Ladies and gentlemen, good morning, good afternoon, good evening. My name is Zed and I'll be your conference operator today. At this time, I would like to welcome everyone to the NJ Resources Q3 FY 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session Thank you. I now invite Dennis Puma, Head of Investor Relations. You may please begin the conference sir.

Okay. Thank you, Zed. Good morning, everyone. Welcome to New Jersey Resources Third Quarter Fiscal '21 Conference Call and Webcast. I'm joined here today by Steve Westhoven, our President and CEO; 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 current expectations and beliefs forming basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to materially differ from our expectations, as explained 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 Forms 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. We'll also be referring to certain non-GAAP financial measures such as net financial earnings, or NFE. We believe that NFE or net financial loss provides a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in this presentation in today's earnings release and in Item seven of our Item seven of our 10-K. Our agenda for today is found on Slide 2. Steve will begin today's call with highlights from the quarter, followed by Pat, who will review our financial results. We’ll then open the call up for your questions. The slides accompanying today's presentation are available on our website and were furnished on Form 8-K filed with the SEC this morning. With that said, I'll turn the call over to our President and CEO, Steve Westhoven. Steve?

Thanks, Dennis and good morning everyone and thank you for joining us today. This morning we reported a third quarter GAAP loss of $1.16 per share and a net financial loss of $0.15 per share. During the quarter, we incurred a onetime after-tax impairment charge $72.7 million related to our investment in the PennEast project. While this is included in our net income for the quarter, it is excluded from and does not impact our net financial earnings. It remains our belief that PennEast is important and needed project to serve energy demands in the Northeast. The impairment we've taken reflects the ongoing uncertainty around the project's in-service date and the regulatory milestones needed to achieve it. As a reminder, in November, we moved PennEast from our forecast and the impairment has no bearing on our long-term growth targets. Moving on to the highlights of the quarter. We are increasing our fiscal 2021 and NFEPS guidance to a range of $2.10 to $2.20 per share. This guidance, increase the third one for this year is driven by better-than-expected results at Energy Services and our BGSS incentive program at New Jersey Natural Gas. We are also pleased to report that construction and final testing on the Southern Reliability Link are complete with an expected in-service date later this month. At Clean Energy Ventures, despite delays for some of the in-service dates of some of our investments, our project pipeline remains robust. We now have more than 70% of our original $315 million CapEx target for fiscal years '21 and '22 either operational, under construction or under contract. Leaf River, our natural gas storage facility in Mississippi, increased the long-term commitments of new and existing customers, significantly derisking our future revenues. And finally, Adelphia Gateway received a FERC notice to proceed for…

Thanks Steve and good morning everyone. Slide 15 shows the main drivers of our NFE for the third quarter. We reported a net financial loss of $14.1 million or $0.15 per share compared to NFE of $2.7 million or $0.03 per share in the third quarter of fiscal 2020. NJNG's NFE was lower due to O&M expenses related to increased bad debt and compensation expense. CEV saw a modest increase in NFE due to lower depreciation expense, partially offset by increases in O&M expenses related to project maintenance and leasing. S&T was lower primarily due to higher interest expense related to Adelphia Gateway and Leaf River acquisitions. Energy Services was down $5.9 million due to timing of certain storage hedges. Also although excluded from NFE we incurred $92 million or $72.7 million after-tax, impairment charge on our investment in the PennEast project. Since we previously removed PennEast from our financial projections, the impairment has no impact on our ability to achieve our long-term NFEPS dividend and cash flow from operations growth targets. On slide 16, I'll summarize the evolution of our NFEPS guidance for fiscal years 2021 and 2022. Fiscal year 2021 was going to be a reset year with lower NFE than in fiscal 2020 due primarily to the change in the accounting for ITCs going from flow through to the deferral method and also some regulatory lag related to items we expect to recover as part of our 2021 rate case filing. In March and then again in May, we increased our NFEPS guidance due to the outperformance of Energy Services, resulting from winter storm Uri. Today, we're increasing our fiscal 2021 guidance again due to better-than-expected results from NJNG's BGSS incentive program and also Energy Services, driven by volatility associated with slightly warmer-than-normal weather in the summer…

Thanks, Pat. Before I open the call to questions, I'd like to summarize the quarter. NJR continues to deliver strong results for the first nine months of this year. The strength of our business led by Energy Services and New Jersey Natural Gas has allowed us to increase NFEPS guidance for the third time this year. Our rate case continues to progress on schedule and we look to forward to a resolution later this year. SRL is now complete and we expect it to be in service later this month. Our CEV project pipeline remains strong with over 70% of our targeted CapEx either operational under construction or under contract. We received FERC approval and began construction on the second phase of Adelphia Gateway. And Leaf River significantly derisked its revenues going forward through long-term contracts with the new and existing customers. I want to thank all of our employees for their hard work throughout this year and I'll now open the call for questions.

