Good morning and welcome to The New Jersey Resources First Quarter Fiscal 2019 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, Kate, and good morning everyone. Welcome to New Jersey Resources first quarter fiscal 2019 conference call and webcast. I'm joined here today by Steve Westhoven, our President and Chief Operating Officer; 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 this call that the expectations, assumptions and beliefs forming the basis for forward-looking statement 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 in our most recent Form 10-K and Q as filed with the SEC. 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. 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 in item 7 on our Form 10-K. I'd also like to point out that there are slides accompanying today's presentation which are available on our Web site and were furnished on Form 8-K filed this morning. With that said, I'd like to turn the call over to our President and COO, Steve Westhoven. Steve?

Thanks Dennis and good morning everyone. Hopefully you've all had a chance to review our earnings release from this morning. Before we discuss the results for the quarter, I'd like to begin today by focusing on our strategic outlook. The demand for clean low cost natural gas continues to grow. Here in New Jersey three out of four homes are heated with natural gas and it is our obligation to provide safe, reliable service. As a result, our infrastructure investments are vital, in fact natural gas infrastructure represents the largest portion of our business as we now serve over 540,000 retail customers in New Jersey. The extreme cold weather we recently experienced produced one of the highest send out days in our history. To meet peak day demand, we have designed and invested in our system to provide operational flexibility and capacity. To accomplish this, each year we spend in excess of $100 million to grow and maintain our distribution system and have programs designed to enhance safety, integrity and resiliency. Through our Safe and NJ RISE programs and the SRL project, we will invest over $450 million in total to enhance resiliency and strengthen our overall pipeline network. As we continue to add new customers, the need for additional supply only becomes more apparent. Our midstream infrastructure investment which include PennEast and Adelphia Gateway are designed to help meet this demand and provide low cost natural gas supply to currently constrained markets. We will assess additional projects and opportunities in the midstream space as they present themselves. Our deep understanding of wholesale natural gas markets position as well for future opportunities. As we look forward, we recognize that New Jersey's policy focused on clean energy will play a prominent role in the state's future. We will continue to focus…

Thanks Steve and good morning everyone. Today we reaffirmed our fiscal 2019 net financial earnings guidance range of $1.95 to $2.05 per share. On Slide 5, you can see the breakdown of the expected future NFE contributions from each of our business segments. Our regulated businesses will continue to ride the majority of our total earnings to re-buy infrastructure investments and customer growth. Looking at the pie chart on the left, we expect NJ Energy to contribute between 45% to 50% and the midstream business to contribute between 5% and 15%. As you may recall, this year we expect CEV to contribute between 25% and 35%, which is higher than prior years. There are two reasons for this. First to take advantage of a lower tax rate, we're able to align the timing of symmetric sales to 2019. Second, we expect to recognize the ITC is associated with all of our commercial solar projects placed in a service this year. We expect CEV to return to a more normalized range of 10% to 20% in fiscal 2020 and beyond depicted by the chart on the right. We also expect energy services to contribute between 5% and 15% percent Slide 6 provides a breakdown of the changes from year-to-year in each of our principal subsidiaries for the first quarter. There is also New Jersey Natural Gas for lower to slightly higher O&M expenses and lower VGSS incentives. Midstream inclination ventures were down year-over-year primarily due to the effects of tax reform on our fiscal 2018 results. Energy services decreased due to the lack of sustained cold weather and related pricing volatility as compared to last year. To further illustrate this point, on Slide 7, we have a comparison of TETCO M3 daily prices versus heating degree days for the last two…

Thanks Pat and thank you all for joining us today. As you can see we've had another successful quarter. I'd like to thank our employees for their hard work that drives our performance. We have a great team and we're dedicated to executing our strategy to ensure safe, reliable service for our customers, grow our business and deliver performance to our shareholders. I'd now like to open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Travis Miller of Morningstar. Please go ahead.

Good morning. Thank you.

Good morning, Travis.

Hey, Travis.

I wonder if you could just compare and contrast the cold weather we had last week and operationally or financially what you've seen relative to even last year or going back to the polar vortex a couple of years ago?

Hey, Travis. This is Steve. I think the big difference is that the weather that we've had even if you compare it back to the previous cold spell that we experienced is the immediate warming that has taken place right afterwards. And essentially that's taken a little bit of pressure off the market, reduced volatility and certainly lightened up on some of the operational issues that pipelines would normally experience when they have a sustained cold period. So I think that's kind of the fundamental difference between what we're experiencing now and if you were to compare it to previous periods.

