New Jersey Resources (NJR) Q1 2026 earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. My name is Calvin and I will be a conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources fiscal 2026 first quarter conference call. All lines have been placed on me to prevent any background noise. After the speakers and marks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on the telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Adam prior director of investor relations.

Please go ahead.

Thank you. Welcome to New Jersey Resources fiscal 2026 first quarter conference calling webcast. I'm joined here today by Steve West Hogan, our president and CEO, Roberto Bell, our senior vice president and chief financial officer, 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. This could cause results to materially differ from our expectations as found on slide two.

These items can also be found in the forward looking statements section of yesterday's earnings release. Furnished on form 8k and in our most recent forms 10k and 10q 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 here in in light of future events.

We will be referring to certain non gap financial measures such as net financial earnings or NFE. We believe that NFE net financial loss, utility gross margin, financial margin, adjusted funds from operations and adjusted debt provide a more complete understanding of our financial performance. However, these non gap measures are not intended to be a substitute for gap. Our non gap financial measures are discussed more fully in item seven of our 10k.

The slides for today's presentation are available on our website and we're furnished on our form 8k filed yesterday. Steve will start with this quarter's highlights in a business unit overview beginning on slide five. Roberto will then review our financial results, then we'll open it up for your questions.

With that said, I'll turn the call over to our president and CEO Steve West open. Please go ahead Steve.

Thanks Adam and good morning everyone. The natural gas industry just navigate an extraordinary weather event with record setting demand. And once again, NJR's diversified businesses responded with extraordinary performance.

I'll start today's call by acknowledging our team's execution during this prolonged period of extreme cold weather, which hasn't been seen in decades.

I want to say thank you to all of our employees for your collective efforts on behalf of our customers. Our assets were operated safely and successfully across our entire natural gas portfolio.

Looking at this event and at recent major winter storms, we consistently demonstrate that our systems and our people are prepared, resilient and able to execute under pressure.

At New Jersey Natural Gas, these past few weeks highlighted how critical our lifeline services are to our customers. The utility kept homes and businesses warm and supported emergency providers without interruption.

Our non-utility business has held true to the same level of performance. Both the Delphi and Leaf River experienced high utilization and continuously delivered despite regional disruptions and the energy services team once again, expertly executed.

Our strategically located assets generated significant value from the volatility created by the prolonged cold temperatures. As a result of energy services performance, we are able to increase our fiscal 2026 NFEPS guidance by 25 cents to a range of 328 to 343 per share.

This represents the sixth consecutive year of raising guidance as a result of the strength of our complimentary portfolio of businesses.

As I started, this was an extraordinary weather event met with NJR's extraordinary performance. I'll turn next to how New Jersey Natural Gas took steps to help protect customers against high natural gas prices during the recent cold weather.

Over a seven-day stretch, New Jersey Natural Gas delivered the highest sendout in its history. This demand underscores how all aspects of our local economy rely on natural gas, even more so under extreme conditions when our customers need us most.

Sustained low temperatures likely will result in higher gas use by our customers, which will have an impact on bills.

With a supportive regulatory framework approved by the New Jersey Board of Public Utilities, New Jersey Natural Gas is proactive in helping to protect customers against these high-use increases.

Each year, the utility purchased natural gas well in advance of the heating season when commodity prices are more likely to increase in spike during winter weather events.

As a matter of policy, a minimum of 75 percent of the upcoming winter season's projected gas needs are secured in advance. Going into this winter, New Jersey Natural Gas was over 87 percent hedged. This is impactful. Our average hedge price was approximately $2.27 per deck of them for storage and LNG compared to city gate pricing that traded in excess of $135 per deck of them during the event. This disciplined approach prioritizes affordability as it allows us to secure a cost-effective supply to serve our customers.

In addition, throughout the year, our energy efficiency programs, namely save green, help customers reduce usage and lower bills. More than 110,000 customers have taken part in our programs to date with those utilizing our whole-home offerings realizing bill savings of roughly 30 percent. In addition to managing usage, we also provide support through financial assistant programs. These efforts help connect customers with more than $16.5 million in energy assistance funding.

Now, let's turn to customer growth. Natural gas remains the cheapest option to heat your home or business, supporting New Jersey Natural Gas's strong customer growth. This growth also reflects favorable trends in new construction and conversions across our service territory.

In our slide deck, we've included a photo of a new housing development in Monmouth County that will add roughly 350 new customers once completed. It's a clear example of the meaningful customer-driven opportunity ahead.

Now switching to a discussion of storage and transportation on slide eight, as we noted on our year-end earnings call, we expect to double NFE over the next two years at S&T.

This is driven by strong re-contracting about the Delphi and Leaf River. These are fixed price contracts with quality, credit-worthy counterparties.

