New Jersey Resources exceeds fiscal 2025 expectations, guiding to strong 2026 EPS growth of $3.03 to $3.18 amid strategic capital investments.

OPERATOR - (00:01:26)

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, New Jersey Resources. You may begin.

Adam Pryor - Director of Investor Relations - (00:02:07)

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 forward-looking statements within the meaning of the securities laws.. Meaning of the securities laws. We wish to caution listeners of this call that the current expectations. call that the current expectations, assumptions and beliefs forming the basis of 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 2. 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 the 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.. Non GAAP financial measures such as Net financial Earnings or NFE. We believe that nfv, net financial loss (NFL), utility gross margin, financial margin, adjusted funds from operations and adjusted debt provide a more complete understanding of our financial performance. However, these non GAAP measures are not intended to be a substitute for gaap. Our non GAAP financial measures are discussed more fully in item 7 of our 10K. The slides for today's presentation are available on our website and were furnished on our Form 8K filed yesterday. Steve Westhoven will start with this year's highlights. And a business unit overview beginning on slide 5. Roberta will then review our financial results. Then we will open it up for your questions. With that said, I will turn the call over. Call over to our President and CEO, Steve Westhoven. Please go ahead, Steve..

Steve Westhoven - President and CEO - (00:03:53)

Thanks Adam and good morning everyone. I hope you all had 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 are a few key themes as we look ahead for fiscal 2026 and beyond. First, consistency and execution. We're guiding to NFEPS of $3.03 to $3.18 per share in fiscal 2026. The range is consistent with our long term 7 to 9% growth rate while leaving 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, NJ Natural Gas. To put the $5 billion into context, this represents a 40% increase compared to the capital expenditures (CapEx) spent 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 base growth through 2030s and T is expected to more than double net financial earnings by 2027, driven by favorable recontracting of both Adelphia 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 at Clean Energy Ventures. We expect to expand capacity by more than 50% over 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 dilution to shareholders. Let me turn to a brief discussion of each business unit, starting with the New Jersey Natural gas on slide 7. Our planned investments in New Jersey Natural Gas are expected to drive high single digit rate base 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 heat 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 Storage and transportation is emerging as a key earnings growth driver for njr. Over the next few years we expect NFE to more than double at S&T and this is largely driven by strong recontracting in both the Delphi and Leaf River. These are fixed price contracts with quality credit worthy counterparties. We recently reached a settlement in our FERC rate case at Adelphia. 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 upside of Leap river which we outline on the next slide. When we acquired Leaf River in 2019. It 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 binding open seasons which confirmed a high level of commercial interest in capacity expansion. Following this favorable response, we filed a Federal Energy Regulatory Commission (FERC) application at the end of October that included several complementary investments to increase Leaf Rivers working gas capacity by over 70%. They include the expansion in our existing caverns to working gas capacity of 43 BCF by 2028 and the development of an additional fourth cavern that will bring total capacity to 55 BCF. Each phase of the investment is expected to be backed by long term fee based contracts. Building on our already strong NFE growth, this phased 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 and T becomes a Greater contributor to NJR's earnings profile. Moving to Clean Energy Ventures on slide 10, we expect to grow in service capacity by more than 50% across 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 high single digit unlevered returns. So with that I'll turn the call over to Roberto for a financial review.

Roberto Bell - Senior Vice President and Chief Financial Officer - (00:09:20)

