New Jersey Resources (NJR) Q4 2025 earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources Fiscal 2025 fourth quarter and year end financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Adam Pryor, Director of Investor Relations. You may begin.

Thank you. Welcome to New Jersey Resources Fiscal 2025 fourth quarter and year end conference call and webcast. I am joined here today by Steve Westhoven, 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 for-looking statements within the meaning of the securities laws.

We wish to caution listeners of this call of the current expectations, assumptions, and believe forming the basis of our for-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 for-looking statements section of yesterday's earnings release.

Furnished on form 8K and in our most recent forms, 10K and 10K that is filed with the FCC. We do not by including the statement assume any obligation to review or revise any particular for-looking statement referenced here and in light of a future event. We also be referring to certain non-gap financial measures such as net financial earnings or NSE. We believe that NSE net financial loss, utility gross margin, financial margin, adjusted funds from operations and adjusted debt provided 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 were furnished on our form 8K filed yesterday. Steve will start with this year's highlights in a business unit overview beginning on slide five.

Roberto will then review our financial results. Then we will open it up for your questions. With that said, I will turn the call of your president and CEO, Steve Westoven. Let's go ahead, Steve.

Thanks, Adam, and good morning, everyone. I hope you all have a chance to review our earnings materials which include detailed disclosures on our growth prospects. I wanted to start by discussing a few highlights.

We delivered excellent results in fiscal 2025 driven by strong execution and performance. For the fifth year in a row, we exceeded initial earnings guidance and long-term growth targets. After a successful 2025, there were a few key themes as you look ahead for fiscal 2026 and beyond.

First, consistency and execution. We're guiding to NFVPS of 303 to 318 per share in fiscal 2026. The range is consistent with our long-term seven and nine percent growth rate while leaving an additional room for upside.

Second, targeted capital deployment. We expect to invest roughly $5 billion over the next five years across the whole company with roughly 60% allocated to our utility, New Jersey natural gas. To put the $5 billion in the context, this represents a 40% increase compared to the half-extend over the last five years.

Third, a healthy balance sheet anchored in disciplined financial management. We expect credit metrics to remain strong with healthy cash flows, ample liquidity, and a balanced debt maturity profile that supports long-term stability. Importantly, NJR requires no block equity issuance to execute on its capital plan. On the next slide, we highlight a few of the key drivers that are business segments.

To begin, New Jersey natural gas is positioned for high single-digit rate-based growth through 2030. S&P is expected to more than double net financial earnings by 2027, driven by favorable re-contracting of both the Delphi and Leaf River. And looking ahead, we recently filed with FERC, a plan to increase working gas capacity by over 70% at Leaf River. And in clean energy ventures, we expect to expand capacity by more than 50% over the next two years with a robust pipeline of safe harbor projects.

In short, through a disciplined capital investment strategy, we have visibility to deliver sustainable growth well into the future, supported by a solid balance sheet.

And we're able to achieve all this with minimal solution to shareholders. Let me turn to a brief discussion of each business unit starting with the New Jersey natural gas on slide seven.

Our plan investments that New Jersey natural gas are expected to drive high single-digit rate-based growth through 2030. New Jersey natural gas operates within a constructive utility framework and continues to make responsible investments in safety and reliability, while prioritizing affordability for our customers.

Natural gas is by far the cheapest option for customers to eat their home. Energy efficiency programs such as save green further reduce usage and costs while aligning with environmental goals. For example, residential customers who fully participate in save green, whole home offerings see a reduction of up to 30% in their energy usage, saving hundreds of dollars in utility costs every year.

Moving to the next slide, the origin transportation is emerging as a key earnings growth driver for NJR. Over the next two years, we expect NFE to more than double an S&T. And this is largely driven by strong re-contracting about the Delphi and Leaf River. These are fixed price contracts with quality and credit worthy counterparties. We recently reached the settlement in our FERC rate case of the Delphiate. This constructive outcome enables recovery of the substantial investments and operational improvements made in recent years.

While near-term earnings are set to double, we are actively pursuing organic growth opportunities for additional outside of Leaf River, which we outline on the next slide. When we acquired Leaf River in 2019, the positioned NJR as a leading service provider on the Gulf Coast, one of the highest growing energy demand centers in the United States. In addition to the prime location, the long-term value of the asset was enhanced by expansion options beyond the three existing operating caverns.

