Q1 2025 New Jersey Resources Corp Earnings Call
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Prilla: Thank you for standing by. My name is Prilla and I will be your conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources Fiscal 2025 First Quarter Conference Call.
Prilla: For those of you listening on the live call, all participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions.
Prilla: Please note, this event is being recorded. Thank you. I would now like to introduce your speaker for today, Adam Prior, Director of Investor Relations. You may begin.
Prilla: Thank you. Welcome to New Jersey Resources fiscal 2025 first quarter conference call and webcast. I'm joined here today by Steve Westhoven, our president and CEO, Roberto Bel, our senior vice president and chief financial officer, as well as other members of our senior management team.
Prilla: 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.
Prilla: This could cause results to materially differ from our expectations as found on slide 2.
Prilla: These items can also be found in the forward-looking statements section of yesterday's earnings release.
Prilla: furnished on Form 8K and in our most recent forms 10K and 10Q as filed with the FCC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events.
Prilla: We'll also be referencing the certain non-GAAP financial measures such as Net Financial Earnings or NFE. We believe that NFE, Net Financial Loss, Utility Gross Margin, Financial Margin, Adjusted Funds from Operations, and Adjusted Debt provide a more complete understanding of our financial performance.
Prilla: However, these non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K.
Prilla: The slides accompanying today's presentation are available on our website and were furnished on our Form 8K filed yesterday. Steve will begin with this quarter's highlights, beginning on slide 4, followed by Roberto, who will review our financial results. Then we will open the call for your questions.
Speaker Change: With that said, I'll turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve. Thanks, Adam, and good morning, everyone. Fiscal 2025 is off to a strong start. During the first quarter, we continue to execute on our strategic initiatives, driving growth across our business segments.
Speaker Change: At NJ Aftergast, we achieved a significant milestone with the implementation of new rates following the approval of our base rate case. This was supportive of our ability to recover the $850 million of investments made since our last rate case and results in a rate base of $3.2 billion.
Speaker Change: We launch the next iteration of Save Green, our $386 million energy efficiency program, which is the largest in New Jersey natural gas history and runs through June of 2027.
Speaker Change: Investments in saving are incremental to our rate base and earn a near real-time return to a rider that is updated annually.
Speaker Change: Cree Energy Ventures continues to advance its commercial solar strategy. With a project pipeline of over one gigawatt, we remain well positioned to drive growth.
Speaker Change: At Storage and Transportation, we continue to move forward on our capacity recovery project at Leap River, and Adelphia Gateway's Section 4 rate case is progressing with an expected resolution later this year.
Speaker Change: And finally, at Energy Services, we continue to derive significant value from our portfolio of strategically located storage and transportation assets, as well as continued contribution from the asset management agreements announced in 2020.
Speaker Change: These achievements reinforce our commitment to delivering shareholder value through disciplined capital allocation.
Speaker Change: As we review our strong first quarter performance, it's clear that NJR is not only delivering on its commitments, but is strategically positioned to capitalize on emerging growth opportunities.
Speaker Change: Now let's turn to our guidance for fiscal 2025 on slide five. This reflects the strength of our diversified portfolio and our ability to navigate current opportunities and long-term objectives.
Speaker Change: Our fiscal 2025 NFAPS guidance is $3.05 a share to $3.20 per share, which exceeds our long-term growth rate of 7 to 9 percent and incorporates the one-time gain from our sale of our residential solar portfolio.
Speaker Change: We are encouraged by the recent operating performance across all of our businesses and we will carefully monitor and assess our financial outlook as we move forward through the winter season.
Speaker Change: We've slightly narrowed the contribution ranges of our business units in the first quarter and will continue to do so as the year progresses. The majority of our NFVPS is expected to come from our utility operations.
Speaker Change: Now let's discuss our complementary business units starting with New Jersey National Gas on slide 7.
