Good morning. My name is Chad and I'll be your conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources Fiscal 2021 Earnings Conference Call. Please note today's event is being recorded. Now I'd like to turn the conference call over to Dennis Puma. Sir, you may begin the conference.

Okay. Thank you, Chad. Good morning, everyone. Welcome to New Jersey Resources fiscal 2021 year end 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 form the 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 first on Form 8-K, and in our most recent Forms 10-K and Q as filed with the SEC. We do not by including the statement assume any obligation to review or revise any particular forward-looking statement referenced here and in light of future events. We will also be referring to certain non-GAAP financial measures such as Net Financial earnings or NSE. We believe that NSE or net financial, utility gross margin and financial margin provide a more complete understanding of our financial performance. However, these non-GAAP items, non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in item 7 or 10-K. Our agenda for today is found on slide 2. Steve will begin today's call with this year's highlights followed by Pat who will review our financial results. Then we will open the call to your questions. The slides accompanying today's presentation are available on our website and were furnished on Form 8-K8 filed 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. I'd like to begin today's discussion on slide 3 with review of the fiscal year end results. This morning we announced fiscal 2021 net financial earnings per share or NFEPS of $2.16, which is a 24% increase versus last year's NFEPS of $1.74. Fiscal 2021's NFE is much larger or much stronger than expected, exceeding the midpoint of our original guidance for the year by 35%. You may recall that last year's Analysts Day we were expecting 2021 to be a reset year. And this is mainly due to the change in accounting method for investment tax credits. However, the reset was negated by better than expected results in energy services, as well as positive results from our BTS incentive program and New Jersey Natural Gas. This allowed us to raise guidance three times during the fiscal year. In September, we raised our dividend to an annualized rate of $1.45 per share, a 9% increase compared to 2021, reflecting stronger cash flows and confidence in our strategy. We have now raised our dividend every year for the last 26 years. As you can see on the charts our track record of growing NFEPS and the dividends speak to the ongoing strength of our business. We have produced an NFEPS CAGR of 8.3% over the last four years. With the recently announced increase to our dividend grade of five year dividend per share CAGR is a healthy 7.3%. Turning to slide 4; it's been nearly a year since our 2020 Investor Day, we laid out our vision for strategy and growth. At our core NJR remains an energy infrastructure company with a portfolio of complementary businesses that leverage our utility experience, our strategy for growth is granted three key principles, growing our regulated utility and…

Thanks Steven, and good morning, everyone. Let's begin with slide 11 showing the main drivers behind the NFE changes from fiscal 2020 to 2021. The 2021 reported NFE of $207.7 million or $2.16 per share, compared to $165.3million or $1.74 per share last year. NJNG report its fiscal 2021 NFE of $107.4 million compared to NFE of $126.6 million during fiscal 2020. The decrease is due to the higher volume expenses and mainly related to increases of bad debt. Turning to our non-utility businesses; CEV's net financial earnings declined by $5.3 million, primarily due to lower SREC revenue, which was partially offset by lower depreciation expense. The decrease in depreciation expense was a due to a change in the useful life of CEV's assets. Storage and transportation reported fiscal 2021 NFE of $13 million, compared with the NFE of $18.3 million during fiscal 2020. The decrease in NFE was due primarily to lower contributions from our equity method investments, higher compensation depreciation expense, which is partially offset by increased operating revenues at both Leaf River and Adelphia Gateway. Finally, energy services reported NFE of $71.1 million compared with net financial loss of $7.9 million in fiscal 2020. The decrease is due primarily to the significant natural gas price volatility associated with a strong Uri in February this past year. Turning to Slide 12. As Steve mentioned, the BPU approved a settlement of NJNG's rate case with a $79 million annual revenue increase that will become effective on December 1st. Under the terms of the settlement, our overall allowed rate of return is 6.84%, which includes a return on equity of 9.6% with a 54% equity letter. Our composite depreciation rate also did not change, remaining at 2.78%. Importantly, the improved rate base of $2.5 billion includes SRL and our Green…

