Good morning everyone and welcome to the New Jersey Resources' Second Quarter Fiscal 2018 Earnings Conference Call. All participants will be in a 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 sir.

Thank you, Laura, and good morning, everybody. Welcome to New Jersey Resources' second quarter fiscal 2018 conference call and webcast. I am joined here today by Larry Downes, our Chairman and CEO; Steve Westhoven, our Executive Vice President and Chief Operating Officer; and Pat Migliaccio, our Senior Vice President and CFO, 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 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 1. These items can also be found in the forward-looking statements section of today’s earnings release furnished on Form 8-K and on our most recent Forms 10-K and Q filed with the SEC. 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. Turning to slide 2, we will be referring to certain non-GAAP financial 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 a substitute for GAAP. Our non-GAAP financial measures are discussed more fully on Item 7 of our 10-K. I'd also like to point out that there are slides accompanying today's discussion, which are available on our website and were also furnished on our Form 8-K filed 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. Thanks for being with us here this morning. Things you know from our news release, we had a strong second quarter. So if you look at slide three, we reported net financial earnings or NFE for the quarter of $142.1 million or $1.62 per share, and that compared with the $1.21 per share for the second quarter of last year. NJRE Energy Services is having an excellent year. It was the primary net financial earnings driver this quarter making a significant contribution of $72.8 million which is compared with $15.7 million during the same quarter last year. Strong demand and market volatility from the extremely cold weather we experienced in late December and early January drove those results. New Jersey natural gas and our other subsidiaries performed in line with our expectations, and we reaffirmed our fiscal 2018 earnings guidance range of $2.55 a share to $2.65 per share. Moving to slide four, you can see our anticipated sources of net financial earnings for fiscal 2018. Aside from the net financial earnings related to the revaluation of deferred taxes which is shown in the red on the pie chart, the largest contribution will come from our regulated businesses. We expect that New Jersey Natural Gas and NJR midstream will contribute between 40% and 55% in annual net financial earnings, and we currently anticipate that energy services will contribute between 20% and 30% of net financial earnings in fiscal 2018. Moving to slide five, we continue to target a strong annual dividend growth rate of between 6% and 8% with the payout ratio goal of between 60% and 65%. We believe that this performance will keep our balance sheet strong and provide a competitive current return to our share owners. We will reinvest earnings to support our expected growth in new natural gas and clean energy infrastructure investments, and reduce our future external equity needs. And with that, I’ll turn the call over to our Chief Operating Officer, Steve Westhoven. Steve?

Thanks, Larry and good morning everyone. I’d like to begin today by updating you on progress in New Jersey Natural Gas. Slide six provides details on the strong customer growth at our utility. For the six months ended March 31, we recorded a 13% increase in customer additions over the last year. The majority of this customer growth was from new construction, particularly in Ocean County. We now expect 65% of our new customer additions to come from new construction over a three-year planning period running from fiscal 2018 through 2020. Between now and 2020, we expect to add 26,000 to 28,000 new customers, representing an average annual growth rate of 1.7%. Based on current rates, we estimate that this growth will add cumulative utility gross margin of approximately $16 million. Turning to slide seven, we are also growing through our investment in two BPU-Approved infrastructure programs, Safe II and New Jersey Rise. These programs help us to ensure the safety and reliability of our system and that annual recovery mechanisms, which provide current returns on our invested capital. Safe II began in fiscal 2017 and we have replaced about 91 miles of unprotected steel main to date, including 22 miles in fiscal 2018. We expect to have over 72% of our unprotected steel main replaced by the end of the fiscal year. Moving on to NJ Rise, we completed the secondary natural gas distribution main between Brick and Mantoloking, and reinforced a regulator station on Long Beach Island. We also continue to work on a secondary natural gas distribution main to the Seaside barrier island which is expected to be completed in June of 2018. In addition, we have installed more than 11,400 excess flow valves in storm prone areas of our service territory since the program’s inception. Our…

