Hello, everyone, and welcome to the New Jersey Resources Fiscal 2022 Fourth Quarter and Year-End Conference Call. My name is Emily, and I will be your conference call operator today. [Operator Instructions]. I will now turn the call over to our host, Adam Prior at New Jersey Resources. Please go ahead, Adam.

Thank you. Welcome to New Jersey Resources Fiscal 2022 Fourth Quarter and Year-end Conference Call and Webcast. I'm joined here today by Steve Westhoven, our President and CEO; and Roberto Bel, our Senior Vice President and Chief Financial Officer; 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. This could cause results to materially differ from our expectations, as found in 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-Q and 10-K as 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. We'll also be referring to certain non-GAAP financial measures such as net financial earnings or net fee. We believe that NFE net financial loss, utility gross margin, adjusted funds from operations 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 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 for your questions. The slides accompanying today's presentation are available on our website and were furnished on our Form 8-K filed this morning. We'll begin with an overview on Slide 3. With that said, I will turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve.

Thanks, Adam, and good morning, everyone. Our performance this past year speaks to the strength of our diversified business model. and our ability to adapt to challenges in ways that benefit our customers and investors. At our core, NJR is an energy infrastructure company with a portfolio of complementary businesses positioned to leverage our utility experience while also investing for a clean energy future. This morning, we reported fiscal 2022 net financial earnings per share or NFEPS of $2.50. This represents a 16% increase compared to last year that is at the top of our guidance range. At New Jersey Natural Gas, we reported solid results driven by new base rates. Our hedging policy and BGSS incentive programs have helped to mitigate the impact of rising natural gas prices to customers. This reflects our commitment to delivering safe, reliable energy at a reasonable cost. Clean Energy Ventures now has our largest ever project pipeline. During the fourth quarter, we placed our first New York project into service, consistent with CEV's geographic diversification strategy. At Energy Services, the asset management agreements or AMA signed in December 2020 became effective this year providing predictable, fee-based revenues to this business. The significant uptick in natural gas price volatility through the summer allowed the energy services team to generate additional value from our remaining physical assets. Finally, I want to thank the entire S&T team as we were able to place Adelphia Gateway fully into service prior to the end of the fiscal year. Adelphia is an 84-mile pipeline converted from oil to gas that runs from Martins Creek, Pennsylvania to just south of Philadelphia. This completion is a major accomplishment for our company. Adelphia is now delivering reliable energy to a capacity-constrained region, fueling further economic growth and helping downstream customers achieve emissions…

Thank you, Steve, and good morning, everyone. As usual, I'll highlight a few that the operational and financial metrics for the year. Slide 12 shows the main drivers of our net financial earnings or NFE for fiscal 2022. We reported NFE of $240.3 million or $2.50 per share compared with NFE of $207.7 million or $2.16 per share last year. New Jersey Natural Gas, an improvement of $32.7 million from the prior year, an increase of more than 30%, primarily due to the positive impact of new base rates that went into effect on December 1. Turning to our nonutility businesses. Clean Energy Ventures increased NFE by $22.6 million, more than twice last year's NFE due to higher electricity sales and highest revenues. Storage and Transportation reported an improvement of $9.4 million, driven by increased revenues at Leaf River and higher contracted capacity from La facility is a went into service at Adelphia during the year. partially offset by higher depreciation expenses. Finally, Energy Services reported NFE of $39.1 million compared to $71.1 million in the prior year. As a reminder, last year's NFE was higher due to national gas pad volatility from the extreme weather generated by winter storm Uri. The decrease in NFE was partially offset by the contribution of the MAS. Turning to Slide 13. Given the recent increase in natural gas prices, I want to take a moment to discuss how our utility manages the cost of natural gas. As you know, the cost of our natural gas supply is a pass-through to our customers. To mitigate the risk of sudden and dramatic price changes, New Jersey Natural Gas has a robust hedging program in place. By policy, at least 75% of our estimated winter send-out for residential and small commercial customers must be hedged prior…

