New Jersey Resources Corporation (NYSE:NJR) Q3 2025 Earnings Call Transcript

New Jersey Resources Corporation (NYSE:NJR) Q3 2025 Earnings Call Transcript August 5, 2025

Operator: Thank you for standing by, and welcome to the New Jersey Resources Fiscal 2025 Third Quarter Financial Results. [Operator Instructions] Now I would like to turn the call over to Adam Prior, Director of Investor Relations. Please go ahead, Adam.

Adam Prior: Thank you. Welcome to New Jersey Resources Fiscal 2025 Third Quarter Conference Call and Webcast. I’m joined here today by Steve Westhoven, our President and CEO; Pat Migliaccio, our Senior Vice President and Chief Operating Officer of New Jersey Natural Gas; 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 2. These items can also be found in the forward-looking statements section of yesterday’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 yesterday. Steve will begin with this quarter’s highlights beginning on Slide 4, followed by Pat, who will discuss New Jersey Natural Gas highlights. Roberto, who will review our financial results, and then we will open the call for your questions. With that said, I will turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve.

Stephen D. Westhoven: Thanks, Adam, and good morning, everyone. Fiscal 2025 continues to be an excellent year for NJR, marked by disciplined execution and consistent performance across all segments. This quarter was no exception. NJR raised the lower end of its full year guidance increased CapEx projections driven by utility investments, advanced projects through the CEV pipeline and made regulatory progress while identifying multiple expansion opportunities at S&T. We reported robust investment at New Jersey Natural Gas under our SAVEGREEN program, investments that are delivering near real-time returns while helping customers manage their energy use. CEV placed 63 megawatts into service so far this year and will likely finish the year with close to a record amount of capacity placed into service while also maintaining a project pipeline of investment options that remains diverse and flexible.

In storage and transportation, we have reached a settlement in principle at the Adelphia Gateway rate case and expect resolution by the end of the year. At Leaf River, we continue to evaluate expansion opportunities that support future growth. Energy Services provide stability through fee-based performance from our asset management agreements. And finally, NJR Home Services was named a Top Ruud Pro Partner for the ninth consecutive year. This recognition is a testament to our entire team’s dedication to service excellence and meeting our customers’ home comfort needs with the installation of high-quality and reliable equipment. Turning to Slide 5 for more details on our guidance for the year. We are raising the lower end of our fiscal 2025 NFEPS guidance range by $0.05 to $3.20 to $3.30 per share.

This reflects strong operating performance across our businesses and greater visibility into full year results. The revised range, which is above our long-term 7% to 9% growth target, demonstrates our ability to execute through dynamic environments. On Slide 6, we present our updated NFEPS guidance by segment. New Jersey Natural Gas remains the strongest contributor to NFEPS benefiting from our recent rate case settlement and customer growth. CEV is expected to contribute over 20% of our NFEPS this year based on high-performing operating assets and the monetization of the residential solar portfolio. We are slightly narrowing the range of contributions across our business lines, consistent with our practice as the year progresses. These updates reflect outperformance in Energy Services and a modest change in the relative contributions from New Jersey Natural Gas and CEV.

Roughly 65% of our full year NFEPS is expected to come from utility operations, rising to over 70% when excluding the CEV gain related to the sale of our residential solar business. This shows how our platform is anchored in stable recurring earnings. With that, I’ll turn the call over to Pat to discuss New Jersey Natural Gas on Slide 7. Pat?

Patrick J. Migliaccio: Thanks, Steve. At New Jersey Natural Gas, customer growth continues to be consistent and reliable contributor to our performance. We now serve approximately 588,000 customers with over 90% of these customers being residential and the vast majority being located in our core counties, Monmouth, Ocean and Morris. These counties are experiencing solid population growth, steady housing starts and new commercial development. Our service territories remain among the most economically vibrant in New Jersey with stable trends and high demand for affordable, reliable energy. As these customers are integrated into our system, that drive recurring margin that compounds over time that supports continued capital investment.

I want to take a moment to highlight the importance of SAVEGREEN as part of our future investment. SAVEGREEN remains one of the most impactful and unique utility energy efficiency programs in the country. It serves as a model for how regular utilities can simultaneously deliver benefits to customers and shareholders. This quarter, we are raising our 2025 capital projections for SAVEGREEN by over 30%, bringing the expected range up to $90 to $95 million. This represents another year of record investment. This increase is driven by growing adoption of more efficient HVAC systems, installation and authorization for both residential and commercial customers. From a financial standpoint, SAVEGREEN investment benefits from an accelerated cost recovery mechanism.

