New Jersey Resources Corporation (NJR) Q2 2017 Earnings Report, Transcript and Summary

Good day and welcome to the New Jersey Resources' Second Quarter Fiscal 2017 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event has been recorded. I would now like to turn the conference over to Dennis Puma, Investor Relations. Please go ahead.

Thank you, Ryan, and good morning everyone. Welcome to New Jersey Resources' second quarter fiscal 2017 conference call and webcast. I’m joined here today by Larry Downes our Chairman and CEO; Pat Migliaccio our 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 believes 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 2. These items can be found in the forward-looking statements section of today news release furnished on Form 8-K and in our most recent 10-Q and Form 10-K filed with the SEC. Both can be found at sec.gov. We do not by including these statements assume any obligation to review or revise any particular forward-looking statements referenced herein in light of future events. Turning to Slide 3, we will be referring to certain non-GAAP measures such as net financial earnings or NFE. We believe that NFE provides a more complete understanding of our financial performance. However, it is not intended to be substitute for GAAP. Our non-GAAP financial measures are discussed more fully in the Item 7 of our 10-K and I urge you to read this. I would also like to point out that the slides accompanying today’s discussion which are available on our website and are also furnished on a Form 8-K this morning. With that said, I’d like to turn the call over to our Chairman and CEO, Larry Downes. Larry?

Thanks Dennis, and good morning everyone. Going to Slide 4, I’d like to go over the highlights on a very strong quarter. For those of you who have seen today’s earnings release, you’ll know that we’ve reported net financial earnings which I’ll refer to as NFE of $1.21 per share for the second quarter and that compared with $0.91 last year and for the six months ended March 31, we reported $1.68 per share versus a $1.51 last year. We remain confident that we will meet our NFE guidance range of $1.65 to $1.75 per share for fiscal 2017 and we reaffirmed that guidance range this morning. Customer growth was a key driver in New Jersey Natural Gas and NJR Clean Energy Ventures increased utility gross margin from new higher base rates as well as customer additions led New Jersey Natural Gas Companies’ results this quarter. At CEV, favorable winter weather allowed us to accelerate our residential construction schedule. In the second quarter we completed more than 370 residential installations. As a result, we expect to increase our investments in the Sunlight Advantage residential solar program by about $2 million this year to $37.6 million and that will compare with $34.3 million that we spent in fiscal 2015. We also reached several milestones on our key infrastructure projects. On February 24, the New Jersey Department of Environmental Protection approved critical permits for our Southern Reliability Link. In addition, shortly after the end of the quarter, PennEast received final approval from the FERC of its environmental impact statement, the Pennsylvania Department of Environmental Protection also issued PennEast water permit. These were important steps forward. And finally, we continued to expand our commercial solar portfolio. Our project in Pemberton New Jersey is on schedule and we expect to complete it this summer. Three other commercial solar projects will be completed by the end of the fiscal year and taken together, the four projects will add 24.1 megawatts of clean energy to our CEV portfolio by year end. Pat will provide additional details related to these items during his portion of the call. Moving to Slide 5, I will provide a breakdown of the NFE contributions that we currently expect from each of our businesses. As you can see, New Jersey Natural Gas will continue to provide the majority of our earnings this fiscal 2017 and as I noted, NJNG will have a strong year due to new higher base rates as well as higher utility gross margin through customer growth. We anticipate that NJR Midstream will contribute between 5% and 10% of NFE this year. When you combine our regulated businesses, NJNG and NJR Midstream we expect - currently we expect to contribute 65% to 75% of NFE in fiscal 2017. Through CEV, we’ll strategically invest in residential and commercial solar and onshore wind projects and we expect CEV to contribute between 15% and 25% of NFE this year. And finally, we expect NJRES to contribute between 5% and 15% of NFE this year. As you can see our long-term average NFE growth targets it remains at 5% to 9%. Now let’s move to Slide 6. Earlier this year, we increased our dividend by 6.3% and that represented the 23rd increase in the last 21 years. Our dividend strategy is focused on providing an annual growth rate of 6% to 8% while maintaining a payout ratio of 50% to 55%, which will ensure proper earnings retention to support future NFE growth. We believe that our annual dividend growth objective and our track record of increases compared very favorably with our peers. And with that, I am now going to turn the call over to Pat and he is going to share some details on our second quarter results. Pat?