Thanks Pat. I'd like to finish up today with a few thoughts on what lies ahead for us in fiscal 2022. At New Jersey Natural Gas as discussed rate case is now behind us. SRL and our first hydrogen project are including those rates, which go into effect in December. And moving forward, we expect our customer growth numbers will return to pre COVID levels approximately 1.7% as the economy continues to recover, we are reassessed -- we are assessing sites for future hydrogen RNG projects and we'll continue to add low and zero carbon fuels to our system. And at CEV, we currently have $150 million of projects under construction. We continue to grow outside New Jersey as we seek to expand our pipeline of projects. We expect that more of Adelphia will come online during fiscal 2022. And we'll continue to seek additional organic growth from that project. In an energy services, our NFE projections only consider contracted AMA revenues and cash flows. We will continue to seek more fee based transactions, allowing for more predictable NFE from the segment. To conclude moving to slide 19, we expect NJR to continue delivering long-term value for our shareholders anchored by our regulated utility and the infrastructure investment opportunities provided by our other business. And to summarize, we offer investors an attractive 11% to 13% expected total return based on our dividend yield of about 4% and our long-term NFEPS expected growth rate of 7% to 9%. We appreciate that you took the time to join us here today. And I'd like to recognize and thank our employees for all their hard work and dedication that drives our performance. So now let's open the call for questions.

And the first question will come from Gabe Moreen from Mizuho.

Hey, good morning, everyone. Yes, couple of questions for me just some of the guidance there. You mentioned kind of more visibility, I think to future stuff beyond the rate case having just settled, I guess, is there anything else that you'd kind of call out in terms of the upper or lower end of that range being narrowed? And then also on a related note, is it safe to assume that I guess the dividend growth guidance at this point is 7% to 9% as well.

So yes, it's safe to assume. I think there was a number of things so rate case being settled, certainly a big one, but in that was completing SRL which is the project that took a little while to complete. So we're happy to say that's operating. Also Adelphia Gateway, it's under construction, and we're getting close to some commercial operations for some of those facilities. So there have been a number of large projects that are coming into commercial operation, or into rates, that really allowed us to narrow the range.

Thanks Steve. And then maybe if I could follow up on the rate case settlement and future kind of green investments, whether it's RNG, or hydrogen, given the how facility, and its performance so far, and its cost, just curious whether in discussions with the BPU, during the rate case or outside the rate case. What's your appetite now is I guess, to spend on more hydrogen facilities, how should we think about the cost of those facilities? And then maybe and update in terms of your latest, a little more on the latest RNG efforts, if you don't mind?

So I think that's a great question. And really the way I've wanted to describe this or explain it to investors is that we're on a path to decarbonization, and that after decarbonization, it's going to include hydrogen, it's going to include renewable natural gas, we've got energy efficiency, as part of it, and then at some point in the future, you're going to see carbon capture and storage evolve as well. I think if you're looking for next steps most likely, I think the next transaction we've seen, although we don't have anything to announce now, is we'll have RNG being blended into our system. But scaling up all those things will depend on a number of all the factors when does hydrogen come to scale? We need to work with our regulators and administration to determine timing and development. And when will renewable resources come in and influence hydrogen production and other things. So there are just a number of factors that come into view. Also we need to look and keep an eye on consumer costs as well. So we need to balance all these moving forward. So I think we're going to move forward, we certainly are in a passage carbonization. But there's going to be some innovation, and you'll see us taking next steps. But I think a few things have to come to clear view. Certainly scaling cost and things like that need to materialize.

That's fair, and I think last one, for me would just be on energy services, I noticed that you're not providing or not including anything beyond AMAs and guidance. I know you typically hadn't really had that much contribution from energy services and guidance. And kind of normal matter, of course, but I just want to ask, is there any change to business strategy there because of that? Or you just really are leaving additional energy service upside? Is that just out of sigh again?

