission system through our two utilities, South Jersey Gas and Elizabethtown Gas. Our combined rate base is a sizable $3.4 billion as of the end of 2020. And from a high level, our utilities are fortunate to encompass two highly desirable operating and investment attributes, namely above average customer growth and a continued collaborative and supportive partnership with our regulators that has been well established and evidenced over many years. As you've heard me repeat time and again over the years, safety and customer experience are non-negotiable core values. We remain aware of the great responsibility we have to provide safe and reliable service to the 700,000 customers we are honored to serve. This tone is set at the highest management levels. And the consistent recognition we've received from J.D. Power for many years is a source of pride among our more than 1,100 talented and dedicated employees who endeavor each day to be the best at what they do. South Jersey Gas is the larger of our two utilities with a $2.3 billion rate base and proudly serving approximately 400,000 customers in the Southern part of New Jersey through more than 6,600 miles of gas transportation and distribution infrastructure. SJG serves a diverse mix of customers from urban, suburban, rural, and coastal communities. customer base is more than 90% residential customers. SJG's growth is driven by the addition of new customers, infrastructure modernization and energy efficiency investments, periodic cost recovery through base rate cases, and other important regulatory-approved safety, redundancy, and clean energy initiatives. SJG's exceptional grown at an impressive rate of 1.5% annually over the past five years, or about 8,000 new customers annually, primarily driven by customers converting to natural gas from alternative fuels such as heating oil and propane. Over the next five years, we expect this level of activity to remain robust given a variety of factors. Among these, strong demand for natural gas, lower costs of gas relative to alternative fuels, cleaner burning than alternate fuels, and a sizable identified opportunity of more than 60,000 potential customers. As you can see, customer growth has been slightly lower than historic levels more recently due to the pandemic. as construction projects were delayed and conversion customers put off work in their homes. More recently, however, as pandemic recovery and reopening has accelerated, we have seen conversion levels normalized and are encouraged by trends in new construction we've seen recently in our area. We have an across the board commitment to operational excellence. SJG's operational performance has been strong for many years and not solid improvement across all key categories over the past five years. We're very proud of our employee safety metrics and our system resilience and response metrics are positively correlated with having now achieved full replacement of all cast iron and bare steel from SJG systems. As mentioned, we have a highly constructive partnership with our regulators that fosters an environment of safety, reliability, and energy efficiency for our customers. In October 2020, we achieved a supportive resolution in our base rate case that allowed for the recovery of prudently incurred operating costs, affirmed our authorized ROE of 9.6%, and raised our equity layer to 54.0%. Our regulators understand the need to stabilize SJG's margins from the impact of weather or conservation risk, assure safe and reliable service, reduce fugitive methane emissions, and improve energy efficiency. Accordingly, the BPU has authorized important decoupling, infrastructure modernization, and energy efficiency programs. These programs are supported by riders that allow for timely cost recovery. Over the next five years, having replaced all the cast iron and bare steel from its system, SJG expects to begin replacing more than 800 miles of vintage steel and vintage plastic made. SJG has two important regulatory proposals pending before the BPU. The first is a proposal for an extension and upsizing of SJG's infrastructure modernization programs, which are set to end later this year. We have proposed a new five-year, $742 million program to replace the more than 800 miles of infrastructure that I previously mentioned. We remain in constructive dialogue with the BPU and expect a resolution of this proposal over the summer. The second is an engineering and route proposal for approval to construct needed system upgrades in support of a plan two BCF liquefied natural gas facility in support of critically needed redundancy on SJG system in the event of supply interruption. Discussions with the BPUs surrounding this important project continue to progress, and we expect resolution of this proposal before year end. Both of our utilities are exploring opportunities to decarbonize their systems to align with the clean energy goals of our state. We are currently exploring a number of opportunities to develop RNG production for injection into SJG system, including the potential repurposing of previously owned and operated landfill gas to power sites. We also announced a partnership this past December with Atlantic Shores Offshore Wind for a pilot to explore green hydrogen development for potential natural gas blending into our system and other utility systems in New Jersey. Both of these projects represent exciting new clean energy investment opportunities for SJG. And as Melissa noted earlier, legislation that would allow for the rate basing of these investments would be a true win-win for both customers and shareholders alike. SJG's capital plan for the next five years is roughly $1.7 billion with about 50% of investments in support of infrastructure modernization and new business which earns a timely return. I would note that SJG's energy efficiency investments of $133 million over the next three years, while not classified as rate-based CapEx, will earn separate recovery in a timely manner. Hence, the absolute percentage of SJG's total investments that benefit from timely recovery is actually 60%. As you can see, SJG's sizable $1.7 billion capital plan drives very healthy rate-based growth of approximately 10% over the next five years. Before concluding the SJG section, I want to take a moment to summarize some key takeaways. SJG's $1.7 billion capital plan drives roughly 10% rate-based growth over the next five years, with roughly 50% of the spend recovered in a timely manner. SJG has excellent visibility for strong 1.5% customer growth moving forward, driven by a continuation of robust conversion activity as well as new construction. And our partnership with our regulators is well established, with constructive rate case outcomes and approvals of important rate mechanisms supporting safety, reliability, and energy efficiency. Turning now to Elizabethtown Gas. ETG is the smaller of our two utilities with a $1.1 billion rate base and serving approximately 300,000 customers in the northern part of New Jersey through more than 3,200 miles of gas transportation and distribution infrastructure. ETG serves two distinctive customer bases. an urban, densely populated base in the Eastern Service Territory and a more rural base in the West. Similar to SJG, ETG's customer base is more than 90% residential, with a low concentration of risk associated with large customers. ETG's growth is also driven by the addition of new customers, infrastructure modernization and energy efficiency investments, periodic cost recovery through base rate cases, and other important regulatory approved projects. Both of our utilities have been fortunate to be recognized by J.D. Power for high customer satisfaction rankings for many years. In 2020, ETG received the first place ranking in its region for the sixth consecutive year with SJG achieving fourth place and just one point from third place. These rankings are an immense source of pride for our talented and dedicated employees. There remains a strong demand for natural gas in both of ETG's geographic service territories. Prior to our acquisition in 2018, ETG's historic customer growth rate was approximately 0.9%. Since our acquisition, we have been able to raise ETG's growth rate to 1.4%, or roughly 4,000 new customers annually, driven by a combination of an innovative approach from our sales and marketing teams and a collaborative effort across the entire organization. Over the next five years, we expect to achieve approximately 1.5% annualized growth driven by a continuation of new construction and conversion customers with a sizable identified opportunity of more than 35,000 potential customers. ETG's operational performance has likewise improved across all categories since our acquisition in the mid 2018. ETG's recently approved infrastructure modernization program is accelerating the replacement of cast iron and bare steel pipe, which in turn will continue to have a favorable impact on system resilience metrics. We have a highly constructive partnership with our regulators with regard to ETG, just as we do with SJG. Since our acquisition of ETG in 2018, the BPU has approved a constructive rate case resolution in 2019 that allowed for the recovery of prudently incurred operating costs, affirmed its authorized ROE of 9.6%, and raised its equity layer from 46% to 51.5%. also approved a five-year, $300 million infrastructure modernization program, and recently approved energy efficiency program and decoupling. Similar to SJG, these important programs are supported by riders that allow for timely cost recovery. Over the next five years, ETG will be laser focused on replacing nearly all the remaining cast iron and bare steel that remains in its system, totaling more than 300 miles. Beyond the next five years, ETG's system has more than 600 additional miles of vintage steel and vintage plastic pipe in need of replacement that will become our focus. ETG, like SJG, is similarly exploring opportunities to decarbonize its system to align with the clean energy goals of our state. ETG is currently exploring a variety of RNG development opportunities for gas blending into its system, including landfills, wastewater treatment facilities, food waste, and dairy farms. ETG's capital plan for the next five years is roughly $1.0 billion, with about 50% of investments in support of infrastructure modernization and new business, which earns a timely return. Like SJG, ETG's energy efficiency investments of $74 million over the next three years are not included in CapEx, but are recovered separately in a timely manner. So the percentage of ETG's timely recoveries are similarly 60%. As you can see, ETG's sizable $1 billion capital plan drives very healthy rate-based growth of approximately 10% over the next five years. So for ETG, a few key takeaways. ETG's $1 billion capital plan drives roughly 10% rate-based growth over the next five years, with roughly 50% of the spend recovered in a timely fashion. ETG has excellent visibility for strong 1.5% customer growth moving forward, driven by a balanced mix of new construction and conversions. Our partnership with our regulators is well evidenced since our acquisition of ETG with a constructive rate-based outcome and approvals of important rate mechanisms supporting safety, reliability, and energy efficiency. As I conclude my remarks, I'll share that much has changed in our industry and at SJI over the past 25 years. And I can state without any reservations that our utilities, which represent the majority of our company's earnings, are positioned as well as I've ever seen them to perform at the highest level and achieve exceptional growth over the next five years. I am truly excited about the energy and experience we can offer our customers in the future and the value we can create for shareholders. I wish you well, and thank you for your time and attention today.