Thanks, Larry and good morning everyone. I’d like to begin on Slide 7. This morning, we reported second quarter NFE of $104.1 million, or $0.21 per share compared with $77.9 million or $0.91 per share last year. For the six months ended March 31, we reported NFE of $144.5 million or $1.68 per share versus $129.2 million or $1.51 per share last year. As expected, NJNG was the main driver of our improved performance for both periods. That said, all other segments with the exception of NJR Energy Services performed better than the prior year. Turning to Slide 8, you can see the impact of new base rates and customer growth of NJNG, which accounted for the largest changes in both periods. This was consistent with our expectations for the quarter. We also recognized additional SREC revenues and tax credits at CEV, which was a result of more SRECs, higher prices from our operating solar assets, investment tax credits from the expected solar assets positioned this year and additional production tax credits from our Alexander and Ringer Hill wind farms. We saw a lot of performance in NJR Energy Services, but as Larry said earlier, we are maintaining our NFE guidance range for fiscal 2017 of 5% to 15%. During the second quarter, the PennEast project, of which NJR Midstream is a 20% owner, recognized allowance for funds used during construction or AFUDC of about $2.4 million or $0.03 per share in the quarter. This reflected a cumulative adjustment based on our total capital spending to-date on the project. We also closed on the sale of the building owned by CR&R and recognized a net gain of approximately $1.1 or about a penny of NFEPS. This sale which was underway last year had moved back into our early guidance for fiscal 2017. Additionally, we sold some available for sale securities, which resulted in a net gain of approximately $1.6 million or about $0.02 per share. Slide 9 shows the bridge, in fiscal 2016 actual NFE for the midpoint of our fiscal 2017 NFE guidance range. As you can see, the largest increase will come from NJNG. Utility gross margin is expected to be up by about $0.25 per share mainly due to the effects of the base rate case and customer growth. And after offsetting a utility gross margin, higher expenses and lower BGSS margins, we expect NJNG to provide a 10% to 15% increase in its NFE year-over-year. Part of the contribution should come from CEV anchored mainly by an increase in SREC revenue. NJR Energy Services contribution while performing within the guidance range will be about $0.13 per share lower. This winter although colder than the prior year, but still longer than initially predicted and impacted the value such as storage and transportation efforts and our portfolio resulting in lower results year-over-year. These lower results were partially offset by the aforementioned sales of available-for-sale securities. NJR Midstream, with the addition of the AFUDC I previously discussed is being estimated a $0.05 increase year-over-year. Let me emphasize though, I think AFUDC contributions beyond fiscal 2017 will be included in NJR’s guidance for future years will be taken into account in our overall assumptions and estimates, when we give that guidance. Therefore that should not be viewed as incremental to our average annual growth rate of 5% to 9%. Slide 10, shows our capital spending update for NJNG for the second quarter and for six months of fiscal 2017. There are two items I want to highlight. Our SAFE II program is well underway as we have invested $15.3 million in the first six months of fiscal 2017 to replace 31 miles of unprotected steel pipe. As part of this program, NJNG will earn AFUDC on its invested capital during construction and will cut rate increases for $157.5 million of safety spending and annual filings. As a condition of approval, NJNG required to file a base rate case no later than November 2019. The other item is our NJ Rise program. To-date, NJNG has resolved nearly 7900 excess flow valves in storm prone areas and less service areas. These valves restrict the flow of natural gas when there is a change in pressure on the service line. The secondary feed in the secondary feed into Sea Bright in Monmouth County was completed in April and the redesign of Ship Bottom Regulator Station on Long Beach Island is underway and is expected to be operational in June of 2017. The remaining four projects are in the design and as permitting phases the whole project is scheduled for completion by fiscal 2019. Turning to Slide 11, our customer growth remains strong. For the six months ended March 31, we had 4130 new customers, a 13% increase over last year. We believe we will add about 9,000 new and conversion customers in fiscal 2017, which is up from the 8300 previously estimated with an anticipated utility gross margin contribution of 5.28 annually. The increase is due to the inclusion of Superstorm Sandy-affected customers, who are expected to have service reconnected within this fiscal year as new customers. In total, we expect to spend between $100 million and $110 million between fiscal 2017 and 2019 to add 26,000 to 28,000 new customers representing a growth rate of 1.7%, up slightly from our previous estimate of 1.6%. About 55% of that growth will come from new constructions and 35% from conversion to the natural gas from other fuel sources. Turning to our Clean Energy segment. You can see our capital spending and project status on Slide 12. Although we did not faced any commercial projects into service during the quarter, CEV has more projects under construction in New Jersey representing a total investment of $56 million with an aggregate installed capacity of 24.1 megawatts. By the end of fiscal 2017, our commercial solar portfolio is expected to total approximately 130 megawatts. As Larry alluded to, the warm weather allowed us to add residential customers at a greater pace than planned. As a result, we expect to invest about $2 million of additional capital above our original plan from the Sunlight Advantage program for a total nearly $38 million. We added 688 residential customers during the first six months of fiscal 2017 totaling 6.3 megawatts of capacity, more than double the 291 customers and 2.5 megawatts of capacity added during the comparable period in fiscal 2016. We now have nearly 5800 home owners who have taken advantage of our program. From the wind project perspective, the completion of our Ringer Hill wind farms in December improved our capital spending for the fiscal year. As we’ve discussed in the past, and at length during our November 17 Analyst Day, there is a direct relationship between SREC pricing and the timing of the BGS auction. This relationship is expressed in the chart on the left of Slide 13. Ahead of February’s BGS auction, SREC price is for all energy years increased. In particular, energy year 2019 increased by 42% compared with the market prices we shared with you on November 17. As such, and consistent with our strategy, we use these market conditions as an opportunity to actively hedge our SRECs during that timeframe. As a result, you can see on the chart on the right, that nearly all of our SREC sales from facilities that are currently operational and under construction ahead for energy years 2017 and 2018. And more than three quarters of our SREC sales are now hedged for energy year 2019 which is significantly up from last call. Slide 14 brings together our capital plans for NJR for the next three years. As you can see, our investment in NJNG approximates $703 million over the next three years which equates to rate based book or about 6% annually. We have no material changes to the plan at this time, other than the estimated $2 million increase in residential solar spending this year. We will continue to update you on our plans as the year progresses. Moving to Slide 15, you can see that our capital plan is anchored by strong cash flow from operations as well as equity from our dividend reinvestment program. We plan to issue approximately $162 million of equity over our fiscal 2017 to 2019 planning period. This is down from the $200 million that we had previously discussed primarily to the timing of capital expenditures associated with our projects. We believe our cash flows and financing plans will continue to support our strong financial profile now and in the future. I’ll now turn the call back to Larry for some final thoughts.

