Q3 2023 New Jersey Resources Corporation Earnings Call

To mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time press star one on your telephone keypad I will now turn the conference over to Mr. Adam Prior of New Jersey Resources. Please go ahead.

Thank you operator, welcome to New Jersey resources fiscal 2023 third quarter conference call and webcast I'm joined here today by Steve <unk>, Our President and CEO , Roberto Bell, our senior Vice President and Chief Financial Officer, as well as other members of our senior management team.

Certain statements in today's call contain estimates and other forward looking statements within the meaning of the securities laws, we wish to caution listeners of this call that the current expectations assumptions and beliefs, forming the basis of our forward. Looking statements include many factors that are beyond our ability to control or estimate precisely.

This could cause results to materially differ from our expectations as found on slide one.

Items can also be found in the forward looking statements section of today's earnings release furnished on form 8-K and in our most recent forms 10-K and 10-Q as filed with the SEC we.

We do not by including this statement assume any obligation to review or revise any particular forward looking statements referenced herein in light of future events.

We will also be referring to certain non-GAAP financial measures such as net financial earnings or NSE. We believe the NFA net financial loss utility gross margin financial margin adjusted funds from operations and adjusted debt provide a more complete understanding of our financial performance. However, these non-GAAP measures are not intended to be a substitute for GAAP or non-GAAP .

Measures are discussed more fully in item seven of our 10-K.

The slides accompanying today's presentation are available on our website and were furnished on our form 8-K filed this morning, our agenda for today is found on slide three.

Steve will begin with this quarter's highlights followed by Roberto who will review our financial results then we'll open it up for your questions.

With that said I will turn the call over to our President and CEO , Steve <unk>. Please go ahead Steve.

Thanks, Adam and good morning, everyone.

We had another solid quarter at <unk> as a complementary portfolio of businesses continued to perform in line with our expectations. As a result, we remain on track to achieve our fiscal 2023, and EPS guidance range of $2 62 to $2 72 per share.

We reported net financial earnings of <unk> 10 per share in the third quarter of this year.

And $2 40 per share year to date.

To summarize a few highlights.

New Jersey natural gas added over 800, new customers during the quarter with our growth rate now beginning to return to pre pandemic levels in.

In addition, we are proud that new Jersey natural gas has been recognized by <unk> as one of their 2023, most trusted utility brands.

Clean energy ventures continued its strong momentum increasing its in service capacity and growing its project pipeline to the highest level in our company's history.

At S&P, we reported strong year over year revenue growth.

And finally energy services improved its NFC year over year, driven by continued contribution from the AMA and strong performance from our long option strategy during the quarter.

Turning to slide five as I noted earlier, we are reiterating our fiscal 2023, Nf EPS guidance range of $2 62 per share to $2 72 per share earlier. This year, we raised our guidance by 'twenty driven by outperformance at energy service during winter Storm Ella.

In December 2022.

Our long term EPS growth range remains at 79% from our original 2022 guidance and we expect to be at the higher end of that range for fiscal 2024.

New Jersey natural gas had a strong quarter as highlighted on slide six.

We invested $315 million at New Jersey natural gas during the first nine months of fiscal 2023 with approximately 40% of that Capex, providing near real time returns.

We've added nearly 5900 new customers this year.

Paired to approximately 5300 customers during the same period last year through a combination of new construction and conversions.

In June we filed our annual rate adjustments.

We're once again able to provide cost savings to our customers effective this coming winter.

This is in addition to the rate decrease and Bill credits provided in March of this year.

Our team works hard to manage supply costs and we are pleased to pass these savings on to our customers.

As indicated on prior calls we expect to file our next rate case in fiscal 2024, consistent with the timeline of our major technology investments.

Moving to slide seven the team at clean Energy ventures continues to grow its project pipeline and has made great progress increasing the size of its portfolio.

We have added 75 megawatts of new solar capacity since the start of fiscal 2023.

This represents the largest capacity increase in any fiscal year since <unk> inception.

We continue to expand geographically since the start of the year approximately 40% of our capacity growth has come outside of the state of New Jersey.

This includes two operating assets in Michigan, and Indiana that added 21 megawatts to our in service capacity in July .

