Q2 2025 New Jersey Resources Corp Earnings Call
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Karen: Hello, everyone. My name is Karen. I'll be your conference operator today at this time I would like to welcome everyone to the New Jersey Resources fiscal 2025 second quarter and first half financial results conference call
Karen: All lines have been placed on mute to prevent any background noise. After the speaker's remarks will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your keypad. If you'd like to withdraw your question, just press star once again. [inaudible]
Speaker Change: Thank you. I would now like to turn the call over to Adam Prior, Director of Investor Relations. Please go ahead.
Speaker Change: Thank you, welcome to New Jersey Resources fiscal 2025 second quarter conference call and webcast. I'm joined here today by Steve Westhoven or President CEO Roberto Bel or Senior Vice President and Chief Financial Officer, as well as other members of our senior management team.
Speaker Change: Certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities law. We wish to caution listeners of this call that the current expectations with assumptions and beliefs forming the basis of our forward-looking statements, including many factors that are beyond our ability to control or estimate precisely. Thank you very much.
Speaker Change: This could cause results to materially differ from our expectations as found in slide two. These items can also be found in the forward-looking statement section of yesterday's rinse release, furnished on form AK and in our most recent forms 10K and 10Q is filed with the SEC.
Speaker Change: We do not, by including the statement, assume any obligation to review or revise any particular or forward-looking statement referenced herein in light of future events.
Speaker Change: We love to be referring to certain non-GAAP financial measures such as net financial earnings or NFV.
Speaker Change: We believe that NFE, net financial law, utility gross margin, financial margin, adjusted funds from operations and adjusted debt provide a more complete understanding of our financial performance.
Speaker Change: Albany's non-GAF measures are not intended to be a substitute for GAF and non-GAF financial measures are discussed more fully in item 7 of our 10K.
Speaker Change: So, slides accompanying today's presentation are available on our website. We're furnished on our form 8K filed yesterday.
Speaker Change: Steve will begin with this quarter's highlights, beginning on slide four followed by Roberto who will review our financial results. Then we will open the call for your questions.
Speaker Change: Thanks Adam and good morning everyone. At NGR we recognize that affordability and reliability remain the foundation of our value proposition to our customers.
and our long-term strategy reflects that.
Speaker Change: In today's environment, delivering safe, affordable and reliable energy is more critical than ever.
Speaker Change: That's why we are focused on disciplines, capital deployment, operational excellence, and strategic innovation across all of our business segments.
Speaker Change: Our results this quarter once again demonstrate the strength of this approach.
Speaker Change: Fiscal 2025 continues to be a strong year for NJR. In the second quarter, we delivered solid results across all of our business segments.
Speaker Change: These results reflect the strength of our integrated portfolio and consistent execution by our team to drive long-term sustainable growth.
Speaker Change: In particular, our wholesale gas marketing business, NJR Energy Services reported strong performance during the winter by capitalizing on periods of pricing volatility through its long option strategy.
Speaker Change: As a result of this outperformance, we are raising our fiscal 2025 NFVPS guidance by 10 cents a share to a revised range of 315-330 per share.
Speaker Change: Looking at our other subsidiaries, we saw solid execution in the quarter from our entire portfolio of complimentary businesses.
Speaker Change: At New Jersey Natural Gas, we completed the first full quarter of new rates following our base rate case settlement.
Speaker Change: We also initiated investments under the Extended Safe Green Program, our largest energy efficiency violent today, which earns near real-time returns.
Speaker Change: At Clean Energy Ventures, we are advancing our solar portfolio with new projects coming online and building a growing, diversified project pipeline.
Speaker Change: We continue to prioritize discipline capital deployment and strategic expansion across multiple states.
Our storage and transportation business also continue to make progress.
Speaker Change: We continue the Capacity Recovery Project at Leif River and remain engaged in the settlement process for Adele V. Gateway's Section 4 rate case, which is proceeding as expected.
Speaker Change: Turning to slide 5 for more details on our guidance. We are raising our fiscal 2025 NFBPS guidance range to $3.15 to $3.30 per share, an increase of $0.10 from our prior range.
Speaker Change: This new outlook reflects our strong, upgraded performance through the winter season for energy services and includes the gain from the sale of our residential solar portfolio at clean energy ventures.