Thanks, Steve. And good morning everyone. I’d like to begin on slide 10, with the NFE waterfalls. The key drivers in net financial earnings for the three months ended March 31st was as follows. New Jersey Natural Gas’s quarterly NFE were flat. The high utility gross margin net of taxes which was offset by increased O&M expenses as well as lower BGSS incentives. Midstream is modestly relative to the second quarter of 2017 due primarily to lower AFUDC. With the aim of reporting AFUDC for the first time last year in the second quarter, which included a catch up entry and we also had recorded to update you see this quarter reflecting the FERC’s modification of PennEast capital structure to 50:50. The decrease at Clean Energy Ventures was due primarily to fewer tax credits recognized during the quarter as compared to last year, which is the result of our expected sale-leaseback financings for all of our commercial solar assets in 2018. For Energy Services the significant increase in NFE was driven by colder weather in early January which resulted in increased demand for natural gas and higher volatility allowing Energy Services to capture additional margin from natural gas price spreads. For the six months ended March 31, New Jersey Natural Gas saw an increase in gross margin net taxes that was only partially offset by the higher O&M expenses, which mainly over time resulting from the colder weather. Both our Midstream and CEV segments improved over the prior year as a result of the deferred tax evaluation associated with tax reform, and the increase in Energy services for the six months ended March 31, was also the result of the colder weather. Turning to slide11, I’ll walk you through some of the factors that will have an impact on NFE…

Thanks Pat. You may recall on last quarter's call I talked about our strategy to provide our customers with reliable, affordable and clean energy services. To execute that strategy we remained focused on natural gas, energy efficiency and clean energy investments. Today, I wanted to spend just a few minutes updating you on where New Jersey is with its energy agenda and importantly how that agenda aligns with our strategy. In early April the New Jersey legislature passed clean energy bills to advanced solar energy, reduce greenhouse gases and expand energy efficiency in our state. Those bills are currently awaiting Governor Murphy signature. The legislation sets important clean energy goals for New Jersey up by 2025, 35% of the states' energy will come from renewable energy sources. And by 2030, 50% of the states' energy will come from renewables. We believe that our path is on the – our state is on the path to achieve those goals. And I think it's also important to note that New Jersey already has one of the largest solar markets in the nation which is supported by public policy and driven by customer demand. Now Governor Murphy has made clear his strategy to build a robust clean energy economy that will drive job growth and create new energy investment opportunities. The strategy includes developing more solar and offshore wind, investing in energy efficiency, advancing energy storage, modernizing the grid and furthering the adoption of alternative fuel vehicles. As you can see a number of the governors priorities are directly aligned with the strategy that we've been pursuing for more than a decade. So I want to make three points today about our states' clean energy strategy. And the first one is the importance of energy efficiency. New Jersey is long recognized with the…

Good morning, everyone. This is ;[actually Sammy] on for Dennis. First, congratulations on the really strong results. We were actually wondering it's such a strong quarter, but this fiscal year 2018 is unchanged. Are there any offsetting factors for the year that we should be thinking about? Or what should we look for in the next two quarters in terms of your expectation?

Yes. Sammy, this is Pat Migliaccio. We don't provide quarterly guidance, but looking at how we typically perform in the second half of the fiscal year, you can expect that New Jersey natural gas post of the very modest lost. In addition NJR Energy Services earnings tend to be extremely weighted towards the front half of the year. Whereas the storage and transportation contracts that they have tend to be rated over the last 12 months. So a good portion of that lost in the back half of the year is attribute to NJR Energy Services. And then finally in the first quarter and again on this call I reference certain of the opportunistic tax planning activities that contribute about $0.20 to $0.30 of that offsets. So those things taken together get back to the midpoint of the guidance range.

Okay. That's helpful. And then more specifically for SRL it looks like the in-service date is extended to 2019 from the fiscal year first quarter 2019 and then most of the CapEx is also pushed to 2019. Could you speak about what might have caused the additional delays?

Sammy, this is Steven. So, we're working through the process of obtaining the necessary permits in right of entry to the joint base and we expect to achieve those this fiscal year with construction starting and then we'll put the pipe in the ground and have that service in 2019, so that's the current plan looking forward.

Okay. All right. Thank you.

The next question will come from Shahriar Pourreza of Guggenheim Partners.

Good morning, guys.

Good morning, Shahriar.

So, just let me just focus on the clean energy standards. Obviously it’s a big change in direction for New Jersey, New Jersey somewhat been trailing other states. Let me – first and foremost what's taking the governor so long to sign the legislation?

Shahriar, this is Larry. I think you have to ask him that question, but there are – there's a lot of element to the legislation and I would just imagine that team or staff are going through the delivery of processes as they evaluate the bill. I do think at least what we thought we focus on is his clear commitment to cleaner energy and to really do that over an extended period of time. We actually are -- we feel New Jersey's been a leader in the area of clean energy and it's important to focus not only on the statistics that I gave on the solar market, but also energy efficiency. And when we you look at these areas, New Jersey was not only – has not only been a leader but was a first mover in those areas and given I think as the overall characteristics in the states they relate to solar. The states done a really good job there and has been responsive to the changes in the market that have come from the growth in solar to take a long-term view to facilitate we think a continued path of growth in that market.

