Q1 2020 Earnings Call

Thank you good morning, everyone and welcome to Astro <unk> first quarter 2020 earnings conference call and webcast.

Joining today by Mike Renna, our President and Chief Executive Officer, as well as something additional members of our senior management team.

Our earnings release in the presentation slides that accompany the call were issued yesterday after the close of the market and are also available on our website at www Dot SJ industries Dot com.

The release and the associated 10-Q provide an in depth to review of earnings on both the gap in non-GAAP basis, using our non-GAAP measure of economic earnings reconciliations of economic earnings will be comparable GAAP measures appear in both documents.

Throughout today's call will be making references to future expectations plans and opportunities for US Jr. Actually results could differ materially from those projected in any in our forward looking statements that include among others statements about the lengthen severity of a pandemic or other health crisis, such as the recent outbreak of code at 90.

For a discussion of factors that could cause actual results could differ please refer to our SCC filings.

With that said I'm pleased to introduce our CEO Mike Renna.

Review, our current operations, that's <unk> Chief Financial Officer, CLL Fernandez will then review our first quarter financial performance and discuss our financial outlook. Mike will then offer some final remarks after that we'll be happy to take your questions with that introduction, let me now turn it over to Mike.

Thanks, Dan.

Thanks for joining us today. This is a very challenging time for all of us or customers our communities our country our world.

Cobot 19 years affected Egypt the most.

And for many in a very profound way, let me just say that on behalf of the entire Sci family or thoughts are with all of you. We hope that you are safe and well and we pray that this terrible crisis passes soon.

Because of the cobot 19, pandemic or call will be different than normal.

In addition to talking about how the virus and subsequent stay at home orders have affected our business will provide insight into our organization from response and outlook.

Early on we mobilized our crisis management business continuity teams.

Through extensive planning the innovative use of technology and a full commitment to safety, we were able to move all 700 employees into either a home base or remote reporting condition.

From customer service to dispatch the operations, we have continued to maintain a central service and operate at a very high level.

Most importantly, we have helped reduce the spread of the virus and kept our employees their families our customers in our community safe.

Today, we have not seen immaterial impact in our operations.

Nor are we experienced anything going to take more time reductions across our utility segments. We are expecting similar to other utilities to see a decrease in commercial loans offset by an increase in residential volumes.

It's too early however to fully quantify the extent of that offset.

As expected, we have incurred incremental operating costs for emergency supplies cleaning services, enabling technology and other specific needs. During this crisis.

During the first quarter those costs were approximately $600000 with two thirds of this amount recorded as property plan equipment on our balance sheet.

We do expect additional pandemic related costs as we move through the crisis.

These type of emergency related costs have traditionally been recognized as prudent expenditures by our regulators and we expect this will again be the case during this current challenge.

Today, we have yet to see a significant impact on our accounts receivable.

Well I'd, we continue to monitor this metric very closely.

Similar to emergency related costs Uncollectable balances have also traditionally been included in regular covering.

System modernization programs designed to replace an upgrade aging infrastructure continue to move forward.

Some specific construction activity. However has been suspended in accordance with directors directives from Governor Murphy.

Currently we are only entering customer homes to perform emergent work.

Looking forward, we do expect an uptick in construction activity as we emerged from this crisis and our mobilizing plans accordingly.

We also remain on track with our timeline for our targeted solar re entry in support of the energy Master plan.

With regard to our regulatory initiatives. The BP you continues to hold regular commission agenda meetings via teleconference.

Our South Jersey gas base rate case, which was filed on March 13 recently began to discovery process matters are progressing consistent with our previous rate cases, and we continue to expect a resolution of the case later this year.

We are in good shape from a financial perspective.

People you know, we completed critical steps to strengthen our liquidity and ensure the funding of our 2020 capital program.

At this time, we have no near term current maturities of long term debt and near term cash requirements related to our pension programs.

Haven't taken be proactive steps, we feel confident or even just through yet but the team rapidly.

He is a very fluid situation be assured that we're continually monitoring our business operations and are prepared to adjust as necessary as we've done throughout this crisis to keep the gas flowing and our employees and community safe.

I will be back later with some closing remarks, but at this time, let me turn it over to see Halo to review, our first quarter results and guidance.

Thanks, Mike Good morning, everyone as Mike noted probably make team I've had a significant inside out all the work.

This country in email service so sorry.

Despite that our business performed well in this or sweater.

And we see or you know, but the reality financial impact from different Dennis.

First what is 22 any economic areas, where you sort of 16 cents per diluted share from here, we do a lot of nine cents per diluted share in December 20 to 20 like.

He is he going CVD Army Oh I saw another 18 cents per share what appears to US dollar euro nine cents into anything.

He built we saw good slapstick 80 heat wave.

These that became effective last November of cement good old embraced increases related to shaky infrastructure my decision for them.