Good morning, everyone. My name is Steve Kochi, and I serve as SJI's Senior Vice President and Chief Financial Officer. And it's my pleasure to be with you all today. In this segment, I will spend time talking about the strategy and value created by our non-utility businesses. As you'll see, SJI's long-term strategic growth plan embeds a disciplined non-utility strategy that is complementary to our utility business one that aligns with the clean energy goals of our region and focuses on decarbonization investments that generate strong project returns strong cash flows and predictable earnings to begin as mike noted in his opening remarks our non-utility businesses are comprised of three distinct segments Our midstream investment in pennies supports our strategy of investing in long term contracted energy infrastructure that will support a more sustainable environment while bringing abundant, responsibly produced and low cost Marcellus gas to the mid Atlantic region. Make it more affordable for families and competitive for businesses. Our energy production segment supports our strategy to enhance the value of our infrastructure. and reduce our carbon footprint through investing in traditional renewables that produce low carbon electricity and investing in decarbonization opportunities such as RNG that lower the carbon content of natural gas. And finally, our energy management segment supports our desire to leverage our deep industry expertise and relationships to provide essential services to utilities, power generators, and industrial customers. Starting with midstream, as you know, Penn East addresses a critical supply need for our region. Since inception, SJI has invested $68 million to advance this important project that provides access to low-cost supply that will benefit customers and local economies. SJI remains committed to the Penn East project as we await decisions from the FERC to proceed with phase one in Pennsylvania and the U.S. Supreme Court to proceed with phase two in New Jersey. The financial projections we're sharing with you today embed only phase one of the project. We have removed phase two from our projections due to the uncertainty around an in-service date. We remain optimistic that phase one of the project, constructed entirely within Pennsylvania, will proceed later this year, and we look forward to the Supreme Court's decision, which is expected by the end of June, after reviewing a lower court's decision concerning condemnation authority. Turning now to energy production, SJI is extremely well positioned to support investment opportunities that align with the clean energy goals of our region and is focusing on renewable and decarbonization investments that generate strong project returns, strong cash flows, and predictable earnings. Today, we are announcing our intention to spend $750 million over the next five years with roughly two-thirds in support of decarbonization investments, and roughly one-third in support of traditional renewables that align with our state's clean energy goals. With regard to the renewables, we plan to invest approximately $250 million over the next five years, a modest average annual investment of roughly $50 million. Our fuel cell investments are aimed at utilizing innovative energy technology to reduce emissions and strengthen grid reliability in our region. Our roughly $80 million investment in two fuel cell projects in 2020 affirms our commitment to this strategy. With roughly 75% of fuel cell revenues fixed under New York's Value of Distributed Energy Resources, or VETR, program, these projects produce steady, low-risk cash flows, and unlevered returns are in line with our hurdle rate for non-utility investments. Our solar strategy is similarly aimed at supporting the clean energy goals of our region and reducing SJI's carbon footprint by investing in solar arrays at our corporate facilities, former landfill gas to electric sites, and other projects across the region. Turning to our decarbonization strategy, we plan to invest approximately $500 million over the next five years on the decarbonization. specifically through our ownership and partnership with leading RNG developer RevLNG. Recall that in late 2020, SJI acquired a 35% interest in Rev along with rights to develop anaerobic digesters at a portfolio of dairy farms to produce RNG. The rationale for our partnership with Rev is straightforward. Rev offers us an immediate opportunity to accelerate on our decarbonization strategy with a proven industry leader. The business is low risk, driven primarily by contracted margins from credit worthy counterparties. The business has a sizable and growing queue of opportunities to develop RNG for injection into utility and interstate pipeline systems. And the projected returns are in excess of our hurdle rate for non-utility businesses. On the equity side, our plan assumes 100% ownership of REV by 2025, upon REV attaining financial milestones. On the farm development side, our plan includes approximately $280 million to develop up to 25 farms, and we continue to look for opportunities to add to this portfolio. We're in advanced stages of negotiating various partnership opportunities with industry leaders to develop these farms. The partnership opportunities are anticipated to take one of two forms, and will benefit SJI by sharing the CapEx to develop the farms and locking in long-term contracted cash flows. Under one partnership form, SJI will sell RNG production and the associated environmental attributes to an end user under a fixed price long-term take or pay contract. Under the second partnership form, SJI will similarly sell RNG production to an end user under a long-term contract but will retain flexibility to monetize the environmental attributes under a structured hedging program. On average, SJI expects to spend $6 to $8 million to develop each farm for RNG production, resulting in an average EBITDA of $1.5 million and average net income of $750,000 per farm. The number of cows and the carbon intensity score of a farm are the biggest factors driving returns. We're excited to begin development of a portfolio of dairy farms in 2021 and expect eight SJI farms to begin contributing to earnings in 2022. With this visual, I'd like to give you a sense of the process for producing RNG at dairy farms. As illustrated, the RNG project lifecycle has many steps from site analysis to gas sales and the average timeframe per farm development is approximately 10 to 14 months. Turning now to our financial forecast for energy production, we expect our $750 million capital plan over the next five years will result in approximately 20% growth in economic earnings. As you can see, we expect roughly 10 to 15% of SJI's total earnings contributions in 2021 come from energy production, largely from traditional renewables, including ITCs. Our five-year forecast embeds approximately $55 million in total ITCs, principally in the early years of the plan, which are increasingly replaced by cash flows and earnings from decarbonization activities. In sum, our energy production plans are very straightforward, and we believe we're very well positioned to support the accelerating trend towards clean energy and decarbonization. Our capital plan drives significant 20% growth in economic earnings from 2021 to 2025. Our alignment with REV, an experienced industry partner, provides both equity investment income and low-risk contracted margins from farm development. And as Melissa mentioned earlier today, pending legislation in both New Jersey and at the federal level in support of decarbonization investments represent a potential opportunity to achieve upside to our five-year plan. Switching now to energy management, this segment of our business is expected to provide steady earnings contributions from a reshaped and de-risked wholesale business. and modest contributions from our retail services business. Our wholesale operations include stable cash flows from providing fuel supply management services to merchant generators under multi-year contracts, contributing on average approximately $1 to $1.5 million of earnings each. Our five-year plan assumes continuation of our nine existing contracts and the addition of two new contracts. Wholesale operations also include our wholesale marketing book, which has been reshaped and de-risked in recent years, reducing future earnings volatility. Included in this business is our management of Elizabeth Town's gas supply portfolio under an asset management agreement. Our retail services operations are driven by modest contributions from meter reading, appliance service contracts, and energy consulting. Energy consulting is a low risk commission based business that capitalizes on our expertise in matching suppliers with end users, gas and electricity, and is expected to post modest growth through core business development and acquisitions over the next five years. Turning now to our financial forecast for energy management, we expect approximately 10% growth in economic earnings, primarily driven by renewed and new fuel management contracts as well as organic growth and small acquisitions in energy consulting. As you can see, we expect roughly 10% to 15% of earnings contributions in 2021 to come from energy management activities, largely from our wholesale group, with an increasing contribution coming from our retail services group over the five-year planning horizon. To sum up our non-utility businesses, as you've seen, our long-term strategic growth plan embeds what we consider to be a highly disciplined non-utility strategy that is complementary to our utility business. Our energy production operations align with the clean energy goals of our region with forecasted 30% growth focused on investments that generate strong project returns, strong cash flows, and predictable earnings. and our energy management operations are expected to generate steady returns with 10% growth forecasted into 2025. Thank you. Now it's my pleasure to review our financial plans for the next five years with you. As Mike stated in his opening remarks, and as my colleagues have reinforced in their presentations, our businesses have exciting and strong growth prospects. Our financial goals and priorities are based on a $3.5 billion capital plan with 80% allocated to our utilities and 60% for sustainability investments. A key focus of ours will remain on assuring ample liquidity, balance sheet strength, and solid credit ratings in order to effectively execute the opportunities we see before us. We are projecting 5% to 8% economic earnings per share growth over the next five years with a majority of our earnings coming from our utilities and further supported by our wholesale and clean energy