Dennis Puma - Investor Relations Larry Downes - Chairman and CEO Glenn Lockwood - Chief Financial Officer Mark Sperduto - SVP - Regulatory and External Affairs New Jersey Natural Gas.

Mark Barnett - Morningstar Spencer Joyce - Hilliard Lyons.

Good day and welcome to the New Jersey Resources Corporation Q3 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Dennis Puma. Please go ahead..

Thank you, Kate, and good morning, everybody. Welcome to New Jersey Resources' fiscal 2014 third quarter conference call and webcast. I'm joined here today by Larry Downes, our Chairman and CEO; Glenn Lockwood, our Chief Financial Officer, as well as other members of our senior management team.

As you know, certain statements in our news release and in today's call contain estimates and other forward-looking statements within the Private Securities Litigation Reform Act of 1995.

We wish to caution readers of our news release and listeners to this call that the assumptions forming the basis for forward-looking statements include many factors that are beyond NJR's ability to control or estimate precisely which could cause results to materially differ from the company's expectations.

A list of these items can be found, but is not limited to items in the forward-looking statements section of today's news release filed on Form 8-K, and in our 10-Q to be filed on August 4, 2014. Both of these items can be found at sec.gov.

NJR does not by including this statement assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. I'd also like to point out that there are slides accompanying today's discussions that are available on our Website and that was also filed on our Form 8-K this morning.

With that said, I'd like to turn the call over to our Chairman and CEO, Larry Downes.

Larry?.

Thanks, Dennis. Good morning, everyone, and thank you for joining us.

I think for those of you who follow our company have seen this morning's press release you know that fiscal 2014 is a very strong year for New Jersey Resources because not only of the largest components of our portfolio turning in solid results, but according to a recent study by (inaudible) reports New Jersey Natural Gas was ranked the most trusted utility brand in both New Jersey and Eastern region and was rated among the best in the United States.

During my presentation this morning I'll be making forward-looking statements. Our actual results will be affected by many different factors including those that are listed on slide one. The complete list is included on our 10-K and as always I would ask you to take the time to please review them carefully.

Also as we note on slide two, I'll be referring to certain non-GAAP measures such as net financial earnings or NFE, as I discuss our results. And we believe that NFE provides better measure of our performance as it excludes the changes in the value of the derivatives we use to hedge NJRES operations.

However, NFE is non-intended to be a substitute for GAAP or non-GAAP measure or discuss more fully in Item 7 of 10-K or 10-K end. I'd ask you to take the time to review that disclosure as well. So starting to with slide three, you'll see an overview of our third quarter year-to-date results by business.

This morning, we announced net financial earnings of $196.3 million or $4.67 per share for the nine months ended June 30, 2014 that compared with $113.9 million or $2.73 per share for the same period last year. And that represented a 71% increase.

Our performance this year is primarily attributable to the strong results from NJR Energy Services, which benefited from strategically located assets that enabled us to meet increased demand during the sustained cold weather this winter.

As you can see on the chart, NFE for the third quarter was $0.11 per share this year compared with $0.23 per share last year, primarily due to the anticipated loss in NJRES, which resulted from the seasonal nature of its business and year-round transportation in storage expenses.

These results were in line with our previously announced quarterly guidance. At the same time, New Jersey Natural Gas and NJR Clean Energy Ventures both generated strong results for the third quarter and the nine month period. Glenn Lockwood, our Chief Financial Officer will provide more details on our financial performance later.

But first, I'd like to review our results in the context of our long-term strategy which remains focused on New Jersey Natural Gas Company’s regulated margin and infrastructure growth. Moving to slide four, on July 16th, we increased our fiscal 2014 guidance range to $4 to $4.20 per basic share from $3.90 to $4.10 per basic share.

This morning, we reaffirmed that guidance along with the expected contribution range from each of our businesses. As we said before, our strong performance not only benefits this year but also supports our long-term growth strategy as the increased earnings retention has reduced our need for future equity issuances.

By avoiding earnings dilution, we expect to improve the per share profitability of our new investments. This has given us the ability to increase our long-term NFE growth rate to a range of 5% to 9% and our dividend growth rate to a range of 6% to 8%.

And in addition to all of those benefits, we gain additional financial flexibility to prudently utilize our share repurchase program depending on market conditions. Moving to slide five which shows our earnings guidance through fiscal 2017, you can see that we expect the majority of our earnings to come from our regulated assets.