Speaker Change: During the quarter, we invested $127 million at New Jersey Natural Gas, with 43% of that capex providing near real-time returns.
Speaker Change: We are leveraging investments to enhance reliability and drive consistent customer growth through our new construction and conversions, as well as expansion into new locations.
Speaker Change: Looking ahead, we are well positioned to continue growing our capacity by leveraging a robust and steadily expanding project pipeline of over 1 gigawatt.
Speaker Change: Furthermore, the sale of our residential solar portfolio enhances our balance sheet and recycles capital to support the future growth opportunities.
Speaker Change: Moving to slide 9, our storage and transportation business continues to deliver stable returns through fee-based revenues. Our infrastructure investments, including pipelines and storage facilities, are strategically positioned to serve constrained energy markets.
Speaker Change: We are also actively advancing our capacity recovery project at Leap River, focusing on restoring and enhancing storage capabilities to meet growing energy demand.
Speaker Change: Overall, we have made excellent progress throughout the quarter on several fronts.
Speaker Change: With that, I'll turn the call over to Roberto for a review of the financial results. Roberto?
Speaker Change: NGNG reported higher NFE as a result of new rates being in place on November 21st, following the successful conclusion of our rate release, and Clean Energy Ventures reported higher NFE as a result of the sale of our residential solar portfolio.
Speaker Change: Our storage and transportation and energy services businesses also deliver higher NFE compared to the prior year period.
Speaker Change: Now let's move to slide 12, where we will discuss the New York Capital Plan.
Speaker Change: For fiscal 2025 and fiscal 2026, we're planning capital expenditures ranging from $1.3 to $1.6 billion, which aligns with our long-term NFPS growth target of 7% to 9%.
Speaker Change: We did not make any changes to our capital plan compared to our prior disclosure and continue to expect spending between $610 and $790 million in capital investments during fiscal 2025.
Speaker Change: Over the next several years, we expect to deploy capital to enhance our utility infrastructure, expand our clean energy portfolio, and optimize our storage and transportation assets.
Speaker Change: Our adjusted funds from operations adjusted debt ratio is projected to range between 18% and 20% for fiscal 2025, which reflects our ability to generate solid operating cash flows and manage debt effectively.
Speaker Change: In summary, our first quarter performance reflects the strengths of our diversified portfolio and disciplined financial strategy.
Speaker Change: We remain on track to deliver on our long-term growth objectives supported by a solid bonus sheet and steady cash flows. With that, I'll turn the call back to Steve for a discussion on our organization initiatives on slide 14.
Steve Westhoven: Thanks, Roberto. Last month, we issued NJR's Fiscal 2024 Corporate Sustainability Report. This reflects our commitment to transparency with our stakeholders in the evolving energy landscape.
Steve Westhoven: In the report, we detailed our leadership and accomplishments in emissions reduction and renewable energy, as well as our long-term vision for the role of existing pipeline infrastructure.
Steve Westhoven: Our sustainability initiatives remain business-driven, as highlighted by notable achievements such as record investments in energy efficiency and the advancement of new innovations such as carbon capture.
Steve Westhoven: During the year, NJ Natural Gas became the first natural gas utility in New Jersey to install and operate distributed carbon capture technology at our headquarters, and we are also fueling a portion of our fleet operations with renewable diesel.
Steve Westhoven: This work underscores our leadership in driving a more sustainable energy future and our commitment to pursuing innovative, reliable, clean energy solutions.
Steve Westhoven: To conclude, NJR is well-positioned for sustained long-term growth across our diversified businesses as we highlight on the next slide. NJR's diversified business model supports an industry-leading long-term NFEPS growth rate of 79%.
Steve Westhoven: Key drivers include continued customer growth at New Jersey Natural Gas, solar investments at CED, and enhanced asset utilization at Reef River and Adelphi Gateway.
Steve Westhoven: As we progress through the winter season, we are pleased with the strong operating performance across all of our businesses. Our results highlight the resilience of our physical infrastructure and, equally important, the talent and dedication of our team.