This allows us to begin recovering our investment in real time, eliminating regulatory lag and improving capital efficiency. Strategically SAVEGREEN aligns with our decarbonization goals. It reduces customer bills, lower emissions and positions NJNG as a forward-looking utility committed to sustainability. It’s an example of how policy alignment, customer service and investor returns can coexist within a single program. We expect SAVEGREEN to remain a core element of NJNG’s capital strategy in the years ahead. As of third quarter, NJNG has invested approximately $383 million in capital projects, which we highlight on Slide 9. More than 47% of these investments are earning near real-time returns through mechanisms such as SAVEGREEN. These programs provide timely recovery and reduced the earnings lag traditionally associated with utility CapEx. Our capital allocation at NJNG is designed to support our 3 strategic pillars: safe and reliable service, customer-focused growth and clean energy leadership.

We maintained clear visibility into our capital plan, supported by a multiyear pipeline of planned work, strong regulatory relationships and predictable customer demand. Looking ahead, we expect NJNG to continue driving value through targeted capital deployment that aligns with reliability, safety, decarbonization goals and providing an appropriate return to our shareholders. With that, I’ll turn it back to Steve.

Stephen D. Westhoven: Thanks, Pat. I’ll move to a discussion of our other operating businesses, beginning on Slide 10 with Clean Energy Ventures. CEV continues to demonstrate the value of a diversified and flexible development model. Year-to-date, we placed approximately 63 megawatts into service, including adding over 30 megawatts since our last conference call. We’ve been closely monitoring the implications of the Big Beautiful Bill on the renewable sector. Our development pipeline is advancing projects through construction, and we are identifying attractive opportunities that will align with our investment criteria. Our current pipeline includes approximately 131 megawatts of solar projects scheduled to be brought into service in the next 2 years, representing approximately $350 million of investment with over 800 megawatts of additional investment opportunities in the future.

Our project pipeline includes a range of opportunities, varying in size, location and time line, and our agreements with developer partners are scheduled to preserve returns. These contracts give NJR the right but not the obligation to move forward with individual projects at our discretion. This approach gives CEV the flexibility to advance only those projects that are aligned with our long-term capital plan and offer the most attractive risk-adjusted returns. It also allows us to scale investment based on market dynamics, interconnection timing and return profiles, ensuring disciplined capital deployment and a focus on value creation. CEV plays a strategic role in NJR’s portfolio through disciplined return-focused investments aligning with the broader capital plan that remains anchored in our core utility and infrastructure businesses.

The sale of our residential solar portfolio earlier this year not only unlock value, but demonstrated the strength of our execution and the underlying quality of our assets. Solar remains one of the fastest and most efficient ways to answer the need for new generating capacity. With a robust pipeline, flexible capital approach and strong operational capabilities, we believe CEV is well positioned to address this need while contributing to NJR’s long-term growth. Now let’s turn to our Storage and Transportation segment. Our portfolio of midstream assets, Adelphia Gateway and Leaf River positions us to serve growing energy demand in constrained markets with highly reliable infrastructure. At Adelphia, we reached a settlement in principle with the FERC staff and the customers participating in our section 4 rate case.

We expect to file an offer of settlement with FERC in the coming weeks and remain optimistic about reaching a resolution this year. At Leaf River, we’re advancing our capacity enhancement efforts and evaluating multiple expansion opportunities for both existing and new caverns aimed at delivering attractive long-term returns. As noted on our last call, we recently completed a nonbinding open season for a potential fourth cavern which drew encouraging interest. As we assess the economics and refine the design criteria at the site, our due diligence has identified several organic growth opportunities. We expect to advance the subset of these projects and begin the regulatory process at FERC in the coming months. Market conditions for storage remain favorable, and the site’s structural and geographic advantages reinforce its long-term value.

As part of NJR’s broader strategy, our S&T business complements both our utility and clean energy platforms, contributing stable fee-based cash flows and offering accretive reinvestment potential. With that, I’ll turn the call over to Roberto for a review of our financial results. Roberto?