Since our purchase of the asset, market demand has strengthened. Throughout fiscal 2025, we conducted a number of non-vinean open seasons, which confirmed a high level of commercial interest in capacity expansion. Following this favorable response, we filed a FERC application at the end of October that included several complimentary investments to increase Leaf River's working gas capacity by over 70%. They include the expansion in our existing caverns to a working gas capacity of 43 VCF by 2028.

And the development of an additional fourth cavern that will bring total capacity to 55 VCF. Each phase of the investment is expected to be backed by long-term debased contracts, building on our already strong entity growth.

This phase approach has an inherent speed-to-market advantage that positions NJR ahead of greenfield development options. To conclude, we see considerable upside in both the near and long-term, as S&T becomes a greater contributor to NJR's earnings profile.

Moving to clean energy ventures of slide 10, we expect to grow in-service capacity by more than 50% over the next two years.

Looking ahead, we have a strong project pipeline designed to maintain investment tax credits through strategic safe harboring. This position CEV to deliver continued growth in five single-digit unlevered returns.

So with that, I'll turn the call over to Roberta for a financial review. Roberta?

Thanks, Steve. Physical 2025 was an excellent year. With strong energy growth at falling balance sheet and continued investment across our businesses.

Slide 12 highlights a few fiscal 2025 accomplishments. New Jersey National Gas achieves a constructive outcome in its recent rate case and the lower record investments for safe green. Clean energy ventures at a record new capacity. In fiscal 2025, CB plays 93 megawatts of new commercial solar capacity into service, expanding more portfolio to 479 megawatts. In addition, CB is a current investment option for years to come through effective safe harboring.

In storage and transportation, a Delta received approval settlement on its third rate case when we were advanced expansion initiatives.

Energy services achieve strong cash flow generation and our home services business was named our road top 20 pro partner for the ninth consecutive year. We also mark an important milestone, 30 consecutive years of devastating increases and restoring confidence in our long-term plan. On the next slide, we finished the year at a top end of our guidance range, which was raised earlier this year.

With the lower financial results ahead of expectations, roughly two thirds of total NFS came from the utility. And when you exclude the net impact of the sale of our residential solar assets that figure raises to over 70% and restoring the stability of our earnings.

Drivers of our performance included a completion of a rate case and a record year of saving investment. Additional drivers included approximately 30 cents per share from the table of our initial solar portfolio, improved performance from our storage and transportation business and a solid winter results from energy services.

Moving to the discussion of capital's life 14, we deployed 850 million dollars across our businesses which I'll highlight in the next few slides.

On slide 15, New Jersey natural gas represented approximately 64% of total capex with investment directed towards strengthening corporate structure, enhancing system safety and reliability and supporting customer growth.

Almost half of these investments are recovered with minimal lag. As shown in slide 16, fiscal 2025 capex for CV came in well above expectations, reflecting accelerated progress.

Importantly, our capital deployment target is fully safe harbor, securing tax benefit for future capital expenditures. Building on this from 2025, I wanted to shift our capex outlook on slide 17.

For sharing a five year capex outlook of 4.8 to 5.2 billion dollars through fiscal 2030, is represents a 40% increase over the previous five years of capital spending across our businesses.

We expect that more than 60% of our total projected capex will be dedicated to the utility with CV and S&P representing the balance. Together, these investments support our 7 to 9% long-term NFPF growth target while maintaining a solid balance sheet as discussed in the next slide.

Strong cash generation across our businesses translating to an adjusted effort but just a debt ratio that is projected to remain at around 20% for the next five years, with no blockage within it.

Additionally, ample liquidity and a well-lathered debt maturity profile minimize near-term refinancing risk and preserves financial flexibility. And finally, we're initiating fiscal 2026 NFPF guidance with a range of three dollars and three cents to three dollars and 18 cents per share. The range is consistent with our long-term 7 to 9% growth rate when leaving additional room for upside.

So, utility is expected to contribute approximately 70% of fiscal 2026 NFPF complemented by earnings growth from CV and S&P and a baseline outlook for energy services.

With that, I'll turn it back to Steve for concluding remarks most likely one.

Thanks, Roberto. Over the last 25 years, we've delivered industry leading returns reflecting both the quality of our utility investments and discipline contributions from our non-utility businesses. While our infrastructure investments have been the foundation of this performance energy services has complemented that strength, enhancing consolidated returns and providing flexibility to reinvest in our infrastructure businesses. To recap, fiscal 2025 was another year of solid execution, marking five consecutive years of exceeding initial earnings expectations.

Our long-term growth remains anchored by our regulated utility with clear visibility into capital spending at New Jersey has your gas.

