New Jersey Resources Corporation (NJR) Q1 2026 Earnings Call Transcript
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Overview
The earnings call highlights strong financial performance with increased NFEPS guidance, consistent dividend increases, and strategic investments in infrastructure and clean energy. The Q&A section reveals optimism about market demand and regulatory support, despite some vague responses. The company's strong financial metrics, coupled with optimistic guidance and a positive shareholder return plan, suggest a positive stock price reaction. However, the lack of clarity in some responses slightly tempers enthusiasm, keeping the sentiment from being strongly positive.
Key Financial Performance
Net Financial Earnings (NFE) Reported NFE of $118.2 million or $1.17 per share for the quarter, reflecting disciplined execution and solid performance across businesses. Higher contribution from the utility due to new base rates being in place for the entire quarter in fiscal 2026. Offset by a lower CEV contribution given the gain on the sale of residential solar assets in the prior year period.
Capital Expenditures (CapEx) Deployed approximately $119 million across businesses during the quarter. New Jersey Natural Gas represented approximately 70% of total CapEx for the period with investments directed towards strengthening core infrastructure, enhancing system safety and reliability, and supporting continued customer growth.
Clean Energy Ventures (CEV) Capacity Added approximately 10 megawatts of capacity during the quarter. Looking ahead, expected to grow in-service capacity by more than 50% over the next 2 years. Proactive safe harboring initiatives to preserve federal tax incentives further strengthen the position in the marketplace.
Storage and Transportation (S&T) Earnings Expected to double NFE over the next 2 years, driven by strong recontracting in both Adelphia and Leaf River. Filed a FERC application to increase Leaf River's working capacity by more than 70% over the next few years. Already secured a long-term contract covering the initial capacity expansion at existing caverns.
Adjusted FFO to Adjusted Debt Ratio Projected to remain around 20% for the next 5 years. Energy Services outperformance provides meaningful additional cash flow, enhances ability to manage capital spending, and maintains strong credit metrics.
Fiscal 2025 CapEx Deployed $850 million across businesses. New Jersey Natural Gas represented approximately 64% of total CapEx with investments directed towards strengthening core infrastructure, enhancing system safety and reliability, and supporting customer growth. Fiscal 2025 CapEx for CEV came in well above expectations, reflecting accelerated progress.
Dividend Increases Marked 30 consecutive years of dividend increases, underscoring confidence in the long-term plan.
Energy Services Performance Generated significant value from volatility created by prolonged cold temperatures. Strategically located assets contributed to the outperformance, allowing an increase in fiscal 2026 NFEPS guidance by $0.25 per share to a range of $3.28 to $3.43 per share.
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Operating Highlights
Clean Energy Ventures (CEV): CEV plans to grow in-service capacity by more than 50% over the next 2 years. It has a strong project pipeline and is leveraging safe harboring to maintain investment tax credits.
Residential Solar Portfolio: CEV placed 93 megawatts of new commercial solar capacity into service in fiscal 2025, expanding its portfolio to 479 megawatts. It also sold its residential solar assets, contributing to financial performance.
Customer Growth at New Jersey Natural Gas: Strong customer growth driven by new construction and conversions. For example, a new housing development in Monmouth County will add 350 new customers.
Leaf River Expansion: Filed a FERC application to increase Leaf River's working gas capacity by over 70% by 2028, including the development of a fourth cavern. This expansion is supported by long-term fee-based contracts.
Energy Efficiency Programs: SAVEGREEN program helps customers reduce energy usage by up to 30%, saving hundreds of dollars annually. Over 110,000 customers have participated.
Operational Resilience: During extreme cold weather, NJR's systems operated safely and reliably, delivering record-setting demand without interruptions.
Capital Deployment: NJR plans to invest $5 billion over the next 5 years, a 40% increase compared to the last 5 years. 60% of this will be allocated to New Jersey Natural Gas.
Financial Management: Maintaining a strong balance sheet with no need for block equity issuance. Adjusted FFO to adjusted debt ratio is projected to remain around 20% for the next 5 years.