Speaker Change: On slide 6, we present our updated NFVPS guidance by segment.
Speaker Change: New Jersey natural gas remains the largest contributor followed by clean energy ventures and energy services.
Speaker Change: In the second quarter, we slightly narrow the range of contributions across our business lines [inaudible]
Consistent with our practice as the year progresses.
Speaker Change: These updates reflect outperformance and energy services and a modest change in the relative contributions from New Jersey natural gas and clean energy ventures.
Speaker Change: Now let's discuss our complimentary business units, starting with New Jersey Natural Gas on Slide 7.
Speaker Change: New Jersey Natural Gas Continues Deliver, Consistent Customer Growth, Quarter After Quarter, driven by a healthy mix of new construction activities, system expansions, and steady conversions across our service territory.
Speaker Change: This underscores the ongoing demand for reliable affordable natural gas service and supports long-term investment in our utility infrastructure.
Speaker Change: We also remain proactive in strengthening the relationship with all of our customers.
Speaker Change: Throughout the winter season, we regularly shared information on utility assistance programs and focused on maintaining our reputation as a responsive and dependable service provider.
We continue to leverage mechanisms that help manage energy affordability.
Speaker Change: The resulting margin benefits are largely credited to customers, helping to mitigate the impact of higher energy prices.
Speaker Change: In the last ten years, New Jersey Natural Gas has saved customers nearly $800 million as a result of this program.
Speaker Change: Alongside these efforts, we remain focused on long-term investments that support system reliability, customer growth, and New Jersey's clean energy goals.
Speaker Change: We've invested $254 million at New Jersey Natural Gas this year, with 46% of that cat-bex providing near real-time returns.
Speaker Change: And as I noted earlier, we began making investments onto the latest iteration of our SAVE Green program.
Speaker Change: These investments assist our customers with affordability, helping them lower their energy usage, reduce admissions, and manage bills more effectively, all while delivering timely returns to NJR through a proven regulatory construct. Thank you very much.
Speaker Change: Moving to slide 8, we are consistently placing new projects into service at clean energy ventures.
Speaker Change: adding 31 megawatts of solar capacity into service this fiscal year.
Speaker Change: In addition, we are moving projects through our pipeline with 60 megawatts currently under construction.
Speaker Change: Our project pipeline stands at over one gable up with the majority of those investment opportunities located outside of New Jersey.
Speaker Change: The CEV team was deliberate in their efforts to diversify the project pipeline seeking to avoid an overreliance on any one market or policy regime.
Speaker Change: This strategy is proving more valuable as the renewable energy industry continues to navigate interconnection policy-related complexities.
Speaker Change: A robust pipeline of capital blooming opportunities combined with the discipline to Esra Kedgen strategy, positions us to continue generating stable predictable cash flows from our solar
Speaker Change: Moving to Slide 9, storage and transportation continues to deliver steady, fee-based revenues.
Speaker Change: At Leif River we continued our capacity recovery project restoring capacity that had been impacted by salt creep over time [inaudible]
Speaker Change: Separately, we are exploring the potential development of a fourth cavern in recently completed a non-binding open season with encouraging interest as we evaluate the economics and design optimization.
Speaker Change: At Adelphae Gateway, we continue to advance through the third rate case process with settlement discussions ongoing as we move towards achieving resolution and recovering the significant investments we've made to the system.
Speaker Change: These assets represent strong long-term value proposition, particularly as system constraints by light the critical role of existing natural gas infrastructure.
Speaker Change: So with that, I'll turn the call over to Roberto for review of our financial results
Roberto: Thank you, Steve, and good morning, everyone. Slide 11 shows the main drivers of our NFC for the second quarter and your 28th period of fiscal 2025.
Roberto: In the second quarter, we reported NFCPS of Adolaron 38 times pressure, compared with NFCPS of Adolaron 41 times pressure last year.
Roberto: We saw higher NFC at New Jersey National Gas, driven by higher-rigidly growth margin as a result of our recent base rate case settlement and storage and transportation reported in proof performance versus a prior year, driven by higher revenues at least river.
Roberto: A clean and adventurous, we reported higher NFE for the year-to-date period, primarily raised by the failure of a residential solar portfolio during our fiscal first quarter.
