New Jersey Resources Corporation (NYSE:NJR) Q3 2023 Earnings Call Transcript
New Jersey Resources Corporation (NYSE:NJR) Q3 2023 Earnings Call Transcript August 6, 2023
Operator: Hello, and welcome to the New Jersey Resources Fiscal 2023 Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I will now turn the conference over to Mr. Adam Prior of New Jersey Resources. Please go ahead.
Adam Prior: Thank you, operator. Welcome to New Jersey Resources fiscal 2023 third quarter conference call and webcast. I'm joined here today by Steve Westhoven, our President and CEO; Roberto Bel, 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 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 1.
These items can also be found in the forward-looking statements section of today's earnings release furnished on Form 8-K and in our most recent Forms 10-K and 10-Q as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures such as net financial earnings or NFE. We believe that NFE, net financial loss, 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 10-K.
The slides accompanying today's presentation are available on our website and were furnished on our Form 8-K filed this morning. Our agenda for today is found on Slide 3. Steve will begin with this quarter's highlights, followed by Roberto, who will review our financial results. Then we'll open it up for your questions. With that said, I will turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve.
Steve Westhoven : Thanks, Adam. Good morning, everyone. We had another solid quarter at NJR as our complementary portfolio of businesses continue to perform in line with our expectations. As a result, we remain on track to achieve our fiscal 2023 NFEPS guidance range of $2.62 to $2.72 per share. We reported net financial earnings of $0.10 per share in the third quarter of this year and $2.40 per share year-to-date. To summarize a few highlights. New Jersey Natural Gas added over 1,800 new customers during the quarter, with our growth rate now beginning to return to pre-pandemic levels. In addition, we are proud that New Jersey Natural Gas has been recognized by Escalent as one of their 2023 most trusted utility brands. Clean Energy Ventures continued its strong momentum, increasing its in-service capacity and growing its project pipeline to the highest level in our company's history.
At S&T, we reported strong year-over-year revenue growth. And finally, Energy Services improved its NFE year-over-year, driven by continued contribution from the AMA and strong performance from our long option strategy during the quarter. Turning to Slide 5. As I noted earlier, we are reiterating our fiscal 2023 NFEPS guidance range of $2.62 per share to $2.72 per share. Earlier this year, we raised our guidance by $0.20, driven by outperformance in Energy Service during Winter Storm Elliot in December 2022. Our long-term NFEPS growth range remains at 7% to 9% from our original 2022 guidance, and we expect to be at the higher end of that range for fiscal 2024. New Jersey Natural Gas had a strong quarter, as highlighted on Slide 6. We invested $315 million at New Jersey Natural Gas during the first nine months of fiscal 2023, with approximately 40% of that CapEx providing near real-time returns.
We've added nearly 5,900 new customers this year compared to approximately 5,300 customers during the same period last year through a combination of new construction and conversions. In June, we filed our annual rate adjustments. We were once again able to provide cost savings to our customers effective this coming winter. This is in addition to the rate decrease in bill credits provided in March of this year. Our team works hard to manage supply costs, and we are pleased to pass these savings on to our customers. As indicated on prior calls, we expect to file our next rate case in fiscal 2024, consistent with the time line of our major technology investments. Moving to Slide 7. The team at Clean Energy Ventures continues to grow its project pipeline and has made great progress increasing the size of its portfolio.
We have added 75 megawatts of new solar capacity since the start of fiscal 2023. This represents the largest capacity increase in any fiscal year since CEV's inception. We continue to expand geographically. Since the start of the year, approximately 40% of our capacity growth has come outside the State of New Jersey. This includes two operating assets in Michigan and Indiana that added 21 megawatts to our in-service capacity in July. Operational asset acquisitions have proven successful for us in the past. We target projects with strong offtake that offer performance optimization and future organic growth opportunities. The operations and maintenance team at CEV does an excellent job ensuring our projects perform at the highest operational standards.
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In fact, our portfolio typically performs at over 99% availability, a significant advantage for us as an organization and a testament to the focus of the team at CEV. Finally, our project pipeline continues to grow and now includes over 750 megawatts of potential investment options, which is the highest in CEV's history. And with that, I'll turn the call over to Roberto to review our financial results. Roberto?
Roberto Bel : Thank you, Steve, and good morning, everyone. Slide 9 shows the main drivers of our NFE for the third quarter and year-to-date of fiscal 2023. Through the first nine months, we have reported strong year-over-year improvement in our consolidated results with NFE of $232.3 million or $2.40 per share compared with $192.4 million or $2 per share last year. This represents a 20% improvement in our net financial earnings per share for the period. For the third quarter, we reported NFE of $9.7 million or $0.10 per share compared with a net financial loss of $3.6 million or $0.04 per share last year. The quarterly results of our business segments were consistent with our expectations, generally reflecting a year-over-year improvement in margins at NJNG and Energy Services and new revenues at CEV and S&T, offset by higher depreciation and interest expenses.
The largest difference compared to Q3 of last year was from the benefit that CEV derived from the successful resolution of an income taxation allowance. This benefit was included in our current NFEPS guidance for the year. Turning to our capital plan on Slide 10. For fiscal year 2023, we're slightly tightening our overall CapEx range, while keeping the midpoint unchanged. At the business unit level, we expect modest CapEx increases at NJNG and S&T, offset by a reduction in the top end of the CEV CapEx range. We'll update our CapEx expectations for fiscal years 2024 and 2025 in our year-end conference call in November. Our capital projections are anchored by strong cash flows from operations. On Slide 11, we show our updated projections for fiscal year 2023.
As you can see, we expect operating cash flow to range between $400 million and $420 million. This improvement from our previously stated range is mainly due to higher earnings and a positive impact that lower gas prices had on our working capital requirements. Our credit metric projections for fiscal 2023 have improved in tandem with our operating cash flows, which are shown on Slide 12. We now project NJR's adjusted FFO to adjusted debt, our preferred credit metric, to be between 19% and 20% for the year, while NJNG maintains a favorable investment-grade credit rating. And while we have no plans to issue block equity, our existing dividend reinvestment program includes a waiver discount feature that allows us to raise equity on an opportunistic basis.
With that, I will turn the call back to Steve.
Steve Westhoven : Thanks, Roberto. We've been proactive in our discussions with the governor's office concerning the executive orders made public several months ago. This week, the New Jersey BPU is holding a technical conference to discuss the Executive Order 317. We have initiatives in place to align with the state's decarbonization goals and are actively participating in this conference, which is happening in real time. Governor Murphy has made a clear strategy to build a clean energy economy that will drive job growth and create new investment opportunities. A number of the governor's priorities are directly aligned with the strategy that we've been pursuing for more than a decade. In closing, NJR is an energy infrastructure company focused on meeting the needs of our customers while transitioning to a clean energy future.
Our capital investments and our efforts to develop organic growth opportunities are supportive of our peer-leading, long-term NFEPS growth targets. As always, I want to thank all of our employees for all their hard work and contribution. And with that, I'll now open the call for questions.
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