operations. And we're projecting roughly 3% annual dividend growth during the planned period, returning cash to shareholders while balancing our cash flow needs to generate solid returns. Our capital allocation strategy is disciplined, balancing the importance we place on maintaining a strong balance sheet with delivering strong growth. As you've heard throughout today's presentations, we're allocating capital first at our utilities to assure we continue to provide safe and reliable service to our customers. Our non-utility investments in clean energy provide attractive risk-adjusted returns with decarbonization investments expected to achieve returns well above our hurdle rate of 10 to 12% on an unlevered basis with steadily increasing cash flows. our balance sheet debt and credit metrics have all improved over the past year and support the growth plan we are laying out today. And we will continue to make future investments with a focus on prioritizing low risk cash producing initiatives. And finally, returning cash to shareholders through a rising dividend remains our commitment, just as we've done for the past 22 consecutive years. As you can see, our $3.5 billion capital plan commits a majority of our investment to our utilities with a focus on safety and reliability and sustainability initiatives. SJI's sizable capital plan drives very healthy rate-based growth over the next five years with a roughly 10% combined annual growth rate projected at both South Jersey Gas and Elizabethtown Gas and with approximately one half of our capital investments earning a timely return, reducing regulatory lag. Under our plan, SJI's consolidated rate base will grow from approximately $3.7 billion in 2021 to approximately $5.4 billion in 2025. The key assumptions underlying our plan include an expectation for continued strong customer growth, infrastructure modernization, redundancy and clean energy projects, periodic base rate case filings, and stable cost of capital metrics. Yesterday, we released our first quarter 2021 earnings results, and I'm pleased to report that we're off to a strong start in 2021, with improved results as compared to a year ago reported at both our utility and non-utility operating segments. Utility segment improvement was primarily driven by new base rates implemented at South Jersey Gas on October 1st, 2020, and the roll-in of infrastructure modernization investments under our authorized plans. Non-utility segment improvement reflects both improved energy management results driven by asset optimization opportunities at wholesale services, as well as improved energy production results reflecting positive contributions from fuel cells, and our 35% equity investment in REV. For 2021, at the midpoint, we're forecasting a $30 million improvement in economic earnings for 2020 results. As outlined in our fourth quarter 2020 earnings release and conference call, 2020 results included a number of positive but non-recurring gains. Adjusting for these items Our 2020 economic earnings base is $150 million, which, if you recall, is the level management originally forecasted for 2020 back in 2016. SJI was able to achieve this level of earnings despite significant changes in federal tax policy, wholesale market fundamentals, New Jersey Energy Master Plan revisions, and other items. Our forecast for 2021 utility segment improvement reflects a full year contribution from SJG's rate case, strong customer growth, and continuation of modernization programs through the year. Our forecast for 2021 non-utility segment also reflects strong performance. Within this segment, energy management is expected to contribute 10 to 15% of economic earnings with 2021 improvement largely driven by the positive impact of wholesale marketing results as already witnessed in the first quarter. Energy production is expected to contribute 10 to 15% of 2021 economic earnings as well, with improvement largely driven by renewables investments, as well as contributions from our equity interest in REV. 2021 other, which includes interest on debt, is also expected to post improved results as a result of our recent financing transactions and repayment of debt. Looking forward, SJI is forecasting attractive economic earnings per share growth of 5% to 8% over the next five years, with an expectation that significant utility and decarbonization investments will continue to support strong growth well through the second half of the decade. With the forecasted improvement we outlined on the prior slide and utilizing 110 to 112 million in weighted average diluted shares outstanding, SJI's 2021 economic earnings forecast is $1.55 to $1.65 per share. Under the plan we've outlined today, SJI's consolidated economic earnings per share increases strongly to $2 to $2.10 per share in 2025, with more significant step-ups in 2023 and 2025 driven by the timing associated with utility rate cases and clean energy investments. Under our plan, utility operations will continue to generate a majority of consolidated earnings. As Melissa noted during her remarks, Important legislation is under discussion at both the New Jersey state and the federal level that would provide incentives for the development of renewable natural gas at our utilities. I would reiterate that these initiatives, if implemented, could result in a potentially significant lift to SJI's regulated earning mix above the 70 to 80% that is currently in our plan. As I mentioned, We're committed to maintaining and growing our dividend on an annual basis, just as we've done for decades. We're forecasting roughly 3% dividend growth annually through 2025, in line with our current rate, until we achieve our targeted payout ratio of 55 to 65%. As we achieve our target level, we would expect dividend growth more in line with earnings growth, subject to approval of our board. Please note that our dividend is increasingly supported by strong cash flow growth. Under our plan, SJI's consolidated cash flow from operations increases 30% from 205 to 215 million in 2021 to 600 to 650 million in 2025. The key assumptions underlying this growth include strong projected cash flows from RNG dairy farm development, as well as improved cash flows at our utilities, driven by the addition of new customers, timely recovery of infrastructure modernization and energy efficiency investments, and periodic rate relief. As you can see, our forecasted improvement in earnings results in steady improvement of our dividend payout ratio, which declines to under 70 percent by 2025. and our forecasted strong improvement in cash flow generation results in a much lower dividend percentage, declining significantly by 2023 and achieving a low to mid 30% range by 2025. Turning to our balance sheet, in March, SJI executed several financing transactions designed to strengthen our balance sheet, improve our credit ratings, and significantly fund the capital plan we've outlined for you today. Specifically, SJI sold a total of 11.7 million shares, with 1.9 million issued in the first quarter and 9.8 million shares under a forward sale that are expected to be issued over the next 12 months. Gross and expected proceeds from these offerings are expected to total more than $260 million. At the same time, SJI issued and sold 6.7 million mandatory convertible units, generating gross proceeds of $335 million. These offerings accomplished the goals that I previously outlined. Following their execution, S&P affirmed our BBB ratings and raised their outlooks for SJI, SJG, and ETG to stable from negative. We're now set up to execute our growth plan from a significantly improved financial position. In the aftermath of these transactions, we continue to have ample liquidity at both SJI and our utilities, with $1.16 billion in total cash, credit capacity and available through our equity forward, and approximately $977 million available as of March 31st. In addition, With the proactive refinancing efforts we've undertaken over the past year, as well as repayment of debt from our equity transactions and the remarketing of notes from our prior mandatory convertible units, SJI has no significant debt maturities due in the near term. Turning now to our financing plan. As outlined for you today, Our plan projects capital uses of approximately $4.5 billion, with the majority allocated for our utility and non-utility clean energy investments. We expect about half of our funding needs to be met by internally generated cash flows, with the remainder met through external financing. Having completed the equity financing transactions I've just described, Our remaining financing needs from today through 2025 will largely be met through debt financing, with a modest 5% to 7% through equity financing over the next five years. As we've noted many times, we have tremendous growth opportunities before us and remain focused on defending our balance sheet and credit ratings as we execute our plan. We believe the modest amount of remaining equity in our plan accomplishes this goal. Along these lines, as you can see, our forecast supports an equity capitalization of 40 to 45% during the plan period with a gradual improvement in our FFO to debt metrics from 11 to 12% in 2021 to 12 to 13% in 2025. Before turning it over to Mike for his closing remarks, let me summarize some of the key financial items that I've reviewed today. From an overall financial perspective, I'm very pleased with the improvement we've been able to achieve over the past year that positions us to execute successfully on the significant growth plan we've outlined for you today. Our plan calls for strong 5% to 8% economic earnings per share growth with significant step-ups in 2023 and 2025 driven by timing associated with rate cases and clean energy investments. A majority of the growth in our plan will be driven by our utilities in support of safety, reliability, and sustainability initiatives. Our plan calls for significant non-utility investments in support of decarbonization and renewables that both align with the clean energy goals of our state and region, as well as produce strong cash flows and earnings. Our balance sheet, liquidity, and credit ratings have all improved as a result of our actions over the past year, and our financing plan supports our ability to execute our plan while maintaining and improving on these important financial metrics. Along with my colleagues who you've heard from today, I believe SGI is very well positioned for strong growth in the years ahead, and I'm very excited to execute this plan. As I conclude, I want to thank my team for the hard work that they've put in over the past year. My thanks to all of you for your participation today and for your continuing interest and investment in our company.