Thanks, Roberto. Sustainability is not new to NJR. Over the last several years, we've invested in our distribution network, making it the tightest in the state with nearly 100% of our system used plastic or protected steel. We are safely and affordably delivering energy through 7,700 miles of high-quality infrastructure that has already been permitted, built and paid for. The value of our energy delivery network will only continue to grow as we start to transport increasing percentage of low and zero carbon energy, helping the state to reach its climate calls in the most affordable and resilient way possible. At CEV, our portfolio of clean energy infrastructure continues to perform well, delivering 100% renewable energy to homes, businesses in the grid. We are working to navigate near-term state policy and regional interconnection delays. But with the support of a proactive federal policy, corporate ESG goals and the strongest project pipeline we've ever had, CEV is well positioned to drive growth and be a mechanism for sustainable investment for years to come. Let's turn to Slide 20. One of our key priorities is ensuring that our environmental strategy aligns with that of public policy. And in August, the inflation Reduction Act of 2022 was signed into law. This legislation represents an unprecedented investment in addressing U.S. energy security, clean energy infrastructure and climate change. The extension of solar tax credits and incentives and renewable fuels such as green hydrogen and RNG, has the potential to help accelerate our existing efforts to decarbonize. While we're incorporating the extension of the 30% ITC out multiple years in our growth plans, we feel that there are additional opportunities in which we can take advantage of incentives included in the IRA. These would be incremental to our growth expectations, but we understand that these will take some time to develop. To conclude on Slide 21, for more than 7 decades, we have successfully built, acquired and operated to energy assets to meet market needs and policy demands. Our reputation for acting responsibly with our regulated suppliers and customers, along with our proven ability to execute, allows us to deliver value for our shareholders. We reported strong financial performance through passing our initial targets and raised our guidance twice during the fiscal year. These results reflect the great work of our team and combined the strength of our businesses. NJR currently offers investors an attractive 11% to 13% total return based on our current dividend yield and long-term NFEPS expected growth rate of 7% to 9%. We appreciate that you took the time to join us today. And with that, I'll open the call for questions.

[Operator Instructions] Our first question today comes from the line of Gabe Moreen with Mizuho.

Quick 2-part question for me on SMT. Just first of all, I guess, with Adelphia now back online, should we take the fourth quarter run rate for that? -- the quarterly run rate going forward at this point? Or is there something else in there? And then secondly, Robert, you referenced the potential -- some organic growth CapEx to potentially arise in the segment. I'm wondering if that's alluding to Leaf River or if there's other opportunities you guys might be looking at?

So regarding your first question, I would say no, because as you know, I mean, we are just ramping up at Adelphia and there are still new customers we're bringing in. So I wouldn't say that the run rate we have right now is a run rate that we're going to have in the future. So we expect that to actually improve over the next, I would say, year or so. And regarding your second question, yes, so potential revenue opportunities are coming from potentially actually both Adelphia and Leaf. I mean we're not ready to discuss what those are, but there are potential opportunities there that may arise.

Great. And then maybe if I can ask kind of on CV in the range of CapEx. Can you talk about kind of the next milestones you're expecting either sort of in the New Jersey regs or the interconnection bottlenecks, just sort of what you're looking for and maybe the timing on potentially getting some more visibility there?

Gabe, it's Steve. Yes. I mean we're expecting New Jersey to continue to work on their new program. And certainly, I guess, over the coming months, there are some commitments that they'll finally bring the program to bear. Also, PJM should be resolving relatively soon, but we don't know certainly for certainty when that's going to take place. So that's why it's got a little bit of a wide range there. But the thought that I want to leave you with is that CEV is well supported, certainly, in New Jersey and many of the surrounding states in which we're making investments. So we feel pretty good about our project pipeline and the growth prospects in that business going forward.

If I could just squeeze one more in on bad debt expense, where that stands, kind of, I guess, moratoriums, no moratoriums, how that's factored into your guidance for this upcoming year, particularly with what might be some. Appreciating that you're in a better position than many of your peers as far as gas costs go, but what might be some higher bills for this next winter?

Yes. This is Roberto again, Gabe. Yes. So the moratoriums related to COVID have been lifted. Of course, we're during winter, we cannot shut off customers. But in terms of bad debt in general, it's actually trending well. It's a lot of the deferrals that we had during the COVID period are actually coming down. So it's actually trending in a good direction right now.

Our next question comes from Richard Sunderland with JPMorgan.

Circling Exo the inflation reduction impacts you outlined, can you speak a little bit more to CEV's potential upside from the IRA adders and how much of the pipeline could take advantage of these. Curious if this also impacts your return assumptions.

Yes. Certainly, it's a positive impact, right, but we've got to wait for how exactly it's going to be implemented. We said during the call there that we've embedded a 30% ITC, but there's certainly upside again, on the way it's described, but we've got to wait for implementation to city, how that's going to play out. Also, there's subsidies in the IRA for hydrogen development as well, which is positive for our business. We've talked about the carbonized fuel delivery at the utilities for quite some time with our hydrogen plant, bringing those costs down or productive. There's subsidies for battery storage. So all these things are trending very positively for our business and specifically how it aligns with our strategy, but we've got to wait for those details to really come through to put those into a presentation or put some numbers to them.

But maybe just from a financial perspective, all we have in our numbers right now is the assumptions that ITC will go to 30%. In the others, we may get on top of that of our new projects will be incremental.