And Shahriar this is Pat Migliaccio. The only thing I would add is that even though the legislation hasn't been signed, we have seen resulting strength in SREC prices in outer years. And as Steve pointed out his remarks, they've been aggressively hedging our expected production in both energy year 2019 and energy year 2020 at these price levels.

Shahriar, this is Larry. Just one other point and I'm talking from this strategy point of view, when you look at the longer term goals they may seem aggressive, but we believe that there is a path here to achieve those goals. It is clearly longer-term and it's going to really require improvement in technologies, but when you look at how we're positioned and the things that have already been done, the state is off to a good start and although it's aspirational I think it's also realistic where the government is trying to drive us to.

Got it. And just since you touched on SRECs, is there any sense whether you could see a change in that market either from a construct or administrative standpoint because I think part of the mandate that the DPU has to look at as a result of the standard is whether they should see any changes in the SREC markets?

Shahriar, this is Steve Westhoven. So as the energy legislation is drafted it does require the DPU have to closing period on projects that are built prior to the legislation going into action and essentially that is going to make a change in the market. So your grandfather existing projects and then will have to be a new market probably similar to the one that we see now going forward and establishing the solar builds in the future. So there is going to be a change and like Pat has referenced, I think that change is reflected somewhat in your forward SREC curve being supportive that this legislation is supportive of the market going forward.

Got it. Got it. And then you touched a little bit on sort of the mandates whether it's storage or offshore wind, do you guys have any sense on what the incentives or penalties could look like as a result of this legislation like what do you see that's palatable?

I think it's too early to tell how that's going to evolve and how that will transpire. You do have some big investments that need to be made particularly at offshore wind. So I think it's something we have to watch and develop over time.

Got it. And just from a locality standpoint, do you guys have any sense on whether storage could be seen as a retail product as these mandates sort of kick in there because I think the BPU has some flexibility there on whether storage should be seen as sort of again, a power deregulated product or something that could be part of the retail rate structure?

I think that's very similarly as is way off in the future. And I think technology have to evolved in order to create the situation in which the question you just asked becomes meaningful. So I think that's something we're going to have to wait and watch that developed and see how that creates and opportunity for us.

Got it. Thanks guys. That's all I had. Thanks.

Thanks Shahriar.

And next we have a question from Joe Zhou of Avon Capital Advisors.

Good morning, Larry, good morning and Pat and Steve, congratulations on the good quarter.

Hey, Joe.

Thanks, Joe. Good morning.

Good morning. So I got a quick question on wind side. So now that you're planning to sell your existing wind portfolio and staging this increasingly difficult to find good wind project, onshore wind project to develop. Would you like to share some of your thought on the competition landscape on the wind side? Is it because of a margin squeezed from other developers or is it because of the margin shrinking or why you make this conclusion? Thank you.

Joe. I think it’s a combination of number of those events. Certainly scale is important when you're developing wind assets and we've seen some big players moving through that market. And as these market become developed, other risks come into play, basis risks between the point in which your wind farm is operating and where you can hedge that towards becomes an important item as well. So when you factor all these together, we weren’t able to find the project that continue to develop this business and really push us to explore these other opportunities for us.

And Joe the only thing I’d add is that if you’ve seen atleast more recently a lot more investment both on the regulated utility side with the rate facing these wind investments and also infrastructure pension funds have come in with lower cost to capital than some of the strategies. And so, that’s also putting some pressure on it as well.

Understood. Thank you very much. And also when you are looking at monetizing this wind portfolio, would you share some of your thoughts on timing and what evaluation metrics you are looking at?

Yes, we said we are going to the process now Joe, and as information becomes available and it’s appropriate to share, we will but we are expecting to close in 2019.

Are you going to sell as a portfolio or you are going to sell single asset, asset by asset?

As I said, we are working through the process, so that is yet to be determined.

Okay, great. Thank you very much.

Thanks, Joe.

[Operator Instructions] and this will conclude our question and answer session. I would like to turn the conference back over to Larry Downes for any closing remarks.

And I’ll turn it over to Dennis.

Thank you, Laura. Thank you everyone for joining us this morning. As a reminder, a recording of this call will be available on our website. We as always we appreciate your interest in investment in New Jersey Resources. Enjoy your weekend. Have a great day.

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