We are not changing our longer term expectation for NJRES and expect earnings contributions in the range of 5% to 15% in fiscal 2015 and beyond, which we believe is a reasonable expectation based upon prior performance. However, as we saw this year, NJRES actual results will be determined by market conditions.

The contributions from our other businesses are currently expected to return to previously announced levels in fiscal 2015 as well and that is illustrated in the chart on the right.

I think it’s also important to note that New Jersey Natural Gas, our core business continues to have a very strong year and we expect that our regulated investments including our midstream assets will contribute between 65% and 80% of total NFE in fiscal 2015 and beyond.

On slide six, I'd like to be begin with a summary of New Jersey Natural Gas, which is I think everyone knows comprises the majority of assets, earnings, people and capital expenditures.

NJNG now serves over 500,000 customers in in Monmouth and Ocean Counties and in parts of Burlington, Morris, Middlesex and Sussex Counties covering areas with an estimated population of 1.4 million people.

Our annual customer growth rate is about 1.5%, driven by new both new construction and conversions which is above the industry average compared with other local distribution companies. Over the next two years, we expect to add about 7,500 new customers annually with that half coming from conversions from other fuels.

Additionally, NJNG has a long history of constructive regulatory relationships based upon our ability to achieve balance between our customers, our regulators, our share owners, while supporting public policy.

I think you can see this collaboration is evident in the riders that have been approved for program such as the SAVEGREEN Project, our BGSS incentives and most recently the approval of our NJ RISE program. We project new capital expenditures of more than $1.4 billion including SAVEGREEN to fiscal 2017.

And as we move to slide seven, we lay out our capital spending plans from the conclusion of our last base rate case in 2008 through fiscal 2017. We currently plan to have most of the expenditures completed before we file our next base rate case which we expect to file no later than November 2015.

And as noted on the slide, many of these expenditures are already contributing to NJNG's margin through regulatory mechanisms. These margin producing expenditures total about $691 million and represent a little more than half of our planned capital investments in fiscal 2017.

On slide eight, we provide some additional details on three of our infrastructure programs that are currently earning returns. Under our SAFE program, we’re replacing 276 miles of cast iron and bare steel. To-date we’ve invested nearly $34 million and replaced about 145 miles.

Given our longstanding focus on infrastructure replacement, we have the lowest amount of cast iron of any LDC in New Jersey. Our NGP fueling station project is well underway and we currently expect to have three stations operational this year.

And finally our SAVEGREEN Project which promotes the installation of high efficiency energy heating equipment is doing well. SAVEGREEN was expanded by up to $85 million of new expenditures last year and to-date we’ve spent $24.7 million for home energy audits on-bill loans and grants..

And finally we’re in the process of evaluating route options for our proposed Southern Reliability Link which will add an additional pipeline connection to our service territory in Ocean County. This line will improve the resiliency of our system and support future customer growth in that area.

Moving to slide 10, as I mentioned earlier NJR Energy Services has been the key driver in this year’s outstanding performance. NJRES basic business is providing physical natural gas services to customers across North America. NJRES has developed a diverse portfolio of competitively price storage and pipeline transportation assets.

This portfolio is positioned to take advantage of market volatility driven by factors such as the weather or other events. Now as a reminder we do not take commodity price risk natural gas that is held in storage as properly hedged.

In fiscal 2014 sustained periods of cold weather drove NJRES' exceptional results and that is evident in our performance. Over the past few years our producer services business which is based primarily in the Marcellus region has generated stable streams of income which reduces our reliance on market volatility to drive earnings.

And while we assume normal weather in the future we also remain positioned to take advantage of any potential upside as we saw this year. As I previously noted, we forecast an NJRES' contribution NFE will return to a range of 5% to 15% in fiscal 2015 through 2017.

Moving to slide 11 we discuss our clean energy business which includes our solar and onshore wind projects New Jersey solar market which is supported by the sates renewable portfolio standard which I would refer to as RPS provides the opportunity to invest capital profitably and support the state's energy policy.

In the future, the RPS will continue to increase which combined with slow and construction should lead to higher prices for solar renewable energy certificates or aspects. In addition solar investment tax credits are expected to decline from 30% to 10% through 2017.

As we have previously announced our plans to transition our renewable portfolio by gradually lowering our solar capital spending over the next three years to reduce our reliance on investment tax credits. To achieve this transition we've already begun to diversify from solar to wind projects.

To-date we've announced investments of $64 million in onshore wind projects. But before I comment a little further on our wind strategy I just wanted to take a moment to expand a little bit more on the abstract markets.

