Larry Downes - Chairman, President, and CEO Pat Migliaccio - SVP and CFO Joanne Fairechio - IR.

Shahriar Pourreza - Guggenheim Partners Brian Russo - Ladenburg Thalmann Sarah Akers - Wells Fargo.

Good morning and welcome to New Jersey Resources' First Quarter Fiscal 2017 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question. [Operator Instructions] Please note this event has been recorded.

I’d now like to turn the conference over to Joanne Fairechio. Please go ahead. .

Thank you, Keith. Welcome to New Jersey Resources' first quarter fiscal 2017 conference call and webcast. I’m joined here today by Larry Downes our Chairman and CEO; Pat Migliaccio our Chief Financial Officer as well as other members of our senior management team.

As you know 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 believes forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely, which could cause results to materially differ from our expectations.

A list of these items can be found in the forward-looking statements section of today news release furnished on Form 8-K and in our most recent Form 10-Q and Form 10-K filed with the SEC. These fillings can be found at www.sec.gov.

We do not by including these statements assume any obligation to review or revise any particular forward-looking statements referenced herein in light of future events. I would also like to point out that the slides accompany today’s discussion are available on our website and were furnished on our Form 8-K filed this morning.

With that said, I’ll turn the call over to our Chairman and CEO, Larry Downes..

Thanks Joanne and good morning everyone and thank you for joining us today. Before I begin I want to remind you that during our presentation Pat and I will be discussing our future and we’ll be making forward-looking statements. Our actual results may be affected by many different risk factors including those that we’ve listed on slide two.

The complete list is included in our 10-K and as always I would encourage you to review them carefully. As noted on slide three, we’ll be referring to certain non-GAAP financial measures such as net financial earnings which we’ll refer to as NFE.

We believe that NFE provides more complete understanding of our financial performance, however I want to stress, that NFE is not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K, and I would encourage you to please take the time to review that disclosure carefully as well.

Moving to slide four, for those of you who have seen our announcement this morning, you know that we are performing in line with our original expectations and importantly we reaffirmed our net financial earnings guidance of a range $1.65 to $1.75 per share for fiscal 2017.

Our expectation for fiscal 2017 is that New Jersey Natural Gas will continue to provide the majority of our earnings and JNG will have a strong year due to margin from customer growth, as well as new higher base rates.

We will also continue to invest in Midstream projects, such as the PennEast pipeline and we expect that Midstream will contribute between 5% and 10% of NFE this year, combined New Jersey Natural Gas and NJR Midstream are currently expected to contribute about 60% to 75% of our total NFE in fiscal 2017.

In addition through NJR Clean Energy ventures, we will invest strategically in residential and commercial solar and onshore wind projects. Our expectation is that NJRCEV will contribute between 15% and 25% of fiscal 2017 NFE.

NJR Energy Services is performing within our guidance range and is expected to contribute between 5% and 15% of fiscal 2017 NFE, and our annual dividend rate goal remains 6% to 8% with a targeted payout ratio of 60% to 65%. Now I am going to ask Pat, to review our results for the first quarter of fiscal 2017.

Pat?.

Thanks, Larry and good morning everyone. As Larry indicated, this morning we reported first quarter net financial earnings of $40.4 million, or $0.47 per share versus $51.3 million or $0.60 per share for the same period last year.

If you had to breakdown by company, on slide five, our results are consistent with our expectations and we remain confident, we will achieve our earnings guidance for the fiscal year. I’ll now explain our performance this quarter, as well as the factors that support our confidence that we’ll achieve our financial goals for the year.

Slide six, illustrates the changes in our NFE year-over-year. As you can see, the biggest change occurred in NJRES, we saw our net financial earnings declined by $6.5 million. To put that in the context though, it is important to understand that the first fiscal quarter of 2016 was the second fastest first fiscal quarter in NJRES’s 20 year history.

So the decline in NFE from NJRES is consistent with our expectations. The quarter’s results were also influenced by weather that was slightly warmer than historic averages.

The amount of tax credits that we recognized in a given quarter is influenced by both the expectation of projects that we will place in service for the year, as well as the income generates for that same quarter. Our lower quarterly income resulted in recognizing lower tax credits of approximately $2.5 million during the same period last year.

Additionally we sold approximately 10,000 fewer SREC this quarter than in the first fiscal quarter of 2016. Our utility gross margin was higher than the prior year’s quarter by approximately $8 million NFE were down modestly over last year.