Steve Westhoven: I'd like to recognize and thank our employees for all their hard work. And with that, let's open up the call for questions.
Steve Westhoven: Great, thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press the star followed by the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press the star one again. One moment please for your first question.
Speaker Change: And the first question comes from the line of Char Perez with Guggenheim Securities. Please go ahead.
Hey guys, good morning.
Speaker Change: Morning, do you want to get a sense on how you feel about the guide for 25 to 283 that's out there? You know, if we strip out that gain from the residential sale.
Speaker Change: add back a couple of pennies from lost earnings. We get to about $0.92 for Q1 and on a more recurring basis which
Speaker Change: You know is slightly below expectations. I guess how are you trending within the EPS range you have out there for 25? I know winter matters a lot and you highlighted you're going to be monitoring it, but just curious how you're trending for 25. Thanks
Speaker Change: share this Roberto so we have our guidance out there 305 to 320 we're not changing that at this point in time
Speaker Change: Understood, but any sense on how you're trending within that range?
Speaker Change: We're well within our range, that's all I can tell you.
Thank you.
Speaker Change: Okay, that's perfect. And then just on CEV, I mean obviously good growth, you're seeing slightly larger opportunities.
Speaker Change: outside your footprint versus a year ago. I guess, what's driving that? Should we assume more of that mix will continue to shift outside of New Jersey? In any sense on whether any of the uncertainties around maybe IRA are impacting the discussions, especially as we think about the pull forward of demand? Thanks.
Speaker Change: Yeah, you know, Char, we've, you know, purposely diversified that portfolio and that strategy has been in place, you know, for many years and, you know, really focused on jurisdictions that are friendly towards solar and supportive.
you know, in the solar landscape.
So, you know, that has is basically, you know.
Speaker Change: You know, as far as, you know, kind of the, you know, IRA, you know, you know, currently, you know, you know, based on our past safe Harvard provisions that we don't see any impacts in the near term.
Speaker Change: project pipeline as we move forward. So it's really as business as usual and all the metrics that you referenced supporting the business. So we're in a good place.
Speaker Change: Fantastic. Thanks guys. Appreciate it and see you soon. Appreciate it. Alright. Thanks, Chuck.
Speaker Change: And your next question comes from the line of Richard Sunderland with JP Morgan. Please go ahead.
Richard Sunderland: Hi, good morning. Thank you for the time today. Hey, Rich.
Richard Sunderland: Maybe starting on winter and energy services, any color on the market opportunities for energy services upside during last month's cold snaps? I don't know if there's any way to frame this on an order of magnitude basis versus what you're able to realize last year. Just any thoughts there. Thank you.
Richard Sunderland: Yeah, you know, the weather was, you know, constructive across all of our businesses, you know, not only energy services.
Richard Sunderland: to solve our infrastructure business, really shows the value of existing infrastructure.
and these peak periods of need.
Richard Sunderland: You know, as the market grows, you know, we just see our infrastructure becoming more valuable.
Richard Sunderland: You know as far as how to think about that in reference to the event that happened and we've got quite a bit of winter left and You know as we look forward To you know the next quarter. You know we'll we'll update you know the market you know as appropriate and That's that's about all that I will say at this point
Speaker Change: Understood. Well, thank you for the call there. And then turning to the Adelphia rate case process, I realize it's early, but are there any key dates in the procedural schedule we should watch for? I guess I'm curious what the typical settlement window is.
Richard Sunderland: Yeah, you know, it's a typical rate case, you know, it's really just, you know, verifying, you know,
Richard Sunderland: quite a bit of the money that we spent during the initial construction, which was several years ago. So a regular Section 4 rate case. And, you know, we said we expect this to proceed forward and be settled sometime in 2025. So we haven't changed for many of that. So, you know, that's about all the color that we can give right now since we're we're in the regulatory proceeding.
