Good morning. My name is Matt, and I will be your conference operator today. At this time, I would like to welcome everyone to the NJR First Quarter Fiscal 2021 Conference Call. . Thank you. I will turn the conference over to Dennis Puma, Director of Investor Relations. You may begin your conference.

Okay. Thank you, Matt. Good morning, everyone. Welcome to New Jersey Resources first quarter fiscal '21 conference call and webcast. I'm 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.

Thanks, Dennis, and good morning, everyone. Thank you for joining us today. New Jersey Resources delivered strong performance in the first quarter. And on Slide 3, I'll take you through the highlights. We reported NFE of $0.46 per share, driven by the performance of our core business, New Jersey Natural Gas. We are also reaffirming our NFE guidance for fiscal 2021 of $1.55 to $1.65 per share and increasing our fiscal 2022 NFE guidance to $2.20 to $2.30 per share, an increase of $0.15 per share from prior guidance. At New Jersey Natural Gas, we completed almost 90% of the Southern Reliability Link and expect to place the project into service this year. We received approval to move forward with our infrastructure Investment Program, a 5-year, $150 million accelerated recovery program that will improve the resiliency and reliability of our natural gas infrastructure. And we filed for SAVEGREEN 2020, a new energy efficiency program that is designed to help our customers reduce their energy consumption and save money.

Thanks, Steve, and good morning, everyone. Slide 10 shows the main drivers of our NFE for the first quarter. As we communicated at our Analyst Day in November, this is the first quarter where we're utilizing the deferral method of accounting for CEV. And as such, we've recast our financials for the comparable periods. Reported NFE of $44.7 million or $0.46 per share compared to NFE of $34.9 million or $0.38 per share in the first quarter of fiscal 2020. New Jersey Natural Gas saw an NFE improvement of $5.6 million due primarily to a full quarter of higher base rates from NJNG's fiscal 2020 rate case settlement as compared to a partial quarter a year ago. CEV was down $2, primarily due to increased O&M expenses related to project maintenance costs, especially with new projects placed in service, which is partially offset by a decrease in depreciation expense. Storage & Transportation saw a modest increase during the quarter, mostly related to increased operating income from Leaf River, and was offset by interest expense related to the acquisitions of Leaf River and Adelphia Gateway. Energy services improved $6.6 million, primarily due to higher financial margin compared to last year, due to increased natural gas pricing spreads. Home Services and Other saw slightly lower operating revenue and slightly higher interest expense. As Steve mentioned, we reaffirmed our NFE guidance of $1.55 to $1.65 per share for fiscal 2021. On Slide 11, you can see the segment contributions with our core businesses, NJNG and CEV, accounting for 80% of total NFE. To help understand the distribution of our net financial earnings by quarter, let me walk you through how we expect NJNG's utility gross margin and CEV's revenues will occur. For NJNG, we expect to recognize approximately 70% of our utility gross margin in the first half of the year, in line with our historical trends. At CEV, the majority of our revenue will come in the second half of the year, in particular the fourth quarter, when we expect to recognize the majority of our SREC revenue. We expect the net financial earnings contributions of our Storage & Transportation business to be fairly consistent throughout the year, because of the fixed price contracts. On Slide 12, we've highlighted the details of our SREC hedging program. We continue to actively hedge to ensure SREC revenues are largely unaffected by future changes in SREC prices. Energy year 2023, we increased our hedge level to 75%. Comparing year 2024, market fundamentals and pricing remained strong with SREC trading at over 85% of SACP. And we now have 49% of our 2024 volumes hedged.

Thanks, Pat. Before I open the call to questions, I'd like to summarize the quarter. NJR is off to a good start for fiscal 2021 and on track to meet our NFEPS guidance for this fiscal year. We increased our fiscal 2022 NFEPS guidance by $0.15 per share, and we expect strong cash flow to support our dividend growth.

. Your first question comes from the line of Gabe Moreen with Mizuho.