This was due primarily to lower BGSS incentive margin and higher operating and maintenance expenses, which offset the increases in utility gross margin from higher base rates and customer growth during the quarter. Through CIP, our redecoupling mechanism NJNG insulated from declines in utility gross margin from weather and customer usage.

However NJNG still earns utility gross margin on the basis throughput, as such, the majority in utility gross margin for the full year is earned during the heating season from November through March. During the first fiscal quarter, NJNG generated 28% of its utility gross margin, we expect to earn 42% in our second fiscal quarter.

As a result the majority of the benefit of the base rate case will be realized in the second fiscal quarter.

As noted, our first fiscal quarter earnings were in line with our expectations, additional segment guidance shown on slide seven, indicates why we are confident that we will achieve our annual net financial earnings guidance of between $1.65 and $1.75 for this fiscal year. As you can see, we expect the largest increase to come from NJNG.

Distribution margin is estimated to be up about $0.25 per share due to the effects of higher base rates and customer growth.

After offsetting a portion of that increased distribution margin with higher expenses and slightly lower BGSS incentives, we expect NJNG’s net financial earnings to increase by approximately 10% to 15% over the prior fiscal year. We also expect positive contributions from NJRCEV in midstream in fiscal 2017.

NJR Energy Services fiscal 2016 earnings were slightly outside our 5% to 15% range at 16%. Our expectation for this fiscal year is closer to the midpoint of the guidance range for this business and we expect NJRES to perform within that range.

On slide eight you can see NJNG’s capital spending update for the first quarter, there are few items I want to highlight. Our SAFE II program is along their way and we’ll invest an $8.6 million in the first quarter fiscal 2017. SAFE II is a BPU approved five year extension of NJNG’s SAFE program.

Through SAFE II we’ll replaced remaining 276 miles of unprotected steel main and associated services in NJNG’s distribution system.

As part of this program, NJNG will earn an Allowance for Funds Used During Construction on its invested capital during construction, and will request rate increases for the approved $157.5 million of SAFE II spending in annual filings, consistent with the company’s other regulatory filings.

As a condition of approval NJNG is required to file a base rate case no later than November 2019. The other item is our NJ RISE program, to-date NJNG has installed nearly 7,600 of the approximate 35,000 accessible valves in storm-prone areas of our service territory.

These valves restrict the flow of natural gas when there is a change in pressure on the service line. In addition, we’re constructing a secondary feed into Sea Bright it is expected to be completed in fiscal 2017.

The remaining four storm hardening projects under this program are in the design and/or permitting phases with all projects scheduled for completion by fiscal 2019.

Turning to capital spending at NJR Clean Energy ventures on slide nine, for fiscal 2017 we expect to place approximately $90 million to $110 million of solar installations in service compared with the $86 million invested in fiscal 2016.

In the first quarter of fiscal 2017 NJRCEV began construction of a new commercial solar project for the Brick Township Board of Education in Ocean County, New Jersey. This $6.6 million investment represents 2.5 megawatts of capacity and is expected to be completed in the summer of 2017.

NJRCEV has three other commercial projects, totaling 24.4 megawatts planned for fiscal 2017 completion. The total of 26.9 megawatts of commercial solar projects represents all of the planned commercial solar spend we communicated to investors in November. Additionally demand remains strong for NJRCEV’s residential solar program.

The Sunlight Advantage, we added 314 residential customers in the first three months of fiscal 2017, totaling 2.8 megawatts of capacity, compared with 84 customers and 0.7 megawatts of capacity during the same period in fiscal 2016. The Sunlight Advantage currently serves approximately 5,400 customers for both roof and ground-mounted solar systems.

NJRCEV plans to invest approximately $35 million in residential solar systems in fiscal 2017, compared with $34 million in fiscal 2016. Through both our residential and commercial programs NJRCEV now has a total of about 152.4 megawatts in service through December 2016.

Finally our Ringer Hill Wind Farm came online in December 2016 at a cost of $88.9 million. This 39.9 megawatts project is located in Somerset County, Pennsylvania and the majority of the energy produced is hedged under a 15-year agreement. We expect to earn a return on equity of approximately 15% on this investment.

NJRCEV’s onshore wind capacity now totals 126.6 megawatts. Before I turn the call back to Larry I want to briefly review the effect of potential changes to the corporate tax rates on slide 10. As you know there are several different versions of tax reform packages that are being discussed.