So on slide 12, you can see that the monthly solar capacity additions in New Jersey have declined from their peak in early 2014, which combined with the annual increase in the RPS has support to corresponding increase in SREC prices. We believe that these fundamentals will continue to support higher SREC prices in the long-term.

So when we look at the fiscal 2017, we currently expect that the majority of CEV's earnings will come from the generation in sale of over 184,000 SRECs from our solar portfolio, higher SREC prices and returns on our wind investments. Turning to slide 13, I just want to briefly discuss on our onshore wind investment strategy.

You can see the key value drives of wind which include the renewable portfolio standards in various states production based tax credits and long-term power purchase agreements. Our 9.7 megawatt Two Dot project in Montana became operational in May, June and will contribute to earnings this year.

Our second project Carroll Area, which is a 20.7 megawatt project located in Iowa is under construction and expected to begin operations in fiscal 2015. We have 25 year power purchase agreements in place with NorthWestern Energy for Two Dot and MidAmerican Energy for Carroll Area, which will provide us with annuity-like income streams.

Our solar and wind fundamentals continue to support our forecast of between 10% and 12% of our total net financial earnings coming from Clean Energy ventures in the future. With that strategic update, I want to turn the call over to Glenn and he will give you more details on our financial results from our various segments.

Glenn?.

Thanks, Larry, and good morning, everyone. I'll take a few minutes to review the results for each of our major segments.

The increases in utility gross margin that we show on slide 14 for both three and nine months ended June 30, 2014 were due primarily to increases related to our infrastructure investments their earning and immediate return, customer growth and BGSS incentives.

We have added 5,151 new customers to our system so far this fiscal year and as Larry mentioned, we are on track to achieve our goal of adding between 7,000 and 7,500 new customers this year. Our firm natural gas deliveries have increased about 7.8 Bcf so far this year because of the colder than normal winter.

But keep in mind that our CIP mitigates this impact of colder weather on our margin and we have accrued a credit to customers of about $5.5 million. Speaking of the CIP, I am happy to report that the BP recently gave its approval for us to continue to operate under our CIP with no expiration date. It will be subject to review in our 2017 rate filing.

Moving to slide 15, our strong customer growth continued into the third quarter of fiscal 2014 as the housing markets continued to recover in our service territories. As you can see, there is a good balance of about 50-50 between new construction conversions, some of the fuels, primarily fuel oil and we expect that mix to continue.

We continue to see an increase in the pace of new construction in our service territories, particularly in Ocean County service area. We also saw 437 of our existing customers convert to natural gas heat this year.

These are customers who have natural gas service in their home for other applications but have decided to install natural gas heating equipment as well. The 14,000 to 16,000 new customers we expect over the next two years to represent an annual growth rate of about 1.5% which is above the national average.

As we turn to slide 16, you can see the effect that all of these programs will have on NJNG’s gross margin over the next several years. NJNG’s incremental gross margin is expected to more than double.

While customer growth will remain the largest component, we will also receive important contributions from SAVEGREEN, our BGSS incentive programs and NGV Advantage. Turning to slide 17, fiscal 2014 year-to-date NFE at NJRES was $90.2 million, compared to $21.5 million in the first nine months of last year.

The extraordinary growth was due primarily to increased gross margin attributable to the extreme cold weather this past winter which created volatility in short term gas markets. In the third fiscal quarter, NJRES generated as expected, a net financial loss of $8.6 million, compared with NFE of $2.1 million in the same period last year.

As Larry mentioned in his remarks, the quarterly results reflect the seasonal nature of NJRES business as well as the cost of unwinding the hedges associated with our gas sales in second fiscal quarter. NJRES is expected to contributed 35% to 40% to total NFE this year.

And again, I’d like to emphasize that looking forward, we assume a return to normal weather and we expect that beginning next year NJRES will resume its historic 5% to 15% contribution to total NFE while being positioned to take advantage of unexpected short term volatility.

On slide 18, you can see that fiscal 2014 year-to-date NFE at NJRCEV was $20.3 million compared with $9.1 million last year. And for the quarter NJRCEV reported NFE of $3.9 million compared with a loss of $1.4 million last year.

The growth in both periods is due primarily to higher SREC revenue and an increase in capital to be placed in service this year versus the last.

During the third quarter, NJRCEV replaced the 9.2 megawatt ground-mounted, grid-connected system in West Pemberton, New Jersey into service, which brings the total number of ground-mounted commercial solar systems placed into service this year to three, representing total capacity of almost 11 megawatts.

We currently have two other commercial solar projects under construction, one should be operating by the end of this fiscal year and the second is expected to be placed into service in the first quarter of fiscal 2015.

