Good afternoon. My name is Michelle and I will be your conference operatortoday. At this time, I would like to welcome everyone to the fiscal 2007year-end conference call. (Operator Instructions) I would now like to turn thecall over to Mr. Puma. Sir, you may begin your conference.

Thank you, Michelle. Good afternoon, everyone and welcome toNew Jersey Resources fiscal 2007 year-end conference call and webcast. I am joined today by Larry Downes, our Chairman and CEO;Glenn Lockwood, our CFO; as well as other members of our senior managementteam. As you know, certain statements in our news release and intoday’s call contain estimates or other forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. We wish tocaution readers of our news release and listeners to this call that theassumptions forming the basis for forward-looking statements include manyfactors that are beyond NJR’s ability to control or estimate precisely, whichcould cause the results to materially differ from the company’s expectations. Alist of these items can be found but is not limited to items in theforward-looking statements of today’s news release filed on Form 8-K, on Form10-K to be filed on or before November 27, 2007, and on our quarterly report onForm 10-Q filed on August 2, 2007. All these items can be found at sec.gov. NJR does not by including this statement assume anyobligation to review or revise any particular forward-looking statementsreferenced herein in light of future events. With that said, I would like toturn the call over to our Chairman and CEO, Larry Downes. Larry.

Thanks, Dennis. Good afternoon, everyone and thank you againfor joining us on the call. I think as you know, this morning we were proud toreport earnings for fiscal 2007 of $3.17 per basic share. That performancerepresented the 16th consecutive year of higher earnings, which we believe isthe longest streak in our industry. It compares favorably with last year’sperformance of $2.82 per basic share. Overall, all of our businesses turned in strong performance.The increase in earnings was due primarily to improved results at NJR EnergyServices. NJRES has proven itself to be a strong contributor to our overallearnings and we expect that to continue in the future. As you examine theresults of NJRES, you will find that we have taken a disciplined approach tothis business, which is clearly reflected in our performance. From a strategic perspective, the fundamentals of New JerseyNatural Gas remain strong, characterized by steady customer growth in bothresidential and commercial markets at a rate that exceeds the national average. In addition, our incentive programs in New Jersey NaturalGas were recently extended by our regulators, they are performing well, andthey were higher than last year. Our commitment to customer satisfactionremains strong in fiscal 2007, and for the 15th consecutive year we had thefewest number of complaints per thousand customers with the New Jersey Board ofPublic Utilities of any of the state’s major electric and natural gas utilities. We were also recognized by JD Power & Associates as bestamong the state’s natural gas utilities in both residential and businesscustomer satisfaction. In just a few moments, Glenn will give you more of thedetails behind the numbers, but before he does that, I just want to emphasize afew points. First of all, through the end of fiscal 2007, ourshareowners were awarded with a five-year average total return of 14%, whichcompares with 10.8% for…

Thanks, Larry and good afternoon, everyone. As Larrymentioned, this morning we announced a 12% increase in earnings for fiscal 2007of $88.4 million, or $3.17 per basic share, compared with $78.5 million, or$2.82 per basic share last year. On a diluted basis, earnings per share were $3.15 comparedwith $2.80 last year. The increase was driven primarily by 42.8% increase inearnings at NJRES, our wholesale energy subsidiary. Consistent with the seasonal nature of our primarybusinesses, which typically generate a loss in the fourth quarter, we did posta consolidated loss of $15.3 million, or $0.55 per basic share, compared with aloss of $12 million, or $0.43 per basic share last year. Breaking our earnings down by operating segments, earningsdecreased NJNG, which earned $44.5 million in fiscal 2007 compared with $46.9million last year. And in the quarter, NJNG lost $11.2 million compared with $7million last year. As previously disclosed, the increase in the loss during thequarter was driven primarily by a pretax settlement charge with the New JerseyBoard of Public Utilities of $4 million related to certain previously deferredremediation claims associated with litigation and related insurance settlementsassociated with the manufactured gas plant in Long Branch, New Jersey. This amount was determined to be related to personal injury andtherefore not recoverable under our remediation adjustment clause. All othercosts associated with the MGP sites were recoverable. Switching to the weather for the year, it was 5.6% warmerthan normal and 2.6% colder than last year. Normal weather is based on 20-yearaverage temperatures as calculated based on three different references areas inour service territory. As with the WNC which preceded it, the impact of weatheris significantly offset by the conservation incentive program. In addition to the weather, the CIP also normalizesyear-to-year fluctuations on NJNG’s gross margin and customer [sales] thatresult from change in usage pattern. Included in the…

Michelle, we’re ready to take questions now.