Travis, this is Pat Migliaccio. We considered certainly all the weather up through January into reaffirming our earnings guidance this morning.

Okay. Okay, great. And then switching to the solar. I wonder if you could kind of give a sense for what you're seeing on the SREC like you talked about on the pricing there and more competition, are you seeing more competition as being reflected NASDAQ's or are you not seeing any more competition and that's why maybe SRECs are stronger. I just wonder if you could talk through the relationship there and if you're seeing any competition.

So, Travis, I think it's still the same. It's still the same market. You have a lot of the same participants but there are certain situations that occur every year in the market. And I'll let Pat take you through that.

Travis remember that the fundamentals of the SREC market are driven by the supply and demand for SRECs. And with the passing of the legislation in May that's essentially created a situation where the market for leased energy year 2019 and 2020 is likely short SRECs. And so that creates during the period of BGS auction some upward pressure on pricing and we've seen that reflected not only in the 22s which is the vintage we're just starting to hedge now but also the 21s as well.

Okay, great. I appreciate the answers.

Thanks Travis.

The next question is from Dennis Coleman of Bank of America Merrill Lynch. Please go ahead.

Yes. Good morning everyone. Thanks. Just a couple for me. I guess one is a little bit of logistics and SRL seems like maybe that's in service has been moved back a little bit and I just -- am wondering how that fits with the rate case. I thought the plan was to try and get it done to include in the rate case so maybe that's a little bit different if you can just comment on that.

No, Dennis, that's still the plan. So remember that we are required to file in November of 2019, but we will sync up the file with the rate case with the completion of SRL. Recall that within the New Jersey regulation, we're permitted to include rate base additions up to six months after the end of a test year. And so that influences both the timing of the rate case and how we'd be able to include SRL in that.

Perfect. Thanks. And I had forgotten that. Then I guess also on Adelphia, you've got the environmental permit, but still some work to do at the FERC. And then once you get that file for approval then you proceed to closing?

That's right. We received our environmental assessment from FERC on January 4th and we expect to receive our final FERC certificate second quarter this spring like timeframe. And then, once we receive that then we'll be able to transfer ownership from Tallinn in the IEC pipeline over to Adelphia Gateway. And at that point that'll immediately become a FERC regulated project and then the customers will fall under FERC jurisdiction, the operation fall into FERC jurisdiction, and then, we'll begin construction on the southern portion of that line converted over natural gas and then serving those customers in the future.

Got it, Steve. Thanks. And just to make sure I understand you said second quarter you're talking fiscal second quarter?

Yes.

Okay.

Dennis, it's actually about, yes, it'll be this spring. Usually it's like 90 days after you receive your environmental assessment. But FERCs schedules are very hard to predict. But rule of thumb 90 days so sometime in and around there 3, 4 months after the environmental assessment was issued.

Okay. That's helpful. And then, I guess if I could just tie this out to the billion dollar that would then be in that billion dollars spend that you talked about for CapEx?

Dennis that's correct. So we expect that the construction on the southern portion will occur in our fiscal year '19 and have always stated that we expect the project to materially contribute to earnings in our fiscal '20.

Perfect. That's all I have. Thanks for the update.

Thanks Dennis.

Your next question is from Stephen D'Ambrisi of Castleton Investment Management. Please go ahead.

Hey, guys. How are you?

Hey, Steve.

Good morning, Steve.

Thanks for taking my question. Just had a quick one. I guess when I look at first quarter earnings for NFE for CEV, it looks basically flat with first quarter 2018 adjusted for the Tax Cuts Jobs Act impact. And I guess I was pretty surprised by that given the midpoint of guidance for the year is up like $0.45. So can you walk us through I guess, is that the timing impact or how these ITCs and SREC gets recognized and when that comes through in the rest of the year because I think that was a big thing that I think I missed.

Yes. So Stephen remember that we are required to forecast an annual effective tax rate for NJR and in doing so, then we record only a certain amount of ITCs throughout the year consistent with how we recognize the income. So it is strictly timing for us. So you would expect in the second and third quarter that you'll see more of that investment tax credit being recognized as the income tax benefit.

Okay, great. That's all I had. Thanks very much guys.

[Operator Instructions] There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Dennis Puma for closing remarks.

Okay. Thank you, Kate. Just wanted to thank everyone for joining us this morning. As a reminder recording of this call is available for replay on our Web site. As always we appreciate your interest and investment in New Jersey Resources. Thanks. Bye.

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