Good morning, everybody, and welcome to today's New Jersey Resources Fiscal 2022 Third Quarter Conference Call. My name is Drew, and I'll be coordinating your call today. I'm now going to hand over to Dennis Puma to begin. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to New Jersey Resources Third Quarter Fiscal '22 Conference Call and Webcast. I'm joined here today by Stephen Westhoven, our President and CEO; Roberto Bel, 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, assumptions and beliefs forming 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 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 Forms 10-K and Q as filed the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein light of future events. We will also be referring to certain non-GAAP financial measures such as net financial earnings, or NFE. We believe that NFE net financial loss utility gross margin and financial margin provide a more complete understanding of our financial performance. However, these non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K. Our agenda for today is found on Slide 2. Steve will begin with this quarter's highlights followed by Roberto, who will review our financial results. Then we'll open the call to your questions. The slides accompanying today's presentation are available on our website and were furnished on Form 8-K filed this morning. We'll begin with an overview of the quarter on Slide 3. With that said, I'll turn the call over to our President and CEO, Steve Westhoven. Steve?

Thanks, Dennis, and good morning, everyone. Thank you for joining us today. We're pleased to report that our complementary portfolio of business continues to perform ahead of expectations. As a result, we are increasing our previously announced guidance for fiscal 2022 by $0.10. This marks our second guidance increase for this year. To summarize a few highlights, New Jersey Natural Gas added nearly 1,700 new customers. In July, Clean Energy Ventures placed an 8-megawatt project into service. Energy Services reported significant improvement in NFE in the third quarter as a result of our asset management agreement. And finally, Adelphia is now servicing 75% of its contractual commitments, and we expect to reach 100% by the start of the heating season. Moving to Slide 4. We're increasing our fiscal 2022 NFEPS guidance to $2.40 to $2.50 a share compared to our previous range of $2.30 to $2.40 per share. This increase is due to a combination of factors, including strong performance at New Jersey Natural Gas, greater-than-anticipated financial margin from Energy Services long option strategy and increased electricity revenue adding Clean Energy Ventures. Our performance at Energy Services is worth noting. In line with our strategy to derisk that business, we executed an asset management agreement in December of 2020. This transaction provides Energy Services with fixed payments over the next 10 years, while still maintaining the ability to capture value and the volatility from the remaining portfolio of assets, which is what we're experiencing this summer. Moving to the next slide, I'll take a few moments to discuss the quarterly achievements at each of our business units, starting with New Jersey Natural Gas. On the left, you can see that New Jersey Natural Gas is in a solid position with strong capital deployment across a variety of programs. Year-to-date, we've…

Thank you, Steve, and good morning, everyone. As usual, I'll highlight a few operational and financial metrics for the third quarter. Slide 10 shows the main drivers of our net financial earnings or NFE. We reported a net financial loss of $3.6 million or $0.04 per share compared with a net financial loss of $14.1 million or $0.15 per share last year. NJNG saw an improvement of $1.1 million, primarily due to the impact of new base rates that went into effect on December 1. CEV remained mostly flat compared to the prior year period as higher electricity sales were offset by lower SREC revenues and higher depreciation expense. As a reminder, NJR has historically sold the majority of its SREC in the fourth quarter. Energy Services reported an improvement of $7.5 million, largely driven by the contributions of . Storage & Transportation reported an improvement of $1.1 million during the quarter, driven by increased revenues at Adelphia Gateway and Leaf River. Finally, home services improved by $1 million, mostly driven by higher installation revenues. On Slide 11, we have highlighted the details of CEV's SREC hedging program. The sale of SRECs remains a large portion of CEV's revenue, and we lock in these cash flows by hedging our expected production of SRECs. As you can see, our expected SREC generation is only hedged through an early year 2025 and 29% hedged for energy year 2026. I will now turn to our capital plan on Slide 12. For the current fiscal year, we expect capital spending at NJNG to following the rate communicated during our last quarter's call. Similarly, we expect CEV's CapEx for fiscal 2022 to remain unchanged from last quarter's communication. We'll continue to tighten our projection for fiscal 2023 as we see more progress around the New Jersey regulatory programs. And at Storage & Transportation, the construction of Adelphia Gateway is approaching completion and represents the largest capital expenditure for this segment. Turning to our projected cash flows on Slide 13. As we mentioned last quarter, we continued to assess the impact that elevated gas prices would have in our cash flow from operations is sustained through the end of fiscal 2024. Despite higher working capital needs at Energy Services and measures in natural gas, we remain in a strong position to execute on our growth objectives. With that, I'll turn the call to Steve.