Richard Sunderland: Great, thank you. I'll leave it there. All right, thanks Rich.
Speaker Change: And your next question comes from the line of Gabe Boreen with Mizuho, please go ahead.
Gabe Boreen: Good morning, everyone. If I could just ask a question on CEV TAPEX relative to what you've spent year-to-date and the target range.
Gabe Boreen: Was this kind of what you intended, I guess, to spend and we should expect maybe a potential acceleration? Yes.
Gabe Boreen: to kind of get you to the midpoint of the range or is there still just I guess uncertainty around the timing and span as to whether you're going to get to that midpoint of the CAPEX range for CED this year?
Gabe Boreen: So for this year, you see what our guidance range for CAPTEC-4CB is out there. This is higher than what we did last year. So from that perspective, yeah, you can consider it as an acceleration, but we expect to be well within our guidance range for the year, as stated in our presentation.
Gabe Boreen: Thanks, Roberto. And I know, I think we asked about this last quarter about a potential follow on to the IIP, any additional thoughts as far as renewing the IIP now that you're, you're, the rate case is in the review.
Gabe Boreen: Hey Gabe, it's Pat Migliaccio. Thanks for the question. You know, just as a reminder, we do have the current IIP that has spending forecasted through fiscal year 25. That'll close out with rates effective in 2026.
Speaker Change: We had a really constructive energy efficiency filing, record level of approved investment of $386 million. That ramps up over time. As far as a success or a fall on IAP, we'll evaluate that and update you when we have something to report.
Thanks, Beth. Appreciate it.
All right. Thanks, Gabe.
Speaker Change: Thank you, and once again if you would like to ask a question, simply press star followed by the number 1 on your telephone keypad.
Speaker Change: Your next question comes from the line of Travis Miller with Morningstar. Please go ahead.
Good morning. Thank you. Hey, Travis.
Speaker Change: I think Richard asked my question on the January operations of your midstream business.
Speaker Change: So, look forward to hearing about that next quarter. But Save Green, I'm wondering if you could remind us the regulatory treatment, was any of that included in the rate case? And then if not, what's the recovery of the capital side of that program?
Speaker Change: Hey Travis, it's Pat Migliaccio. So Save Green Spend is not included in our base rate case filings. It is a separate
Speaker Change: separate filing that operates a little like our infrastructure riders. So we recover annual investment each year as we make that investment. So when we consider our complexion of our capital investment that's as near real-time recovery as we can possibly get.
Speaker Change: Okay, perfect. And then a broader question. Someone asked, do you have tariffs? Is that going to have any impact either on getting the equipment that you need to execute the capital investment program, or even more directly, possibly on the solar?
just want to thank you for joini
Speaker Change: Hey, Travis, this is Steve. You know, we talked about, you know, just general, you know, impacts from before, you know, at this point in time, you know, due to the construct of our business and, you know, safe harbor provisions and things like that, you know, we don't expect any impacts.
on the, I guess, the regulatory world.
Okay, and no impact on just your regular
Adam Prior, Roberto Bel
Speaker Change: I don't think there's anything that, you know, is significant at this point in time, you know, when you look at our overall makeup, you know, especially if you look at the utility, you know, most of it's labor. So, you know, materials, this is a smaller portion of it. And, you know, I would expect that, you know, any issues we'd have would be.
Speaker Change: quickly work through. So not seeing it as a big issue. It's going to be fluid. We'll monitor this as it moves forward. But we have no expectation of any impacts at this point.
Okay, great. Thanks so much. All right. Thanks Travis
Speaker Change: All right, thank you, and I'm showing no further questions at this time. I would like to turn it back to Adam Prior for closing remarks.
Speaker Change: Thanks so much and thanks to all of you for joining us. As always, we appreciate your investment and interest in NJR and have a good rest of your day. Thanks again.
Speaker Change: Thank you and this concludes today's conference call. You may now disconnect.