Before we turn to Q&A, I'd like to spend a few minutes summarizing some of today's key takeaways. As I said at the onset, the world is moving towards a clean energy future. SAI is invested in it, and our strategy is centered upon it. South Jersey Gas and Elizabethtown Gas are strong businesses and will remain our largest, both in terms of capital allocation and earnings generation. Both companies enjoy above average customer growth, a long runway for infrastructure modernization and decarbonization investment opportunities. We expect rate base to grow at a compounded rate of 10% through 2025. At Energy Production, we'll be investing approximately $750 million in renewable natural gas and traditional renewables over the next five years, with low-risk contracted margins fueling returns above our utility and eclipsing our hurdle rate for non-utility businesses. And our Energy Management Group is set to provide steady contributions, with roughly 10% growth through 2025 from a de-risked and predictable platform. As we look to 2025, we expect to grow economic earnings per share 5% to 8%, with significant step-ups in 2023 and 2025, driven by timing associated with utility rate cases and clean energy investments. We expect significant 30% increase in cash flow from operations over the next five years, driven by clean energy investments, as well as growth fundamentals at our utilities. We expect dividend growth of roughly 3% in line with our current rate as we balance the return of cash to our shareholders with the exceptional growth opportunities we have before us. Finally, over the next 15 years, our investments will reduce our operational emissions and consumption, lower the carbon intensity of the gas stream, and transition SGI to a 21st century infrastructure company delivering the clean energy of the future. We look forward to delivering on these projections and creating significant long-term value for our investors. I want to thank you for your attendance today. And as always, for your interest and investment in our company, we'll now take a five-minute break and then begin Q&A.