Roberto F. Bel: Thank you, Steve, and good morning, everyone. Slide 13 shows the main drivers of our NFE for the third quarter and year-to-date period of fiscal 2025. In the third quarter, we reported an NFEPS of $0.06 per share compared with a net financial loss of $0.09 per share last year. Year-to-date, NFE is $313.4 million or $3.13 per share, an increase of nearly 55% year-over-year. Drivers include higher utility margins at New Jersey Natural Gas post rate case, a net benefit of approximately $0.30 per share for the sale of our residential solar portfolio during our fiscal first quarter, improved performance in our Storage & Transportation business and storm results from Energy Services during the winter period. These results show the resiliency and balance of our business model.

Now let’s move to Slide 14, where we will discuss NJR’s capital plan. For fiscal 2025 and fiscal 2026, our planning capital expenditures ranging from $1.3 billion to $1.6 billion, which aligns with our long-term NFEPS growth target of 7% to 9%. We increased the lower end of our capital plan from our prior disclosures, driven by better-than-expected SAVEGREEN deployment at the utility. We now expect spending between $650 million and $770 million in capital investments during fiscal 2025. We plan to update our fiscal 2026 capital plan in November consistent with our typical time line. This update may include several areas of potential incremental upside, including SAVEGREEN. These investments align with our long-term strategy to enhance utility infrastructure, expand Clean Energy investments and optimize our Storage and Transportation capabilities.

As highlighted on Slide 15, our strong balance sheet and disciplined financial management remain foundational to NJR’s long-term strategy and our ability to invest through various economic or market conditions. We’re projecting an adjusted FFO to adjusted debt ratio of 19% to 21%, reflecting our conservative approach to balance sheet management and ensuring ongoing access to low-cost capital. For fiscal 2025, we project cash flow from operations between $460 million and $500 million. This robust cash generation is supported by stable utility earnings and contributions from CV, S&T and Energy Services. In terms of liquidity, we have $825 million of credit capacity across our credit facilities. This flexibility positions us to fund our capital plan and manage working capital needs.

Our debt maturity profile is well laddered with no outsized refinancing risk in the near term, limiting interest rate exposure. Our cash flow strength, liquidity position and prudent financial policy support NGR’s ability to fund growth, maintain flexibility and preserve shareholder value across a variety of market conditions. With that, I’ll turn the call back to Steve for concluding remarks on Slide 16.

Stephen D. Westhoven: Thanks, Roberto. Fiscal 2025 has been an excellent year for NJR. In the third quarter, we delivered solid operational and financial results, raised the lower end of our full year earnings guidance and advanced key strategic investments across all of our core business lines. These businesses work together to form a well-balanced enterprise that generates predictable earnings in a peer-leading long-term growth rate, supports consistent capital deployment with the ability for incremental upside and creates meaningful value for customers and shareholders alike. Just as important, our success this year has been supported by a healthy balance sheet, ample liquidity and disciplined capital allocation. That financial strength allows us to maintain flexibility in how we fund growth, manage risk and respond to changing market conditions.

And at the core of all this is a team of dedicated employees who show up every day to serve our customers and communities. I want to give a special thank you to our employees out in the field, working through 95-degree heat this summer to ensure our customers are safe and comfortable. Your hard work does not go unnoticed. To conclude, we believe NJR is well positioned to deliver attractive long-term risk-adjusted returns. Our track record reflects not only the ability to navigate changing environments, but also to allocate capital to where it matters most serving the evolving needs of our customers. So with that, we’ll now open the line for questions.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Richard Sunderland with JPMorgan.

Richard Wallace Sunderland: For the Adelphia rate case, what would be the year-over-year impact of the settlement in 2026? And are there any other key considerations here?

Stephen D. Westhoven: Richie, so right now, we’re still in the, I guess, the middle of the settlement and none of those details have been made public at this time. Negotiations has been constructive. I think we’re nearing an end, but we’re not going to divulge any more information around that at this point. When we reach settlement obviously, we’ll share what we can.

Richard Wallace Sunderland: Understood. Fair enough. And then turning to CEV, the 131-megawatt target over the next 2 years, how have you sized that relative to initial expectations last fall when you rolled out your ’25 and ’26 capital plan? And then I guess, similarly, has OBBB changed your expectations at all around CEV?

