Steve Westhoven - Executive Vice President and COO Pat Migliaccio - SVP and CFO Dennis Puma - Director, IR

Travis Miller - Morningstar Paul Zimbardo - Citadel Michael Gaugler - Janney Dennis Coleman - Bank of America Merrill Lynch

Thank you Denise and good morning everybody. Welcome to New Jersey Resources' third quarter fiscal 2018 conference call and webcast.

I’m joined here today by Steve Westhoven, our Executive Vice President and COO, Pat Migliaccio, our Senior Vice President and CFO, 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, which 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 on our most recent Forms 10-K and 10-Q filed with the SEC.

We do not by including the statement assume any obligation to review or revise any particular forward-looking statements referenced herein, in light of future events. Turning to Slide 2, we will be referring to certain non-GAAP financial measures such as Net Financial Earnings or NFE.

We believe that NFE provides a more complete understanding of our financial performance. However, NFE is not intended to be a substitute for GAAP.

Our non-GAAP financial measures are discussed more fully in item 7 of our 10-K. I'd also like to point out that there are slides accompanying today's discussion, which are available on our website and were also furnished on our Form 8-K filed this morning.

With that said, I'd like to turn the call over to Steve Westhoven, Steve?

Thanks Dennis and good morning everyone. I’ll be leading today’s third quarter fiscal update.

I’m standing in for our Chief Executive Officer Larry Downes, who could not join us due to a family obligation. In line with our expectations, we reported a net financial loss for the quarter of $9 or $0.09 per share compared with an NFE of $0.20 per share in the prior year.

However, due to the continued outperformance in energy services, we are increasing our earnings guidance for the year by $0.05 a share to a range of $260 to $270 per share. Moving to Slide 4, you can see our anticipated sources of NFE fiscal 2018.

The largest contribution will come from our regulated businesses. We expect New Jersey Natural Gas and midstream will contribute between 40% to 47% in NFE in fiscal 2018 and energy services will contribute between 25% to 30% of NFE this year.

Turning to Slide 5, we continue to see strong customer growth at New Jersey Natural Gas. For the nine months ended June 30, we added over 6,900 new customers representing an 11% increase over last year.

The residential new construction market continues to see strong growth due to increase demand in the multifamily market and is exceeding our expectations. As a result, we have increased our new customer forecast over the three year planning period ending in fiscal 2020.

We now expect new customer additions to be in the range of 27,000 to 29,000, which is an increase of approximately 1,000 customers over that period. This still represents an average annual growth rate of 1.7%.

Based on current rates, this growth will add cumulative utility gross margin of approximately $16 million over our three year planning period. Moving to Slide 6, I’d like to provide an update on the southern liability link.

We recently achieved a significant milestone for SRL when we received an easement from the Joint Base on June 26. And, we continue to make progress obtaining the remaining road opening permits.

We expect SRL to be in service in 2019 and plan to recover the capital cost associated with the project through a future rate case proceeding. Moving to Slide 7, I’d like to update you on clean energy ventures.

During the quarter, we closed on the sale of the Two Dot wind farm and realized a pretax gain of about $1 million. We plan to sell our remaining wind portfolio and expect to potentially close the sale in the first quarter of fiscal 2018.

We placed two commercial solar projects in the service during the third quarter, totaling 23 megawatts a capacity. And two additional commercial solar projects are planned to go into service in the fourth quarter, totaling almost 20 megawatts of capacity.

These four projects represent a total capital investment of approximately $100 million this fiscal year. And, by the end of the year, total capacity for our commercial solar business will be approximately 174 megawatts.

Our residential solar program, the Sunlight Advantage continues to graph and today we serve nearly 7,000 customers. Turning to Slide 9, on our last call Larry spoke about Governor Murphy’s vision to build a robust clean energy economy that will drive job growth and create new investment opportunities here in New Jersey.

And, on May 23, the Governor signed legislation that will drive clean energy agenda. Among other things, the legislation creates new aggressive renewable energy standards, strengthens the solar market in the state and requires utilities to implement energy efficiency measures.

We are well-positioned to support the state and its goal to reduce overall energy consumption trough energy efficiency. Since 2006, we have helped our customers reduce their energy usage by more than 10% and those customers have saved more than $380 million.

Earlier this year, we filed with the New Jersey Board of Public Utilities to significantly expand our energy efficiency programs. Pending the BPU’s approval, we plan to invest up to $341 million to bring customers innovated new choices to save energy, to save money and help environment.