Ladies and gentlemen, we will now begin the five-minute break before Q&A. Please continue to hold. Thank you.

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We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. This time, we will pause momentarily to assemble our roster. Our first question today comes from Shar Correza with Guggenheim Partners. Please go ahead.

Hey. Hey, guys. How you doing? Good, Sean. How are you? Not too bad. Not too bad. So a couple of quick questions here. First, I know, you know, obviously in the preparative marks, We talked about potential legislation in New Jersey around rate-basing RNG. How do we sort of think about that interplay between regulated RNG and base rates versus non-utility opportunities? If we get legislation, could we see the $500 million allocated to non-utility RNG swing downward? Or could legislation just add to further RNG spending at the base utilities while you still kind of maintain that $500 million target at the non-utility? Great question. So I think a lot of that's going to be determined by the final legislation. If it's as broad as what – What they have in Oregon, where you can rate-base RNG outside of the utility, yes, I think you would see a transfer of some of those investments that right now are contemplated in the non-regulated businesses move into the utility, right? So they would become part of the utility. And there, a lot of it's going to be determined by geography, whether it's cost-effective to compress and then truck and inject that RNG, if it's a more narrow legislation that permits weight-basing of RNG within the state, then I think, again, from a non-regulated perspective, the money that we've got dedicated to RNG development is... Right now, it's all dairy farm shards, so that would all be out of state. We don't have a lot of dairy farms in New Jersey. But that would give us an opportunity for food waste, wastewater treatment facilities, landfill gas to be developed and then rate-based in New Jersey. Okay. Got it. Got it. Thank you for that. And then, you know, obviously we're still waiting for the LNG redundancy opportunity at South Jersey Gas. But curious if there's additional opportunities with ETG service territories as well. For LNG, sure. Look, I'll ask Dave to comment. I think, you know, globally, Char, obviously one of our – One of our responsibilities as a utility is to ensure reliability and continuity of service. And as demand continues to grow, as we continue to add customers and capacity continues to be a scarce resource, LNG is certainly a means with which to – to address that, right? It's either pipelines or it's alternative needs of supply, one of which could be large-scale liquefaction and storage. Dave, maybe you could jump in really quick and talk about the differences between San Jose gas and Elizabethtown gas with respect to the systems and any potential capacity constraints.

Yeah. Look, I think right now we've subscribed to sufficient peaking systems so that we're well protected should we see prolonged cold. We do have, as Mike mentioned, we have an LNG facility in the Elizabethtown Territory. We have begun very preliminary reviews of where on our system could be add that critical redundancy there's nothing really moving on that right now right now our primary focus is you know replacing the the existing infrastructure we have but you know we'll continue to pursue that um in the western territory of of elizabethtown it will be more uh Probably the most likely possibility at some point would be something in the eastern region where it's densely populated and there's more infrastructure to connect to. So again, very preliminary in reviewing that. The one in Vineland is very important to us. And as you mentioned, we've had good dialogue with the regulators. We've had discovery. We've had public hearings. So that's still moving forward, which we're certainly encouraged by.