So far this year in the Sunlight Advantage program, our residential solar lease program added, we have added 739 customers or 7.2 megawatts during the first nine months of fiscal 2014, bringing the total number of customers to 2,825 since the program’s inception.

In total, NJRCEV expects to place into service projects totaling between $70 million and $80 million of capital this fiscal year compared to $61.1 million last year.

Before I turn the call back to Larry, I would like to point out that with NFE of $4.67 per share through June and our annual guidance for the full fiscal 2014 of between $4 and $4.20, the current forecast for fourth quarter is now a net financial loss of between $0.47 and $0.67 per share.

This projected loss is due to seasonal nature for both NJRES and NJNG’s businesses, higher discretionary expenses including the estimated impact of a voluntary early retirement program. With that Larry has some closing remarks..

Thanks, Glenn. As we close our call this morning, I think you can see that our portfolio of energy-related businesses which is anchored by our regulated assets is continuing to generate excellent returns.

Our service territory and strong demographic that offer the opportunity for consistent long-term infrastructure investment and margin growth opportunities and comprises the majority of our earnings.

Our regulatory strategy remains balanced and recognize the importance of generating value for our customers and shareowners while supporting public policy.

Our non-regulated energy related activities provide a source of incremental growth we have a strong and efficient financial profile that will provide access to capital as needed and we believe these fundamentals will support our long-term earnings and dividend growth targets both of which we increased earlier this year and exceed our peer group average.

So as I close, I just want to again mention after results we've reported to you today would not have been possible without the hard work and dedication of our employees and on behalf of our Board and our entire leadership team, I thank them because it is their effort that drive our performance.

We're a strong company today with the bright future because of everything that our employees do. And I also want to say thank you to our investors for their confidence in NJR. And with that we would be happy to take any of your questions..

(Operator Instructions) Our first question comes from Mark Barnett from Morningstar. Please go head..

Hey good morning guys..

Good morning..

Thanks for all the commentary, a lot of detail today, I did just have one more broad question.

Given that you are not going to be filing until mid or for mid 2015 what's our kind of timeframe on I guess when your next -- what's regulatory schedule look like I guess through the rest of the full year and of the fiscal year? And when can you remind me the timing of that formal filing that you might make going forward?.

I think Mark you are referring to the base rate filing that will be in November of 2015. So we will go through the normal internal preparation process in anticipation that filing..

But generally it’s a pretty quiet period now that you've got in the NJ RISE approved and the CIP.

So really just going to utility the operating under zone get some of its own steam for the next year or so?.

Mark Sperduto has the regulatory income on that..

Yes, that's generally true with the completion of NJ RISE and that approval just earlier this month, the initiatives are pretty much taken care of. And just to add a little bit to the rate case preparation.

The rate case will be filed in November as Larry said in '15 and will be top most likely the 12 months ended June of 16th, and then according to regulatory parameters in New Jersey we are allowed to add capital additions through the balance of '16 to take us through December of '16 calendar year..

So the only thing, you'll see Mark, you'll see our normal filing that you’d see, but that’s it. .

Okay, thanks a lot guys. Thank you all the details today..

Thank you. .

(Operator Instructions). There are no questions at this time. This concludes our question-and-answer session. I am sorry, we do have a question from Spencer Joyce from Hilliard Lyons. Please go ahead..

Hey good morning guys..

Good morning..

Hey, Spencer..

Sorry, I buzzed in kind of late on you. Glenn, just a quick nuance question for you. I noticed the line in the press release about the one-time payment at the Clean Energy Ventures segment.

Can you give us a magnitude on what that was? And then any kind of color on as to whether we could see something like that in the future?.

Spencer, its Glenn. It’s the majority of the other income reported in the third quarter so you can that number in the income statement and the attachments to the press release..

Okay, fantastic.

And then also potentially in the other line, the expenses you mentioned for potentially some voluntary early retirement, would we see those pop up maybe in the O&M line or would that maybe be somewhere else?.

That will be in the fourth quarter and that will be in the O&M line..

Okay, alright thanks guys, that’s all I had..

Thanks Spencer. .

(Operator Instructions) There are no questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Dennis Puma for any closing remarks..

Alright, thank you Kate, thank you everyone for joining us this morning. As a reminder a recording of the call is available for replay on our website. Again, we appreciate your interest and investment in New Jersey Resources and we will see you next quarter. Good Bye..

The conference has now concluded, thank you for attending today’s presentation. You may now disconnect..