Understood. That's very clear. And sticking with CEV here, if you look at the CapEx relative to your 2020 Analyst Day plan, you're still certainly spread. I know you spoke just a minute ago about New Jersey and PJM and some of the timing there. But I guess, at a high level, thinking about your post-2024 growth, when do you need those 2 plans to start converging, I guess? When do you need CEV's development return to that kind of initially contemplated run rate?

So the way I'd answer that question is that we reaffirmed our 7% to 9% growth rate this morning. So we've got a strong portfolio of businesses, we're able to make investments and we feel confident that we'll be able to do so. We're in a good position, and we've got a lot of tailwinds associated with IRA and other things that are taking place. So not to get into specific CapEx numbers in 2025, which we certainly don't project out that far. But generally speaking, in our planning, we feel confident that we'll be able to hit our numbers.

Fair enough. And then if I could slip one more in here. On the NJNG side, you've spoken a little bit about the R&D efforts in the past. Just curious what's in the plan right now and how this might change going forward.

So I've got Pat Migliaccio here. He's a blast from the past coming back to the investor call. So I'm going to turn it over to Pat as COO of the utility. Pat?

So pursuing opportunities on both the RNG supply and the investment side, and we've reflected some modest assumptions in our capital plan for both '23 and '24.

And any sense on if there might be an acceleration there? Any potential on that over, say, the next 12 months?

Whether and if we have no information, we'll update you at that time ago.

[Operator Instructions] Our next question comes from the line of Julien Dumoulin-Smith with Bank of America.

This is Sam Schwartz on for Julien. I was wondering if you could just kind of walk us through the latest you're seeing on supply chain availability for your solar projects. Do you have the panels on site that you need to be at '23 projects? And just broadly speaking, how much of the capital is procured for '23 and '24?

So I've got Amy Cradic on the call, and she's the CEO of our nonutility businesses, and she's going to take that question. Amy?

We're in a good position for the capital projects that we have moving forward from a solar panel perspective. We're not seeing any -- we don't have any risks or concerns in the near term. we'll continue to monitor the supply chain situation, but we're in a good spot.

Excellent. And then just on interest rates, could you provide some color on what's embedded in your plan? And what kind of offsets your kind of expecting in '23 and beyond?

Yes. This is Roberto again. Our guidance incorporates already the current interest rate environment. So these higher interest rates we're facing right now and the current projections from the market on interest are embedded in our plan. So that's already in. We don't see any risk with that right now.

Our next question comes from Michael Gaugler with Janney Montgomery.

Steve, I'd like to get your thoughts on the New England gas supply situation and how that could play out for the Energy Services segment, we've had Joe Nolan with Eversource actually writing the White House asking for a relief in terms of the Jones Act to get more gas into New England, if that's possible?

Yes. Mike, I think certainly, it's a constrained market up there and all evidence points to it, not only the letter that was written, but the pricing associated ahead of the winter period. I guess the way I'd address that, we're not in New England. We don't participate in that market from a utility perspective and from a trading perspective. I couldn't comment on how much of the book is up there. But overall, I think the general direction is that the gas industry has some constraints in these assets that we own, not only our utility but our sort of transportation assets are extremely valuable and certainly, the contractual assets that we hold in Energy Services as well. So it sets up nicely for our infrastructure businesses and being able to take advantage of that, and you saw that last year provides for outsized returns as well. So we're looking forward to the winter. We're prepared for it. We understand the risks associated with it and we like the infrastructure that we have.

Okay. And maybe just as a follow-up to that. I'm wondering what -- how are you thinking about it this year versus last year? Are there better opportunities this year versus last year given what we're seeing?

We look at our businesses and certainly how to quantify those opportunities and the risks and how they're embedded in our earnings and projections going forward. We try to take a baseline and put that as a projection to speculate on how big those opportunities are. That's extremely difficult. We look at our earnings and the performance and really try to stay in the fairway of a certain risk profile that I think would be acceptable to our investors. So we can provide a nice base of earnings and give them a potential upside. And we've proven that year and year again. Sometimes the upside comes, sometimes it doesn't, but we've got a very strong base of earnings, and that's what we project going forward.

Okay. That wasn't actually where I was going with the question. Maybe I can rephrase it. As you look at the market, does it appear more constrained this year versus last year? That's probably the way I should have asked the question.

That's hard to say without getting to like a very detailed supply and demand side of the market. But certainly, as the natural gas markets and all these markets continue to grow, and you've got a slowdown of some infrastructure being put in place. You could say that. Weather is a big variability exports or big variability. There's a lot of variance around variability that comes to this market.

[Operator Instructions] At this time, we have no further questions. I'll pass the call back to management for any closing remarks.

Thank you, Emily. I'd like to thank all of you for joining us this morning. As a reminder, a recording of this call is available for replay on our website. And as always, we appreciate your interest and investment in NJR. Thank you, everyone.

Thank you, everyone, for joining us today. This concludes our call. You may now disconnect your lines.