During the first quarter, we filed a FERC application that includes several complimentary investments that would increase Leaf River's working gas capacity by more than 70 percent over the next few years. Today, we're announcing that we've already secured a long-term contract that covers the initial capacity expansion at our existing caverns. The remaining phases of the project will also be supported by long-term fee-based contracts.

We are currently active in the FERC process with a likely authorization decision coming by the end of the fiscal year. This is on track with our expectations, and we will provide updates as the project progresses.

Moving to clean energy ventures on slide nine, we added approximately 10 megawatts of capacity during the quarter. Looking ahead, we expect to grow in-service capacity by more than 50 percent over the next two years, and our proactive safe harboring initiatives to preserve federal tax incentives further strengthens our leading position in the marketplace.

In a region where energy affordability concerns are driven in large part by supply shortages, CV speed to market capability is a competitive advantage. Specifically, CEV is advancing significant wholesale PJM solar assets as PJM demand projections are trending upward.

We expect these operating assets to continue to increase in value. At the same time, the market shortages are opening up additional organic growth opportunities, including new technologies to optimize our existing interconnections. These technologies have the potential to unlock incremental value and add new supply to the grid at a time when New Jersey and PJM needed most.

With that, I'll turn the call over to Roberto for a financial review.

Thanks, Steve. I'll start with a brief walk for the quarter on slide 11. We reported in the fee of $118.2 million for $1.17 pressure for the quarter, reflecting discipline execution and solely performance across our businesses. We saw higher contribution from the utility this period, largely due to new base rates being in place for an entire quarter in fiscal 2026.

This was offset by a lower CV contribution, giving the gain on the sale of our residential solar assets in the prior year period.

Let's move to discussion of our capital plan on the next slide. We deployed approximately $180 million across our businesses during the quarter. New Jersey National Gas represented approximately 70% of total capital for the period, with investments directed towards strengthening core infrastructure, enhancing systems safety and reliability, and supporting continued customer growth. We are reaffirming our five-year topics outlook of $4.8 to $5.2 billion through fiscal 2013.

We expect that more than 60% of our total project at CAPEX will be dedicated to the utility with CEV and S&T representing the balance. At CEV, our capital deployment target is fully safe hard work, securing its future tax benefits.

Together, these investments support our 7 to 9% long-term NFPS growth target, while maintaining a solid balance sheet as is discussed in the next slide.

On slide 13, we highlight the strength of our balance sheet. Strong cash generation across our businesses translates into not just a default to adjusted debt ratio that is projected to remain around 20% for the next five years.

Energy services of performance this quarter provides meaningful additional cash flow, enhances our ability to manage capital spending and maintains strong credit metrics, and reinforces that we have no need for a blockade within the foreseeable future.

Additionally, unpaliquity and a well-lathered debt maturity profile minimize the near-term refinancing risk and preserve financial flexibility. And finally, as a result of the old performance from energy services during the winter today, we're raising our NFPS guidance range by $0.25 to a range of $3.28 to $3.43 per share. We're also revising our expected segment NFPS contribution percentages as a result of this for fiscal 2026, with energy services percentage rising as a result of capturing additional financial margin during this period of volatility.

With that, I'll turn it back to Steve for concluding remarks on select 15.

Thanks, Roberto. Last month, we issued NJR's Fiscal 2025 Corporate Sustainability Report, which reflects our commitment to transparency with our stakeholders. The focus of this year's report is appropriately on affordability.

The report gives greater detail around our energy efficiency and customer assistance efforts. Lower natural gas prices are effectively helping to reduce overall household energy costs, an important factor when addressing affordability.

As many of you know, New Jersey welcomed a new governor last month. Governor Cheryl moved quickly to outline her priorities, signing two executive orders aimed at addressing rising electric utility costs, and New Jersey's broader energy supply challenges. These actions are consistent with what she emphasized during the campaign, focusing on affordability for customers.

These discussions are an important issue for the state, and we look forward to continuing our dialogue in working with the new administration to help drive solutions forward while growing our business.

To conclude, our long-term growth remains anchored by our regulated utility, with clear visibility into capital spending at New Jersey natural gas. Our top priority is making sure our system operates reliably when it's needed most.

Storage and transportation is set for accelerated growth, with earnings expected to more than double in the near term before we even begin to factor in the capacity expansions at Leave River.

Over the next two years, clean energy ventures expects a 50% increase in installed capacity and our project pipeline is secured into the future through proactive safe harboring. Overall, the momentum across all of our businesses reinforces our confidence in the path ahead. And finally, I want to again thank all NGO employees for your dedication and hard work.

So with that, let's open the line for questions.

Ladies and gentlemen, we will now begin the question and answer session. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment, please, for your first question.