We got political seeming invasion of TPG, we would need crossed an important milestone with the exit of our fees sake, we saw them during the latest period.

Oh, London, TD accommodations, conceivably savings centsper share compared with nine cents per share in 24.

Oh, absolutely its lowest right in line with muskets bullets, CBD driven by warm weather, which we thought that see no would imagine every those assets optimization opportunity.

The decline was partially offset by my investments constructs that became operational over the last 12 months and lower oil him caused from insane football CHP assets in February.

Oh, this cycling conservative I love economy, and himself nine cents per share.

Then last year, the flexing incident, upsets, including CTG, an anchor, especially since it.

A copy of Sandy showed where Uh huh $14 million last into first flyer flexing investments for quite sometime ago and utility infrastructure upgrades.

We continue to bad copied everything being off more than 600 million dollar last month when 20, we've upped the nearly 80% for for safety and reliability investments Oh, we needed.

With that.

Laying there would not yet the latest thoughts solid investment in support of the new Jesse Energy Master plan.

I didn't think plans continues left field it can be nation I said in equity financing in support of I'll go through each of these.

As Mike mentioned in April we compete it's fair to its right.

Sure the ongoing funding above 2020 topical program.

As of May start.

We have one point 25 billion dollar enclave facility in more than four covenant I'm, sorry videos or less email the board there.

We also knowledge I 200 million dollar ATM program in April, which provide us flexibility in that they see no 22 any equity.

Much study first thing they've seen equity to sort of separate the station was 41.6%.

It was 29.6% at December 31st when he makes me.

The improvement slack.

Successful execution of our lives the strength of balance sheet using cost seats from noncore asset sales.

Including comparison of mandatory convertible units in April 2021.

<unk> equity credit so great agency for long duration.

Our adjusted equity to sort of compensation ratio in no defamation west Saudi nicely for saying at March 31 slate 20.

Okay are we sort of 7.5% at December 31st Lady Lake.

So let me not to guidance, we continue to that's 2020 own going economy, and so I thought in the same level, that's 60 cents everybody shift.

Approximately 75% of earnings for another utility operations, excluding acquisition related financing costs.

Why do we have that's why weakness in U.S., what ends up in Buffalo pandemic, which is consistent with our first quarter ever thought.

We couldn't simione monitoring all facets of our operation, we will communicate any future impacts of finance projection.

That concludes my remark I, we know some feedback somebody.

Thank you Siloed.

During this challenging time, our long term focus remains steadfast on addressing critical infrastructure investments to modernize our system.

New projects to ensure adequate supply in system redundancy.

And innovations that will lower consumption, but then the carbon content of natural gas and supported the stage energy Master plan.

Emerges from this crisis.

And as we have during periods of past periods of uncertainty Sci stands ready to assist the leaders of our state with a recovery plans.

During the financial crisis of 2008, Sci partnered with the state to accelerate important infrastructure improvement work Sperry job creation and assisting in the reviving our economy.

And again following a destination of Superstorm Sandy we part with the state to harden vulnerable infrastructure and jumpstart the economy long or short communities.

Today, we stand ready to take similar action again on behalf of the citizens of New Jersey.

Initiatives have been identified with initial conversations with our leaders currently taking place.

As many of you know I typically conclude my remarks by thanking our 1100 employees for their outstanding work and I have never been proud of this exceptional team and I am today.

They have worked tirelessly.

Throughout this crisis.

To assure safe reliable and exceptional service and their courage commitment and selflessness inspires me every day.

I also want to thank all of our healthcare workers first responders and critical employees in our service areas. So doctors nurses paramedics police.

Firefighters and so many others for their her overt warfare doing every day.

With such good people working together for the common good I'm confident that we will get through this crisis.

Operator that concludes our prepared remarks, we're now ready to open the lines for questions.

Thank you ladies and gentlemen, if you have a question or comment at this time. Please press Star then one for your telephone keypad. If your question has been asked what are you wished or move yourself from the Q simply press the pound cake.

Again, if you have a question or comment at this time. Please press Star then one Oh your telephone keypad.

Please stand by we've compiled acuity roster.

Okay.

[laughter].

[noise] we of course, the comment from the line a Ritchie two drilling from Bank of America. Your line is open.

Hey, good morning, guys. Congrats on the quarter appreciate you taking my question.

Thanks, Richard Good morning.

Yes, I just wanted to see if you can provide additional color on your your solar remarks.

With that remaining on track for the or anything that you're seeing in terms of that supply chain fried around that demand from customers that.

How did you more comfortable with the timeline for 2020.

The earnings guidance for this year and anything that could potentially delay on that and you try to execute against those targets.

Yes.

Richie are you talking specifically just solar or more general.

Yes, specifically on the solar front whatsoever.

We continue to see a pretty healthy Q.

Projects, both in New Jersey, and in the mid Atlantic region.