Roberto thanks Steve. Fiscal 2025 was an excellent year with strong revenue growth, a solid balance sheet and continued investment across our businesses. Slide 12 highlights a few fiscal 2025 accomplishments. New Jersey Natural Gas achieved a constructive outcome in its recent rate case and delivered record investments for SafeGreen Clean Energy Ventures added record new capacity in fiscal 2025, CEV placed 93 megawatts of new commercial solar capacity into service, expanding our portfolio to 479 megawatts. In addition, CEV secured investment options for years to come through effective safe harboring in storage and transportation. Adelphia received approval settlement on its first rate case while lever advanced expansion initiatives Energy Services achieved strong cash flow generation and our home services business was named a Route Top 20 Pro Partner for the ninth consecutive year. We also marked an important milestone 30 consecutive years of dividend increases and restoring confidence in our long term plan on the next slide. We finished the year at the top end of our guidance range which was raised earlier this year. We delivered financial results ahead of expectations. Roughly 2/3 of total NF EPS 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%, underscoring the stability of our earnings. Drivers of our performance include the completion of a rate case and a record year of savings investment. Additional drivers include approximately $0.30 per share from the sale of our initial solar portfolio, improved performance from our restoration transportation business and a solid winter results from energy services Moving to the discussion of CapEx on slide 14, we deployed $850 million 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 investments directed towards strengthening core infrastructure, enhancing system safety and reliability and supporting customer growth. Almost half of these investments earned recovery 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 benefits for future capital expenditures. Building on this strong 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 through fiscal 2030. This 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 CEV and S& P representing the balance. Together these Investments support our 7 to 9% long term NFPs growth target while maintaining a solid balance sheet. As discussed in the next slide, strong cash generation across our businesses translating to an adjusted FFO to adjusted debt ratio that is projected to remain at around 20% for the next five years with no block equity needed. Additionally, ample liquidity and a well lazered debt maturity profile, minimize near term refinancing risk and preserve financial flexibility. And finally, we're initiating fiscal 2026 NF ETF guidance with a range of $3.03 to $3.18 per share. The range is consistent with our long term 7 to 9% growth rate while leaving additional room for upside. The utility is expected to contribute approximately 70% of fiscal 2026 in the CPs, complemented by earnings growth from CV&S and T and a baseline outlook for energy services. With that, I'll turn it back to Steve for concluding remarks on slide 21.

Steve Westhoven - President and CEO - (00:13:47)

Thanks Roberto. Over the last 25 years we've delivered industry leading returns reflecting both the quality of our utility investments and disciplined contributions from our non-utility businesses. 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, Natural Gas 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 those capacity expansions we highlighted earlier. 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. NJR today stands as a balanced, 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 were front and center. We understand the challenge the state 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. And finally, a sincere thank you to all NJR employees for your dedication and hard work throughout the past year. Your commitment is the foundation for our continued success. So with that, let's open the line for questions.

OPERATOR - (00:15:40)

Thank you and we will now begin the question and answer session. If you have dialed 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 speakerphone on your device, please pick up your handset and ensure that your Phone is not on mute when asking your question. Again, it is Star One if you would like to join the queue. And our first question comes from the line of Gabe Maureen with Mizuho. Your line is open.

Gabe Maureen - Equity Analyst at Mizuho - (00:16:17)

Hey, good morning everyone. Hey, just a question. Maybe to start off on S and T here in Leaf river seems like a lot of positive developments. One, can you just talk about the contract renegotiations and the extent to which at this point maybe all the original contracts have rolled over on a remarketed or resigned at market rates at this point or is there still more, more to go on that front in the years ahead? And then secondly around the fiding of some of the bigger expansions that you may be looking at. Can you just talk about potential timing for fiding those projects given the customer interest that you've seen in some of the non binding open seasons?

Steve Westhoven - President and CEO - (00:17:01)

Yeah, sure. So talking about the contracts, the contract tenure 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 a bias towards longer term 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 9 cents a decathearm per month. We're now up to almost 20 cents a decotherm per month on average. So you know, big contract upgrade there and that's really driving, you know, the doubling of the NFP from S and T over the next few years. And then moving forward, you know, further constructive story. The open season, you know, provided for about three times the amount of capacity that we had available. And if you looked at the FERC filing, we got a few stages or phases of investment and expansion action at that facility. I would say that before we make any investment we've got contracts to back it. You know, that's something we've talked about for, for a long time and we're. Not going to deviate from that. So we've got signed contracts and certain. Really quite a bit of clarity on where the revenues are coming in to support those investments. So you can, you can make that assumption moving forward. So as we make these investments, first, we have, we've got an expansion of the compressor station, we've got enlargement of some of the existing facilities. Those we're starting to spend money and put those in motion. You can see those in our capital plan moving forward. Those are going to lead really nicely into a Fourth cavern expansion in the out years. We'll make f ideas we get closer to that. But like we said, the open season certainly supports it and it's very constructive for that business moving forward.

Gabe Maureen - Equity Analyst at Mizuho - (00:19:10)

Thanks Steve. And maybe if I can turn to CEV 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 why you think, you know, you may be past some of the delays I think that you may have seen in the past at the segment.

