NEW JERSEY RESOURCES CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Steve Westhoven noted fiscal 2024 was excellent, exceeding NFVPS guidance, and successfully resolved NJNG's base rate case and energy efficiency programs.
• Roberto Bel reported fiscal 2024 EPS at $2.95 per share (higher than prior year's $2.70), segments performed better than expected, and BPU approved NJNG rate case settlement with $157M annual revenue increase.
• Capital plan: Fiscal 2025-2026 CapEx projected $1.3B-$1.6B, with NJNG to get $430M-$490M, CEV $160M-$265M, and S&T $20M-$35M. Strong credit metrics with adjusted funds from operations to adjusted debt ratio projected 18%-20% for fiscal 2025.

Segment Performance

• New Jersey Natural Gas: Invested $503 million in fiscal 2024, with 42% of CapEx providing near real-time returns. Customer base grew steadily.
• Clean Energy Ventures (CEV): Had over one gigawatt of commercial solar projects in pipeline. Sold Sunlight Advantage residential portfolio for $2.5 million, with pretax gain range $45 to $60 million and net after-tax gain around 30 cents.
• Storage and Transportation (S&T): Completed booster compression project and initiated 4 BCF capacity recovery project at Leaf River. Filed rate case with FERC for Adelphia Gateway to reflect pipeline investments.

Guidance

• Fiscal 2025 NFVPS guidance range $3.05 to $3.20 per share, maintaining long-term growth target 7%-9%, boosted by one-time gain from Sunlight Advantage transaction.
• Cash flow from operations expected $460M-$500M in fiscal 2025.
• Target total shareholder return 11%-13% with 4% dividend yield.

Risks

• Factors beyond control that could materially differ results from expectations.
• Uncertainties in interest rate environment affecting financials.
• Uncertainties in rate case processes for S&T's Adelphia Gateway.

Question and Answer

• Q: Good morning, everyone, and congratulations on another year in the books here. Just maybe if you guys could touch on the economics of the residential solar sale. Implied fees seem like it could be north of ten, maybe even mid-teens. So any color there would be helpful. And does this affect the capacity you would have for electricity sales in the future? Or is that really derived from the commercial portfolio that you have? A: As far as the commercial portfolio and our electric sales, those will not change into the wholesale market. We'll continue to sell the same amount of electric in the wholesale market. The residential market was primarily a lease market, so you expect that to be the same going forward. And, Roberto will take the key question you asked. Yeah. Hey, Rob. This is Roberto. So regarding the Sunlight Advantage transaction, what you'll see is that the proceeds were $2.5 million, and what you'll see later during our 10-K, you know, that pretax gain, we're providing a range of $45 to $60 million. And then finally, what you're seeing on slide six is that we estimated the net after-tax gain on this is going to be around 30 cents. That's why our guidance is higher than our long-term implied range.
• Q: Good morning. The guidance range for the year is a little on the wider side for NJNG. Can you give us any color on what your thoughts are there in terms of the range and why bigger this year and, you know, that sort of stuff? A: Are you still can Chris, are you still can use Roar? Are you talking about the earnings guidance range? It is 15 cents at $3.05 to $3.20. And it was 15 cents wide last year as well. So there's no real change there. Can you give us any thoughts in terms of the know, pluses and minuses on the accretion dilution from the Sunlight Advantage divestiture? Yeah. So for fiscal 2025, once you take into account that one-time gain, I'm doing that from the illusion and Patrick, we said we'd say that's going to be about 30 cents. That's why we're increasing our guidance this year by that. For the future year, there are some dilution, but that dilution decreases over time. In I know we're three or four years, it will be zero. Can you give us any thoughts in terms of you've got a pretty big I'll call it, backlog of CV projects under at year-end. Can you give us any thoughts in terms of how those completions play out through 2025? So with the projects that we have in place, you know, we're continuing to construct and you know, we feel good about, you know, our CapEx schedule, you know, not only for the year that we just completed, but also going forward. And, you know, with this support of the state that we're operating in, you know, our CapEx schedules, you know, stands. Okay. And lastly, as far as the Leaf River expansion goes, can you give us any color in terms of you know, contracting or the, you know, the increase in the size proportionately or any of those kind of color? Yeah. You know, we've stated that the increase in that cavern is about 4 BCF, and that's gonna be staged in we, you know, kind of deep brine that facility to make it larger. And as that becomes larger over the term of construction, then we're gonna you know, match the contracting associated with that. So, you know, long and short, you know, over the period, you're gonna be able to increase it by 4 BCF, and you should expect you know, the same as from the contract standpoint.
• Q: Good morning, everyone. Thank you. Hey, Josh. Just wondering strategically on those Sunlight Advantage sale, could you talk a little bit more about why deciding to do that now? Why deciding to do it at all? Was this something where someone came to you at the price you liked, or is this something where you saw better returns somewhere else in the portfolio. I'm just wondering if you could talk strategically about that decision. **A: Travis, you know, Sunlight Advantage was a great fit, you know, did a great business and certainly the team, you know, did a great job of, you know, developing that business and then building it out to what it is today. You know, we had the opportunity to simplify that business model a little bit and ultimately, you know, I think it's a good place for our customers. You know, Spruce is buying, you know, a good business there, and it's gonna continue to operate and I feel confident expanding for them. And what it did for us is it was able to, you know, focus us on the wholesale solar market. And, you know, continue to grow in that space and, you know, allow us to recycle some capital as well. So, you know, just the win-win all the way around and an opportunity that, you know, was good for the company. Okay. So now the dollar goes anywhere. Right? But your thought here is that you put a lot of those proceeds to support the growth of the solar pipeline more so than the commercial solar more so than transferring it to NJNG. Yeah. It's a portfolio of companies. So, you know, we'll take that back in and certainly when we look at, you know, allocating capital, you know, to its essentially highest returns, you know, we'll continue to do that. That's an exercise that's always done. Sure. Okay. And then on the step up in the system integrity, CapEx in 2026, how much of that is approved? How much is in that that is in a program what what's the sensitivity in terms of regulatory approval? Around that $200 million or so? 2026. Hey, Travis. This is Pat. Maybe I So everything that's just in territory line will be subject to a key filing and rate case review. But, you know, well, all of the plain vanilla integrity investment, if you look at our last rate case, I know there was, you know, no issues related to getting that type of investment approved by regulators. Okay. So there's counting out some good read through from the settlement and the support for system integrity. Yes.