Good day, and welcome to the New Jersey Resources' Fourth Quarter Fiscal 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dennis Puma, Director of Investor Relations. Please go ahead.

Thank you, Nicole, and good morning, everybody. Welcome to New Jersey Resources' fourth quarter fiscal 2017 year-end conference call and webcast. I am joined here today by Larry Downes, our Chairman and CEO; Steve Westhoven, our Executive Vice President and COO; Pat Migliaccio, our Senior Vice President and Chief Financial Officer, as well as other members of our senior management team. As you know 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 the call that our current expectations, assumptions and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely, which could cause results to materially differ from our expectations as found on Slide 2. These items can also be found in the forward-looking statements section of today news release furnished on Form 8-K and in our most recent Forms 10-K and Qs has filed with the SEC. We do not by including this statement assume any obligation to review or revise any forward-looking statements referenced herein in light of future events. Turning to Slide 3, we will be referring to certain non-GAAP measures such as net financial earnings or NFE. We believe that NFE provides a more complete understanding of our financial performance. However, NFE is not intended to be substitute for GAAP. Our non-GAAP financial measures are discussed more fully in the Item 7 of our 10-K. I’d also like to point out that there are slides accompanying today’s presentation, which are available on our website and we’re also furnished on our Form 8-K this morning. With that said, I’d like to turn the call over to our Chairman and CEO, Larry Downes. Larry?

Thanks, Dennis, and good morning, everyone. As I begin this morning, I wanted to congratulate Steve Westhoven on his recent promotion to Executive Vice President and Chief Operating Officer of New Jersey Resources. I think many of you know Steve, but – for almost three decades now, he's been a valuable member of the team. He has made significant contributions to the Company, particularly on the development of our successful wholesale energy and midstream strategies and I am confident that he will continue to deliver results for our customers, our shareowners and all of our stakeholders. As you know from our news release, this morning, we reported another strong fiscal year. Thanks to the performance of our employees, and their hard work, their focus, and their dedication. As we look at Slide 4, we reported net financial earnings or NFE of $1.73 per share for fiscal 2017 and that compared with $1.61 per share of last year and represented a very strong growth rate of 7.5%. Our results were in line with financial community expectations and our stated guidance range of $1.65 to $1.75 per share. I would also point out that the results from each of our business were within the ranges that we have provided to you at the beginning of the fiscal year. Consistent with our plans, New Jersey Natural Gas once again had a very strong year and drove our financial results, higher utility base rates and record customer addition lead to a 14.2% earnings growth rate over the prior year. Demand for solar, continues to grow in New Jersey and we remain well-positioned strategically in this market. Our Clean Energy business NJR Clean Energy Ventures has become one of the largest residential solar providers in New Jersey. This year, we also placed five commercial solar…

Thanks, Larry, and good morning, everyone. I would like to begin by discussing our Midstream business and recent announcement regarding the Adelphia pipeline acquisitions on Slide 8. Shortly after the end of the fiscal year, we signed an agreement to acquire an 84-mile 18-inch pipeline, which runs from Marcus Hook, Pennsylvania just South of Philadelphia, North to Martins Creek, Pennsylvania for $166 million. At the same time, we announced an open season for the Adelphia Gateway pipeline. NJR Midstream intends to convert the 50-mile Southern section of the pipeline to a Natural Gas only line and we will bring the pipeline system under FERC jurisdiction under the new name Adelphia Gateway. Capital costs for the conversion are expected to be in the $80 million to $130 million range. Today, the Philadelphia market is constrained with limited access to affordable energy sources. Adelphia Gateway will serve this need, fueling economic growth and job creation as businesses and manufacturers expand their operations. The project will have minimal impact on the environment because the pipe is already in the ground. The conversion process to natural gas involves minimal construction and utilizes brownfeild locations and existing rights of way. We expect the project to be in service in 2019 and to contribute to earnings in 2020. Our other midstream pipeline project, PennEast is expected to construct 120-mile FERC regulated interstate natural gas pipeline system that will extend from Northern Pennsylvania to West New Jersey and is estimated to be completed and operational in 2019. PennEast is currently awaiting the FERC certificate to move the project forward. Turning to Slide 9, New Jersey Natural Gas once again provided the majority of their earnings this year due to higher base rates, customer growth and infrastructure investments. During fiscal year 2017, we added over 9,000 new customers…

