Good morning, and welcome to the New Jersey Resources Third Quarter Fiscal 2020 Earnings Teleconference. 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 is being recorded. I would now like to turn the conference over to Dennis Puma. Please go ahead.

Thank you, Brandon. Good morning, everyone - everybody. Welcome to New Jersey Resources third quarter fiscal 2020 conference call and webcast. I am joined here today by Steve Westhoven, our President 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 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 on Slide 1. These items can also be found in our forward-looking statements section of today’s earnings release, first on Form 8-K and in our most recent Form 10-K and Q as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures, such as net financial earnings, or NFE. We believe that NFE, net financial loss and utility gross margin provide a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in the Item 7 of our 10-K. Turning to Slide 2, we have our agenda for today. Steve will begin today’s call with highlights from the quarter, followed by Pat who will give our financial results, we will then open the call up to your questions. The slides accompanying today’s presentation are available on our website and were furnished on our Form 8-K filed this morning. With that said, I’d like to turn the call over to our President and CEO, Steve Westhoven. Steve?

Thanks, Dennis, and good morning, everyone and thank you for joining us today. Before we review the third quarter results, I want to provide a status update on COVID-19 impacts on NJR. In June, New Jersey Natural Gas resumed in-home inspection work for SAVEGREEN, our energy efficiency program and over the last month, we started to resume other services that have been scaled back at the peak of the pandemic. We are now performing non-emergency service-related utility work at customers’ requests. Our team has done a terrific job of navigating pandemic-related restrictions, despite a COVID-related delay and certain home construction activities during the quarter. The utility continues to add customers. We’ve added nearly 5900 new customers so far this fiscal year and we have over 2500 pending installations as of today. We are likely to lag our original goal of adding 98,000 new customers in fiscal 2020, but we view this as a near-term delay and remain confident in reaching our three year target of 28,000 and 30,000 new customers by the end of 2022. As always, the safety and well-being of our employees, customers and the communities we serve take priority, we continue to voluntarily suspend customer disconnects and late fees and provide assistance to those in need through various federal and state programs and through our gift of warrant and NJR Charity designed to assist customers in paying their bills. Moving to Slide 4, despite the challenging environment, we are reaffirming our fiscal 2020 NFE guidance range of $2.05 to $2.15 per share with the expectation of NFE falling towards the lower end of the range. We now expect New Jersey Natural Gas to contribute 64% to 67% of total NFE, compared to our previous range of 61% to 65% due to decreased O&M expenses. We lowered the…

Thanks, Steve, and good morning, everyone. Slide 9 shows the main drivers of our quarterly NFE and net financial loss changes. During the third fiscal quarter of 2020, NJR reported a net financial loss of $5.8 million, or $0.06 per share, compared to a net financial loss of $17.5 million or $0.20 per share in 2019. New Jersey Natural Gas saw an NFE improvement quarter-on-quarter of $15.8 million due to higher base rates and lower O&M expenses. Midstream saw modest improvement during the quarter with increased operating income from Leaf River and Adelphia, mostly offset by income taxes and interest expense. Energy Ventures was down $6.8 million, primarily due to the timing of SREC sales and investment tax credit recognition which as Steve mentioned will mostly occur in the fourth quarter. Energy Services improved $7.1 million due to higher financial margin this quarter when compared to the same period in 2019. Home Services and other decreased $5 million, mainly due to the timing of some expenses related to our IT system replacement project. Slide 10 outlines our capital spending for the first nine months of fiscal 2020 and the next two years. As Steve mentioned earlier, the delay in Adelphia Gateway’s permitting process resulted in a portion of our fiscal 2020 capital spend getting pushed to fiscal 2021. We now expect capital expenditures for Adelphia Gateway to be in the range of $140 million to $160 million for 2021 and 2022, compared to our previous estimate of $100 million to $120 million. As you can see on Slide 11, NJR remains well positioned in terms of liquidity. As of June 30th, we had almost $600 million of liquidity available to us. In addition, in July, NJR received a total of $335 million for the issuance of unsecured NJR notes and…

Thanks, Pat. Before I open the call for questions, I want to thank our employees for their hard work and dedication, especially considering the circumstances that we are all dealing with. Back in March, we had to pivot quickly to this new working environment and all of our associates embraced the challenge and our performance through this period has been largely unaffected. Weathering the field of working remotely, we’ve excelled at serving our customers’ needs and respecting their wishes for how that service should take place. Our focus on customer service is why we are recognized in June for the seventh straight year as a most trusted utility niche according to Cogent Syndicated by Escalent. I appreciate you taking the time to join us today and I’ll now open the call for questions.

[Operator Instructions] Our first question comes from Gab Moreen with Mizuho. Please go ahead.

Good morning everybody. Couple questions. Wanted to actually start with the energy efficiency programs and the solicitation on the BPU. Can you just talk about, maybe the magnitude of what you are looking to do there over and above, your SAVEGREEN programs and what you’ve done in the past?