Thanks, Pat and before I open up the call for questions, I wanted to take just a few minutes to review our strategy to create long-term value for our shareholders which we’ve outlined on Slide 16. Our value proposition begins with a solid utility platform with a further average customer growth that should add more than $5 million in incremental utility gross margin each year. In addition, our strong and supportive regulatory relationships have allowed us to receive approval for over $600 million of accelerated infrastructure projects to-date. Those projects are benefiting our customers through safe reliable service. To create additional value, we invest in non-regulated, diversified energy infrastructure projects that are aligned with our investment criteria. These investments are allowing us to capitalize on opportunities to serve customer demand by investing in midstream infrastructure projects like PennEast, as well as solar and onshore wind projects. Our Energy Services segment serves the wholesale market generating net financial earnings that can be reinvested and for our capital programs thereby reducing our external equity needs and all of our investments are supported by a disciplined capital allocation process that’s focused on maintaining a strong financial profile that will provide access to external capital as we needed at appropriate rates. Turning to Slide 17, we can see the three segments that are the foundation of our growth strategy, Natural Gas, Clean Energy and Energy Efficiency. Our strategy is built around the ongoing transition in our nation’s energy landscape, increased demand for natural gas is due to several factors, abundant natural gas suppliers in the Marcellus and Utica fields and across the country have driven prices to historical lows and as more and more coal-fired electric plants are retired, natural gas has become the fuel of choice for electric generation. For us, this means more potential opportunities in the midstream markets and for our core utility customers they are benefiting from lower prices at their homes and businesses. Customer demand and public policy goals to use clean energy a driving growth in solar and onshore winds together, these forces are providing attractive infrastructure investment opportunity for us primarily in the natural gas space, as well as in Clean Energy and Energy Efficiency. Now when you think about Energy Efficiency, the value is clear, using less energy is the best way to improve the environment and both customer and investors benefit. New Jersey Natural Gas is a leader in New Jersey developing programs that support the state’s policy focus on Energy Efficiency by rewarding customers who use less energy and providing substantial savings. Consider that, our typical residential customers’ heat usage has declined by more than 10% since we started these programs in 2006. In addition to that, our customers have saved almost $370 million below the usage and at the same time our conservation incentive program which we refer to as CIT has protected over a $169 million of utility gross margins. We’ve also invested about $144 million in our SAVE GREEN program which has made Energy Efficiency upgrades more portable for our customers. When you think of it together, both the CIT and SAVE GREEN have earned approximately $1.37 per share for our share owners. And as we look to the future, we believe that there would be regulated opportunities with energy efficiency. On the unregulated energy side, we are currently studying how innovative products like battery storage with solar can model to manage energy needs at the retail level could enhance our offerings to customers. And now before we go to questions, as always I just want to say thank you to the outstanding work of our more than 1000 employees. These dedicated women and men are the foundation of our company. They give the best they can every single day and as a result of that, they are the driving force between everything we do. So I want to thank you all for joining us today and we welcome your questions or comments.