Steve Westhoven - President and CEO - (00:19:37)

Yeah, we certainly have spent, you know, quite a bit of money as you can imagine. The construction cycles are, you know, a. Little bit longer and they, and they go across fiscal years. So, you know, we're spending money now for projects that are going to be coming into service, you know, in the next fiscal year and then the following fiscal year. We know we talked about the last claw, we saved Harvard, you know, you. Know, quite a bit of projects, you. Know, a large amount of megawatts. So we've got great options moving forward. You know, I think the other thing to consider as well is that, you know, with the capacity, electric capacity shortfall, you know, in State of New Jersey and pjm, the quickest way to bring capacity to the market are those projects that are shuttle ready and we have a number of those. So we feel well positioned going forward. You know, that combined with the fact. That, that, you know, we've got mature. Positions within the PJMQ as well. So everything's moving forward. You know, we've got a good position, you know, great number of options. And you can see by our capital plan and the extension of that capital plan out of five years, you know, the confidence that we have in our investments moving forward.

Gabe Maureen - Equity Analyst at Mizuho - (00:20:41)

Thanks, Steve.

OPERATOR - (00:20:45)

And our next question comes from the line of Jamison Ward with Jefferies. Your line is open.

Jamison Ward - (00:20:51)

Hey guys, congrats on another strong result and thanks for the extra visibility with the five year look on CapEx and on CED, which I'll build off Gabe's question here with the favorable treasury guidelines and then of course all the planned investments they've harbored. What's the realistic deployment timeline? It's probably the most common inbound question we get. But as we think about that pipeline, how should we model the earnings cadence?

Steve Westhoven - President and CEO - (00:21:23)

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 harbor projects we have, especially over the next two years, we've got projects through safe harbor that are far in excess of what we need in our capital plan. So you've got some ability to accelerate that. But the capital plan that we have is 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. That's terrific. I'll skip S and P because yeah, it was a very thorough answer before. I'll just ask one more question, quick one on CEV and then on the overall plan. So as we think about srex, T Rex, et cetera, what's the weighted average contract life? How should we be thinking about the time frame? That's the second most common question we get and it's CEV related. I think you're going to find a lot less questions after this deck. So thanks for all the information, but. I'll just ask that one. So you're saying from a time related perspective that you know, the amount of time allotted to, you know, kind of t Rex and SRECs and how long they live with the. I'm trying to get to the specifics of what you're asking. Yeah, so just at a high level. So we model like roll off over the next few years and the question that we get is just how confident are you in, you know, basically in the numbers that you've got there. So we're just looking for very high level, just a weighted average life remaining. Right. Because of course the SRECs sort of trimmed down or tailored down over the last few years. You're going to have S and T, which you were speaking to earlier, obviously doubling and picking up a lot of that slack there. So just a quick question on that and then one on the overall 2030 capex plan. So. So I'll talk about solar just from. A kind of a broader perspective. You know, we just talked about it was the quickest way to bring, you know, capacity to 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 policy adjustments. The products that we have. We've got the schedule for kind of T Rex, srecs. Everybody knows the longevity of those. I would also add that as infrastructure. Becomes harder to build each of these facilities. You've got the ability to repower, put in battery. You've already got an interconnect that's there as well. You've got kind of increases in Class 1 wrecks that have been happening over time. So speaking to just the long term value of these facilities as we need more capacity, it's not going to be constructive 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 in them as well? So we really view this as a, as a long term business, you know, one that's supportive of the growing energy need that is, you know, certainly in the east, but over, you know, the entire US as well. And you're going to 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 and how do we organically improve and grow those facilities as well. So hopefully that answers your kind of a long term view of how we're, how we're thinking about these assets.

Jamison Ward - (00:25:01)

Yeah, yeah, it does actually. That's terrific. You know, I think actually I'm good on the 4.8 to 5.2 through 2030 as well. As I flip through here, I was going to ask one on affordability, but I think saw your slides toward the end of the deck in the appendix there. You know what, I'll throw it out. Because that's the other as a final question, it's the other one we get. Of course, just given everything in New Jersey, you spoke to it in the prepared remarks. You've got some great slides here. But anything else you'd want to add as we think about the next rate case? Of course you just got new rates November of 24. But as we look ahead, how should we think about your affordability efforts in New Jersey specifically? And that's it for me.

Adam Pryor - Director of Investor Relations - (00:25:38)

Thank you.