Today CEV is a leading solar provider in New Jersey and we are optimistic about how the state’s policy goals will support the solar market as we continue to grow our clean energy business. Since 2009, we have invested approximately $700 million in New Jersey’s solar market and we currently expect to invest about $360 million more over the next three years.

I’d like to turn the call over to Pat now for some details in the financials, Pat?

Thanks Steve and good morning, everyone. I’d like to begin by following up on Steve’s clean energy thoughts and discuss the results of our SREC Hedging Strategy on Slide 9.

The new solar legislation resulted in stronger SREC prices. And, since our last call, we significantly increased our hedged of NJR 2020 and 2021.

We are now over 91% of hedged in 2019 and 2020, and average price of about $190 per SREC. And, we continue to focus on 2021 and are closed to 60% hedged for that NJR as well.

Slide 10, shows our capital spending update for New Jersey Natural Gas. We continue to make progress on our Safe II Program.

We’ve invested nearly $20 million of the plan $36 million in the first nine months of fiscal 2018. By the end of the fiscal year, we estimate we have replaced 390 miles of unprotected steel main, which represents more than 70% of the tool on our system.

We remain on track to replace our unprotected steel main by the end of fiscal 2021. For NJ Rise, we spent $19 million of the plan $28 million in the first nine months of fiscal 2018.

The remaining capital for this fiscal year will be devoted to the completion of the Seaside Barrier Island Project, which will provide service into this region. We have two additional projects that we plan to complete in fiscal 2019.

In March 2018, we requested the base rate increase in the amount of $6.9 million for Safe II and NJ Rise. New base rates are expected to go into effect on October of 2018.

You could see our CEV and midstream capital spending and project status on Slide 11. As Steve mentioned, we made significant progress on our CEV investments.

And, by the end of the fiscal year, we plan to spend about $100 million. And, our midstream segment, we spend approximately $3.3 million related to PennEast and $1.1 million related to Adelphia Gateway to exempt those projects forward.

Moving to Slide 12, I’ll explain the drivers of NFE for the three and nine months ended June 30. For the quarter, NJNG’s NFE were down due to increased O&M expenses, mainly consisting of compensation including a voluntarily early retirement program.

While NFE was essentially flat on a year-to-date basis compared to last year. The decrease of CEV was due primarily to fewer tax credits recognized during the quarter compared to last quarter, which is the result of our planned sale-leaseback financings of our commercial solar assts.

For energy services, the decrease in NFE for the third quarter was driven by an increase in transportation demand fees and O&M expenses as compared to the prior year. While the high performance in midstream and CEV for the first nine months was largely due to the deferred tax evaluations associated with tax reform.

The increase in energy services for the nine months ended June 30 was a result of periods, weather volatility, particularly in late December of 2017 and early January 2018. Moving to Slide 13, I want to update you on our equity needs.

Our original plan included about $83 million of new equity in fiscal 2018. By the end of this fiscal year, we were issued $58 million of equity through the waiver discount feature and normal reinvestments under the DRIP.

This is a decrease from our original plan due to the outperformance of energy services and the benefits of tax reform. Our fiscal 2019 financing assumptions will likely be impacted by the results of our wind asset sales.

I’ll now turn the call back to Steve for some closing remarks.

Thanks Pat. Before we get questions, I want to thank our team for their outstanding work and contributions.

I also wanted to mention that New Jersey Natural Gas has been recognized by Cogent Reports as a most trusted branch, ranking first in the state and seventh in the nation among natural gas utilities. We appreciate you joining us today and welcome your questions and comments.

Good morning, thank you.

Good morning, Travis.

I was wondering on energy services what you’ve seen nine months, I know you talked about weather volatility helping out, is there anything in that business and the success you’ve had this year and that would be an ongoing benefit that you could see repeat over the next few years?

Travis, this is Steve. I really think it’s the weather that we’ve had in some of the extremes in the weather.

We had such cold ended December and beginning of January, and then we had a very, very warmth February, I think April was the third coldest April on record and then flip immediately to some of the warmest July and August that we’ve ever experienced historically. So, I think the storyline there is - volatility is good for that business and those extreme changes in weather had been support of that business.

And, as far as how that would be viewed going forward, we would have to see that similar volatility to see similar performance.

Sure, sure, okay. And, then longer-term, what are your thoughts in terms of offshore winds, obviously I would think you would have to partner with someone to do something like that, would you be at all interested and what’s been thought about in the legislation?