Hey, Gab. This is Steve. I am going to pass this question to Mark Kahrer, who is the Head of our Regulatory to give you some details on those programs.

Yes. So, just to give you a quick background, as you know our SAVEGREEN program call it a $1.5 million was a vast improvement over our prior program. We have investing about $15 million a year in the prior programs and we get approval in the last one to do $135 million over a three year period. And when we take a look at the upcoming filing, we are still working through that that is due on September 25th. We will know better what that program will look like when it gets approved and the target date right now is May of 2021. We expect it to be somewhat similarly size, there will be some ins and outs in the programs. But for right now, we are really uncertain and can’t discuss what the final details will be. The positive aspect it is – is that there are many programs that were run previously by the Clean Energy program of the BPU. Those programs are specific around residential and commercial customers will be coming over to the utilities and natural gas. So, we look forward to that and working with the BPU on creating the collaborative – those programs, once they get approved and we are hopeful by May 1, there will be implementation required by July 1st of 2021. So, right now, there is still a lot of uncertainty of what those programs look like the size. We know that will be about a three year program. So, expect these similar to what SAVEGREEN projects are or it could even be a little bit bigger.

Appreciate that. Thank you. And then, maybe if I can turn to COVID costs or potential COVID cost, it doesn’t sound like there has been much of an impact directly. Do you anticipate at all, calling out some of the potential COVID impacts? I know the BPU has allowed for that. One of your peers, I think noted that they were doing so yesterday when they reported. Is that’s something you anticipate going forward?

Gab, this is Pat Migliaccio. Certainly we are aware of the order. To-date, the COVID-19 cost for us have been largely immaterial. And so, we continue to monitor that. We’ve not seen a material increase in net write-offs related to bad debt expense. To put some ranges around that and in a typical year we’ll see a $2 million to $3 million going all the way back to the great recession of 2008, 2009, that got us high as $7 million, just to give you some sense of a magnitude. But, as I mentioned earlier, today those costs both COVID-19 specific as well as bad debt are largely immaterial.

And this is Mark again. We have been having productive conversations with the Board of Public Utilities about the whole aspect of uncollectibles. And so, they are acutely aware of that. We’ll work through that over the next periods and as we work through in getting some of these customers the assistance that they need to be able to pay their bills.

Thanks, Pat. Thanks, Mark. And then, maybe my final question is just on SRL, can you just talk about whether the total cost there has changed through the project looking at the SRL specific slide at this point versus last [Indiscernible] The capital plans like huge machines for SRL. So, just looking for clarification on job and also the confidence which you will be able to recover during the rate case even if the costs are higher?

Gab, this is Pat Migliaccio. So, our estimates of cost for SRL largely unchanged from what we reported last quarter and do not see any issues with recovering the cost associated with the project.

Okay. Thanks, Pat.

Thanks.

Our next question comes from Michael Gaugler with Janney Montgomery Scott. Please go ahead.

Good morning, everyone.

Good morning, Mike.

Good morning, Mike.

Steve, got one for you. Given the cancellation of Atlantic Coast, just wondering what you are thinking in terms of your existing midstream assets and energy marketing. Does it create any opportunities for you in the future?

A few thoughts on that, Mike. One, certainly, infrastructure is becoming hard to build, which is making the infrastructure that’s in place and I think more valuable as we move forward. Natural gas, very important energy source and we’ve even seen that recently with the top procurements come through here not got a lot of electric service and there has been a lot of gas-fired generators has been running that have been helping to provide electric service. So, not only important in winter, but important in summer and its critical infrastructure. So, when we look at the projects that we have on the board, Adelphia Gateway, already in the ground. We got some permitting still left in Pennsylvania. But minimal construction, minimal environmental impact and so many constrained markets. And so, we are excited about moving forward that project once we get the approval. Leaf River Energy Center, the storage facility down in Mississippi performing well. Certainly, volatile gas prices has helped there as well and Gulf Coast, LNG liquefaction it’s been tough, but that’s been helping spreads in such down in that area and really shows the balancing needs down in Louisiana, as well. PennEast, still an important project. We’ve got capacity constraints in the Northeast. So, I think as we push forward, we received the EA. We are marching forward with that project. Certainly, very needed. But right now, I think the opportunities that we have are to get the projects that we have on our slate developed and get them completed in running, which is what we are working pretty hard at right now.

Okay. And then, you grow PennEast, I am just wondering what’s the target to begin construction there on Phase 1?

So, Phase 1, I think we’ll have a completion in 2022 and we – right now, are going through the process. Receive the EA. We need to receive the FERC certificate this fall and then some other approvals. So, I think, we are working through the process and as you know, that’s been an unpredictable process. So, current schedule having that in service, I believe the end of 2021, 2022 right, currently.

Thank you, sir.

Our next question comes from Richard Ciciarelli with Bank of America. Please go ahead.

Hey. Good morning. Thanks for taking my questions.

Good morning, Rich.

Hey, Rich.