I mean, short answer is yes, it's going to be additional upside will be that. I think the one thing to note is that the portfolio is a little bit smaller from the release of some of these assets, and certainly just tighten up that book. So I think that could be a consideration as well and in view of that business.

And your next question comes from the line of Shahriar Pourreza from Guggenheim.

Hey, good morning, guys. Just on RNG, energy guys have highlighted opportunities more in terms of like third party purchases, kind of with the potential for New Jersey legislation to allow rate basing of RNG assets through Senate Bill 3526, how are you sort of thinking about your strategy with PPAs versus company owned? Assuming it's signed into law? And is there any status on the legislation?

So I don't know the status of the legislation. And I know we're in lame duck now. And I guess it's anybody's guess, of whether or how quickly that could move through. But I think about RNG for our purposes we've got a few opportunities that are on our system. And we're certainly pursuing it and seeing how we can integrate those. It's an important part of the process, like I was just saying, where to gate this is all a multi pronged approach to decarbonization. So we will pursue RNG, and getting those lower carbon fuels on our system. And we'll wait and see how the legislation occurs and certainly what types of transactions will fit us and our customers as far as cost goes to being able to decarbonize the fuel stream. I'll ask Mark Kahrer, if he has any thoughts associated with RNG, kind of the legislative side of things?

Yes, thanks, so from our standpoint, right now, with respect to our investments, we already have the authority to be able to do that, under the regi legislation that was passed a number of years ago, that's an important form to understand that, again, that enabled us to make that investment in the green hydrogen plant as well. So the opportunity already exists for our investments, the aspects of the legislation, we will try to clean up a little bit more is with respect to third party purchasers, and how that gets done and ensuring that those going forward. We are pretty confident on and working with our commission to talk through these situations. And as long as we can reach reasonable accommodation on the transactions and work into our supply portfolio, it's aligned with where the governor strategy is and where we want to be.

Got it. Perfect. Thank you for that, and then just on CEV, I mean, obviously Steve, you highlighted a lot of the growth. Capital has been derisked at least through '22, right? How do we sort of think about maybe prospective growth opportunities for CEV in light of sort of the input cost pressures that you kind of touched on a little bit on the prepared, whether it's labor or transport panels? We've seen the space and I guess do you have some purchasing flex like larger developers to sort of avoid it? Or can we see some slowdown at CEV? Maybe under an assumption these cost pressures are more long term in nature, especially as we're thinking about post '23, right? I guess what, how are the conversations going with your suppliers?

So certainly there's tightness as you go farther and farther out in the market. I think the group's done, our CEV groups done a good job of kind of looking around the curve and being able to pre contract for the projects that we currently have under construction and make sure that the supplies are available, and a little bit of tightness in some of the other components that we're seeing in the marketplace. But I guess as we move forward and go farther and farther out a little bit less view of that, but I'm assuming this is a short term, issue, short term being measured in maybe a year or two, and then we can get back to normal for a capital plan. Now, you can see you've got $150 million under construction almost $100 million that are under contract. And right now we're prepared to execute on that, and not change that.

And your next question will come from the line of Travis Miller from Morningstar.

Good morning, everyone. Thank you. I get kind of stuck on the whole RNG and hydrogen theme. And then thinking about coming into the winter here. What are you seeing in terms of as you blends? Are you displacing some of the traditional natural gas supply that you need? Is it coming at a lower cost for customers, their storage, and thinking through kind of the benefits and of either displacing traditional natural gas or being able to supply at a lower cost through hydrogen and RNG versus natural gas? Are those any considerations that are happening right now?

So I think thinking about at least the hydrogen component it's a proof-of-concept, the volume is pretty small compared to our own system. So really the minimus impact on pricing and such, and as far as looking ahead of the winner what are we going to displace, there's not enough find there to really make any impacts and I think we're a few years off, before we get to scale where you see numbers, I think, where you're going and what to talk about is how this is impacting the overall supply chain both natural gas coming to the system. So I think it's too small right now to really predict or talk about the way that you're asking that question.

Yes, okay, do you see it ultimately, being able to, I don't know, save as the correct word, but offset some of the extra infrastructure costs using hydrogen, RNG?