Thanks, Dave. Thanks for the question. Yeah, sorry about the double repeat there. The energy services group and our guidance that we issued last night based on results today or kind of our estimates through the end of January. So obviously we've got a lot of fiscal year that's left and not able to incorporate events that haven't happened yet.

So we'll see how those continue to play out.

You talked last quarter about some of the economics behind your contracts and how that stepped up. But are those supportive now in your mind of full greenfield development around the river?

Yeah. So the whole story at least for ever, we're going to double earnings. And that's largely through, you know, contract upgrades at a healthy gateway in the river through 27, you know, through 2027. The first filing, you know, shows, you know, compression expansion, 15 cavern expansion, and then a fourth cavern expansion, which is what you're referring to from the, you know, to the 55, you know, BCF. So what we have the contracting for now and what we were talking about on today's call is that compression expansion and existing capacity expansion.

That fourth cavern, we do not have contracts for yet. But as you can imagine, you know, the market has been very constructive, but we're still, you know, working through that. We held an open season and certainly, like I said, constructive to that point of expanding going forward.

There is additional expansion, you know, both at a del fia gateway and at the river. But on what we've talked about here today, you know, we'll continue to work, you know, you know, the markets and see what they're willing to pay for. Remember, you know, we get signed contracts and then those will essentially drive, you know, our investment at those facilities. So we'll back to back those. And as those come in, you know, we'll certainly share it, you know, with our investors.

But, you know, good news today and certainly the market and even recent conditions, you know, drive for the need for more storage and capacity in the northeast, southeast, you know, really all over the U. S. Thank you. Appreciate it.

Your next question comes from the line. Eli, you sent us, Jake, you more than please go ahead.

Thanks, Eli. Yeah, you know, affordability's always been important, you know, for us at NJR. You know, we talked to our narratives about, you know, the way that we've hedged our gas, you know, driving energy efficiency, you know, reducing customer usage in order to lower their bills. You know, energy assistance, you know, for those that need it. So that's not a new narrative for us. You know, we'll continue, you know, to drive that forward.

Remember, you know, we completed a rate case which went into effect about 14 months ago or so, 15 months ago or so. So we don't have any pressing needs to jump into the regulatory process. You know, we're going to continue to, you know, work with the administration, take advantages, take advantage of the opportunities that will present themselves. You know, we do have capacity needs that are clearly stated, you know, in the state of New Jersey. And we're going to work proactively with the administration to achieve our shared goals.

So, you know, that's the way that we're looking at it. It offers you at CEV.

Yeah, it's encouraging, you know, thanks for asking the question, you know, permit reform, you know, ways to accelerate interconnects ways to accelerate with the our ability to develop, you know, our safe harbor assets in the state of New Jersey are the quickest, you know, capacity that can be brought to market. So all the things are encouraging, you know, we're going to work with the administration that they've got some work to do in order to effectuate all that.

But, you know, those, those tailwinds are clearly in the making in order to develop more. And, you know, when we are able to achieve, you know, some, you know, evidence that we're able to move forward, then we'll certainly share that with the investing community.

Yeah, I think the, you know, the open season that we've had to date have been, you know, constructive, you know, the things that we need to do or to be able to turn those open seasons and the pricing and the terms into an agreement that that we can then turn it and build upon. You know, right now, you know, the timing is perfect. You know, we're able to put in the compression. We can expand our existing facilities. You know, that obviously that more brownfield expansion a little bit cheaper to come the market than a greenfield, but the pricing we're seeing, you know, gives us confidence that being able to, you know, develop the sport of the cabin, you know, is certainly, you know, possible in the future and we're working towards that.

You know, as far as timelines go, you know, we've already said, you know, we're going to double earnings through 2027. Then, you know, we're working after we get our first certificate construction through the facility. So then you see, you know, the existing cabin expansion and capacity. You know, come the market with that matching contract in like a 2028 timeframe. And then fourth carbon expansion as this market develops, you know, like I said, you know, certainly recent events are supportive.

Looks like, you know, 2029 timeframe, you know, starting construction, obviously some time prior to that. So we'll have to, you know, we'll see how that ends up playing out. But like I said, the open season's recent market, you know, volatility all points towards the need for more storage in that area and know that we're pursuing that aggressively.

Thanks.

You know, we've got about 50% of our forward-looking projects are outside the state of New Jersey, 50% obviously inside the state of New Jersey. You know, we're continuing to pursue projects that, you know, meet our rate of return and, you know, build in, you know, an area that it's friendly from a regulatory perspective and there's a number of states that are around us that are friendly from a regulatory perspective.

So, you know, we see those markets continuing. And remember PJ M's big, right? And, you know, certainly any power grid is an independent from those adjacent to it. You got a capacity shortage in one. It usually means there's capacity shortage in others. So, you know, this trend and the ability to quickly bring, you know, solar capacity to market, you know, more quickly than, you know, other forms, you know, nuclear, you know, sub-large together. So, you know, we see gas-fired generations and instances like that, you know, it's important. So, all these are constructive.