The common link among them all is a reduction in the corporate tax rate. For New Jersey Natural Gas with the exception of our BGSS incentives we would expect the impact to be a largely neutral. So if there’s a presidential return the benefits of a lower tax rate and any associated revaluation on deferred tax liabilities to rate payers.

However for our non-regulated businesses the impact would generally be positive. We would see a significant one-time benefit from re-measuring their deferred tax liabilities principally created by book to tax differences at our Clean Energy business NJRCEV.

We would also see an ongoing benefit for our non-regulated businesses from a lower corporate tax rate as well. That said lower corporate tax rate would result in a decrease in our tax appetite and therefore an increase in [indiscernible] to utilize tax benefits. I’ll now turn the call back to Larry for some closing thoughts and Q&A..

Thanks Pat what I’d like to do now is to put our performance into a strategic context. So if you turn to slide 11 you can see that we have built our growth strategy in our capital allocation on the ongoing transition on our nation's energy landscape.

As we all know this new energy environment is the result of the abundant natural gas supplies in the Marcellus and Utica fields, as well as new sources across the country that have been made possible through advances in drilling technology.

We are focused on three strategic areas, natural gas, energy efficiency and clean energy that will provide both essential support to the economic environment well-being our communities and our customers as well as investment opportunities to create long-term value for our shareowners.

First, demand for natural gas which is supported by abundant supply is driving new opportunities for us to grow our customer base and invest in infrastructure. Second our focus on energy efficiency enables us to encourage customer savings and pursue growth opportunities that will benefit our shareowners.

And finally, clean energy support state and federal energy policy goals that will play an increasing role in meeting the nation's growing energy needs and it will also create new investment opportunities for New Jersey Resources. If you move to slide 12, you can see that natural gas is the foundation of our business and anchors our portfolio.

The core strength of New Jersey Natural Gas Company’s service territory support a strong and growing market that is largely residential. Specifically Ocean County is one of the fastest growing counties in our state, which is providing a solid opportunity to invest new capital to add new customers and create long-term value.

In addition our infrastructure programs are enhancing safety and reliability for our customs, while also creating long-term investment opportunities.

I'd like to talk about the projects like the Southern Reliability Link to which we are strengthening our system with the second feed, but we're also creating supply diversity to meet the long-term energy needs of our customers.

And I think when we think about the SRL it’s important to note that it will provide greater overall system resiliency and benefit over 1 million people in our service territory.

Our basic gas supply service programs, which are now in their 25th year complements our natural gas procurement activities and provide lower cost for customers and value for our shareowners. In fact since 1992 shareowners have earned an average of an additional $0.05 per share each year.

And over the past several years our BGSS programs have also added approximately 100 basis points to New Jersey Natural Gas Company’s return on equity each year.

Further growing wholesale demand offers new opportunities for physical and producer services at NJR Energy Services and increasing long-term natural gas supply combined with growing demand provide opportunities for long-term value creating opportunities for future investment in midstream infrastructure.

Slide 13 provides an update on the PennEast pipeline, PennEast in which we have a 20% interest will bring low cost Marcellus natural gas to the New Jersey marketplace and benefit New Jersey’s natural gas customers. According to a study by a Concentric Energy Advisors, customers in our region can save nearly $1 billion annually in energy cost.

I also want to emphasize that 90% of PennEast capacity is already contracted by local distributions and others to serve customers including those in New Jersey. And in addition PJM, which as you know is the independent electric system operator that serves our region has said that the PennEast pipeline would greatly improve grid reliability.

So I think that when you look at all of these facts objectively, it's clear that PennEast will responsively support our region's growing energy needs, while offering potential savings for customers.

Last month the Federal Energy Regulatory Commission extended the date for the release of their environmental impact statement by six months to April 7th of this year for its most recent schedule for PennEast also sets the 90 day federal authorization decision deadline for July 7, 2017.

PennEast does not expect this development to impact the anticipated in service date of the project, which remained scheduled for the first fiscal quarter of 2019. Turning to slide 14, we will continue to invest in clean energy projects consistent with our strategy we've successfully diversified our portfolio between onshore, wind and solar.

Our portfolio current includes about 280 megawatts of solar and wind, which is well diversified and that 45% of the portfolio consists of onshore wind.

Turning to slide 15 when we last spoke to the financial community in November, we discussed the mechanics of New Jersey's basic generation service, which we refer to as BGS auction, which is a key component in establishing forward SREC pricing.