Got it. And then just lastly for me, just on the growth rate, it's obviously a pretty healthy number here. To sort of hit the top end, would you kind of need incremental items like legislation or At the state level, I mean, you talked a lot about levers. I was just trying to get a sense on what would drive you within that range, especially with, you know, so much, you know, more than half of your spending having minimal regulatory lag. So how do we sort of think about the interplay between the bottom and top end given the plan that you presented this week? I'm sure you probably just took the next four questions off the board for that one. Look, I think on the higher end, certainly the RNG legislation that would allow for the rate-basing of RNG would be one way that we would get to the higher end of that range. Certainly, if on a federal level, If biomass is included in future ITC legislation, that would be one way. But I do want to reiterate what Steve said in the presentation. If that were to happen, we would revisit our strategy with respect to traditional renewable investments. want to be very sensitive to getting back to a point where ITC has become a disproportionate part of our earnings stream. So I think, you know, one way to look at it is we have a lot of planned RNG investment. If there is an ITC attached to it, that would certainly swing us to the upper end of the range, but it would not be, you know, a one-for-one incremental over what we have planned with respect to traditional renewable investments, we would back down some of those and really just shift to RNG. Better regulatory outcomes could get us to the, you know, to the, I should say better than expected. We've been doing some outstanding regulatory outcomes largely as a result of the strong relationship we have with our regulators. But I think, you know, if we were to have, you know, better than forecasted results on that front, that could lead us to the upper end. And then certainly, you know, again, it's shaped our wholesale portfolio in such a way that we really limited the downside. And, you know, conversely, we have less upside, but there's certainly always the opportunity for some upside there. Yeah. Downside, I think, again, it could be the same story. The wholesale falls slightly below expectations. You know, I think, you know, that's probably the biggest one. You know, adverse outcomes with respect to pennies would be the other one. All right. Terrific, guys. Congrats, and I'm glad you got this past you, so congrats. Thanks.

Our next question will come from Gabe Marine from Azuho. Please go ahead.

Hey, good morning, everyone. If I could just follow up on the last question, just in terms of the interplay between, I guess, the IIP ask at SJG as well as the LNG plan, I think in the past you kind of hinted on the timing of the LNG plan being a little bit, well, not variable, but maybe having some flexibility to it. Can you just talk about, I guess, the degree of confidence in the IAP ask at SJG, given its size, and also, depending on what comes back with that ask, whether there's any flexibility on the timing with the LNG plan?

Yeah, Gabe, I'll ask again and jump on this one.

Okay. Thanks for the question, Gabe. So, Regarding the IIP, as we've talked about, it is a little larger than the programs that we've previously asked for at SJG and ETG. We do still have quite a bit of inventory that will need to be replaced. And so when we socialized this with our regulators, you know, we talked about the opportunity of possibly upsizing it You know, given the significant positive attributes of a program like this, right, it's good for the environment. We continue to reduce fugitive methane. The other big thing that got a lot of positive feedback, it's a job creator, right, in a time when we need to put more New Jerseyans back to work. And then, of course, It strengthens the safety and reliability of our system. And as a tracker, it earns a timely return. So this, you know, look, we're confident. Do we, you know, we're not going to speculate on the size of the program. You know what we asked for. Typically, you don't get everything you ask for. So I think we expect a good outcome. I'm not here to predict on the size of the program. I don't think that that would be prudent. But again, we've been in advanced dialogues. We expect something maybe by the end of Q2, but probably more than likely, given what's on the agendas. With our regulators, it may slip to Q3. But we're real confident in that program. You did mention the LNG. As I shared with my comments with Char, had discovery, had local meetings, continue to have dialogue. Again, I think given just the volume of filings, there's a little more slippage for everyone, but we do expect, you know, a favorable resolution, but that may not come until later on in the year. Construction on that LNG program, you know, likely not to start towards the end of 2022.

Thank you. Maybe I could shift to the decarbonization investments in REV specifically. It looks like some of the assumptions that are a little bit back and loaded of the five-year plan. Can you just maybe walk us through a little bit more of the cadence of those, you know, two dozen plus or minus dairy farm opportunities in terms of the in-service states? And then also, if I could just understand correctly, the kind of, I guess, the earn-out that REV has potentially, which looks to be about $200 million, what sort of earnings thresholds are need to be hit and when those payments would potentially occur?

Sure. Gabe, we have not obviously disclosed anything specific with respect to what the triggers are, but they're EBITDA hurdles, and we expect them to be Given the organic growth that REV has in front of it, we would expect to achieve those hurdles and increase our stake in REV twice within the five-year period, reaching full ownership, 100% ownership in 2025. As far as the cadence with farm development, it is a little bit back in place. I think that's largely because, as Steve mentioned, it's about a 10- to 14-month construction window. So we're expecting to initiate construction on several farms this year. That would bring them online in 2022. So I think that's probably... the way we should be thinking about it of the 25 or so farms. There will be a number where construction will commence this year, a number where it will commence next year, and a remaining few that would commence in 2023, all coming online about a year after we begin construction.

Thanks, Mike. And then maybe last question for me would just be around appreciating that future equity needs seem pretty minimal. But I'm trying to ask how you go about issuing that equity at the back. Do you think an at-the-market program is probably your most likely way to go about issuing that equity?

Steve, do you want to grab this one? Hi, Gabe. This is Steve. Yeah, I think you're thinking about that right. I mean, as we pointed out in the deck and in the remarks, the kind of large block issuance of equity was taken care of with our activities in March. I think going forward, something like an at-the-market makes a lot of sense. And we'll talk more about that as we refine our plans and roll something out. Thank you.

Our next question will come from Chris Eliehaus with Siebert Williams. Please go ahead.

Hey, guys. How are you? Good. How are you? Good. Steve, can you give us some color on what your thoughts are on the 2021 ITC level?

Yeah, sure, Chris. The 2021 plan has ITCs pegged out around the same level as 2020, I think is the way you should look at it. And then as we spoke about gradually declining over the course of the plan and being replaced by our decarbonization investments.

Okay. And I assume that you're calculating your your CAGR for economic earnings off of that 55 level?

That's right. That's right.

Okay. The slide, let me see what slide it is. This is the REV slide 53. Can you just sort of break down, I'm just doing some math on you know, the 25 farms and the metrics you gave us there, and it's not entirely clear to me what all of the buckets for that $500 million are. So can you just give us sort of the broad, big buckets for where that $500 million goes to relative to what your portfolio is today, what you're expecting to add, kind of the money headed to

uh the rev purchases can you just sort of break those different buckets out as best as you can sure yeah i think you we we do have included in the slide that our forecast includes approximately 280 million for farm development so That's your number as far as the $500 million goes that will be devoted to farm development. The remainder is a combination of both additional equity buy-ups in the business that will take place over the course of the planned period, as well as capital to support the growth opportunities at REV. REV the entity has a number of opportunities to develop dairy farms on its own, outside of those that we're developing under the SJIRNG DEVCO umbrella. So we would be contributing capital to assist in the development of those farms, as well as then the expectations that those farms will have offtake agreements and we would contribute capital to Red's needs for acquiring additional trucks to transport that RNG from the farms that are developed to the ultimate injection point.