Roberto: For fiscal 2025, we expect that the sale of our residential solar assets will generate a net benefit of approximately 30 cents per share, reflecting both the gain on sale and the lack of earnings contribution from that business for the remainder of the year.
Roberto: Now let's move to slide 12, where we will discuss in your scuttle plan.
Roberto: For fiscal 2025 and fiscal 2026, we're planning capital spenders, ranging from 1.3 to 1.6 billion dollars, which aligns with our long-term NFPS growth target of 7 to 9%.
Roberto: We do not make any changes to our capital plan compared to our priory disclosure and expect spending between $610 and $719 million in capital investments during fiscal 2025.
Roberto: These investments align with our long-term strategy to enhance your token infrastructure, expand clean and early investments and optimize our storage and transportation capabilities.
Roberto: As highlighted in slight routine, our strong balance sheet on liquidification enable us to execute on our strategic priorities of maintaining financial flexibility. Thank you very much.
Roberto: Our gestate fund for operations, our gestate debt ratio is projected to range between 19% and 21% for fiscal 2025.
Roberto: which reflects our ability to generate solid operating cash flows and manage it effectively.
Roberto: Peace levels are consistent with maintaining or embezzling great credit rating at NG&G and strong balance sheet at NGR.
Roberto: We expect our cash flow operations to be between $460 and $500 million in fiscal 2025, providing a solid foundation for our capital plan, dividends and other corporate needs.
Roberto: With that, I'll turn the call back to Steve for concluding remarks like 14.
Steve Westhoven: Thanks, Roberto. Before we move to Q&A, I'd like to briefly address NJR's positioning in light of the evolving macroeconomic environment, specifically in relation to tariffs.
Steve Westhoven: As many of you know, the situation remains fluid. New Jersey National Gas is our largest business unit and because our business activities are domestic, we are largely insulated from the impact of imported goods and materials.
Steve Westhoven: Almost all of our gas supply comes from domestic suppliers, including many of the nation's largest interstate pipe lines. Additionally, New Jersey Natural Gas' capital program uses domestically sourced materials, such as plastic pipe and infrastructure components. Minimizing exposure to current tariffs. [inaudible]
Steve Westhoven: At Clean Energy Ventures, we are proactive when it comes to project cost containment. Most of our contracts incorporate structured provisions that preserve returns and the event of cost increases.
Steve Westhoven: As a result, we do not expect the uncertainty around tires who will materially impact our near-term investments.
Steve Westhoven: Our solar investment pipeline remains broad and diverse, giving us meaningful flexibility in how and when we deploy capital.
Steve Westhoven: It's also important to emphasize that NJR strong balance sheet continues to support our strategy and is well positioned in any short-term market dislocation.
Steve Westhoven: We are not relying on equity issuances to fund our capital plan. We have substantial liquidity and healthy cash flows and our debt maturity profile is staggered with no term debt due at the whole code level in fiscal 2025.
Steve Westhoven: To conclude, NJR is poised for sustained long-term growth across our diverse portfolio of businesses.
Steve Westhoven: Our balanced mix of regulated and non-regulated investments continues to support peer-leading performance.
Steve Westhoven: We raised our initial NFEPS guidance for the fifth consecutive year and our revised range of 315-330 per share reflects the strength of our business model and our ability to navigate dynamic market conditions.
So with that, let's open up the line for questions.
Speaker Change: At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad will pause for just a moment while we compile that Q&A roster.
Your first question comes from the line of Richard Sunderland?
of JP Morgan. Please go ahead.
Hi, good morning and thanks for the time today.
Thank you.
Speaker Change: I'm starting with the leaf river expansion. What is the timing of a potential decision to advance that project? Also, I'm curious how much capital would that require in what sort of returns you're targeting?
Speaker Change: So, you know, we just concluded the open season and evaluating, you know, those kids and doing that at the same exact time as, you know, the cost associated with the expansion is really pretty good in the entire transaction. We don't have a finite timeline set right now, you know, we don't have a determined point which we actually go because you don't know whether you're going to complete contracts. So, you know, you're going to have to do contracts.
or not. You know, it's for as a full capital cost.
Speaker Change: I'm going to have to make a similar between $175 million to $200 billion, you know, total costs, don't hold me to that, but it would probably be somewhere, you know, in that area [inaudible]
Speaker Change: and then as far as returns go, you know, to be in line with what you expect were, you know, a midstream, you know, invest.