(Operator Instructions) Your first question comes from the line ofJoanne Fairechio.

Good afternoon. You had indicated previously that you mightneed to file a rate case. Is there anything new in that thought? And are thereany updates or changes to the CIP now that you’ve gone through a full year ofoperating under the new mechanism?

On the rate case, the situation is the same as we previouslydisclosed. We do currently expect to file a rate case in fiscal 2008 but wewould now expect any impact of a rate case in fiscal 2008 just based on thetimelines that such a filing would take.

Okay.

And on the CIP, Mark Sperduto is here.

On the CIP, we filed June 1st and as Glenn indicated, wereceived provisional rates on October 3rd. There are no changes that have beenproposed to the program by the company or from the intervening parties, whichwould be the New Jersey Board of Public Utilities staff and the publicadvocates division of rate council at this time. Those hearings are still, or that process is still open andit hasn’t been finalized but we would expect within the next three months thatthat would be finalized.

Have you gotten any feedback from customers, or they don’treally realize what goes on in the regulatory area anyway?

Well, generally the feedback on the conservation incentiveprogram has been very favorable. We’ve run several different types of programswith enhanced rebates for high efficiency equipment, as well as providing newcommunication vehicles for customers to understand their gas bill and to takeappropriate action. In fact, some of the new programs will be coming out soon,which will enable people to assess their usage almost on a real-time basis sothey could see how much is reflective of weather conditions and/or otherfactors in their home life of in their business.

Okay, and I just wanted to ask you also, conversions rose upto about 39% or so of your total customer additions last year. Do you see thatjumping up more in ’08 now that residential housing has slowed?

In the [add plan] for next year, which we overall have at1.8%, we see about a 35% mix of conversions to new construction.

Okay. Thank you.

Your next question comes from the line of Chris Shelton.

I was wondering if you could give us an idea of what the --for the ’08 guidance, what the contribution of each of the segments are?

Similar to fiscal ’07, we are forecasting about 40% to 45%of that earnings guidance coming from that business segment.

From energy services?

Correct.

Okay. Thanks.

Your next question comes from the line of James Heckler.

It’s actually Neil Stein from Levin Capital. I actually hada follow-on from Chris Shelton’s question with respect to the percentage ofyour earnings that come from trading and marketing. Of that 40% to 45%, howmuch of that would you regard as spec trading?

De minimis, if zero. That business is not a speculativeoperation, bidding on a directional price of the commodity. It is built onphysical of capacity contracts, both pipeline and storage, and we are on hedgeaccounting, which allows us to be able to forecast where, to the extent we havehedged out our assets, we can project minimum margins from those positions. Sowhile volatility helps us improve the margin on those positions, we do not relyon speculation per se to drive that business.

So could I ask you, should we assume that 100% of that 40%to 45% is locked in, there is no risk associated with it?

No, I didn’t say that. I said that we, from a forecastperspective, internally have projected what we think is appropriate to projectas part of being that 40% to 45% of the overall earnings. That business does dobetter when there is more volatility and less volatility, but again it’s notbased on speculation. It’s based on improving existing positions on thoseassets I mentioned.

I just find from the outside looking in, these businessesare very difficult to model. How should we think about the risk and variabilityassociated with that earnings stream?

Well, the way we’ve handled that, and we think we’ve beenpretty up-front about this, is we actually give that range of percent webelieve internally, based on all the information we have in our assets, what weexpect to earn from those businesses and you can look at our track record andour ability to grow that business segment results. And again, we give you arange of earnings guidance but a range of that guidance coming from thatbusiness.

Okay, but how do you go about -- is it just a matter of youhave a certain amount of contracts and positions and that generates a certainpercentage of earnings? How much do market conditions have to do with it? I’mjust trying to understand. What are the variables that -- is it just volatilitythat impacts the volatility of earnings, or are there any other factors thatmight create volatility in earnings?