Okay, so you're not going to outsource the transportation. You're going to have in-house transportation?

That is the goal. That's still subject to negotiation, but at this point, that's really how Rev got their start, and that's kind of their core business before getting into RNG and their core competency. So we would expect, as they have been able to achieve historically, that we will continue to be able to get the contracts to truck the gas.

Okay, so out of that $280 million bucket You're assuming there at that average sort of capex of $7 million that there's another anticipated development piece to your overall farm portfolio?

Yeah, so what we've talked about thus far is, you know, the development rights that we acquired originally with the acquisition at the end of 2020 Plus, you know, up to a total of 25 farms that we have read a first refusal to develop and would intend to develop and plan to develop in our plan. There are other incremental opportunities that are in the development process or will be in the development process that we are assuming would get you to that $280 million number using the average capex that we've outlined.

Okay. With the totality of the production capex, you know, how are you thinking in terms of the capitalization of that production business in general?

Well, look, this business, once we have – the first kind of tranche of farms in the ground and up and running next year, as you can see from the EBIT, average EBIT projections that we put in there, it's going to generate a lot of cash. So the expectation is that we would finance it, if that's what you're asking, Chris, and forgive me if I misinterpreted your question, but we would finance it through a combination of cash from ops that the business is going to produce um and you know some incremental um activities in the debt capital markets and then you know back to the question that was asked earlier you know minimal composition in the plan coming from equity okay um one last thing um in the capex for the utilities have you got any ami built into that or

You know, what's your thought process on AMI through the 2025 sort of timeframe?

Hey, Chris. This is Dave. So, we do have some dollars for AMI in the latter half of the plan. We think an AMI program makes a lot of sense for us. begin in a smaller fashion as we cycle out meters that need to be replaced. You know, when we have it up and running and we have it approved, we'll be swapping out with smart meters. But I don't think that begins until we're assuming 23. We're still doing our homework on the program, and we really like the program. It's got some great attributes, including some pretty significant environmental benefits um attributes which are which are positive and aligned with the master plan so you won't see a ton of dollars in this five-year plan but i think we'll we'll look to get that program off the off the ground probably starting in in some kind of pilot fashion is that one element of what you see is you know upper end of the earnings growth range of something more substantial in that area It's certainly an opportunity. I think we need to pay close attention to our priorities, right? Our top priority is making sure we make the infrastructure investment for safety and reliability. Towards the back end, we'll have a few more decarbonization opportunities, particularly with RNG. And AMI will be part of that. Could it be upsized as we move along and get more information? Certainly it could.

Okay. Thanks for the details, guys. Appreciate it. Thanks, Chris.

Our next question will come from Cody Clark, Bank of America. Please go ahead.

Hey, everyone. Thanks for taking my question, and thanks for all the disclosure.

Thanks, Julie. Good morning.

So a lot of my questions have been answered already, but I'm wondering if you can provide some color on the breakdown of the $250 million in solar and fuel cell investment. How much is going towards fuel cell versus solar? You stated in the past that fuel cells had a little bit better return profile than solar, so just wondering now who should be thinking about this.

Hi, Cody. It's Mike. Great question. Certainly, you're correct. You know, fuel cells do offer better returns than does solar. And I think what we're targeting are projects and opportunities similar to the one that we closed on in 2020, where you had upwards of 75% of the revenue stack fixed and protected by state credits. So you really de-risked the revenue side. And I think just as importantly, we have a guaranteed availability from from the manufacturer and operator of the fuel cells that, again, protects that side of it. We've got 95% guaranteed availability with make-hole provisions should something happen to the units and they're not available. we feel like it's a significantly de-risked uh investment and given that it's very utility-like in nature so that's that's um you know i think that's why our preference would be on on similarly structured fuel cell deals and we believe there is you know there remains a market um for those i'm not expecting you know to do a lot of them but one a year would satisfy probably a big chunk of our projected traditional renewables investment. For us, solar is a lot about also delivering on our decarbonization goals within our utility operations. So in addition to repowering our facilities with solar energy, We're looking at other opportunities, putting solar on our remediated MGP sites and the like, so that we can produce a lot of green electricity and, again, further decarbonize our operations. Will we continue to look for... attractive solar opportunities in New Jersey and in the region. Sure, we're not going to walk away from a really good opportunity, but our preference would be certainly to continue to identify and develop fuel cell opportunities.

Got it. Okay, that's super helpful. Thanks so much for the time and congrats.

Thanks.

Our next question will come from Richard Sunderland, JP Morgan. Please go ahead.

Hi, good morning. Thanks for taking my questions here, and I appreciate the update. Hi, Rich. Maybe starting off with pennies, just curious what EPS contribution you're making from pennies phase one, and if there are any offsets should phase two not advance?

Yeah, so, you know, again, We approach this trying to balance the need for the project and our strong support for the project because of the benefits it provides our customers and the region. You know, we're still, our utilities and obviously SJI as a whole are strongly supportive of Penn East's But we also wanted to be sensitive to the fact that, you know, there's a case pending in front of the Supreme Court. There's a decision and a final approval pending in front of FERC. So we're pushing, you know, we're looking at a fourth quarter 2022 in service date for phase one. And then, you know, after that, not that I would say that there's great uncertainty around phase two. It would be just, you know, the timing of, of when phase two would come online because we would expect there still to be, you know, a long road ahead of us in New Jersey. All that being said, the earnings contribution is minimal. You know, what was once projected to be 10% to 12% of our earnings is now well less than 5%. It's in the, you know, 2% to 3% range of our earnings. And that's really two factors. One, it's It's the smaller scale of phase one. You know, there's not a BCF of contracted capacity on phase one. So it's a smaller project. But more specifically, it's due to the significant growth in our other businesses that Penn East is a relatively small contributor.

Thanks. So I think that in the past, you've guided to $12 million of net income from the full penny. So is the way we think about that kind of starting at 50% of that figure and then working down somewhat, given it's a little bit smaller under Phase 1 considerations?