You know things are moving forward nicely on a on our own properties, which is as we mentioned earlier was that was a top priority.

We're putting together plans to.

Address.

Some opportunities at the landfills that we currently.

Have the engines on the take the methane and turn it into electricity.

Again, we see some some nice opportunities.

Throughout throughout New Jersey, So nothing at this point in time.

You know is suggesting that there would be any kind of meaningful delay in terms of ready for intended use or core commercial operations can these projects those that were.

Were you know specifically designated as 2020 projects are still on track to for the most part and those that were 2021 are still proceeding to be 21 like project, that's kind of a macro overview.

As far as the supply chain goes I'd I'd ask Steve.

To comment on that he's he's a little closer to those kind of.

Issues that I am.

Sure. Good morning, Ritchie no no no issues on the supply chain side, we've been in close contact with.

With the folks that we've been dealing with on projects that are in the development stage supply supply chain has not been an issue nor has.

The ability to progress with permitting and construction activities everything at this point.

Moving consistent with how how it would have.

Pre covert 19.

Got it thanks, that's very helpful.

And then just I guess on the regulatory front and I still waiting on a approval for the LNG redundancy project.

I'm, just curious what the timeline and how that kind of lined up what the timing of your equity.

On that project are you waiting on the approval there or how should we be thinking about that.

Oct I'll jump in on a broader question around timing of equity and then way either gave her Steve jump in in terms of timing.

On the approvals keep in mind first of all I will say that the approval is not for the project itself. The approval is for the improvements that are necessary.

We've got expand the system in order to be able to.

To bring those kind of volumes to the to the area that we've designated for for the.

The liquefaction facility.

And those those approvals were submitted to the to the BP you, but again like I said, all I'll ask Dave or Steve jump in in a minute and kind of walk walk you through where they are with respect to the BP overview.

As far as the way we're looking at equity.

Yes, I mean that that additional equity.

You know when when we when we looking back is at 2018 when when.

When we first recognize that there was going to be a need for us to go out secure additional equity eight wise with this specific project in in mind, and obviously since that time.

Things have been reprioritized within the utility but.

From a broader.

Sort of view of what really what any additional equity was four was for any project for projects that would have fallen out of our normal.

Expected traditional utility spread so.

The time it would this project certainly we expect to this project to move forward and you know to the degree that that's a 300 million dollar incremental spend above and beyond what we whatever normally traditionally expected to spend in the utility we will support that way with equity said, we protect our balance sheet, both at the restaurant level, but more specifically.

Do you want to make sure we protect our our capitalization at the utility.

To the degree that there are other projects that have been identified since 2000, and an 18 and there have you know again, our intent would be to make sure that we support those additional projects that additional capex with equity.

Well, we're sort of looking at as you know we have a plan.

Five year span to the degree that things get accelerated in the degree that we as an example, we've talked about smart meters that wasn't something we were thinking about back in 2018, it's something that where we're aggressively pursuing right now internally in terms of developing a plan around smart meters, we would support that type of.

Capital investment with equity so.

Again, I mean, I think we should we should always be thinking about incremental capex.

And any equity that we would raise would be for incremental capex at utilities.

Favorite, Steve just want to jump in really quicken and.

Give a sense of where we are ways.

With the improvements.

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Sure.

So the filing that was made with BP you for the the.

Upgrades necessary to to move forward with the plant are still under review you know as a general matter things are still moving at the border public utilities, they're holding.

Their public meetings virtually.

[noise] data request, some things of that nature and and all the matters that we have are moving forward. So I would still expect.

That but the LNG.

Request would would be.

Moving forward sometime later this year.

It is still under review, though and where we're in constant communication with BP staffers that has that progress. This.

Got it that is very helpful. I appreciate all the color that's all that.

Thanks Ritchie.

Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one all your telephone keypad.

We have a question or comment from a minor Chris Ellinghaus from Secret Williams. Your line is open.

Mr. Ellinghaus, you may need to on mute your phone.

Oh for just a second.

Uh huh.

Chris you there.

Oh for just a second.

If we can get them another way.

[noise] because my me a disconnect Sir.

Okay, well, we'll follow up with.

Chris offline I think Chris was the last question is that correct.

So far in acute that's correct.

Okay, well I think we'll find what you get is his questions. Thank you all for joining us this morning.

We know it's a very busy time on so we certainly appreciate your your interest as a reminder, a recording of this call today will be available on our website and as always please feel free to contact me Dan Fidelity.

Analyst and Investor question for Myrisk traveling for media inquiries are contact information can be found on the earnings release, an earnings presentation materials again.

Joining us today for your continued interest as I mentioned, an investment in Australia and this concludes our call. Thanks.

Ladies and gentlemen, thank you for participating in todays conference. This concludes the program you may now disconnect everyone have a wonderful, but they say.

[music].