Before I hand it over to Rick Gardner from our EnergyServices Group, there are decisions that are made throughout the year as towhen to move positions around that then will dictate whether a subsequentmarket event is going to be able to be taken advantage of, so there is someobvious subjectivity as to exactly the impact of volatility on our position. But as we look at the business, and based on our history andthe knowledge of the pipes and the storage facilities that we have, we arecomfortable giving you the guidance that we are giving you. I don’t know, Rick, if you want to add anything to that.

Not a whole lot to add to that but when you asked what elsebesides volatility, there might be some in the marketplace that say volatilityis down a little bit and don’t have the same [earnings], but volatility alonedoesn’t generate the margin and net income, but it does have to do with theportfolio and we do have a very diverse portfolio and we are able to move gasin from the Chicago regions, from the mid-continent up through the Southeast,and it’s the ability of the changing prices between them where we can actuallydecide where we are going to sell our gas and move it to a different location. So the changing price and the decisions we make when wefirst put those hedges on, and what physical options they create thereafter,meaning what can we change around, that’s what generates the margin.

What about the sustainability of earnings beyond 2008? Areyour earnings dependent on certain contracts that might fall away? Do thosecontracts need to be replaced? And do those contracts reflect a certain set ofmarket conditions where if those market conditions weren’t replicated, theremight be issues with the sustainability?

Well, the portfolio does have some terms in there where wewill have some pieces that expire. What we do have on some of our contracts, wehave right of first refusals to some of the pipeline [towers] were we can rollcontracts over. Some of it is going to be dealt with at market conditions.Certain storage facilities, as you are aware, in the marketplace and do havemarketplace base rates. So as some of those contracts expire, we may have to paydifferent rates for those.

Would you say the ’08 level of energy services earnings thatyou are forecasting is a good base that we should just assume you’ll grow offof?

No, I think the farthest we would go is what we have alreadypublicly disclosed, that on an annual basis we come up with our internalforecast and give overall guidance and a percentage that we believe and ourbest estimate could expect from that business segment.

I’ll leave it at that. Thank you very much.

Your next question comes from the line of Selman Akyol.

Good afternoon. A couple of quick questions, if I may; interms of the sharing programs, the ones you said that reset, went from 80-20 to85-15. First of all, do all those reset annually?

Well, this renewal set a one-year renewal on all theprograms. In prior years, sometimes it got two or three year extensions, but atthis timeframe, it was a one year extension for all the programs.

With you filing a rate case in 2008 then, would we be athigher risk going into the renewals of these for compression?

I’ll ask Mark to comment on that.

Well, we would expect that these programs would be subjectto review in any future base rate filing, and at that time, there would be are-look at the programs. The company would have the ability to propose expandedor modified programs at that time as well. You have to keep in mind these programs have worked verywell for customers. We’ve been through multiple extensions over the more than10 years that they’ve been in place, so --

Okay, thanks. And then just one question as it relates toSteckman. I know you have it coming on early in 2009. As we thinking about thathitting the income statement, are you going to be bringing that in through Iguess home services and other, or is that going to come in through the equityearnings line?

Two things; one, we have previously disclosed that we, whilethe project is expected to go online sometime in the middle of our fiscal 2009,we would expect some earnings streams to actually start in 2010 on a fiscalyear basis. Secondly, the answer is yes to both, actually. On the incomestatement, any earnings from that investment, you would see in that equity inearnings line on the income statement, and then when we break out the resultsby business segment, we’ll, as currently set up, include those results in whatis currently called the home services and other business segment, which iswhere Iroquois’ earnings right now are reflected as well.

Thanks, guys.

Your next question comes from the line of Paul Justice.

Can you give me some color on the projected bad debt expensefor currently compared to last year?

One of the signs of our strong service territory is that wehave historically had a fairly low bad debt write-off experience, and I don’t havethe exact percentage off the top of my head but it’s a fairly low percentage ofour revenues that we set aside for bad debt reserves. And we have seen noevidence that we need to change that percentage. We don’t see any impact fromthat perspective.

Okay.

(Operator Instructions) Your next question comes from theline of [Annie Sao].

My question has been asked. Thanks.

(Operator Instructions) Your next question comes from theline of Julia.

You talked about a share repurchase program that the Boardof Directors have authorized. I was wondering for fiscal 2008 guidance, whatare you assuming? What is your share purchase assumption?

From a guidance perspective, there is no assumed earningsgrowth from accelerated repurchases.

There are no further questions.

Thank you very much. We’ll see you next quarter.

This concludes today’s conference call. You may nowdisconnect.