Storage and transportation is set for accelerated growth with earnings expected more than double in the near term before we even begin to factor in those capacity expansions we highlighted earlier. Over the next two years, clean energy ventures expect a 50% increase in installed capacity and our project pipeline is secured into the future through proactive state margarine.

NJR today stands with the bounds of diversified energy infrastructure company built for long-term stability and value creation. The outlook for fiscal 2026 and beyond is clear, well-funded and utility anchored. As we all know, New Jersey recently had a gubernatorial election, electricity prices and affordability issues for front and center. We understand the challenge that data is facing today and we look forward to working with the incoming governor to meet her call for swift deployment of clean energy solutions and to continue providing affordable natural gas service to families and businesses.

Finally, a sincere thank you to all NJR employees for your dedication and hard work throughout the past year. Your commitment is a foundation for our continued success.

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

Thank you and we will now begin the question and answer session. If you have filed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you're called upon to ask your question and are listening via speaker phone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Yeah, sure. So I'm talking about the contracts, the contract can be at Leaf River. They've got various terms. So we've always got contracts that are coming on and off. I would say there's probably bias towards the longer contracts currently and certainly the way the market is moving. Any contract that you're signing up for in the future is higher than the ones in the past.

Remember when we purchased that deal, the average contract rate was probably about nine cents a deck of them per month. We're now up to almost 20 cents a deck of them per month on average. So big contract upgrade there. And that's really driving the doubling of the NFT from S&T over the next few years. And then moving forward, further constructive story, the open season provided for about three times the amount of capacity that we had available.

And if you looked at the first filing, we got a few stages or phases of investment and expansion at that facility. I would say that before we make any investment, we've got contracts to back it. That's something we've talked about for a long time and then we're not going to need the EBA for that. So we've got signed contracts in certain, really quite a bit of clarity on where the revenues are coming in to support those investments. So you can make that assumption moving forward. So as we made these investments, first two, we've got an expansion of the Congressor station.

We've got enlargement of some of the existing facilities. Those, we're starting to spend money and put this in motion. You can see those in our capital plan moving forward. Those are going to lead really nicely into a fourth-carron expansion in the out years. We'll make FID as we get closer to that. But like we said, the open season certainly supports it and it's very instructive for that business moving forward.

And maybe if I can turn to C, V, and I think a little bit more confidence in terms of the growth outlook there. Can you just talk about, has anything shifted on the ground in terms of your ability to start construction? How much of the 50% increase here has actually started construction or waiting on interconnects? And while you think you may be past some of the delays, I think that you may have seen in the past at the segment.

Yeah, we certainly have spent quite a bit of money. As you can imagine, the construction cycles are a little bit longer than they go across fiscal years. So we're spending money now for projects that are going to be coming to the service in the next fiscal year and then the fiscal year afterwards.

We talked about a last call. We've saved far more than a lot of projects, large amount of megawatts. So we've got great options moving forward. I think the other thing to consider as well is that we think we can pass the electric capacity shortfall, State, New Jersey, and PJM, the quickest way to bring capacity to the market are those projects that are shovel writing. We have a number of those, so we feel well positioned going forward. That combined with the fact that we've got a short positions within the PJM queue as well.

So everything's moving forward. We've got a good position, a great number of options. And you can see by our capital plan and the extension of that capital plan out of five years, the confidence that we have in our investments moving forward.

And our next question comes from the line of Jameson Ward with Jeffries. Your line is open.

So for the investments, we've got the capital plan that we put out there. Certainly, I just talked about it with Gabe, from a policy perspective, we believe that there's going to be a lot of pressure to add as much capacity to the grid as possible. And that's favorable for our business. If you look at the amount of safe Harvard projects we have, especially over the next two years, we've got projects that are safe Harvard that are far in excess of what we need in our capital plan. So you've got some ability to accelerate that. But they have a plan that we have, it's the most accurate picture of what we're going to be able to achieve.

And I think looking at that, you can take your guidance from there.

So just a quick question on that and then one on the overall 2030 Catholics plan. So I'll talk about solar just from kind of a broader perspective. You know, we just talked about it was the quickest way to bring, you know, classes in the market, you can see the capital that we're able to deploy over the next two years, you know, being significant and, you know, potentially, you know, maybe be able to accelerate with certain, you know, policy adjustments.

The, you know, process we have, you know, we've got the schedule for, you know, computer X and SREX everybody knows, you know, the longevity of those. I would also add that as infrastructure becomes harder to build, you know, in each of these facilities, you've got the ability to, you know, read power, put in battery, you've already got an internet connected there as well.