I mean, certainly --

In addition, obviously, the environmental benefits, right, but are there a cost component there, that would be beneficial.

I mean, you're definitely for moving towards a low carbon, a decarbonized product being delivered to customers, you're going to have to have energy efficiency, which is going to reduce their usage. You're going to have renewable natural gas, which is similar to natural gas, and its components and being able to be consumed and then have hydrogen as part of it. So you're going to push back on natural fossil fuel, if you will. So that's definitely going to happen in the future as we continue on this journey at what point in time, does this get up to a size that you can discern that in the marketplace? I think that's yet to be determined from some of the things that I mentioned and gave earlier. There's a number of things that have to come to scale, we've got to work with administration, we've got to work with the BPU, we've got to be conscious of customer costs, and things like that. So I think those questions are difficult to accurately predict right now. But key takeaway is, we are starting this journey right now, we are delivering some decarbonize fuel to our customers. And we're proving that essentially, our infrastructure is going to be used long into the future. And there are good reasons to do so.

The next question will be from the line of Julian Smith from Bank of America.

Hey, it's Kody on for Julian. Good morning. So first on Clean Energy Ventures, how are you thinking about geographic mix in the return profile across different states going forward? Are you still seeing that 7% to 7.5% IRR kind of across the board? Or is there a mix between New Jersey and some of the other states that you're looking at?

So I think the way we're looking at it strategically. I think we've said this before we started in New Jersey, we've made relationships with suppliers, with contractors with developers and that's been a natural progression to go into other states and certainly in the Northeast, you've got all the same suppliers and contractors and developers operated in many different states. So in thinking about it, it was a natural move for us to be able to make investments. Each state has a slightly different construct. And we've got some different risk profiles in that whether it's a feed in tariff in another state obviously in New Jersey, you've got what's now our TREC or the second coming of TREC and I think when we look at it slightly different returns based on risk profiles. But I think by and large you're in the ballpark, there. Pat, I don't know if you have any other comments?

I just echo what Steve said, I think you're accurate there. And it's a mix, Kody, we really only have our first project up and down in Connecticut. This year, we've got some others that are slated and rely on to next year. Those features feed in tariff/ PPA type arrangements, as you build up a cost of capital. If you've got something that looks like a 2025 year, PPA that's providing the revenue support for the credit quality utility, you might see the IRR is turned down a little lower on something like. But to New Jersey, we're still fairly comfortable that are probably at the 7% range. And but remember, we have some competitive advantages in the state and that we've 10% of the market share. And so we got lot of efficiencies in the state of New Jersey that we don't necessarily see external to New Jersey.

Okay, got it. And just second, wondering if you're embedding any assumptions around the solar successor program within that New Jersey return profile, and the narrowed CAGR going forward, given some of the reductions in the subsidies that we saw earlier this summer. And some clarity still needed on projects over five megawatts.

So, Kody, it's Pat Migliaccio, again, I think as we communicate our Analysts Day, we expected that roughly half of our projects will be in state, roughly half of them out of state, as we sit here today, that has trended more towards New Jersey projects, probably closer to two thirds to 75%. And that's really a function of the deep relationships we have the state from the very attractive TREC subsidy. And so that's the case for 2022 as we think about the capital plan for 2023, and identifying those I expected to see a bigger shift potentially out of state. And that's one of the benefits of diversification. As you know, the successor program for projects over five megawatts is now targeted for finalization will sometime this winter. And so that's their line on benefit certification we can are between New Jersey and other states. And thank you, ladies and gentlemen, this concludes our question-and-answer session. This time, I would like to turn the conference back over to Dennis Puma, for any concluding remarks.

Okay, thank you, Chad. I want to thank everybody for joining us this morning. As a reminder, the recording of this call is available for replay on our website. And as always, we appreciate your interest in investment in New Jersey Resources. See you next quarter. Goodbye.

Thank you. This concludes today's conference call. You may now disconnect your lines.