Speaker Change: I think that's the story we'll probably go with that in breakdown.
But yeah, it's...
Speaker Change: and from the positive side, it was great, and the market's very supportive team. The downland region, it's a great asset. I think we're in a very good position to move forward. We just need to put all these pieces together to make that capital the best.
Speaker Change: Understood, that's very helpful. And then appreciate the tear of commentary. I just wanted to drill in a little bit more for C.E.V.
Speaker Change: So, at the sort of project level, do you see cost exposure to tariffs, which is then covered by the contractual protections you reference? I guess I'm just trying to think, you know, how do you see development pace if costs do increase, even if your returns are protected. [inaudible]
Speaker Change: You know what, it's really too early to say, I mean such a slow situation, you know, you know, we put that commentary in place just to kind of give a view of how we're thinking about it and also, you know, that we've already thought about, you know, change this market, you know, if you remember, you know, we've had tariffs on solar panels, we've had changes in ITC, we've had a number of issues over the past 15 years that we've been, you know, in this market, developing this market. So, you know, state monitoring provisions, you know, certainly we'll offer us some protection protection.
Speaker Change: As you can imagine, if you look at our capital plan, the construction for many of these facilities is already happy to even know their commercial operation is going to happen until, you know, this year, 2026 or 2027, so these things are done well in advance and we're just trying to convey to the market that we thought about this, we've got some protections in place
Speaker Change: and given the fact that from the state perspective...
Speaker Change: Ben Shulls in a solar state, you know, one place where, you know, it's been a successful program, driving down costs, we've been able to develop, able to play capital. So we feel for all those reasons. It's a good place to stay and I thank you.
Speaker Change: with Tarris and all the other things that could happen. We're trying to prepare it at them, but we don't really see any impacts over the next 12, 24 months or so.
Speaker Change: Understood. Thank you for the time today. I'll leave it there.
Speaker Change: Your next question comes from the line of Richard Sunderland, excuse me. Richard, do we have an up, Richard Sunderland of J.P. Morgan?
Did you have another question, Richard? Richard?
Speaker Change: Okay, I wasn't sure why that popped in. Thank you very much. Sorry about that, ladies and gentlemen. Your next question comes from a line of James and word of Jeffries. Please go ahead.
Good morning.
Speaker Change: Hey, it was great hosting you guys recently in Texas and nicely done on the beaten race.
Matt.
Speaker Change: If I could just expand on Richard's leaf river question here, how should we think about the expected economics in terms of how they compare to your existing caverns and also just given current storage market dynamics. Thanks.
and Adam Prior. Thank you. Thank you.
Yeah!
Speaker Change: H, the way to think about that, you know, this is something that, you know, we're only going to build if we get the returns that are appropriate for. [inaudible]
Speaker Change: The, you know, investments that we're making, right? So what I'm trying to say there is that we're going to make a contract in place.
Speaker Change: We've got to be able to lock in a significant portion of materials and in that clear line of sight and what our construction costs are, and then have a little bit of an extra in order to have safety back or through probably multi-year cycle of developing out that capital. So, build a negative flavor for how we're thinking about this.
Speaker Change: and the types of returns that we would have to have in order to make all that happen. I don't know if it's comparable to our initial investment, because that investment was up and running, it was already confirmed, it was already gone, it was largely largely de-risked. This is a little bit different from that.
Speaker Change: Gotcha. Okay. Thank you for the color there. I appreciated your comments in the prepared remarks around affordability.
Speaker Change: I just wanted to also expand on that with your core utility business now contributing about 65 to 68% of
You know, earnings, you know, and after successful November 2024 rate case settlement.
Just give any affordability concerns and legislative initiatives.
Speaker Change: highlighted recently in the state, how do you view the regulatory environment over the next 12 to 24 months, and maybe heading into your next break case, and are there any specific regulatory mechanisms you're pursuing to further reduce leg between investment and recovery beyond safe green and I IP. [inaudible]
Thank you.
Speaker Change: Jamesson, we're recording a good spot for the regulates for a childhood perspective, you know, having completed our race case and having completed our energy efficiency final and having that, you know, done, really did some clear air, you know, for the next, you know, 12, 24, 36 months, then when our next race case...