[Operator Instructions] First question today comes from Spencer Joyce with Hilliard Lyons. Please go ahead.

Hi, good morning guys. Nice quarter. Thanks for taking the call.

Thanks, Spencer. Good morning.

Pat, maybe start with you for a second, can you talk a little bit about the energy year 2019 while we see a bit of a drop off in the SREC price there? Is there anything structural that you see happening a couple of years out? Or is that just sort of how the market functions there with that type of forward curve?

Well, Spencer, I think with a couple of things you need to consider. The first is that the SACP which is the penalty rate that LSEs have to pay if they do not procure SRECs. Gradually it declines over time and so you’d naturally expect the decline in SREC price as you go further out in the energy year curve. But I think it’s – but I think it’s a bit of tied to market fundamentals, as we discussed at the November 17th Analyst Day, energy year 2019, there is only about a third of supply in the marketplace that is looking for SRECs currently. So we think that’s what really drives the disconnect between energy year 2017 and 2019 prices.

Okay, yes, that’s helpful. It’s been a while since I looked at that SACP chart. I guess, similarly, can you quantify or jump back to slide 15 on the equity needs? I may have just missed it. Did you mentioned any discrete dollar amounts kind of in 2017. 2018, 2019? My prior note here was 50 to 115 clearly, we’d come off from those levels. But did you gave kind of an approximate figure for that 2018 and 2019 equity needs?

Yes, as we did in the Appendix of our slide presentation this morning provided those numbers. For your reference, fiscal year 2017, that was $15 million of equity for 2018 it’s $100 million and in 2019, it’s about $50 million of equity needs. And that would include the issuance under our drift.

Okay, perfect, gotcha. Another, just kind of small modeling point, the available for sale gains in the small real estate item, on the income statement are they under the other income line? Is that right?

So, the available for – sorry, the available for sale securities, you’ll see flow through other income, Spencer and we provide some additional information in the 10-Q in note 2 on those sales and the 10-Q we filed later today. The gain on the sale of the property will actually roll up into O&M in the home services and other segment.

Okay, very helpful. Thanks. I kind of hate to ask this question, is maybe a numb question, but as much ITC as we thought in the second quarter, from an NFE perspective is it possible we could see a negative adjustment in the fiscal Q3 and Q4? I am trying to think back. I don’t think we’ve ever seen that. But I am just trying to back-end of the full year given the CapEx level, it seems like the ITC we bought thus far is really kind of bumping against what we’ll probably see for the full year.

So just for modeling purpose, I think it’s fair to say because we have to estimate our annual effective tax rate and take into consideration with ITC, that’s not likely we will see a negative, but you are right, in that there was a disconnect between the amount of ITC to recognize and the projects we placed into service.

Okay, perfect. That’s very helpful. I guess, last one for me, just from kind of a high level operationally, is it safe to say, kind of across the businesses we are at a fairly clean year, I know, Energy Services has kind of right-sized itself from a contribution standpoint over the last couple of years and even a year ago, we were kind of looking forward to the rate case, but to me it just feels like we are kind of progressing through what a nice clean kind of normal year, if you will. Any thoughts around that sentiment?

Yes, I think that’s a fair statement in terms of business initiatives and the amount of business mix. It’s fairly significant.

Okay, perfect. Again, good quarter and I’ll see you guys soon.

Yes, thanks.

Thank you.

And our next question today comes from Mark Levin with Seaport Global. Please go ahead.