Stephen D. Westhoven: So I’ll take that in a few different parts. One, we’re trying to improve the way that we report the future capital that we’re going to invest in CEV. So 131 megawatts is really what’s under construction or really nearing construction at this point in time. So we’ve got some good visibility on the investments that we’ll make there over the next few years, and you’ll see those come into service. Addressing OBB and all the other questions that are around that. We just talked about our capital plans and the clarity of that over the next few years. We’ve got high confidence in the projections that we’re sharing with you, and that really drives our 7% to 9% growth rate. So when you look at OBB and you look at its potential impact on our total CapEx, you’ll notice the majority of our infrastructure, our assets that deliver natural gas are natural gas related and that’s reflected in our earnings mix.

In fact, over 80% of our CapEx in the past 5 years has come from natural gas business. And we expect the majority of our growth still to continue in that space. So you heard Pat talk today about the energy efficiency program and the growth that’s there. We talked a little bit about the potential expansion at Leaf River and the organic growth of our core businesses. And we feel that this is going to drive the value across all of NJR’s assets. So to put it into context, a majority of the dollars that we’re going to spend, we’re going to be in our gas-related businesses. So regardless of how OBBB turns out, we remain confident that we’re going to hit our capital targets over the next few years through our portfolio of businesses and through the examples that I just had shared with you.

So obviously, that flexibility and our ability to invest in multiple platforms is going to drive our growth going forward. And of course, that’s driven by the fact that you’ve got some really — some very real growth coming in the electric side of the market that we’ve all talked about all this time. So all of our infrastructure is going to be able to participate in that. We still think solar is important. It’s the quickest capacity that you can bring to the market. But overall, just to put it in context, we feel good about our businesses moving forward and our ability to invest and grow.

Operator: And your next question comes from the line of Chris Ellinghaus with Siebert Williams Shank.

Christopher Ronald Ellinghaus: Steve, the expansion of Leaf River, do you have any sense after the open season when a decision time line might look or what a decision time line might look like?

Stephen D. Westhoven: Yes. We’re — we said during the call that we expected in the coming months to be making a filing at FERC. And right now, we have another open season, a binding open season that’s taking place at Leaf River. So we’re narrowing in on exactly what the expansion looks like and certainly, size, scope, customers and things like that. So yes, to me, this is something that hopefully will take place over the next few months, depending on how these processes turn out.

Christopher Ronald Ellinghaus: And is there any incremental color you can add on S&T’s relative strength this quarter?

Stephen D. Westhoven: I think it’s just that it’s a strong natural gas market. We saw weather certainly has contributed quite a bit. If you look at transportation demand and storage demand, balancing extremely hot days, the things that we talk about all the time, this is real growth in the energy markets, and you need infrastructure to be able to supply that. And natural gas is a flexible fuel that’s able to supply those needs when it’s called upon.

Christopher Ronald Ellinghaus: Going back to the Adelphia case, it’s certainly a really big catalyst for 2026. When you make your filing, do you anticipate you’ll do a release for that?

Stephen D. Westhoven: When we — you say when we complete the — I guess, the settlement in the rate case and everything goes into effect? Yes, there’ll definitely be a public disclosure at that point in time. We’ll have to update tariffs. There’ll be a number of things that will be required to do. But certainly, we’ll talk about it.

Christopher Ronald Ellinghaus: Roberto, the utility gross margin for the quarter was a little bit bigger than I was expecting. I’m guessing that, that just has to do with some variance in my seasonality expectations for the rate case. But can you break out at all that $25 million case versus sort of organic growth?

Roberto F. Bel: Yes. No, maybe what I would say on that, Chris, is you do have benefits certainly from the new rate case, but then also, we have been making a lot of progress on the OpEx side. So it’s a combination of the two.

Christopher Ronald Ellinghaus: And lastly, I think you sort of intimated this, Steve, vis-a-vis the tax bill and what the outlook for CEV might be going forward. But the pricing in PJM is pretty — was very strong. So are you kind of thinking part of your thought processes you have fungibility of CapEx across the board. But are you also thinking that sort of the pricing for solar is going to equalize to a certain extent, where power prices are headed and solar project economics will also adjust over time.

Stephen D. Westhoven: There’s certainly going to be a re-rationalization in this market on what costs are. And you’re right, prices have been moving up in the electric side of the market, and that’s driven kind of the value of all infrastructure. This really placed into our general premise that infrastructure is going to become more valuable and NJR owns a lot of infrastructure that you’re able to organically expand and participate in those markets. So it’s been a thesis that we’ve been talking about for a while, and we continue to make investments and grow the company basically feeding into that real market demand. So long-winded way of saying, yes, the demands of the market, the pricing has to support new investment, and that’s occurring real time.