Thank you very much. The first question is from the line of Gabe Moreen from Mizuho. Please go ahead.

Good morning everyone.

Hey, Gabriel.

Yeah, good morning. I just wanted to maybe start off and ask on sort of the hydrogen potential RNG investments. Maybe if you can Steve speak to kind of how you view this hydrogen investment in terms of what the next steps would be, if this investment proved successful? Do you have room to potentially build additional plans on your existing sites for example? And then as far as RNG goes, can you just remind us what the latest developments are in terms of regulatory treatment around RNG, whether it's rate basing your own investments or being able to pass through RNG costs or cost of gas to customers and recover those costs? So just curious how you're thinking about kind of going down that RNG path?

Okay. So Gabe, I'll answer the first question just broadly. So injecting hydrogen into our system it's not a new technology. They're doing it over Europe and in fact in other parts in the US they're doing it. So we're going to prove it out for our system. We expect it to be successful. And then we will have the ability to scale. I mean, this is really part of the decarbonization strategy for the fuel that we delivered to our customers. And really to prove out not only that we're able to do it, but we should be able to decarbonize and do it cheaply and effectively in the future. We are pursuing a number of RNG opportunities within our service territory. But I'm going to ask Mark Kahrer who's the Senior Vice President and Head of Regulatory to answer the question about how that will flow through essentially rate case regulatory treatment.

Thanks, Steve. Gabe, there are two opportunities that we're looking at right now. One would be a direct investment in the processing plant. We believe we have authority under what was the 2005 Energy Legislation. That enabled us to invest not only energy efficiency, but also in renewables as well. And the definition of renewables is that what renewables has been modified by the state a number of different times which incorporates the renewable natural gas. So we believe we have the authority to continue to have discussions with our regulators about that. There's also pending legislation that has been introduced in the state also to encourage BPU to take a closer look at RNG and hydrogen ensuring that not only direct investment and operation of those assets, but also procurement of renewable natural gas would be under their authority renewed and done effectively within the state and begin decarbonizing the gas streams as well. So the second opportunity would be a direct purchase from another facility that whether it's food waste, anaerobic digester or another processing plant that's taking landfill gas and cleaning it up and having it ready to inject into our line and basically buying it from I guess a third-party -- buying from that third-party and inject directly into our system. So we believe we have authority to do all that now. But again, it's something that we'll continue to work with our regulators to ensure that everybody is on the same page as we go forward with this.

This is Pat Migliaccio. Just as a reminder from a capital planning perspective, we've only included the one hydrogen pilot project and a potential RNG opportunity. Those investments total between $30 million and $40 million over the next two years and ultimately support the double-digit rate base CAGR that we talked about at our Analyst Day.

Got it. Thanks everyone. And then maybe if I can switch a little bit the midstream side of things. Can you just maybe talk about some of these new contracts at Leaf River? Do you think those were prompted mostly by winter storm LNG all of the above? And I'm just curious relative to expectations what the pricing has been on those contracts whether you're seeing some sort of uplift relative to prior contracts?

So a number of those were in motion prior to Uri occurring. But certainly, an extreme event like that doesn't hurt the contracting on a forward basis for any facility down in that region. I think as gas becomes such an important part of making a reliable energy mix that quick turn storages like Leaf River will become even more valuable. But just a little bit of color I think it's probably similar to slightly ahead of what our existing contracts were. So overall, supporting the investment thesis that we had for making the investment in Leaf River and it's certainly very supportive of essentially the market going forward.

Great. And then last one for me if I can. Just on the CEV side of things. If I'm hearing correctly, it doesn't sound like the shifting regulatory landscape in New Jersey is altering either your CapEx plan in the state versus out of state? And can you just speak to whether or not you think the shifting landscape alters the earnings trajectory significantly here over the next call it 24 months over the five-year plan?

No, it doesn't alter it. I think what we expect is New Jersey has been a strong supporter of solar for quite some period of time. And if you look at the target capacity that they want to install over here it's about 750 megawatts per year. And typically, we've been installing about 300 megawatts per year over the past 10 years. So I think that that's a statement in itself. And we expect that the programs that they're rolling out that we'll be able to participate and we're optimistic for the future. So we're not expecting to change in any guidance that we've given in the past due to this.

Great. Thanks, Steve. Thanks everyone.

Thanks, Gabe.

Thanks, Gabe.

Thank you. Our next question is from the line of Travis Miller from Morningstar. Please go ahead.

Good morning everyone.

Hey, Travis.

Assuming you had a constructive outcome in the rate case and as you look in the capital plan what's your thought of medium-term timing on going back to regulators for either rate relief or potentially even some kind of project-specific type of tracker or something like that?