We are certainly following that market, I think that market is going to take - need much more development as that evolves. I know it’s going to the process.

There are certain regulations and certainly the structure needs to be put in place. We are certainly interested in it and we’ll keep an eye on it.

Yes, we would have to partner to some large capital expenses, but that you have to be determined. So, we are going to watch that market and if we decide to move forward or do anything we’ll certainly let everybody know.

Okay, great. Thanks a lot.

Thank you.

Hi, good morning.

Hey Paul.

Good morning, Paul.

I have two question questions on the wind business. One, have you disclosed the earnings contribution from the assets you’re divesting?

Paul, no, we have not previously disclosed the segment on this contribution. What we have disclosed though is that the wind assets themselves contribute between $10 million to $12 million of production tax credits each year.

And, for the most part, the wind assets do not generate operating profits, so you can back into NFE or NJNG contribution from there.

Okay, great, very helpful. And, is the safe assumption any proceeds there would at least partially go to offset equity needs?

Yes, that’s a safe assumption.

Okay, great. Thank you very much.

Thank you.

Thanks Paul.

Good morning, everyone.

Good morning, Mike.

Good morning, Mike.

Just one on the Adelphia Gateway perhaps you could provide an update in terms of the timeline for the final approvals and whatnot?

So, we are still waiting for our FERC certificate, we expect that to occur at the end of this calendar year sometime. So, after that is - after we receive that FERC certificate, we would be able to purchase the asset from Talent Energy and then go about making the improvements and converting that to natural gas pipeline.

Remember the 50% of pipeline, the northern portion of the pipeline it’s already flowing natural gas, so that will come immediately under FERC jurisdiction and will have an instinct customer if you will in Talent Energy and the power plants that we’ll be supplying there. So, the pipeline will be producing revenue from day 1.

Hey Mike, this is Pat Migliaccio. We’ve communicated that we don’t expect the Adelphia Gateway Project to contribute materially to earnings in our fiscal year 2019.

That will be that’s more than 2020 time on project.

Understood, that’s all I had gentlemen. Thank you.

Thanks Mike.

Thanks Mike.

Yes, good morning everyone. Just a follow up on that last - about the Adelphia Gateway thought process.

And, then we do have commissioner retiring here in a week, can you just give an update on what you think the process is with the FERC, is it something that we could see an approval come out, they’ve been active outside of their normal meeting process in the last few weeks. So, is that something we could see eminently or could it be delayed if we go into a sort of to Democratic Republican Commission?

So, same answer as we’ve said before to Mike that essentially we are expecting to receive our FERC approval, which is the normal timeline in the last quarter of the calendar year. And, essentially we still expect to receive our approval, the pipeline is largely, everything is in the ground already, so at least 50% of it, we are just converting it from state jurisdiction pipeline to federal jurisdiction pipeline.

And, then for the southern portion of a line, we do need to make some conversion and some improvements, but they’re minimal impact, we don’t have an environmental impact statement, we just have an environmental assessment which is a much lesser bar. So, we still expect to receive it, like I said in the last quarter moving forward and we think it’s little bit of a lower bar for FERC considering all of the - all of the pipe is already in the ground.

Okay. Okay.

And, then just on the PennEast Project. I know there been some back and forth about capital spend and whatnot, now you’ve sort of - you said you would expect it to be in construction next year.

But on Slide 11, we don’t see any CapEx spend there for 2019; I think that’s a little bit of change, any comments there?

I mean the general comment is that we are still waiting for the legal proceeding to conclude gain access to the properties and then move forward with the survey of those properties and complete our New Jersey on DEP permits and as soon as that legal proceeding concludes and we receive judgment then we’ll move forward. But with some of the details of the numbers, I’ll turn it over to Pat.

Hey Dennis, slide 11 you referenced here, it does capture only the fiscal year ‘18 spend for midstream and included as an appendix to the slides, we have our expected cash flows over the next few years and that shows the anticipated capital spend for PennEast in 2019.

Okay, okay. Sorry, I just didn’t just get that part on slide.

So, okay, that’s it from me. Thanks.

Thanks Dennis.

All right. Thank you, Denise.

Thank you everyone for joining us this morning. Just one quick reminder, a recording of this call is available for replay on our website.

As always we appreciate your interest in investment in New Jersey Resources. Thank you and have a good day.

Goodbye.