Yeah, I think, you know, right, $12 was the original project. It would be scaled back considerably. And, yeah, I think, you know, again, you're looking at, Not a lot of spending, and so not a lot of AFUDC related to Phase 2. At least that's how we, in our forecast, in our plan, in this five years that you've seen, that's the assumption that we're making. Again, taking a very, very conservative look. As far as replacing it, it would not take a lot. I mean, again, you should really think about it being 2% or 3% of our overall earnings.

Got it. That makes sense. And then circling back to the LNG project, given what, if I recall, was a late 2022 construction start earlier in the commentary, did that give you a pretty good runway in terms of, you know, any additional slippage to the regulatory approvals? Or just how do you think about, you know, kind of the runway before getting that project geared up?

Hey, Rich, it's Dave. Thanks for your question. So, you know, what was submitted is the plans to upgrade our infrastructure to actually serve the tank. And when we get approval for that, we will begin those upgrades. The actual expenditures on the tanks You know, we'll begin, and it's a pretty long runway. It's quite a complex and large project. But once all those costs are in place, then we would file those costs in, you know, the next base rate case after construction is concluded. So, you know, you're looking at between permitting and construction. I mean, it's like a three-year project.

Okay, so just to be clear on that front, in terms of if the upfront approval process for the associated infrastructure were to slip another six months, you still have room in the plan to get the associated work done as well as the tank build out itself?

Yeah, well, look, we do expect to get the approvals and, you know, we will start sometime next year. Well, certainly, if there are continued delays to get that approval, it could push the completion date out. Naturally, it would. And then we would, if that were to occur, then we'd have to reexamine when we would file that subsequent rate case. So, I think we have a little padding in there because it's such a long lead time. But look, we're just pleased that there's progress. You know, there's been some good dialogue. I think the board understands the critically important needs to create this redundancy. So I'm still optimistic. Would I have loved for it to be approved earlier? Of course we all would, but it's still moving forward. And, you know, if there are some further delays, you know, it could delay by a few months, you know, when it's placed in service. And then when we file that subsequent rate case, a lot needs to happen in the next three years. So there could be a little shifting, nothing that I would consider monumental.

Fair enough. And then, Turning to the utility outlook around the equity component, which I guess is my understanding is the step up for the ETG equity layer. Is that the extent of what you're baking into the plan? And is that, I guess you're kind of done one step on the way there. Is that one more step or modest upticks over the course of rankings in the plan period? Any call would be helpful there.

Well, again, this is Steve. You're absolutely right. We took a step forward with the last ETG case. Certainly it's still below SJG. So is there some opportunity for that to move in another step? Absolutely there is. I'm not sure we're ready to comment on what we think that might be, but certainly there's a possibility to have another step up in that equity cap.

Got it. And then just one last one from me. There have been talking times about higher level stimulus discussions in New Jersey. Just curious if the IIT is the vehicle to watch here, if you see other opportunities to leverage the job creating aspect of your business.

Well, we were asked by, you know, the BPU through the front office to provide projects that if they were placed on an accelerated basis, they could help stimulate New Jersey's economy, create jobs. All the utilities supplied those projects. Within our list was the IIT. I haven't, and maybe Mike can comment, I haven't heard a lot on a stimulus package of late, but as we mentioned we're going to be through our accelerated programs and we still have quite a few miles of inventory to be replaced so we went forward again after socializing with the bpu and staff that hey this may not be a quote-unquote stimulus program but it certainly addresses everything that the stimulus requests would have done, job creation, safety and reliability improvements, kind of the things that I talked on before. So maybe I'll kick it back to Mike to see if there's been any more discussion on an overall stimulus package requested by the state.

Thanks, Dave. No, there hasn't been any direct conversation recently about a targeted stimulus type of package. I think The first step was easing of the restrictions. And as you, I'm sure you know that, you know, New Jersey's just announced that. And I think that in and of itself will allow for increased focus on, you know, specific initiatives around economic recovery. What I will say is that there is a full appreciation in any conversation that I have had with you know, as a part of the reopen and rebuild councils, um, of the, of the criticality of infrastructure and the, the ability for infrastructure type of investment investments to really accelerate, um, you know, both, both an economic recovery, but more importantly, a jobs recovery. So I remain very confident that, you know, um, these types of investments, investments in infrastructure, investments in utility infrastructure, will be a very important part of, you know, any kind of economic recovery plan.

Great. Thanks for the time today. Yep.

Thanks, Rich. Our next question comes from Salman Akhil with Stifel. Please go ahead.

Thank you. Good morning. Most have been asked and answered, but just a little clarification if I could. First of all, it just goes back to the legislation. I know you talked about it being introduced in March in New Jersey, but for the RNG, any idea what a timeline on that might be?

You know, no. I've kind of learned not to try to prognosticate about legislative efficiencies or efficiencies. I think, look, what I'm encouraged by is that there is legislation. It has a sponsor in the Senate. It's got a lot of support. It's got the attention of key people working on a similar type of bill being introduced in the Assembly. I think it would be something that, you know, let me put it this way. I highly doubt it would be something that would be packed into law before, you know, the November elections. It is an election year. So, you know, there's going to be a lot of focus on November. And then I think, you know, after that point in time, you're likely to see things start to advance.

Understood. And then, Also, just clarification again, if the legislation were passed, you would go back, potentially revisit the CapEx budget, and maybe flip some from the non-utility into the utility side. Did I get that correct as well?

Yeah, that's exactly right. We would look to identify projects. Well, just to clarify, if we are allowed to If the legislation permits the rate-basing of investments outside of New Jersey, we would go back, we would revisit our planned development, and we would identify farms where rate-basing makes sense, because whether it's logistically or otherwise, where it would make sense to rate-base those investments. If it's limited to just in-state projects, no, they would then all remain in the non-utility, and we would look to accelerate the development of opportunities behind or within New Jersey, which would largely be in kind of three areas, food waste, wastewater treatment facilities, as well as landfills.

All right. Very helpful. Thank you.

Yep. Ladies and gentlemen, this will conclude our question and answer session. I would like to turn the conference back over to Dan Fidel, Investor Relations, for closing remarks.

Well, thank you all for your attendance today and your great questions. If you have additional questions, please feel free to reach out to me directly. You've all got my contact information available on the website as well. And as always, we thank you for your continuing interest and investment in our company. This concludes our investor conference. Have a great rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.