You couple on, you know, the EO and potential permeated form and things like that. You know, hopefully we see some acceleration, you know, in the near future trying to solve this problem of being short capacity in the short term.

Yeah. I, you know, it's hard to kind of differentiate that, but I think it's, you know, pretty clear if you go back to what our historical earnings are, we're going to double earnings from that segment by 2027. And, you know, in that is, you know, quite a bit of re-contracting, you know, in purchasing the forever, you know, part of our investment thesis that, you know, storage rates, we're going to go up and you see that being executed.

Adelphia Gateway, you know, like a normal interstate pipeline going through rate cases being able to, you know, raise rates to reflect capital that was invested on the pipeline in the future, you know, certainly being reflected as well. You know, I think, you know, this recent weather event continues to reinforce, you know, how short our region is, and we're already talking about that from an electric perspective, you know, for quite some time. So this infrastructure very needed the easiest way to expand infrastructure is to expand already existing infrastructure, which we have in both, you know, Southeast and the forever Adelphia Gateway and the Northeast. So we continue to look at ways to expand that as well and grow.

So we've got our capital plans are out there that'll give you what we're, you know, very certain we're going to be able to execute. And then I think, you know, other factors like the ones I just mentioned are additive. So we're going to continue to work on those and then we'll share those when they come to fruition.

Yeah, you know, you know, a number of great connected facilities, you know, those interconnections are very valuable. Being able to use those in a much higher load factor through distributed generation, battery power, those all bring capacity to the grid. And you can bring capacity to the grid in that way, you know, very quickly. And, you know, being able to deploy capacity quickly is exactly what the market needs. So now it's just a matter of, you know, how do we put together the regulatory constructs aligned with the economics of being able to make the investments to make all this work? But we think we've got a leg up because we have brownfield, you know, infrastructure, right?

Infrastructure that's already in place, the ability to expand without the need to build, you know, pure greenfield, give us that advantage and should make us a first mover in this space. So those are the things we're thinking about and certainly trying to drive forward. Again, all the things are outside of our plan. So that would be upside to our plan. So our plan show exactly what we know is going to, you know, we're making investments on outside of the plan or the things that we're talking about here, you know, forward vision and what we're trying to drive as a management team to execute.

Yeah, exactly it. Exactly it.

Obviously your hedging strategy has really paid off. Handsomely in the first quarter. You know, do regulators fully appreciate the benefit that you bring there? And how do you sort of capitalize on that by, you know, reinforcing the value proposition that you bring with your hedging strategy? Yeah, I mean, the regulators were part of the construct and putting that together. So they certainly are aware of it. We talk about it. And we file our BGSS, you know, that can be recognized.

You know, certainly they see, you know, our rates in the ground, you know, having an average price of storage of $2.27 when, you know, you know, city gate prices were over $100, you know, even if you look at some of the supplier price in 30, 40, you know, dollars down in those areas, being able to avoid those purchases, you know, has a, you know, just a huge benefit to our customers, not having to pay spot prices for that natural gas. So, you know, they're certainly aware of it. You know, we talk about it. And, you know, those programs are in place for a reason. They work and mitigate, you know, costs to our customers longer term.

Thank you.

Thank you.

Yeah, Travis, you know, we looked at our book and we saw the performance in January and decided that it was significant enough to warrant a raise during this call. So, really, this is an estimate, you know, through the end of January at this point.

I'm assuming that's not in your CAPX guidance right now. So, would we see that in the coming quarters?

There's an appendix schedule to what we posted last night and you can go through that. So, that is part of our CAPX schedule right now.

That's right. In 2027, I assume, right?

Yes. 2026 and a 2027. He couldn't believe that.

And then higher level question in New Jersey, politics, et cetera. Would you be interested in rate based solar or rate based? Any kind of generation or energy other than natural gas distribution?

Yeah. You know, we would certainly work with the administration and do, you know, anything to be able to, you know, lower cost or cost improve the amount of capacity within the state of New Jersey, you know, to lower cost of consumers. So, there's a number of, you know, items that are on the table. You know, we're not part of any kind of rate based generation discussions at this point. But, you know, if it made sense at the rate risk profile and we're able to deploy capital, you know, in the energy infrastructure space, then certainly we would consider it.

All right. Thanks, Travis.

There are no further questions at this time. And with that, I will now turn the call back over to Adam Pryor, Director of Investor Relations for closing remarks. Please go ahead.

Thanks so much. I'd like to thank all of you for your patience and for joining us this morning. We appreciate your interest and investment in J. R. and have a good day and the rest of your.

Thank you so much. Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.