Operational asset acquisitions have proven successful for us in the past, we target projects with strong uptake that offer performance optimization and future organic growth opportunities.

The operations and maintenance team at CEB does an excellent job ensuring our projects performed at the highest operational standards. In fact, our portfolio typically performs at over 99% availability a significant advantage for us as an organization and a testament to the focus of the team at CEB.

Finally, our project pipeline continues to grow and now includes over 750 megawatts of potential investment options, which is the highest in ceb's history.

And with that I'll turn the call over to Alberto to review.

Our financial results Roberta.

Thank you, Steve and good morning, everyone Slide nine shows the main drivers of the fee for the third quarter and year to vehicle fiscal 2023.

Through the first nine months, we have reported strong year over year improvement.

<unk> results were.

With any fee of $232 $3 million.

Or $2 <unk> per share compared with $182 4 million or $2 per share last year.

These represent a 20% improvement in our net financial earnings per share for the period.

For the third quarter, we reported <unk> of $9 7 billion.

Our <unk> per share.

Compared with a net financial loss of $3 6 million or <unk> per share last year.

The quarterly results of our business segments were consistent with our expectations.

Generally, reflecting a year over year improvement in margins of engineering and energy services annual revenues of TV and differently.

Offset by higher depreciation and interest expenses.

The largest difference compared to Q3 of last year was from the benefit that CBD right from the successful resolution of an income tax valuation allowance.

The benefit was included in our current and if you'd give guidance for the year.

Turning to our capital plan with slide 10.

For fiscal year, 2023 were slightly tightening our overall capex range, while keeping the midpoint unchanged.

At the business unit level, we expect modest capex increases in gaming and <unk> offset by a reduction in the top end of the CV Capex range.

We will update our capex expectation for fiscal year through May 24, and 2025 and our year end conference call in November .

Our cutoff predictions are anchored by strong cash flow from operations.

On slide 11, we show our updated projections for fiscal year 2023.

As you can see we expect operating cash flow to range between 404 hundred $20 million.

This improvement from our previously stated range is mainly due to higher earnings and a positive impact the lower gas prices had on our working capital requirements.

Our credit metric projections for fiscal 'twenty, two 'twenty three having broken in tandem with our operating cash flows which are shown on slide 12.

We now project in Europe , I guess, they're difficult to adjusted debt our preferred credit metric.

Between 19% and 20% for the year.

While ending G maintains a payroll and between great credit rating.

While we have no plans to issue of locate with our.

Our existing dividend reinvestment program includes a waiver discount feature that allows us to raise equity on an opportunistic basis.

With that I will turn the call back to Steve.

Thanks Roberto.

We've been proactive in our discussions with the Governor's office concerning the executive orders made public several months ago. This week, the New Jersey Btu is holding a technical conference to discuss the executive order 317.

We have initiatives in place to align with the state's decarbonization goals and are actively participating in this conference which is happening in real time.

Governor Murphy has made clear strategy to build a clean energy economy that will drive job growth and create new investment opportunities a number of the governor's priorities are directly aligned with the strategy that we've been pursuing for more than a decade.

In closing <unk>, an energy infrastructure company focused on meeting the needs of our customers, while transitioning to a clean energy future.

Our capital investments and our efforts to develop organic growth opportunities are supportive of our peer leading long term at EPS growth targets.

As always I want to thank all of our employees for all their hard work and contribution with that I will now open the call for questions.

Thank you if you have a question. Please press star one on your telephone keypad.

Draw your question simply press Star one again.

Your first question comes from the line of Robert Moskow with Mizuho. Your line is open.

Hi, good morning, everyone.

Hey, Rob.

<unk>.

Just hoping to get your thoughts on the <unk> staff's recommendation on the CSI solicitation process was this an outcome you guys expected and does it change your strategy at all in terms of scoping project in New Jersey, or your overall growth outlook for <unk>.

Okay.

So.

With any new program.

Be a little bit of a learning curve.

State is going through.

Yes.

Yes.

Certainly at this stage are you committed to clean energy.

These programs work.

The process of course.

Certainly.

His commitment to clean energy.

H C.

Just trying to gauge how it may impact us LNG.

Balance sheet.