Steve Westhoven - President and CEO - (00:25:40)

Thanks, Jameson. So, you know, natural gas is the cheapest way that you can heat your home in business. So we like our position when the affordability conversation comes up, you know, and you know, like we said in the presentation, you know, we've got energy efficiency. Programs and save green. We're able to save, you know, customers money as well. And you know, we look forward to working with the new administration and seeing ways that we can, you know, keep the affordability story going from our company and you know, helping our customers reduce. Costs as much as possible. Terrific.

Jamison Ward - (00:26:16)

Thank you.

Steve Westhoven - President and CEO - (00:26:17)

Thanks, James.

OPERATOR - (00:26:20)

And our next question comes from the line of Eli Joseph with JP Morgan. Your line is open.

Eli Joseph - Equity Analyst at JP Morgan - (00:26:26)

Hey, good morning. Just wanted to start on the EPS growth outlook, seeing some, you know, kind of drivers within the leap river storage capacity and overall S and T earnings. Upside, you know, are there any kind of headwinds elsewhere in the business to keep the growth rate largely the same? Possible decline in CEV contributions, or can you just kind of frame tailwinds and headwinds for the overall range? Thanks.

Steve Westhoven - President and CEO - (00:26:53)

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 reflected in our capital program. So, you know, it's all. 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 those things.

Eli Joseph - Equity Analyst at JP Morgan - (00:27:25)

Got it. Maybe just to frame it differently, is there sort of material upside from this S and T business within the growth range? Should you execute on some of the projects that you outlined?

Steve Westhoven - President and CEO - (00:27:37)

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 grab some upside in these markets. You know, we certainly, you know, kind of normalize our expectations. 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.

Eli Joseph - Equity Analyst at JP Morgan - (00:28:15)

Great. All right, I'll leave it there. Thanks.

OPERATOR - (00:28:17)

Thank you, Adam.

Travis Miller - Equity Analyst at Morningstar - (00:28:19)

And as a reminder, it is Star One, if you would like to ask a question. And our next question comes from the line of Travis Miller with Morningstar. Your line is open. Good morning, guys. Thank you. Hey, Travis, kind of a combined question Here on slides 8 and 9, how much of that increase from fiscal 2025 to 27 on 8 is the Adelphia rate case versus the recontracting and leapfrog river, and then going to Slide 9, is that capacity expansion trajectory also earnings trajectory? I guess the, you know, the crux in both of those is the recontracting element. So first, that split between a Delphia Rate case and the recontracting and then is the recontracting and extra above that. Capacity addition, does that make sense?

Steve Westhoven - President and CEO - (00:29:17)

But you know, there's probably, you know, more coming from Leaf River recontracting. I have to check those numbers. But you know, the bottom line is that, you know, for existing assets and no capital investment, you know, we've been able to double the earnings, you know, coming from those assets. And that's really, you know, you know, 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 Adelphia Gateway and add more customers in that pipeline as well. So depending on how far this market goes, and I believe it is going to go far where it's going to need more and more, you know, energy and you know, expansion of organic infrastructure, you know, the, 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, to make, you know, the investments that you see at. Least in the short term and then. You know, I would guess it's going to continue in the longer term as well.

Travis Miller - Equity Analyst at Morningstar - (00:30:36)

Okay, is that recontracting assumption based on Today's rates at 27 at 20 cents decathlon that you mentioned or is there another assumption you're making on the recon?

Steve Westhoven - President and CEO - (00:30:48)

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.

Travis Miller - Equity Analyst at Morningstar - (00:31:04)

Okay, now one high level question. With all the capex you have and obviously the leap river, et cetera, how much capacity might you have to do more M and A inorganic growth, either logistical, operational or financial?

Steve Westhoven - President and CEO - (00:31:23)

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

Travis Miller - Equity Analyst at Morningstar - (00:31:50)

Okay, great. I appreciate all the thoughts.

OPERATOR - (00:31:54)

Thanks guys. And Ladies and gentlemen, that concludes our question and answer session. I will now turn the conference back over to Adam Pryor for closing remarks.

Adam Pryor - Director of Investor Relations - (00:32:07)

Thanks, Abby. And I'd like to thank all of you for joining us. As always, we appreciate your interest and. Investment in NJR and look forward to. Talking to all of you at Utility. Week in a couple of weeks. And thanks so much. Have a good rest of your day.

OPERATOR - (00:32:20)

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