Speaker Change: where you come back. There's a lot of legislation that's being put forth right now around affordability. I'd say that in any year there's about 10,000 pieces of legislation that are submitted. So what's going to make it through and then what's not? It's hard to say right now. But I can tell you from our perspective as a company, we've been very focused on affordability. We're focused on making sure that the way that we invest money has a minimal impact on our money. We're focused on affordability. We're focused on affordability. We're focused on affordability.
Speaker Change: Customers, and everything that we do for petting programs, the BGSS, that...
Speaker Change: Deploying Chapel at the time, it was really, really conscious around affordability for our customers. Natural access still gets you this way, to heat your home and to stay in New Jersey. And we don't want to give up that conditioning willingly, so we're going to work on making sure that we still maintain that position. You don't go on forward.
Got it. Thank you very much.
Speaker Change: Your next question comes from a line of Travis Miller of Morningstar. Please go ahead.
Everyone, thank you.
Thank you very much.
Speaker Change: Two more quick ones on leaf river one, is there any equipment or supplies that you need to order?
to complete that project if you decide to go forward.
Speaker Change: Yeah, I mean, we certainly have to order new compressors to be piping associated with it, you know, a big chunk of the the dollars is just being, you know, water in and out of it.
Thank you recite Dr. Robert E. Friedman.
Sorry.
Speaker Change: Yeah, you broke up a little bit there, but anyway, so you do have to order something, if they're risk then, the implication there is there risk in terms of supply chain or tariffs, anything else?
in terms of getting what you need to build that. [inaudible]
Thank you, Marlene.
Speaker Change: on that right now. We're still working through confronatory signs and things like that, trying to line those up for contracts. So, for even an optimistic timeframe, those literally would be out for multiple months or maybe this year. I think it would take a while to determine whether this is going to be an impactful and in view of the environment so fluid. It's a brownfield site, so we don't have to order as much, we don't have to put as much infrastructure in places to somebody that's building a greenfield site. [inaudible]
Speaker Change: You know, so that's there to make, you know, a positive to our point. And given the fact that we've already, you know, had the wealth in place, you know, progressed from order, and we've got the grind and facilities in place, which is a big part of the construction and puts us in an advantage. So we're in a good place, you know, from that perspective, but too early to tell on, you know, on things with that nature of this point. [inaudible]
Speaker Change: Okay, perfect. And then, our level question, the utility, you continue to see customer growth over and over and over.
Speaker Change: What's going on there, right? What are some of the fundamentals where we don't necessarily see that at some other utilities?
Speaker Change: Is there a business mix change in terms of residential to business or business to the residential? What are some of the fundamental?
Speaker Change: Ships you're seeing here in terms of still continuing to get customer growth [inaudible]
Speaker Change: I would say that, you know, we have a really attractive service church, right, principally Mammoth, Ocean and Morris Counties.
Speaker Change: Admiral Roode for development, great demographics in terms of some of the highest per capita income brackets in the state of New Jersey.
Speaker Change: and on the folks side though, we are also constantly advocating for ways we can save customer
Speaker Change: Larger Stetford in the state, but that really provides customers an opportunity to conduct an NGO to their home and figure out what they've done warranty efficient for those homes that are already been described. So I hope that answers your question, but we do believe that we continue to see fantastic customer case.
Speaker Change: Yeah, okay, very good, but we'll see all these soon [inaudible]
Thanks. Thank you.
Speaker Change: Maybe an updated draft to the proposed Energy Master Plan, a little bit after your one-Q update. Just wondering if there's anything in particular you're focused on during the common period and anything that might change just given some of the recent affordability legislation proposed in New Jersey, kind of open-ended question, but curious to get your thoughts there.
Speaker Change: and Richard Sunderland. So, I think as far as you're concerned, it's a stage in the moment to see, you know, how this plays out next year or so, and see when a new administration's focus and goals are.
Got it. Appreciate the time.
Alright, thanks.
Speaker Change: This concludes our Q&A section. I will now turn the call back over to Adam Prior for closing remarks. Please go ahead.
Speaker Change: I'd like to thank you all for joining us. We look forward to seeing many of you at AGA later this month, and as always, we appreciate your interest and investment in J.R., good day.