We've got a large pipeline of projects, 40% of those projects are outside of the state we are starting to diversify.

Number of years ago, making investments outside of New Jersey.

Just because.

The size of the capital program and being able to reliably predict when you'd be able to do it.

Make those investments.

Important.

Yes.

Support to be able to achieve their goals.

So all in all it doesn't change our strategy going forward.

Got a large pipeline of projects, 40% in or outside of the state, but we still felt very confident the state is committed to clean energy and their clean energy goals and.

E program worked out.

<unk>.

Okay. Thanks, I appreciate it Steve.

And maybe with another quarter of a delta operations under your belt any early indications on whether you can optimize certain segments of the pipe to come the volumes above its existing load in and maybe can we also get your latest thoughts on a potential will be further expansion.

So.

It's too soon.

The same thing about the optimization.

Adelphia Gateway and certainly we're learning the assay.

As new gas pipeline remember the northern portion.

Natural gas is there some type of single use customers.

The northern portion of it southern portions first operations. This past fall, so still learning that but I would expect in the future.

There will be some optimization associated with it all along.

We're making these investments router companies, where organic growth being able to grow the assets.

Yes.

Certainly there is an expectation to do that in the future.

Nothing to announce on let me forever still working on.

Substantially down in that area.

Constructive environment with all the LNG, that's being built volatility that Theyre experienced inc.

That region.

No.

June .

Come to terms on something we'll certainly make absolutely nothing to announce at this point.

Structured market in that region.

Yes.

Thanks for the time everyone.

Thanks, Rob.

Once again, ladies and gentlemen, if you have a question. It is star one on your telephone keypad.

Our next question comes from the line of Travis Miller with Morningstar. Your line is open.

Good morning, everyone. Thank you.

Yes.

Just following on the conversation that you're having on the Governor's office and all the debates and discussion around the.

Clean energy stuff.

What's your thinking in terms of when some of these discussions get into actual regulatory proposals project proposals.

<unk> filings.

Your thought in terms of the timeline would any of this make it into the next rate case filing or is there something beyond that.

So that kind of timing.

I guess are you talking about.

You're talking about the solar solicitation or are you talking about some of the.

The regulatory proceedings that are taking place.

Yes.

More around the clean energy.

The latter yes, not as much the solar stuff yes.

So I think you got it.

What kind of multiple discussions taking place currently predicting when those are going to come to conclusion as much also need English Paula to policy in an ultra low interest rates.

I think it is very hard to predict at this point in time.

As you say, there's a lot of discussion that's still needs to take place for that would happen.

But yes as a general comment we talked about de carbonization, how we're reducing initiatives here.

New Jersey natural gas and how we're going to continue forward in this path to be able to deliver cleaner fuels are our customers.

Good morning, guys about our hydrogen plant.

Our energy efficiency programs and certainly are.

Our thoughts about the future that we're going to continue to press forward. So we feel good and this alignment with the governors.

Stated goals and certainly stay goes as well.

I think when those all will come to basically become part of regulation unpredictable at this point in time, but we look forward to swing I think were going to work nicely.

Yes.

Steve.

Okay sure.

Remind me again some of that will make it into the.

Our next rate case filing that especially on the hydrogen side is that correct.

So our hydrogen plant remember was already included in rates in our last rate case.

Yes, Jason.

Or.

Page 15 shows it they're supportive of clean energy and clean fuels.

Fuels.

Okay. Okay.

Then on the solar side any updates in terms of changes in supply ability to get spy panels or.

Costs.

Anything along those lines.

Yes, so nothing nothing to add there.

As usual you see that we are bringing projects to completion and putting them into service seven.

75 megawatts in service.

So just moving forward and continue to execute on the plan so really nothing to talk about there.

Okay, Great. That's all I have thanks, so much.

Alright, thanks, guys.

Once again, ladies and gentlemen, if you would like to ask a question. It is star one on your telephone keypad.

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

Well, thanks, everyone I would like to again, thank all of you for joining US. This morning as a reminder, a recording of this call is available for replay on our website and as always we appreciate your interest and investment in and Jr.

Yes.

This concludes today's conference call. We thank you for joining you may now disconnect your lines.

Thank you.