Dennis Puma - Investor Relations Larry Downes - Chairman, President and Chief Executive Officer Glenn Lockwood - Executive Vice President and Chief Financial Officer.

Mark Barnett - Morningstar Equity Research Spencer Joyce - Hilliard Lyons.

Good day and welcome to the New Jersey Resources Corporation Quarter Two 2015 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 call over to Mr. Dennis Puma from Investor Relations. Please go ahead..

Thank you, Catherin, and good morning everyone. Welcome to New Jersey Resources’ second quarter fiscal 2015 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 meaning of 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 on our 10-Q to be filed with the SEC later today. 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 which are available on our website and were also filed on our Form 8-K with the SEC 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 today. I think for those of you who follow our company have seen this morning's earnings release, you know that we are having a very strong fiscal 2015. After my presentation this morning, I will be discussing our future and I'll be making forward-looking statements.

And, as Dennis pointed out, our actual results will be affected by many factors including those that are listed on Slide1. The complete list is included in our 10-K so I'd ask you to please take some time and to review them carefully.

And also as we note on Slide 2, I'll be referring to certain non-GAAP measures such as net financial earnings or NFE, as I discuss our results. We believe that NFE provides more complete understanding of our financial performance. However, NFE is not intended to be a substitute for GAAP.

Our non-GAAP measures are discussed more fully in Item 7 of our 10-K and, again, I'd ask you to please take some time to review that disclosure carefully as well. Turning to Slide 3, this morning we raised our fiscal 2015 NFE guidance to a range of $1.65 to $1.75 per share from our previous guidance range of $1.60 to $1.70 per share.

This is the second time we've raised our NFE guidance this year. As you may recall, our initial guidance was a range of $1.45 to $1.55 per share. Better than expected results from NJR Energy Services are the primary reason for the increase in guidance.

Fiscal 2015 has been colder than normal, which has created opportunities for NJRES particularly in the daily natural gas markets. Moving to Slide 4, this morning we announced net financial earnings of $99.1 million or $1.16 per share for the fiscal second quarter of 2015. That compared with $151.9 million or $1.81 per share last year.

I think it's important to point out that these results exceeded Street expectations by more $0.20 per share. For the six months, NFE totaled $154.3 million or $1.82 per share, compared with $191.8 million or $2.28 per share for the same period last year.

Our better than expected fiscal second quarter NFE performance was driven by strong results from NJRES. Although lower than its outstanding quarter last year, NJRES is having another excellent year and is exceeding our expectations.

We saw steady growth from our two regulated businesses, New Jersey Natural Gas and NJR Midstream, and we had a solid contribution from Clean Energy Ventures. In fact, our second wind farm was completed in January and wind now represents 23% of our distributed power portfolio.

Moving to Slide 5, results at New Jersey Natural Gas reflected continued customer growth, increases in our basic gas supply service incentives, regulatory initiatives such as the SAVEGREEN project, and our accelerated infrastructure programs. We added 12% more customers to our system in the first half of fiscal 2015 compared with last year.

Together with the 390 existing non-heat customers who converted to natural gas heat, we expect that these new and conversion customers will contribute $2.4 million to New Jersey Natural Gas' annual gross margin, a 7% increase over the same period last year.

As I mentioned earlier, NJRES' solid results were driven by periods of cold weather that created short-term increases in demand for natural gas, as well as price volatility, which, in turn, generated higher than expected gross margin.

NJR Clean Energy Ventures' higher NFE reflected the completion of the Carroll Area Wind Farm in Iowa and the addition of 127 residential systems placed into service through our Sunlight Advantage program.

Increased revenue from Steckman Ridge was responsible for higher Midstream earnings, due primarily to increases in storage service revenue and demand for hub services. NJR Home Services' results were affected by the impact of cold weather on equipment sales and installations. However, Home Services' service contract business remains strong.

As you can see on Slide 7, New Jersey Natural Gas will represent the majority of our total planned capital spending for fiscal 2015 and has spent about $85 million so far this year. We invested about $18.5 million to add nearly 4,100 new customers during the first six months of fiscal 2015. That was a 12% increase over last year.

About 52% of our new customers came from conversions and other fuels. We expect to add between 15,000 and 17,000 new customers over the next two years, representing a very healthy new-customer growth, annual customer growth rate of about 1.6%.

We also remain focused on the safety and reliability of our system and have invested nearly $32 million in system maintenance so far this year. At the same time, we've invested nearly $12 million in our SAFE program, which allows us to accelerate the replacement of our cast iron and bare steel.

Through March 31, we have replaced approximately 179 miles of the 276 miles of pipe that were approved by the Board of Public Utilities in 2012. Final preparations are being made to open our first NGV station in Toms River, New Jersey and we are on track to open two more stations by the end of the fiscal year.