Just had a question on sort of the AMAs as well as I think the recent extension of the ITC credit and how that plays kind of into the 6% to 10% growth rate over the next couple of years. Is that a 6% to 10% growth that you think you'll be updating at some point for the AMA impact? And, I guess, looking out to '23 and beyond, is there any reason to think -- and I read there's puts and takes on the tax rate and things like that. Is there any reason at least over that, call it, 1- to 4-year time frame, that sort of the $0.13 per share EPS impact that will be markedly different in those couple of years on the AMA impact? A couple of questions in there sorry about that.

Questions in there. But no, so I think the way to think about the AMA and our long term growth rate, as we said, we're anchoring our long term growth rate of 6% to 10% off our core businesses, and that's New Jersey Natural Gas and CEV, our infrastructure businesses. And as Pat said a fair amount of time today, talking about the AMA and how it's adding positive benefits not only to Energy Services itself by de-risking the business and bringing in essentially fee-based revenue and earnings, but also the financial impacts are positive throughout the company. So when you think about the long term growth rates, still think about it off our core infrastructure businesses. But certainly, quite a bit of enhancement by the AMA for the cash that's coming in and helping out our overall company and the balance sheet. So I think, thinking about it that way is the right way to go.

And then maybe if I could follow-up just in terms of some of the cash proceeds from the AMA, and also maybe in the context of the decision to cash settle the equity forward, how did you weigh that and weigh the additional cash coming in versus, let's call it, accelerating potentially investments at CEV or elsewhere. I'm just wondering kind of what that lets you do potentially in terms of investing maybe more than you would expect it to?

It certainly gives us options. It's nice to have the financial flexibility. But I think as we rolled out in our Investor Day, we've got what I think is -- it could be characterized as gradual ramp-up of investment in CEV. So we're making investments -- the investments that we're making in '21 and '22, not unprecedented things we've done in the past. And then we've got a ramp-up that's going into '23 and '24. So, we certainly have the option to accelerate should we see something, but we've got nothing to announce at this time. And really, our intention is to stick to our plan. And as we rolled out at the Investor Day, and make the investments in CEV as we stated. But certainly, it gives us options, and it's nice to have that flexibility.

And just last one for me. Maybe you can just kind of update us on what COVID impacts have been sort of at the utility and sort of where you see that? What impacted the quarter and where you see that going?

We talked about it a little bit during the call, a little bit of a slowdown in customer growth, most likely due to just the tightening up in COVID restrictions. But still, we're not that far from where we were last year pre-pandemic if you compare to fourth quarter. A little bit of bad debt at the utility, but I think there's -- for the most part, we've identified our COVID impacts. Thank you.

. Your next question comes from the line of Richard Ciciarelli with Bank of America.

I am just following up on Gabe's question on the long term growth rate. I understand you're doing it off the core business here, but just with Energy Services de-risk, any reason why you didn't elect to narrow the growth rate relative to the wider range of 6% to 10%?

So, I think the Energy Services transactions that we alluded to during the call, a little bit chunky in how they're coming in and the payments that are being made. And really, we want to concentrate on our core infrastructure businesses and those businesses that are going to be growing and we can build upon as a company. So, the way we're thinking about Energy Services, and you've been covering us for a long time, remember this when we've had large outsized gains at Energy Services, we certainly reported those and there were some good financial impacts from them, but it wasn't like we grew from those points. So, I think as we talked about Energy Services, this transaction de-risks the business, brings in some stable fee-based revenue, and a lot of positives from this transaction. And certainly, like I was saying to Gabe, the financial benefits as Pat Migliaccio outlined, certainly are there. But right now, we're going to just stick to the guidance off of our core businesses, and you can see the benefits from Energy Services as we described today.

And then just turning over to the utility, what are the expectations on the upcoming rate case filing there? And any potential that could be pushed just given we're still in a pandemic?

So Richie, I've got Mark Kahrer, who's our Senior Vice President of Regulatory with us today. And just remember, just that as the schedule goes, we are quickly coming to completion on the SRL project, so I expect that to be done by the end of this calendar year, which is going to trigger our rate case, but to give a little flavor on that. Mark, can you --?