Thanks, Roberto. We are pleased to report strong financial performance ahead of our financial targets and raised our guidance range for the second time this fiscal year. These results reflect the great work of our team and the combined strength of our businesses. We're working to grow our existing assets through organic growth initiatives, while positioning our portfolio of businesses to take advantage of the clean energy future. And as existing infrastructure becomes more valuable, our assets will continue to deliver earnings growth as well as help achieve our decarbonization goals. We see these as parallel paths and are not mutually exclusive. Stability at our regulated utility and the complementary investment opportunities provided by our other business segments provides a strong profile for growth and benefit to our shareholders. NJR currently offers investors an attractive 10% to 12% expected total return based on our dividend yield of about 3.2% and our long-term NFEPS expected growth rate of 7% to 9%. We appreciate that you took the time to join us today. And before I turn the call over to questions, I want to take a moment and highlight that after 38 years of service to our company, our Director of IR, Dennis Puma has decided to call it a career. We recently celebrated the 40th anniversary of our New York Stock Exchange listing with a bell ringing at the exchange. And for much of that time, Dennis has led our IR efforts with exceptional professionalism in personal care. Dennis, I'd like to thank you, and I know I speak for everyone here and wishing you well. And with that, I'll open the call for questions.

Our next question comes from Richard Sunderland from JPMorgan.

Maybe starting with the inflation reduction acts and potential benefits there impacts your business. Could you speak to what you're seeing at this point, both in terms of impact to existing opportunities and if there are any expansion opportunities of some of the new tax credits considered in the legislation.

Richard, it's Steve. So -- and the way that we're thinking about right now is to roughly to stay exactly what can come out of that legislation. But I'll speak to some soundbites that have been circulating around. Generally, we think it's very positive for our business. If you look at it and you talk about extending the ITC, the support for clean energy and solar battery storage support for hydrogen. So a number of those initiatives that they come through in the legislation would be supportive for us. So we're going to keep an eye on it, and we'll certainly update as information becomes available. But right now, it's just too early to say anything.

Got it. Understood. And then sticking with the renewable theme. Have there been any changes in terms of your timing expectations either on the PJM front or the BPU front? And how are you thinking about line of sight to 2023 capital, I guess, either over 4Q or into 2023?

We -- at the last earnings call, we changed the capital plan a little bit. And I think reflective of some of these challenges for PJM accelerating or going to redo their process in order to accelerate the review of interactions. And you know that the State of New Jersey is looking at putting in place whether third successor program and moving forward. So we believe all these be constructive, we adjusted our capital plan as we were going forward. And I'd say that the facts that I want to leave you with is that we've got a very large pipeline of projects going forward. So when this loan is finally release, we expect that we'll be able to develop. We feel very confident and appropriate. We need to feel confident in our business going forward, you can talk from our earnings today, that the complementary portfolio of businesses support our capital programs going forward.

Got it. Got it. That's helpful color. And then maybe one last one on my end. The cash flow revision, the impact from higher gas prices given that's brought down both 2022 and 2023, does that mean you expect some normalization or, I guess, even reversion in '24? Or could you just speak to the timing of both normalizing recovery and reverting some of the near-term impacts?

Rich, this is Roberto. So now what the assumptions are and -- so we reduced our cash flows from operations for million and $40 million and $20 million for Q3. But this assuming that covering gas prices remain in place until the end of 2024. And so that's definitely in relating assumption. If that prices decreased significantly, you would have a positive reversal.

Our next question comes from Gabe Moreen from Mizuho.

Likewise, congrats to Dennis. Maybe if I can start off with Energy Services. And just want to understand how much benefit there may be in 4Q. Clearly, there's been a lot of volatility I also want to confirm, is there any expectation that Energy Services earnings here being drawn a little bit full relative to, I'd say, the traditional Energy Services earning profile of earning in the winter time, given the volatility we're seeing now or you could still see the same upside in winter as usual?

Gabe, the last part of that question, could you just ask that again, you were asking whether the Energy Services?

Yes. Yes, I know the word we're not necessarily earnings forward here, Steve, in terms of some of the volatility you're capturing now again versus kind of leaving yourself position for the winter as you usually do?

No. I'd say just the opposite. I mean, it's really a short-term volatility it's influenced. And you can see the inflationary it's raising gas prices, electricity prices. There's been a natural hedge within our portfolio of businesses where we've been able to have some offsets to some of those inflationary pressures and invest some benefit to the company because of that you see that the energy prices to increase the volatility. And I think what you're seeing here is that the portfolio of assets outside of the AMA continue to perform and provide value for NJR. We're also seeing that over at CEV, we're increasing electric prices has benefited that group for the amount of electricity that we sell into the wholesale markets -- on a and monthly basis as well. So certainly, we don't like to see the inflation, but it is nice to see that the businesses that they came together are able to work in concert and create value.

Great. And then maybe if I can ask kind of again on the CEV CapEx visibility. I'm just curious kind of what your, I guess, ordering strategy is around components that you'll need for your future projects. Maybe how that has changed and how that of CapEx range you have for '23, so whether you could point to the low end or the higher end at this point in time?