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Risk or Challenges
Market Conditions: The company faces challenges from extreme weather events, such as prolonged cold weather, which can lead to higher gas usage and increased customer bills. This could impact affordability and customer satisfaction.
Regulatory Hurdles: The company operates within a regulated framework and must navigate regulatory approvals, such as FERC applications for capacity expansions. Delays or unfavorable outcomes in these processes could hinder growth plans.
Economic Uncertainties: Rising energy costs and affordability concerns in New Jersey could impact customer demand and the company's ability to maintain growth.
Supply Chain Disruptions: The company relies on advanced procurement strategies to hedge against price volatility, but supply chain disruptions or unexpected demand spikes could strain resources and impact financial performance.
Strategic Execution Risks: The company has ambitious growth plans, including a 40% increase in CapEx over the next five years and significant capacity expansions. Failure to execute these plans effectively could impact financial and operational performance.
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Guidance & Outlook
Fiscal 2026 NFEPS Guidance: Guiding to NFEPS of $3.03 to $3.18 per share, consistent with a long-term 7% to 9% growth rate, with room for upside.
Capital Deployment: Expecting to invest approximately $5 billion over the next 5 years, with 60% allocated to New Jersey Natural Gas. This represents a 40% increase compared to the last 5 years.
New Jersey Natural Gas Growth: Positioned for high single-digit rate base growth through 2030, supported by investments in safety, reliability, and affordability.
Storage and Transportation (S&T) Growth: NFE expected to more than double by 2027, driven by favorable recontracting at Adelphia and Leaf River. Plans to increase Leaf River's working gas capacity by over 70% by 2028.
Clean Energy Ventures (CEV) Expansion: Capacity expected to grow by more than 50% over the next 2 years, supported by a robust pipeline of safe harbor projects.
Fiscal 2026 Revised NFEPS Guidance: Increased guidance to $3.28 to $3.43 per share due to Energy Services' outperformance during extreme weather events.
5-Year CapEx Outlook: Reaffirmed $4.8 billion to $5.2 billion through fiscal 2030, with over 60% dedicated to the utility and the balance to CEV and S&T.
Energy Services Contribution: Energy Services' outperformance during extreme weather events enhances cash flow and raises fiscal 2026 NFEPS guidance.
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Shareholder Return Plan
Dividend Increases: The company marked 30 consecutive years of dividend increases, reflecting confidence in its long-term plan.
Shareholder Dilution: The company emphasized that its capital plan requires no block equity issuance, ensuring minimal dilution to shareholders.
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Key Q&A
Q:Can you discuss the impact of weather events on Energy Services' performance and the potential for further upside?
A:The Energy Services Group's guidance is based on results to date and estimates through January. Future weather events are not incorporated, but January was constructive for results.
Q:Do you have contracts for the capacity expansion from 43 to 55 Bcf at Leaf River, and are there opportunities for further expansion?
A:Contracts are in place for the compression and existing capacity expansion, but not for the fourth cavern expansion. The market is constructive, and further expansions are being explored based on market demand and signed contracts.
Q:How should we think about New Jersey affordability efforts and their impact on future rate case filings and regulatory strategy?
A:Affordability is a priority, with efforts like hedging gas, driving energy efficiency, and energy assistance. There are no immediate plans for new rate cases, but the company will work with the administration to address capacity needs and shared goals.
Q:What is the outlook for the CEV business and the impact of recent regulation or legislation?
A:Permit reform and accelerated interconnects are encouraging for developing safe harbor assets in New Jersey. The company is working with the administration to capitalize on these tailwinds and will update investors as progress is made.
Q:Can you characterize the level of commercial interest in the fourth cavern expansion and its expected capital intensity and timing?
A:Open seasons have been constructive, and pricing supports the development of the fourth cavern. Construction is expected to start around 2029, with existing expansions coming online by 2028. Brownfield expansions are cheaper and prioritized over greenfield.
Q:What are you seeing in the solar pipeline outside of New Jersey, and has the EO changed your geographic diversity strategy?