Ahead of this month's BGS auction energy year SREC prices have increased by 45% compared with the market price we shared with you on November 17th at our Investor Conference. In addition, consistent with our strategy, we have been actively hedging our SREC to mitigate risks.

As you look at slide 15, you can also see that nearly all of our SREC sales from facilities that are currently operational are hedged for energy years 2017 and 2018. And about two-thirds of our SREC sales from these facilities are now hedged for energy year 2019 which is a significant increase from November of 2016.

So we believe that the increasing numbers of SRECs from our growing solar portfolio, combined with our hedging strategy and our earnings from our wind investments and tax credits from solar investments will support CEV’s contribution of between 15% and 25% of our total NFE in Fiscal 2017 and beyond.

Moving to slide 16, energy efficiency is another important part of our strategy. I think when we look at energy efficiency, the value is clear. Using less energy is the best way to improve the environment and both customers and investors benefit.

Through New Jersey Natural Gas Company’s Conserve program we are helping customers save both energy and money. In fact since 2006, we Conserve to Preserve has saved our utility customers more than $366 million through lower usage.

The SAVEGREEN insist customers who want to affordably invest in energy efficiency, while we earn a return on those investments. Since 2009, we have invested more than $114 million in grants, incentives and are on go repayment program through SAVEGREEN.

Our Conservation Incentive Program or CIP as we call it, which has been in place since 2006 protects NJNG’s utility gross margin from worm weather and reduced usage. In the first three months of this fiscal year our CIP rate mechanisms protected $2.9 million of utility gross margin.

And if you look over last 10 years, when the CIP was first put in place, this program has protected approximately $150 million of utility gross margin and contributed an average of $0.11 per share associated with the CIP. So as you can see, our efforts in the area of energy efficiency have benefited both our customers and our shareowners.

So before we open the call for questions, I just want to summarize the reasons why we are confident in our ability to meet our guidance range for fiscal 2017. At New Jersey Natural Gas the positive effect of new higher base rates and customer growth are expected to offset higher O&M and interest expenses which will lead to higher NFE for the year.

Our customer growth forecast remains at 8,300 new customers for the fiscal year, which will provide $5 million in new annual utility gross margins.

We expect that NJRES will meet its NFE range of 5% to 15% for the fiscal year, at CEV additional SREC sales which are mostly hedged as I pointed out will provide higher revenues in fiscal 2017 and our Sunlight Advantage residential solar program continues to grow.

And in addition we plan to add four new commercial solar projects in fiscal 2017 those will total 27 megawatts and will generate additional tax credit compared with last year.

o in closing I think as you look at not only our performance so far and what we expect for the balance of fiscal 2017, our long-term focus is on creating value for our shareowners. In particular, we remain committed to our dividend growth rate of 6% to 8% annually with a target payout ratio of between 60% and 65%.

So before we get into questions, I just want to say thank you as always to the outstanding work of our more than 1,000 employees they remain the foundation of our company and the driving force between everything that we’re able to accomplish. So thank you for joining us and we would welcome your questions and comments..

Good morning, guys. .

Good morning, Shah..

Can you just elaborate a little bit more on the level of confidence in your 2017 outlook, because obviously weather doesn't appear to be a lot of help this quarter either is it sort of you envisioning the sort of the energy services segment, the timing of some of these hedges to offset if you get another quarter weak results?.

Shah, before we begin there I do just want to point out one correction here. In his remarks, Larry had mentioned that the FERC delay for VIS decision over six months in fact it’s actually six weeks. We just wanted to have that on the record.

But to answer your question, specifically if you look at the bridge we provided as the companion to the earnings release this morning, the majority of the increase from the prior year’s results are New Jersey Natural Gas. And so, as you know.

as most people know the 6 degree weather that we are having today which certainly is not a tailwind for NJR Energy Services, we still expect them to formal in the guidance range and the majority of earnings this year are coming from New Jersey Natural Gas. So we are confident in that ability to achieve the earnings guidance range..

Shah it’s Larry, I’d just add to that that's why we spend some time on the call and in the press release talking about how the margin is actually realize the New Jersey Natural Gas to give you a sense of power layout for whole year and that portion of our performance is really underscoring the confidence we have in meeting the guidance range this year..

Got it, thanks for reinforcing that.