Hey gentlemen, congratulations on a very strong quarter. My questions are actually more big picture for Larry. Larry, how do you think about the M&A environment for LDCs in 2017? And I guess that relates, just big picture, how tax reform or a potential tax reform might impact the pace or the speed with which we’ve been seeing these deals over the last couple of years?

I think, first thing, Mark is I can’t comment on it specifically as it relates to us.

Sure.

Which you are looking at the, what we see in the high level details that we’ve seen on the tax side so far. Hard to draw any conclusions there, but Pat, you may want to add something to that as well.

Sure, Mark, good morning. I think the only thing I would add is, probably what you’ve read the press as well as this factor of tax reform and uncertainty around tax – sorry interest deductibility, that may impact certain plans. But beyond that I’ve got no additional information to share.

All right, well, let me…

We need more specific comments would be the bottom-line there, Mark.

Yes, and as you look at the – and I know it sort of dovetails into the next question, which is almost impossible to answer I suppose without having more specifics. But generally speaking, when you think about tax reform and the potential impact of maybe lowering the corporate tax rate and some of the other larger items that are being bandit about, how do you think that? Is that a neutral impact to NJR as you see it now a negative, a positive? I realize the devils in the details, but just as things look today, what conclusions if any can you draw?

So, Mark, we have included in the Appendix or slides something that I’ll walk through for you. I think you have to look at it very much for us from a segment perspective and very differently across the utilities. So, for New Jersey Natural Gas, because there is precedence here, I guess going all the way back to 1986, we would expect that any tax reform would be net neutral. Benefits will have to flow right back to periods. I would add that with the exception of our BGSS incentives, in a lower tax rate environment we’d see a higher EPS contribution from the BGSS incentive. With turning to our non-regulated businesses, obviously, on an after-tax basis, the EPS there would be expected to increase in a lower tax environment. And the other item here is that, we do have significant deferred tax liabilities associated with Clean Energy and that was also the disconnect between the depreciation period for book purposes which is between 20 and 30 years and for tax, this could be a 100% bonus or five year makers depending upon the year you are talking about. We’ll have to revalue that deferred tax liability that will result in a significant one-time benefit. But all that being said, a lower tax rate environment, a 100% CapEx expensing it would take us longer to realize the economic benefits of the investment tax credits and production tax credits that we are generating and that could potentially impact project returns and so we’ll have to take a look at that as well.

Yes, that’s fair. I appreciate the detailed answer. That’s helpful. And then, just finally, when you think about moving away from M&A, maybe just talking about asset acquisition opportunities as you look forward, are there, obviously, you guys have been active on the wind side, reasonable maybe to assume over the next several years, maybe one wind farm per year and are you seeing any additional or incremental opportunities in the Midstream business stuff that would meet the profile and how our seller expectations or how does the pricing look on that side?

Mark, yes, we were certainly, opportunistically evaluating three projects at a time and when we get to a point we got something we would share that. But I don’t – I wouldn’t say that the landscape has changed dramatically for us. We have the COO, or – who led the business this year is Stephen Westhoven and so I’ll ask him to add any color or commentary.

I think that’s a good way to answer that question.

Perfect. I was just curious if you felt like that the market was vibrant right now or right for more - I mean, are you seeing opportunities out there? Or is it something where the seller expectations are at a certain point that would make it difficult to transact?

Mark, I would just probably repeat what Pat just said, we were looking at assets and certainly if we come up with something, we will certainly share it with you. But we have nothing to share at this time.

Got it. Great. Thanks, guys congratulations on a good quarter. Yes.

Mark it’s Larry. One other quick point, in the past, as you know there has been a lot of dollars chasing those types of investments which have driven down the recurrence and as we’ve said, we’ve not been willing to compromise our cost of capital guidelines with the current guidelines we have. So…

Yes, no, that’s exactly what I was after, yes, because I remember Larry, you are saying that in the past and that’s why I was just curious if things had changed on that front, because I do remember that being sort of part of the fabric before.

Yes, that is absolutely not. Those criteria have not changed.

Yes, great. Thanks again. I appreciate it.

Next question today comes from Brian Russo with Ladenburg Thalmann. Please go ahead.

Hi, good morning.

Good morning, Brian. How are you?

Just, the fiscal second quarter results increased nearly $0.30. Yet, on Slide 9, which is very helpful, the earnings protocol year-over-year, full year earnings when we increased $0.09 and I am just curious, I know there is seasonality in the business obviously, but I was just trying to – if you could just kind of reconcile to that delta?