Through our NJ RISE program, we will invest over $100 million in the future for storm hardening and mitigation projects in the most storm-prone portions of our service territory. Spending on that program began this year.

And our liquefaction project in Howell, New Jersey will give us the ability to liquefy pipeline gas for our peak-day needs and create benefits for both our customers and our shareowners. Through March, we've invested $6.4 million on site preparation and equipment manufacturing for the facility.

And, in April of 2015, we filed two petitions with the Board of Public Utilities regarding our Southern Reliability Link project. The SRL will add a second interstate pipeline connection to our service territory in Ocean County and further support safety, reliability, and resiliency.

Finally, through our SAVEGREEN energy efficiency program which provides grants and incentives to customers to install high-efficiency equipment, we invested over $13 million. During the same period, SAVEGREEN performed over 2,400 home energy audits to identify additional energy efficiency opportunities with an emphasis on whole-house improvements.

Our on-bill repayment program also remains a popular option. We've submitted a filing with the BPU that was done in late December seeking extension of SAVEGREEN through June of 2018. Turning to CEV, on Slide 7, we've spent about $90 million through March 31, 2015 to complete two grid-connected projects, which totaled 16 megawatts.

We are working toward another 10.3-megawatt project to be completed later this year. On the residential side, we've become the second-largest solar installer in New Jersey through our Sunlight Advantage program. In the first six months of the fiscal year, we've invested nearly $8 million and added 272 customers totaling 2.6 megawatts.

This brings the total number of residential solar customers to over 3,400 since the program's inception and we currently expect to invest about $32 million in residential solar systems in fiscal 2015. On Slide 8, I want to spend just a few minutes summarizing our long-term growth strategy.

And I think, first and foremost, it's important emphasize that New Jersey Natural Gas will remain the primary driver of our strategy and our performance. It will comprise the majority of our earnings, our assets, our people, and our capital investment. Our Midstream investments will also contribute to our regulated earnings.

Combined, we expect that our regulated businesses, including both New Jersey Natural Gas and NJR Midstream, will contribute 65% to 80% of total NFE in fiscal 2016 and beyond. Through Clean Energy Ventures, we'll provide our customers with cost-effective renewable electricity from solar and wind.

We're diversifying our earnings from Clean Energy Ventures to reduce our reliance on investment tax credits mainly through increased wind investments as well as a higher number of SRECs and higher SREC prices. We expect that CEV will provide between 10% and 20% of NFE in fiscal 2016 and beyond.

And, finally, NJR Energy Services will continue to provide physical and producer natural gas services to take advantage of opportunities in the marketplace.

As I mentioned earlier, NJRES is expected to contribute between 5% and 15% of our total NFE in fiscal 2016 and beyond, but there is the potential for a higher contribution depending upon variables such as the weather, as we have certainly seen in the last two fiscal years.

Now, I would emphasize, and you will recall this, that NJRES' better than expected performance over the past two fiscal years has enabled us to reinvest more dollars into our infrastructure programs thereby increasing the profitability of those investments, which has been enabling us to increase both our NFE and dividend growth targets.

And, finally, I'll conclude on slide 9, which we first introduced last October at our investor conference. It summarizes the key initiatives that we will be pursuing over the next four fiscal years.

As you look at those initiatives, I think you can see that they provide a clear path to our expectation of achieving annual NFE growth of 5% to 9% and annual dividend rate growth of 6% to 8%.

That growth plan, looking out through fiscal 2018, is based upon strong customer growth, infrastructure investments, and regulatory initiatives from New Jersey Natural Gas that will benefit both our customers and our shareowners.

We'll take advantage of expected natural gas demand growth and price volatility in NJRES while providing producer and asset management services. We'll focus on diversifying CEV's distributed power portfolio combined with improving SREC market fundamentals to provide steady income streams.

And our plan is to expand our Midstream strategy including PennEast, which is our latest midstream investment that we've announced. In summary, our fundamentals remain very strong and support the opportunities for future growth.

So as I close and before we take questions, I want to thank our more than 950 employees for their continued hard work and dedication. Without everything that they do every single day, we would not have achieved these excellent results that we are reporting to you here this morning.

They are also the reason that we were recently named the Most Trusted Utility Brand in the East by Cogent Reports. And they are the foundation of our company and I am personally grateful for everything they do every day. So with that, I thank you all for your time today and we would be happy to take your questions..

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Mark Barnett with Morningstar Equity Research..

Hey, good morning everyone..

Hi, Mark..

Good morning, Mark..

I'm glad you guys scheduled for 9:30 since I had four at 9 am. A couple of quick questions.

Just real quickly on the Reliability Link filing, when do you expect you might have a reply from the Commission? And, once that's done, at what point will you start spending the CapEx on that project?.

Mark, we just filed those petitions recently so that will go through the normal process. So, it would be premature for me to speculate on when they would actually decide that. But, obviously, then your next question is once that is decided, we'll start on the construction immediately..