It's too early to point to either end, but we say that the same thing that we said before that we have reserved and purchased a number of solar panels to add in our construction schedule. So we feeling we've got a pretty good hedge in place for a period not only for the remaining part of this fiscal year. But as these projects start to move into the next years construction as well. So feeling good about that, and it will be -- we think, as I said before, we were talking to Rich, some of these loans that are associated with the PJM process, state of New Jersey process, get clear, we're going to be able to develop. And we've got such a large pipeline of projects that are in our hands currently. It's just a matter of just working with the process to get into development of construction.

Got it. And Steve, you mentioned you took a visit to Leaf River. I'm wondering if you can give a little more color on contracting there, what the profile looks are what the uplift might be in contract terms or tenor relative to what you've been seeing before?

Yes. The current volatility is certainly extremely supportive, right? You look the aftermath of the storm Uri, which I know is in the rearview mirror now. But ultimately, it does impact you've got forward volatility that continues to storage and being able to balance that region as it becomes under more and more stress, is going to be extremely important. We have seen increase in contracting a lot of our contracts go out for multiyear churn. So we're confident in our revenue streams going forward. But as does come to roll over and renegotiate yes, we're expecting to get higher prices for that facility into the future. So very constructive. There's a cabin there that's developed. So if the market does get up to the point that there's more capital that can be deployed, and we'll certainly look at that as well. So it's a good market to be in at this point.

Our next question comes from Travis Miller from Morningstar.

Again, congratulations to Dennis, it's always been a pleasure here over the years working with you. Appreciate all the help.

Thank you, Travis.

Yes, sure. In terms of customer bills, I wonder if you could talk a little bit about the trajectory you see going into the winter. Obviously, you had the gas prices peak here earlier this year and then going into the winter, maybe coming down, you have the kind of hedging program through New Jersey's system. What are customer bills looking like going into the winter months, do you think?

I mean to speaking generally to Travis, yes, we've got a pretty robust hedging program that's been in place for a very long time and a majority of the gas supplies are purchased well ahead of the winter. So we've been able to largely insulate the customers as much as we had a customer bill increase that no one likes to see those increases take place. We had submitted to the EPU increased sales to like 13%, something.

What was it, . So ultimately, you don't like to see it, but you can temper that against as gas market, which is up almost 200% or 250%. It was relatively nominal. So inflation customers for that is good. And certainly, we'll see how the market plays out, hopefully normalizes and you get back down to a more normal gas price at least in recent history. But bottom line is customers will be largely insulated from the large increases in natural gas taking place.

Okay. Okay. So I figured. Okay. And then second, more high level, what do you see right now even in the market in general, not even necessarily for yourselves, but the constraints on green hydrogen, where in the system -- are you seeing those constraints on the production level, people just aren't producing enough green hydrogen? Is it midstream? Was it something technical within your system or even at the distribution level in general. Where is that constraint right now?

I think I would describe the hydrogen market, it's evolving, right? And it's certainly maturing. There's a lot of support for it. You got the hydrogen shot at the federal level in developing green hydrogen, driving down prices from their current levels, then with like kilogram, which is around $8 on an equivalent basis. And I think once those prices come down once proven development takes place then you're going to be able to bring that technology that fuel to scale and you'll see that used in a greater way. So I think it's a balancing act going forward. We've got a very high-quality pipeline system that NJR, we believe we can deliver to carbonized fuels in the future. It's just a matter of for these technologies to come to scale. And over time, like any of the grade and clean technologies as you come to scale, we'll start to implement that and drive our way towards a lower carbon impact in the future. So that's the way we're thinking about it. It's going to come over some time. But ultimately, it is moving forward, and there's a lot of, I'll say, third-party effort outside our company driving down these costs, and there's a lot of companies that are looking at it, which is going to be helpful for us and happening for the whole industry.

That does conclude today's Q&A session. I will now hand you back to Dennis Puma for closing remarks.

Okay. Thank you, operator. I want to thank you for joining us today. As a reminder, a recording of this call is available on our website. As Steve said, I'll be retirement in September, so this will be my last call, and I wanted to take a few minutes to say a few words. To my friends and colleagues in the financial community, I want to thank you for the opportunity to work with you, learn from you and get to know you over the past years. It's been an amazing journey and and I, we've had a few laughs all the way. Also I wanted to thank our entire management team, one of the best in the industry for their support and always being available when I needed a question-and-answer or listening as we discuss the financial community perspective on our initiative. Finally, I want to thank my family for their unending support and patients over the years. Guys, I can assure you that the only thing I'll be doing for the November call is listening. As I transition into retirement, my wife and I'll be doing some traveling, perhaps back to some of those places where I've only seen conference rooms and airports. Yes, airports. Enjoying life with family and friends and this is new, I decided to finally forgive golf for being so unforgiving to me over the years and take another shot at it. Let me know how that goes. So thanks for the memories, everyone. I hope our paths will cross again in the future. But until then, and as always, I appreciate, we appreciate your interest in us in New Jersey Resources. Goodbye.

That does conclude today's call. You may now disconnect your lines.