And then only just touch on sort of our tax comments, depending on what scenario we turnout with on the corporate taxes curious that sort of a gas utility you sort of building in a scenario where the higher deferred tax liabilities as a result of the lower corporate taxes, which sort of going to be paid off over the life of an asset, the life of the assets or is there do you envision an opportunity where you can finance some of that liability with maybe short-term debt and sort of increase your rate base at a quicker point..

Shah, as I mentioned, we expect it’s going to be net neutral for the utility to your point we’d expect lower deferred tax liabilities in a 20% environment than what we would have before. And so therefore longer period of time put those benefits.

And in terms of the revaluation from a 35% to say 20% that we expect would be a regulatory liability that would be returned to rate payers over some period of time that is yet to be determined.

As you point out there are still a number of variables here, at least based on the latest information we have it looks like tax reform might be in the spring of ‘18. We have Mark Sperduto I don’t know if he has anything to add..

Thanks guys..

Thank, Shah..

Thank you. And the next question comes from Brian Russo with Ladenburg Thalmann..

Hi, good morning..

Good morning, Brian..

Can you just explain why you sold 10,000 less SRECs this past quarter versus the quarter a year ago?.

Brain, it’s strictly timing, each one of our delivery schedules for SRECs are negotiated with the counter party that we sell to. So it’s simply a timing issue..

Okay good....

For the full year we expect an additional -- an increase of about 16,000 SRECs over the prior year..

Okay, got it. And it looks like compared to your prior disclosure the current SREC price have increased quite notably.

And I’m just wondering is that just a function of what you’ve described in the past just kind of the liquidity side of things?.

Brain, as we laid out at November in our Analyst Day, we expected an increase in liquidity as we led into BGS auction which is occurring right now. And that is -- so there is rise in prices is somewhat consistent with our expectations of better liquidity marketplace.

I would add that since the Investor Day we sold roughly 80,000 additional energy or 19 SRECs on average price of roughly $188..

Brain it’s Larry. Going into the Investor Day and if we had to bifurcate that the conference we -- it was clear that there was concern on part of investors about going out looking at energy year ‘19.

And so that's why we spend time on trying to explain the relationship of the BGS options to potential impact on SREC prices and as the same year for this so that’s exactly what we’ve seen so we try and take advantage of that opportunity now..

Okay, great.

And then the projects that you have in the clean energy services subsidiary, I think you mentioned 24.4 megawatts, can you kind of break that down by each quarter that those megawatts will be operational?.

The current plan the bulk of those projects would be operational either the third or fourth fiscal quarter of 2017..

Okay. Fiscal 3Q, 4Q..

Yes..

Got it, thank you..

Thanks, Brian..

Thank you. And our next question comes from Sarah Akers with Wells Fargo..

Hey, good morning..

Good morning, Sarah..

Can you update us on the SRL permitting process and any revisions to the end service state there?.

No the process is still going on with the department of environmental protection in this as we speak. But I think Sarah, the way to think about that is what happens once that process is over and we think it would take about four months to basically to the bidding and then another roughly 12 months to the construction.

So, -- but we're focused right now what’s going on in the [indiscernible]..

Okay.

And it looks like the CapEx was lower there in ‘17, correct?.

That’s right. We still expect that into receipt of fiscal ‘18, but the other item that winning additional DPEs, this Payments Commission Certificate of Filing, we believe that we may have to refile that as well..

Okay.

And then is there any impact to your previously -- your previous equity guidance I think it was $50 million for this year does the lower CapEx at NJNG impact that at all?.

Naturally that would shift..

It would, okay great thanks a lot..

Thanks Sarah..

Thank you. And the next question comes from Stephen Zambressi with Carlton [ph] Investment Management..

Hi guys thanks for taking my question..

Good morning, Steve..

Just on the earnings spreads that you provided, can you bucket $0.15 of NJRCEV the $0.15 of depreciation O&M in interest, can you bucket those among those three buckets?.

It’s about a third a third a third a third Stephen in terms of additional O&M depreciation and interest expense..

Is that O&M and D&A from the wind farms coming on, or is it….

That’s right..

I guess that’s the major driver..

Yes, the major driver there is the both planned and unplanned maintenance associated with the addition of wind farms..

Okay. All right that’s all I had. Thanks guys..

Thanks Stephen..

Thank you. [Operator Instructions] All right there is nothing more to present at this time. So we'd like to return the call to management for their closing comments..

Okay, thanks Keith. Thank you all for joining us this morning. As a reminder, a recording of this call is available for reply on our website. We appreciate your interest and investment in NJR and enjoy your day. Thank you..

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