Thank you, Steve, and good morning, everyone. This morning, we reported a fourth quarter NFE loss of $12.5 million or $0.14 per share compared with a loss of $2.1 million or $0.02 per share in the same period last year. For the year, we reported NFE of $149.4 million or $1.73 per share compared to $138.1 million or $1.61 per share last year. On Slide 11, you can see the drivers of the quarterly decline and the improvement in our annual results. For the fourth quarter, higher O&M expenses resulted in a lower quarterly contribution from New Jersey Natural Gas. However, for the year, higher base rates and customer growth led to a $10.8 million improvement for New Jersey Natural Gas. Both our quarterly and fiscal 2017 results continue to benefit from AFUDC equity of PennEast, of which NJR Midstream is a 20% owner. We began recognizing AFUDC in the second quarter and recorded approximately $3.6 million for the year. Results in NJRCEV were lower on both the quarterly and annual basis as a result of sale-leaseback financing arrangements executed in the fourth fiscal quarter of 2017. Finally, results of NJRES were higher for the quarter as compared to the prior year, but margin is lower for the full-year which is in line with our expectations. Turning to Slide 12, I would like to review our recent Solar Sale-Leaseback transactions. Under this type of financing arrangement, we retained effective ownership of the solar projects because we still have all the revenue streams including SRECs and also responsibility for the operation and maintenance of the asset. We are however, surrounding our rights to the investment tax credit and bonus depreciation. Since we are not a cash taxpayer for several years, this transaction structure creates additional economic value for us and assisted…

Thanks, Pat. Before we open up the call for questions, I want to summarize the key elements of our plan to create long-term shareholder value. Looking at Slide 16, we have illustrated our accomplishments in fiscal 2017 as well as our path to future growth. We continue to believe this bath will support our long-term growth targets and provide solid returns for our shareowners. We spent the last decade building a portfolio of energy infrastructure assets to help meet current and future energy demand and we've used our knowledge of energy markets to offer services that help both large and small customers manage their energy needs. Our primary strategy is to invest in natural gas and clean energy, the two fastest growing areas of our nation's energy supply and we will continue to provide energy efficiency programs that help our customers use less energy and save money. As the demand for clean domestic affordable energy continues to grow, Natural Gas and Clean Energy will play leading roles in our future supply mix. Our infrastructure investments are aligned with this opportunity. Also as advances in technology make natural gas production more accessible and efficient and as natural gas demand continues to reach record levels, we are investing in natural gas infrastructure to meet customer needs. Our solar investments will advance this transition to a cleaner energy future, supported by state and federal policies, declining costs and growing customer demand, Clean Energy is currently projected to grow to 20% of our nation's energy mix by 2040. We believe that energy efficiency is another important part of our energy future, with new technologies, building codes in energy appliance standards, along with an increased interest in reducing emissions and lowering energy bills, the focus on energy efficiency continues to grow. We believe that energy…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Spencer Joyce of Hilliard Lyons. Please go ahead.

Hey, good morning, guys. Thanks for taking the call.

Good morning, Spencer.

Good morning, Spencer.

Hi, hopefully a couple of quick ones for me, Pat perhaps first to you, how quickly can the sale leaseback agreement be kind of the standard for the new solar operations? I mean will we see kind of a 50/50 split between sale leasebacks and ITC-eligible stuff or is that perhaps too quickly to make that shift?

So Spencer, in our long-term capital plan, we included an estimate of what we expect to sale leaseback finance in both 2018 and 2019 today. The sale leaseback structure, we actually have 90 days after the commercial operation of the asset before it goes into service to execute that, and so provide us some flexibility to ramp that up during the course of the year, if other businesses of ours are performing better than expected.

Okay, that's very helpful. Also kind of sticking with the sale leaseback item, correct me when I'm on wrong here, but was there a negative contribution from ITC specifically in the fourth quarter perhaps as we adjust the earlier quarters for the sale leasebacks, we saw in Q4 or is my math just off there?

No, I think that's accurate. Unfortunately, we have to estimate a future tax rate and take into consideration future investment tax credit. So the fact that, we did not record the investment tax credits on the Pemberton II and Princeton solar projects in the fourth quarter, resulted in a negative ITC adjustment if you will. But I think – sorry Spencer, I think the important number to look at is the year-on-year comps.

Okay. Great. I just wanted to make sure I wasn’t losing my mind here around the holidays at home. So versus the 29.6 NFE ITC comp for 2017, what's the comparable 2016 number, slightly less than that, right?

Yes, the CapEx that I have right in front of me is $85 million roughly for this year and was $87 million last year, so modest decline year-on-year.

Okay, perfect. Final question perhaps Steve to you for a second – first of all, congrats on the promotion.

Thank you.

Welcome to the call. And you made a short comment about perhaps [Wyoming] [ph] SREC as we look over kind of the 2019, 2020 years, was that more a qualitative assertion about support for clean energy from the new Governor there or was that a comment perhaps on simply the structural dynamics of the way the curves are structured in the way that those end use customers buy those SREC?

I guess you can answer that as probably a yes for both. I would imagine that the two are somewhat joined. Certainly, our new Governor has expressed some lofty clean energy goals. So I think that that has been somehow seen in the marketplace, and certainly we've seen some uptick in SREC buying an interest, not only for 2019, but also for 2020 and that's translated in some increase in prices. In February, as you remember there's BGSS auction, generation service auction for this load, certain providers will have to buy SRECs in order to complement their load and to adhere to the guidelines of a servicing load within New Jersey. So that certainly adds upward pressure to the markets. And I think all of these are coming together. So trying not to make predictions on the forward market, but it certainly has some strong support at this point.

Okay. That's very helpful. Happy Thanksgiving and congrats on a real nice year.