Hey. Just curious if you guys can provide a little bit more color on what’s driving your expectations for the remainder of the year. Just looking at what you’ve done year-to-date, it seems it would imply a 100% growth year-over-year from 4Q and I realize that there is some timing considerations with ITC recognition and the SREC revenues at your CEV segment. But just curious if you can provide a little bit more color there.

Hey, Rich, on your end, you cut out little bit on the initial side of the question. So, additional color on what specifically?

Sorry. Yes. For your expectations for the remainder of the year given that you’ve kept your guidance as point to the low-end of the range, but just given what you’ve done year-to-date, it seems like it would imply a 100% growth for 4Q year-over-year and I realize the timing with the ITC recognition. But what else is driving your expectations for the remainder of the year.

No, Rich, you are spot on. It really is timing as Steve alluded to in his remarks, we’ve got roughly 60 plus million dollars of SREC sales that we will deliver in the fourth quarter of this fiscal year which you can effectively tax effect those and drop them to the bottom-line, because there is no incremental additional operating expenses and the balance is income taxes, rather investment tax credits associated with interest. So, it really is strictly a timing issue, not much more than that.

Okay. Got it. That’s very helpful. And then just curious, I know you touched on the energy efficiency program, but also on the IT program. What are your expectations for rider treatment there and when is the timing for approval?

Hi. This is Mark Kahrer, again, Vice President Regulator Affairs. So, we filed back in February of 2019 on that. We answered all of discovery and submitted the cost benefit analysis that was required earlier this year. We’ve begun the settlement process now. So we are hopeful that during the course of this quarter or into the early fourth quarter or first quarter of FY 2021, we’ll have some resolution and close the issue out and get some investments underway.

And Richie, just as a reminder of that, over $500 million program, approximately $280 million was related to what I described as traditional pipe infrastructure. $220 million is related to our, what we’ve done project next, which is the replacement of our customer billing system, ERP and working asset management. That work is underway for our ERP. So - and actually went into service on July the 8. So, just as an FYI, those are the two different types of spend under that program.

Okay. Got it. That’s very helpful. And then, just last one for me here. You alluded to some of the permitting challenges at Adelphia and you shifted the spending there. I also noticed the – some minor spending was shifted out at CEV. What’s driving that?

So, I think, with the Adelphia Gateway, the – getting the permits to the Pennsylvania DEP, we’ve been working with them extremely well. But the COVID-related impact is just slowing things down a little bit. It could be a reason for that. And that’s just slowing the project down. But we still expect that to have commercial - in commercial operation in 2021 and you see in the numbers we’ve shifted out to spending to reflect that.

And then Richie, on the Energy Ventures side, we lowered our expectation for the sunlight advantage last quarter from $26 million to $20 million. We’re still targeted there. And again, that’s also principally COVID-related reference on last call, first with our channel partners, not being able to get at homes to market to our customers and then second at the local municipality level permits have been a little bit slower to achieve.

Alright guys. Thanks a lot for the color. That’s all I had.

Thanks, Rich.

Have a good day.

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

Good morning, guys.

Good morning, Travis.

Hey, Travis.

On SRL, I was wondering if the BPU was involved in anything in terms of investigation or looking into what happened and whether there was any kind of process of dealing with issues like what happened through the BPU rather than the DEP. Just wondering if there was any involvement there.

So, Travis, we notified the BPU and the decision it took place, but that’s been about it. It’s really been the DEP and local permitting that have been involved. And we are working with them right now and like we said, we’ve submitted our risk mitigation plan with them and we are waiting review. So we can start up the sections, construction that’s still continuing. The only other thing that I would add is, remember the BPU has approved this project to start. This is a resiliency project that was really born out of Super Storm Sandy and necessary to get another supply point to our system. So extremely important for us to complete this project going forward. That was the BPU’s I guess, involvement in the situation so far.

Okay. Has there been any kind of pushback from interveners or possible interveners about rate recovery given what happened?

No, we haven’t, so this would go into our next rate case. So, we haven’t had the opportunity to put it in a rate case. At this point we’ve got to get commercial operations in place first. So, there hasn’t been any reaction from an intervener.

Got it. Sure, Thanks. And then, wondering high level, your thoughts on the Dominion deal and any chance that if the right price came along that you might look at a similar divestiture on the midstream side?

We don’t comment on those types of situations, but I will say, we are excited to get Adelphia Gateway up and running and get some of these assets into market. It’s a constrained market. There is definitely a big need for natural gas, deliveries in these markets that we are in. So I think that will provide value for our company for very long time.

Okay. And I appreciate the very elaborate non-answer. Thank you much guys.

Thanks, Travis.

This concludes our question-and-answer session. I would like to turn the conference back over to Dennis Puma for any closing remarks.

Alright, thank you Brandon. We want to thank everybody for joining us this morning. As a reminder, a recording of this call is available on our website for replay. And as always, we thank you for your interest and investment in New Jersey Resources. Good-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.