A:About 50% of forward-looking projects are outside New Jersey. The company continues to pursue projects with favorable returns and regulatory environments, focusing on quickly bringing solar capacity to market.
Q:Can you provide color on the proportionality of recontracting price improvement versus capacity growth in storage and transmission?
A:Earnings from storage and transmission are expected to double by 2027, driven by recontracting and rate increases. Expanding existing infrastructure is prioritized due to cost efficiency and market demand.
Q:Can you elaborate on CEV's technology opportunities for upside?
A:Grid-connected facilities and interconnections are valuable for distributed generation and battery power. These assets can quickly bring capacity to the grid, with brownfield infrastructure providing a cost advantage.
Q:Do regulators appreciate the benefits of your hedging strategy, and how do you reinforce its value proposition?
A:Regulators are aware of the hedging strategy's benefits, which mitigate costs for customers by avoiding high spot prices. These programs are recognized and supported within the regulatory framework.
Q:Was the $0.25 guidance raise entirely due to Q2 expectations or Q1 outperformance?
A:The guidance raise was based on significant performance in January, reflecting results through the end of that month.
Q:Is the CapEx for contracted compression and existing expansion included in current guidance?
A:Yes, the CapEx for these projects is included in the current guidance, with expenditures planned for 2026 and 2027.
Q:Would you consider rate base solar or other energy generation in New Jersey?
A:The company is open to rate base generation if it aligns with lowering customer costs, improving capacity, and having the right risk profile. However, no discussions are currently underway.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the commercial interest level for the fourth cavern expansion, using vague terms like 'constructive' without quantifying interest or pricing. Additionally, the response on CEV's technology opportunities lacked clarity on specific plans or timelines for implementation.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CEV ST
Clean Energy
Energy Services
Energy Ventures
FERC
Jersey Natural
Leaf River
NFE
NFEPS
NJR
Natural Gas
New Jersey
Slide
asset
balance sheet
business
capacity expansion
capacity year
contract
end
energy
gas
harboring
home
period
price
rate
script
utility
weather event
winter
NJR Transcript
New Jersey Resources Corporation (NJR) Q1 2026 Earnings Call Transcript
Positive2-3
The earnings call highlights strong financial performance with increased NFEPS guidance, consistent dividend increases, and strategic investments in infrastructure and clean energy. The Q&A section reveals optimism about market demand and regulatory support, despite some vague responses. The company's strong financial metrics, coupled with optimistic guidance and a positive shareholder return plan, suggest a positive stock price reaction. However, the lack of clarity in some responses slightly tempers enthusiasm, keeping the sentiment from being strongly positive.
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Unknown11-20
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New Jersey Resources Corporation (NJR) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call presents strong financial performance with growth in NFE and CEV solar capacity, increased CapEx, and consistent dividend hikes. Despite economic uncertainties and strategic execution risks, the raised fiscal 2025 NFEPS guidance and strong cash flow outlook are positive indicators. The Q&A highlights robust contract renegotiations and growth potential, albeit with some management vagueness. Overall, the positive elements outweigh the concerns, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
New Jersey Resources Corporation (NJR) Q3 2025 Earnings Call Transcript
Positive8-5
The earnings call summary reflects strong financial performance with raised NFEPS guidance and robust cash flow projections. The SAVEGREEN program and solar investments indicate growth, while shareholder returns are addressed with potential dividend increases. The Q&A reveals confidence in capital plans, though some uncertainty remains in regulatory outcomes. Overall, the raised guidance, strong cash flow, and positive shareholder return strategies suggest a positive market reaction.
NJR Slides
New Jersey Resources Q1 2026 slides: raises guidance despite NFE decline2026-02-02
New Jersey Resources Q4 2025 slides: 11.5% annual earnings growth despite quarterly miss2025-11-19
New Jersey Resources Q3 2025 slides: raises earnings guidance, maintains 7-9% growth target2025-08-04
New Jersey Resources Q2 2025 slides: Boosts guidance on utility and clean energy growth2025-05-05
NJR Report
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