Thank you.

Thanks Spencer.

Our next question comes from Michael Gaugler of Janney Montgomery Scott. Please go ahead.

Good morning, everyone.

Good morning, Mike.

Good morning, Mike.

I got two questions on the Adelphia line. First, I'm wondering how you discovered the opportunity, was that internally sourced or brought to you externally? And then second, in terms of the size of the line, do you plan to upsize before putting it into service?

Hey Mike, it’s Steve. So basically the way that came about that assets had been on the market for quite some time and we actually had gone through multiple bidding processes to finally achieve and win that asset, and essentially we were able to identify constraints in the market and we felt that that line would have significant value due to the constraints in the market, specifically that Philadelphia area, South of Philadelphia area industrialized zone was very short on gas supply. So they need new supply down in that area. So that's what really drove us to pursue this asset in the marketplace. As far as upsizing goals, we have no plans at this point to upsize that asset, that pipeline is already in the ground, and it's been tested. We should be able to convert this pipeline with very minimal construction and just some short laterals that need to be put in place the assets the market down in the Marcus Hook area. So at this point it will stay an 18-inch pipeline and operated as such.

Okay. I guess one final one. Are there any other pipes like that in the area that speaks to your interest?

We don't have any at this point to discuss, but certainly repurposing some certain assets is an easier way to develop gas infrastructure.

Okay. That's all I had. Thank you, gentlemen.

Thanks Mike.

Thanks Mike.

Our next question comes from Sarah Akers of Wells Fargo. Please go ahead.

Good morning.

Good morning, Sarah.

What drove wind out of the capital plan between the Q3 update and update today?

Sarah, we have about $200 million of wind investments slated for fiscal 2018 and 2019. I think it's fair to say with the Adelphia Gateway announcement, we are redirecting that capital into a higher return asset with some attractive cash flows. We will also – so wind will shift to a more opportunistic profile over time.

Okay. Got it. And then relative to the fiscal Q1 and service date for SRL, when do you expect to start recovering and earning a return on that investment?

SRL is currently earning AFUDC equity on the balance of spend, the in-service date shifted a bit for SRL given the delays we've had in achieving the road opening permits and the [Indiscernible] complete the project, but I would say that not materially moving off from where it was before, we got Mark [Indiscernible] in the room, he might want to follow-up on that as well.

Mark Kahrer just joined us probably about six or seven months ago from PS and now leads our regulatory group. So Mark why don’t you comment on that?

Yes. So right now we're working with Craig Lynch in operations to kind of plan out on his construction schedule. When he thinks we’ll likely get through this process and then we’ll begin starting the plan for the rate case; it’s on one of the slides, but we're going to try and think that up pretty closely as we can to when it will go in-service, so there's not any regulatory lag on that asset.

Okay. I thought [indiscernible] correct that it will go in-service in fiscal Q1 of 2019 and that's also when you will file the rate case?

We may file before that if we have a clear shot at being able to get that done and get in the rates before winter sets in.

Got it. And is there any plan to seek an accounting order or any special treatment just to mitigate the lag between the in-service date and when you can ultimately get that in rates?

I think we'd like to, but the infrastructure classes that would do that aren’t really kind of purposed for that. We would have to have a conversation with the board in order to do that.

Okay. And then on the Adelphia project, will you book AFUDC throughout 2019 or should we expect that earnings contribution to be more in 2020?

Yes. Sarah, at this time we're not expecting any AFUDC equity on that project. And it has to do with the fact that a portion of it’s already in-service and so that present some challenge getting to the conclusion on AFUDC. If that changes, we will certainly update it.

Okay. And then last question just a follow-up to Spencer's questions on the ITCs. So for 2018 of the 180 guidance at the midpoint, what is the EPS contribution from solar tax credits? Or if you just have it on an earnings basis not on an EPS?

Yes. I have got in the capital planning side. So we are – one second Sarah, sorry not on top of my mind for you right now. So for 2018 we've got roughly $92 million of ITC all across solar investment, so times the 24% investment tax credit we are looking at close to $18 million to $21 million of ITC – of investment tax credits in 2018. And then the balance of investment is $43.8 million of sale-leaseback solar investment and that will be recognized over time.

Okay. And you said in 2017 it was close to $30 million, so there's a decent delta down into 2018 just because of this. Is it primarily the sale-leaseback that's driving the ITC that you're booking down?

So in 2017, our ITC-eligible solar CapEx was $87.5 million and that compares to a $93.5 million in 2018, so you see a slight step up in ITC-eligible solar CapEx. Sale-leaseback, you also see a slight increase with $33 million roughly this year and it will be a $44 million next year.

Okay. Thank you. End of Q&A

[Operator Instructions] And as we have no further questions, I would like to turn the conference back over to Dennis Puma for any closing remarks.

Okay. Thank you, Nicole. Thanks everybody for joining us this morning. As a reminder, a recording of the call is available for reply on our website. We always appreciate your interest in investment in New Jersey Resources. Have a great Thanksgiving. Bye-bye.

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