Okay. So there's nothing statutory in terms of the Commission's timeframe for a project? Okay..

Yes..

And probably another question you don't necessarily want to answer precisely.

But, is there any chance that we'll see a rate case filing in this next quarter or do you think it's likely going to end up near the November guidance?.

Well, you'll be happy to know that I will answer that question, Mark. As we said publicly, we will file that on or about November 15 of this year and that plan has not changed..

Okay, thanks. Last question. More broadly speaking, obviously the great outperformance at Energy Services; a lot of that's asset optimization. I'm curious what you're seeing on the producer services front over the past six months to a year given the challenges that a lot of drillers have been facing..

Sure. I'll ask Mike to take that one, Mark..

Mark, if anything, especially with some other companies, again, retreating from this line of business, we, if anything, see more opportunities and have seen some RFPs that we had not seen prior to this fiscal year.

So, I think producers dealing with the issues they're dealing with continue to look for value from companies like us in helping them monetize their supply as much as possible..

So, I know you don't break out the numbers specific to producer services.

But, would you say that in 2015 so far the financial results from that segment have grown?.

No. The producer services business is mostly based on production of those producers. And we have disclosed publicly that, going into a normal year, we expect that revenue to be about 30% of the company's margin. But to the extent we're having a better than expected year, the producer services part of it is pretty much on plan.

But, as a percentage of total, it would be actually lower because of the extra profits we're making from the daily markets..

Right. Great. Thanks for clarifying..

You’re welcome..

Thanks, Mark..

[Operator Instructions] Our next question comes from Spencer Joyce with Hilliard Lyons..

Good morning, guys. Congrats on another great quarter and another guidance rise. You're spoiling us..

Thank you, Spencer..

I had to jump on a little bit late. I had some 9 o’clock as well and I apologize if you touched on this.

But, can you just talk a little bit qualitatively about how your wind business has gone so far and how pleased you are with the foray into that line? I guess we're coming up on a year or so of Two Dot and with Carroll Area being online; can you just give us some general sentiments with regard to that move?.

We’ve actually been very pleased the way that business has rolled out and the way the team has executed the strategy. Remember, when we got into that, we did not want to get into the development part of the business. We didn't that that was a risk profile that was appropriate for us.

But we were looking for mid-sized projects that were based upon more steady streams of cash flow, longer-term contracts, as well as the production tax credits. And we were doing that to try and balance the portfolio, which, as we entered that business was more heavily focused on solar and the ITCs, as you are well aware.

So as we look at this now, since we actually got into and began to talk about why we were doing this and the type of projects we would pursue, we're actually quite pleased not only from the strategy point of view, but also from an operational point of view, the way our team has been able to work with our partners to complete these projects and to do that efficiently.

But, I would ask – Stan Kosierowski is with us in the room today. If he wants to add anything to that..

Sure. Just the fact that all the projects that we have are operating. They are operating at or better than the capacity we expected. Construction-wise, they're built well and they're performing well. So on a qualified basis, we're pretty pleased with the investments..

And Spencer, as you said, when we first started talking about wind, the change in the ITC going from 30% to 10%, we laid out very clearly that our strategy was to position the company such that when that happens that we would not be affected by the so-called cliff.

And so as we are much closer to that now, you can see the wind portfolio, 23% of the total portfolio, that we’ve positioned the company just as we had laid out from a strategy point of view to make sure that we wouldn’t be affected by the drop in the ITC. And that's exactly what's happening..

Fantastic. Great color there and really encouraging to hear that strategic move going according to plan..

Okay..

Also, on the wind side, I mean this could be a bit of a stretch, but given the geographic location of some of the facilities in Middle America, if you will; have you seen any either rise and fall or change in, perhaps, the project pipeline from recent malaise in kind of the oil and gas?.

I’m going to ask Stan to take that as well, Spencer..

Well, are you talking about the wind pipeline for future projects?.

Yes, yes..

I think what we see is we have a pretty robust pipeline of projects that people have safe-harbored under the PTC provisions. So, we see a pretty healthy amount.

I think the question becomes one; after that pipeline goes away in 2016 or 2017 what's left and to what extent is the federal tax laws going to change or how the pipeline will develop after that? But, right now, we have a robust pipeline that will meet the financial targets we're looking at..

And, Spencer, I think, as part of that, it's important not only to focus on the PTC, but also the renewable portfolio standards which provide obviously the source of demand in a lot of those areas as well. So, we're taking advantage of that..

Yes. Fair enough, there. Thanks again. Good quarter. And safe travels out to California. We'll see you in a week or so..

Thanks, Spencer..

This concludes our question-and-answer session. I would like to turn the conference back over to Dennis Puma for closing remarks..

Okay. Thank you, Catherine. I want to just thank everyone for joining us again here 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 enjoy the rest of your day. Good-bye..

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