The biggest piece of that, Brian, would be New Jersey Natural Gas, which on a – for the first six months of the year earned about 67% of utility gross margins. In the second quarter, that’s 42% and that’s really the impact of the base rate case coming through in the second fiscal quarter as compared to fiscal year-to-date. So, that’s what drives that disconnect.

Got it. And I apologize, if you talked about this earlier, but the Clean Energy venture’s NFE practically doubled in 2Q, yet on Slide 9 you are only showing $0.02 of year-over-year full year EPS in fact and I am just curious what – I know there is tax credit recognition and maybe it’s front-loaded to SREC sales, but maybe you could just add some color to that?

The main driver there, Brian, is the tax credit recognition based on the accounting rules, we can recognize those ITC on a slightly different basis than when the projects are actually placed into service and it has to do with estimating our annual effective tax rate and for a like a better word, smoothing that out at a time.

Okay, got it, and did the equity needs through 2017, 2019, did they changed from prior disclosures?

Not from the first fiscal quarter, but they did changed from our year end Analyst Day, but moderately. They decreased by about $38 million.

Okay, got it, and then, the slide on the hedge – SREC hedge levels and pricing, the 2019 average head price has come down fairly significantly, as well as the current price and I was just wondering if you could elaborate on that?

Brian, I think the – it’s interesting that the market prices have come down a little bit from the first fiscal quarter there a range of $155 to $160, still higher than year end. The hedge price – I would recall that those have changed that materially from any of the prior materials that we’ve put out whether on the Analyst Day or not when we look at, that would actually circle back to you.

Yes, okay. Great, and then, I didn’t see any slide on PennEast. I was wondering if you could provide an update on that.

Sure, PennEast, as Larry has said during his narrative that they’ve receive their final environmental impact statement on April 7 and then next step in that process is to receive our final FERC certificate which is supposed to come in 90 days. We are certainly waiting for a quorum to be established at FERC in order to receive that certificate. So that’s the next step in the process. So we are moving forward and hopefully that project will reach another milestone here in the next few months.

Okay. Great, thank you.

Bye.

[Operator Instructions] Our next question comes from Travis Miller with Morningstar. Please go ahead.

Good morning. Thank you.

Good morning, Travis.

So, on the gas distribution side, you guys obviously had lot of success on the conversions. Can you give me a sense for what that addressable market is at this point in terms of future potential conversion customers?

Yes, sure, Travis. This is Pat Migliaccio. When looking at – we’ve got a pie chart in the Appendix section that shows the total addressable market. If you look at a slice of that pie chart that we refer to is on main, which are the customers that are right near our distribution system. There is approximately an eight to nine year supply of those customers without much in the way of incremental CapEx and then if you look more broadly across the entire market segment, we have over a 100,000 potential conversion customers, which at the page wrap would imply a 22 to 24 year supply.

Okay. And what would have to change, apart from just natural gas prices, what are some of the key factors that would change that addressable market just on an economic basis? And again, obviously, gas price changes will have effect. But is there anything else that would change that market opportunity?

Travis, I am going to ask Tom Massaro who is our VP of Customer Service and Marketing to address that question.

Hi, Travis. The fluctuation year-over-year, and you hit on one of the drivers that could be the differential between oil and natural gas prices, the majority of those conversion customers are coming from fuel oil. So, these are all greater trend between fuel oil and natural gas and weather obviously also impacts that. It gets colder than normal winters that will – more fuel oil, most likely at higher prices, because of the demand for the oil. But the fluctuation between that wouldn’t bring you much quicker than the 22 to 24 year supply that have for us, when moving up couple of years. But the fluctuation in conversion numbers has been pretty steady.

Okay. So that’s what you are primarily hearing from customers this, we just want cheaper fuel, stuff like that?

Yes, it is definitely driven by economics for the conversion.

Sure. Okay, thanks a lot. That’s all I had.

Thanks.

Thank you.

And at this time, we are currently showing no further questions. I would like to turn the conference back over to Dennis Puma for any closing remarks.

Okay, thanks Ryan. I just want to thank everybody for joining us this morning. As a reminder, a recording of this call is available for reply on our website. As always, we appreciate your interest and investment in New Jersey Resources. Enjoy the rest of your day. Thanks. Good bye.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.