Yes. So, what we've said all along is that we're going -- try to time the rate case settlements to the in-service date to reduce regulatory lag. We think we'll be able to get that done. So, we're looking to kind of file the case in the foreseeable future -- very near future, and we'll continue to work that and time that as appropriately as we can. With respect to the impacts to customers, there's just ways we're going to able to help them mitigate it through energy efficiency and other things, and we'll kind of have that benefit as well making sure that customers are doing everything they can to reduce their bills. But we're also trying to get the worry out of customers that have been impacted to make sure that they seek energy assistance from us. We've been actively working that for a while now. So, again, it's -- we're really trying to help the customers as much as we can. In that sense, we think one of the reasons why we continue year-after-year to get those -- the J.D. Power awards because our customers know they can trust us and reach out those on any of this.

And then just -- with the improvement on the -- your credit metrics given the AMA contract here. Have you had any discussions with the rating agencies on -- what that could potentially mean?

Richard, this is Patrick Migliaccio. So you may recall that New Jersey Natural Gas is the only rated entity through Moody's and both Fitch. And so the improvement in the credit metrics would be NJR writ large, which is not a rated entity.

Thanks Richie.

. Your next question comes from the line of Shahriar Pourreza with Guggenheim Partners.

It's actually Kody Clark on for Shahriar.

Hey, Kody.

So just back on the AMAs. Kind of wondering what the appetite is in the market for more of these agreements, would you be interested in them to further de-risk earnings? And then is there a chance that if you were to enter into more of these contracts that you would be in a position to add NJRES back into the long term EPS growth rate?

So certainly, Kody, if we could do more of these transactions, that would align itself with our Investor Day messaging of de-risking our business and bringing more clarity and certainty around the revenues and earnings of that group. So we certainly would pursue that. Energy Services still has capacity in the portfolio to do so. It's just a matter of finding the right counterparty. So we'd certainly pursue that. And, again, I think the thing -- the way to think about the AMA in context of the long term growth rate, we're still concentrating on the infrastructure parts of our businesses, the ones that we could build upon year-after-year and be able to grow our earnings and support our dividend and all the other financial metrics that we need to for our investors and customers. And Energy Services business does have some variability to its income, so it's still going to be very supportive of the rest of our businesses. But I really look at it as -- almost like two different paths, Energy Services will be part of it. If we can build upon it, that we feel with enough certainty and that certainly would be comparable to the utility and our other businesses that we've got and got ability to rely upon that, then that's a potential for breakdown. As our Investor Day messaging has given out to the investor, we're really just looking at CEV, utility, grow in infrastructure and de-risking this business which the financial benefits that Pat outlined today are very attractive.

And then second on PennEast, the Supreme Court's willingness to hear the case is obviously positive. But it's still well understood that there are hurdles for the project to clear. I'm wondering what steps you would have to pass to be comfortable with adding PennEast back into the plan? What's the trigger point for adding at least Phase 1 back into the plan?

So PennEast is an important project. And certainly, you've seen this whole region that there's a gas constraint, and we need new pipelines to come into the region. So we're very supportive of PennEast. We're supportive from a contractual basis. And I think to really dive into your question, there's a few other regulatory hurdles that would have -- that would have to be met for us to put that back in the plan. And not only met from a point of being able to work their way through them, but work their way through them in a way that we know the timing with some exactness. So I think as PennEast continues to work through the process, and again, we're very supportive of PennEast and we'd like to see it get built. As they work through the process and they de-risk the project, at some point, we have clarity, then we may be able to put that back into the plan. But at this point, there's still a few more hurdles to go over. But positive development, Supreme Court hearing the case, we're certainly hopeful for the project moving forward.

There are no further questions at this time. I would like to turn the call back to Dennis Puma, Director of Investor Relations, for closing remarks.

Okay. Thanks again, Matt. I want to thank everyone for joining us today. As a reminder, a recording of this call is available on our website for replay. And I want to, as always, appreciate your interest and investment in New Jersey Resources. Thank you. Goodbye.

This concludes today's conference call. You may now disconnect.