You've got, you know, kind of increases in, you know, class one RACs, you know, they're going to have been over time. So speaking to just the long-term value of these facilities, as we need more capacity, it's not going to be constructed to retire capacity. So there's going to be some expectation that you continue to operate these facilities and moving forward, and then how do you make improvements to them as well? So we really do this as a long-term business, you know, one that's, you know, supportive of the growing energy need that is, you know, certainly in the East, but over, you know, the entire U. S. as well.

And you're going to, you know, see us looking to enhance, you know, whatever we can do with these facilities moving forward, just like you'd expect. Organic growth is important to us in how to be organically improving growth of those facilities as well. So hopefully the answer is you're kind of a long-term to do of how we're thinking about these assets.

Thanks, Jameson. So, you know, natural gas is the cheapest way that you can keep your home in business. So we like our position when the affordability conversation comes up, you know, and then, you know, like we said in the presentation, you know, we've got energy efficiency programs and say green, we're able to save customers' money as well.

And, you know, we look forward to working with the new administration and seeing ways that we can keep the affordability story going from our company and helping our customers reduce costs as much as possible.

Thanks, Jameson.

Yeah, Eli, I'd say that, you know, we're an energy infrastructure energy services company and this country needs more energy. So we're going to make investments in order to grow that. And, you know, you can see that where you've elected in our capital program. So, you know, it's all positive at this point. And, you know, we're at this point just looking to, you know, execute upon that plan in order to increase, you know, our earnings going forward. So, you know, confident in all of those things.

I mean, there's always upside in our business. You know, we're, you know, we're the same business that we were last year and the year before. And we've always been able to grasp some upside in these markets. You know, we certainly, you know, kind of normalize our expectations on a yearly basis.

You know, there's an ability to accelerate, you know, any of these infrastructure projects, you know, given the right, you know, policy initiatives. So, there's always an ability to upside. But, you know, we put together a plan that we believe is executable.

And, you know, and we hope for the best. So, hopefully some of those things will come through and we'll be able to execute, you know, maybe more quickly.

Thank you. And as a reminder, it is star one, if you would like to ask a question.

Thanks, Travis. Kind of a combined question here on slides eight and nine. How much of that increase from fiscal 2025 to 27 on eight is the Delta array case versus the re-contracting element and leap to river. And then going to slide nine is that capacity expansion trajectory also earnings trajectory. I guess the crux in both of those is the re-contracting element. So, first that's split between the Delta array case and the re-contracting. And then is the re-contracting an extra above that capacity edition.

Does that make sense? Absolutely. Let it out. But there's probably more coming from the beef river concrete contracting. I have to check those numbers. But the bottom line is that for existing assets and no capital investment, we've been able to double the earnings coming from those assets. And that's really driven by better contracts, higher contracts coming from the customers.

So, great story. As far as looking at your forward growth opportunities, you're seeing the beginning of expansion at leaf river. We didn't talk about it, but you still got the ability to expand a little bit at Adelty Gateway and add more customers, that pipeline as well. So, depending on how far this market goes, and I believe it is going to go forward, it's going to need more and more energy and expansion of organic infrastructure.

It's hard to determine where it'll stop right. But certainly, because we've got existing assets, we're able to expand them. We're also able to make the investments that you see, at least in the short term. And then I would guess it's going to continue in the longer term as well.

Is that re-contracting assumption based on today's rate, that $0.27, that $0.20, is that a term that you mentioned? Or is there another assumption you're making on the recon? No, it's not assumption. Travis, these are contracts that we have in hand. So, these aren't estimates of what forward value are. These are contracts that we've got signed in our hands and are driving our earnings over the next two years in that business unit.

Yeah. I mean, we're always looking to kind of hold on acquisitions and things that happen or assets that are available. We're building these businesses, so if something comes along and happens to fit and fits organically, we take a look at it. So, we've got the capacity on our balance sheet, and we like these businesses, the infrastructure business, so we'll continue to pursue it like we have in the past.

And ladies and gentlemen, that concludes our question and answer session. I will now turn the conference back over to Adam Pryor for closing your marks.

Thanks, Abby, and I'd like to thank all of you for joining us. As always, we appreciate your interest and investment in J. R. , and look forward talking to all of you at utility week and a couple of weeks. And thanks so much. Have a good rest of your day.

And this concludes today's call, and we thank you for your participation. You may now disconnect.