Operator: [Operator Instructions] Your next question comes from the line of Travis Miller with Morningstar.

Travis Miller: And just following up on the Leaf River conversation and the expansion. Are there a series of discrete steps that have to be done for the expansion versus — it sounds like you’re also doing an open season for some of the existing capacity. What are the steps in terms of the expansion that you’re looking at that would be next, the FERC filing and then is it up to you to decide an FID?

Stephen D. Westhoven: Yes. I mean really we will get the customers lined up and what services that they need, run through your feed studies to see what equipment and what construction needs to take place. That’s all in motion right now. And then there’ll be a FERC filing of that approval and then that will set in motion to construction to be able to build the services and then go into commercial operations to meet the customers’ needs.

Travis Miller: Okay. And at what point in that process would you know around the CapEx number that you either be willing to share or be putting explicitly into your CapEx forecast. At what point in this process for the expansion would you expect to have some kind of number?

Stephen D. Westhoven: Yes. I think that’s — that will be in the coming months, but I hope to have it done. We normally update our CapEx schedule in November, and I would expect that would take place then if everything lines up the way that we’re expecting at this point.

Travis Miller: Okay. Great. Then a different topic, the dividend. Traditionally, the Board has considered a dividend increase here in the next couple of months. Given the EPS that you’ve had over the last few years, how do you think the Board is going to look at not necessarily the payout ratio, but just generally capital allocated to the dividend given again, your payout ratio will be pretty low on this year’s earnings, but then you also talked about the base earnings number. How is the Board thinking about that base versus actual?

Stephen D. Westhoven: Yes. Travis, we typically view that related to our historical growth rate, right? So in years of outperformance that payout ratio would become a little bit less. I think history is a good guide for the future. In this case, we typically stay pretty tight to how we’re growing the company longer term and the dividend will follow that. And you’ve seen we’ve increased the dividend for the past 23, 24 years, and we expect to continue to do so. So I think historical performance would indicate how we act in the future.

Operator: And your next question comes from the line of Robert Mosca with Mizuho Securities.

Robert Mosca: Just wondering if you could — just wondering if you guys could speak to the higher CapEx in SAVEGREEN. Just wondering what’s driving the stronger demand for that program. And early days here, but could this portend anything around the size of future durations of this program as far as what gets approved?

Stephen D. Westhoven: Thanks, Robert. I’m going to ask Pat to take that question.

Patrick J. Migliaccio: So the January marked the start of the new triennium as we refer to it in the energy efficiency program. And it’s a combination of both strong demand for the market on the residential side for more efficient HVAC systems, but also on the commercial side and the direct install program, which is a newer feature of the SAVEGREEN program. And combined with, candidly, our team’s really strong execution of the program led to the guidance this year. And as we’ve already indicated, we typically update CapEx guidance in 2026. So we’ll make any indications about any future SAVEGREEN increases at that point in time. But just more broadly, as we think about the strategic advantage of the program at the risk of repeating my remarks, it really is a win-win-win, right?

We’re able to lower customers’ bills, which is particularly important in a period we’re focused on affordability, while — at the same time, reducing emissions, it is a strong decarbonization tool. We have a toolkit. And as we pointed out a couple of different times, this is one of the real-time recovery mechanisms that we have at our disposal.

Robert Mosca: Got it. And for my follow-up, it seems like the permitting environment for gas infrastructure in the Northeast might be easing a little bit. Is there anything NJR will be interested in, be it growth projects or trying to secure system or supply redundancy to support some of the customer growth you guys are experiencing and maybe improve reliability?

Stephen D. Westhoven: I mean, these are programs that we have continued to make investments, reliability, expanding the system, making sure you hit customer growth numbers that have been great over the past few years. So I would expect kind of more of the same permitting and conversations around it. At times have been difficult in the past, but we’ve always been able to achieve that investment and to build the infrastructure that we need. So I just expect it to continue.

Operator: That concludes our question-and-answer session. I will now turn the call over to Adam Prior for closing remarks. Adam?

Adam Prior: Thank you, and thank you all of you for joining us this morning. As always, we appreciate your interest and investment in NJR and have a good rest of your day.

Operator: That concludes today’s call. Thank you all for joining. You may now disconnect.