So I'm going to ask Mark Kahrer, to answer that question.

So Travis, we are taking a look at the timing of our next rate case the next base rate case. That was in our Investor Day. We think that somewhere out into 2023 2024 time frame. That's contingent upon the completion of the IT projects where we're basically expanding substantial capital on both the replacement of the working asset management system and the customer information system. With respect to other infrastructure trackers that we might have, we're right now assessing as we wrap up our SAFE II program, what a Successor program could that may look like. So we do have vintage pipe that where the code disaster code existing right now . It is cathodically protected. So we're assessing both the timing of that and the timing of that assessment and the timing of that infrastructure tracker as well.

Okay. Great. And then just to follow up on the previous question about the incorporation of the hydrogen system. Do you think there's regulatory backing or supports to put a tracker in for those type of products, or is that something that you foresee going through future base rate cases?

So Travis I mean it certainly aligns itself with the Governor's Energy Master Plan and certainly decarbonizing our fuel stream and deliver it to our customers. So I think the way to answer that question, is that we're working through the process now. We've got an ongoing rate case and certainly a project that's active. And we're optimistic that due to the alignment with the administration that we should be able to receive some regulatory treatment of that for our customers.

Okay. And then just real quick clarification. Would you anticipate putting that -- the project that's going on right now the powered gas in a future rate case, or have you already talked about a potential tracker if you see stuff like that?

That project is part of our filed rate case that will hopefully conclude at the end of this calendar year.

Okay, great. Thanks so much.

Thanks, Travis.

Thanks, Travis

Thank you very much Our next question is from the line of Julien Smith from Guggenheim Partners.

Hey it's actually it's Kody Clark, from Bank of America here.

Hi, Kody.

So maybe if we can go back to the Solar Successor program quickly. And I think previously, you're assuming 0.9 factor on the TREC going forward. And you had that revenue mix kind of out through 2024 of -- I think it was around 20% just from TRECs. I'm wondering, how you're thinking about that going forward with this new incentive level? What are you assuming for new projects? What incentive level are you assuming? And then I guess, how does that revenue mix change going forward?

So Kody, Pat can answer the question on the details with TREC factors.

Yes. Kody, it's Pat Migliaccio. I think obviously, there are a number of various incentives underneath the Successor program. And so our prior assumption as of the Analyst Day that we've baked in was that roughly 50% of our projects would have been sourced within New Jersey, 50% outside of New Jersey. As we communicated that was a planning assumption. Ultimately what we've actually seen date is that 20% of the projects are out of state leaving the majority in state. The Successor program is broadly supportive of continued investment. And at the end of the day we're going to direct our investments towards those projects that allow us to preserve the returns achieved and get it closer to that 7% to 7.5% IRR. And so that's the way that I think you're getting to a modeling question here, which is if you just think about support level to get you to that 7% to 7.5% IRR.

Okay. Got it. And then just on the 750-megawatt goal that New Jersey has outlined versus kind of what we've been seeing historically that 300-megawatt level wondering, what you've seeing historically in market share of that 300 megawatt and then what you're assuming going forward?

I think historically we've been about 10% of the market share. So we'll see how it ends up playing out. The BPU will be doing a solicitation for large projects and we'll be participating in that. But as things progress we'll certainly keep everybody informed how we're doing.

Got it. Okay. And then sorry to stick with the Clean Energy Ventures being here but it looks like you narrowed your CapEx estimates on the commercial solar side just quarter-over-quarter. What's driving that confidence and being able to narrow your CapEx range? And then second to that, how are you seeing the kind of inflationary backdrop that we've seen with panels and freight and everything? How is that playing into that?

So I'll -- Pat and I were motioning on who's going to take the question. So I'll take the second part of the question as far as the inflationary. So if you look at the projects that we have in the pipeline for the next two years we largely have I guess, the majority of the materials purchased or locked up as far as it goes. So we're -- we'd be dipping into late 2022 or early 2023 into kind of the inflationary pressures if there are any at that point. As far as the CapEx narrowing the guided range, Pat would you want take that?

Yes. So Kody in terms of narrowing the range it really ties back to the fact that we've got over 70% of the projects identified in the pipeline. So a clear line of sight on what those projects look like what they'll cost. And so that confidence in the pipeline allows us to narrow the range of the capital plan.

Okay, understood. Thanks so much for your time.

Thanks, Kody.

Thanks, Kody

Thank you very much. As there are no further questions, I now hand the conference over to the presenters. Please go ahead.

Okay. Thank you, Zed. I want to thank everyone for joining us this morning. As a reminder a recording of this call is available for replay on our website. As always we appreciate your interest and investment in New Jersey Resources. Please stay safe everyone. Goodbye.

Thank you very much. Ladies and gentlemen this concludes today's conference call. You may now disconnect your lines. Thank you.