South Jersey Industries (SJIIU) 9 Aug 192019 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Q2 2019 South Jersey Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]

I would now like to introduce your host for today's conference call Mr. Fidell. Dan

sir. begin, may You

Officer, you, Kevin. second joined welcome SJI's management Chief everyone, by members several of our Good earnings conference morning, senior Executive and quarter President I'm Renna, and well call as Mike additional to team. our Thank as and today webcast.

provide XX-Q our slides using and Our of morning close are and earnings of non-GAAP Reconciliations presentation the website on measures www.sjindustries.com. were review release that filed on The at release both the associated earnings earnings this GAAP economic an of our appear in-depth the issued GAAP of documents. call in the to comparable and economic market also basis, the accompany and yesterday measure the both available after non-GAAP earnings.

that these today's references SEC. factors, various a SJI. and the Actual important will be note company's Forms with expectations, and from me XX-Q materially statements discussed including by differ XX-K on those we throughout those opportunities file making plans call indicated as results for in future the to of Let result may

take that our with guidance remarks. segments earnings I'm that, And then will outlook. CEO, questions. final After introduce financial Cielo our of your review to and and sheet. we'll Officer Chief Hernandez, current SJI's Financial performance, then balance some will offer who the pleased Mike Renna, individual be will our performance said, discuss to our happy Mike

with And me let turn to that introduction, over now it Mike.

our modernize with utilities, making you second that transformation and reliable results for on continued infrastructure am we to our natural strong pleased meet the all system and quarter are our demand thanks investments clean I critical Across proceeding of line report in and for to to are joining affordable efforts and Dan, today. our gas. us track. Thanks, were that expectations

a and The Elkton integration remains largely process. Elizabethtown seamless of

continue non-regulated of Accordingly, at all of and earnings with visible executed to and regulatory which and planned Our highly a repositioning transition XXXX guidance. non-core company, support we reaffirming initiatives and pace, as our flows regulated share our the our per businesses cash monetization are being today XXXX more economic steady are a earnings.

into update to several quarter I key want we pieces on financials, dig strategic an transformation. you of give second the our Before

As I and mentioned, of Elkton going to the efficient Elizabethtown work thanks remains the well. a to is integration QX our full It with of dedicated be XXXX. process, very in on completed employees, track hard integration highly

approved million system discovery In rates. of is The revenue June, including front, steel. of regulatory to $XX iron the similar are we in petition X-year was BPU, authorizing that infrastructure BPU the Gas track true-ups. with annual company's the million a very phase. approximately Elizabethtown AIRP and requesting recover of a program On filed XXX are replacement in is modernization million program case increase proceeding currently program and currently not improvements by $XXX Jersey miles This $XXX April, for the bare replacement Elizabethtown in South cast a to in aging base on

to with discussions in in a order prior months final precedent the followed begin line settlement expect coming We cases. from by

Finally, continue assets pace. non-regulated steady of the on front, a our the financial at sale non-core

retail strengthen our gas the to sheet. and and we to our year, assets the Over sold last solar proceeds debt have our using repay balance assets

the further announce As progress during our quarter. remaining regarding non-core third businesses previously communicated, we expect to

focused of building performance. transformation year, a strong this on we regulated Throughout foundation

see gas. to our and We for demand by encouraged continue are strong pleased we natural with progress the

XXXX are As a result, reaffirming we earnings of share. $X.XX guidance economic to per our $X.XX

Our priorities the XXXX of unchanged. balance for remain

effectively winding down TSA significant business from Elkton regulatory executing including integrate cost the our effectively initiatives with Southern, proceedings. and acquisitions, and transformation savings to continuing on focused are our our our achieving of pending We Elizabethtown

economic operations XXXX guidance investment additional contributions $X.XX, our of our at reaffirming utilities, by productivity business $X.XX non-utility infrastructure customer earnings improved also driven from growth and our from are to per initiatives. and and strong share We gains transformation our efficiency

does unchanged, commitment to as Our strategy earnings. regulated high-quality our remains

the Plan, of requires Master goals recognize aspirational sustained agility. New of Jersey's and also innovation We Energy level a

We look with promotes solution and forward key all deliver Murphy, working the state. leverage the BPU, environmental to the and to of the a reliability natural economic of balanced stakeholders and affordability goals Governor that to gas both

I'll over turn to operational our it to With Cielo that, review performance.

you, Thank everyone. Good morning, Mike.

and I Dan that information slide As detailed GAAP regarding release you recommend deck provide that mentioned, earnings earnings. review the information.

share $X.XX Management and second Gas. our per The and quarter variance business a reduction wholesale E-town earnings. XXXX. financing believes asset For the reflects profitability on addition per non-GAAP economic operations. this in and Jersey measure we'll operations valuable associated offset from by this of impact, [ph] with lower discussion into per loss provides South share $X.XX share earnings increased of focus measure partially from This economic insight our Elkton compared of call, our sales SJI's performance. was results is non-core

utilities reflects positive gas E-town per compared addition per replacement in $X.XX the loss $X.XX Our share of of of investments for XXXX. infrastructure Elkton and operations by customer and contributed roll-in XXXX earnings in share The with July the acquired in a growth. offset variance largely

a over related average. $X.XX growth per at the earnings was close at last project. reflecting X.X% PennEast that Midstream XX national to our rate consistent were remains pipeline above growth customer months, share, Net the utilities AFUDC

mild operations. tighter to new earnings Energy compared our per operations loss driven of year. a rules. weather reflects pipeline share contributed non-utility The of $X.XX Group and asset results economic last decline limited operating breakeven by to spreads, Turning opportunities

legal by with which economic share XXXX off in a associated XXXX. contracts, impacted to roll of in year. loss several share results Energy last Services also $X.XX attributed per were with positive per begins earnings $X.XX headwinds Second quarter compared

Elkton. in Our segment of last E-town economic costs loss for share per with breakeven acquisition other year, $X.XX earnings financing compared a contributed reflecting and and

capital to Turning spending. now

XXXX. and to committed strength remain metrics. credit improving million and we capital million $XXX on than We track spending remain $XXX more the balance around totaled sheet of expense year-to-date for Our in our in

with As of January of in capitalization million This $XXX more June at equity our repayment significantly sale. XX, and up than in issuance XX.X% compared December to for XX.X%, forward XXXX. equity debt a asset the XX, XXXX total reflects non-core was

XXXX. includes non-GAAP XXXX convertibles As growth plan of equity to previously our $XXX.X XX.X% at units total in was our our and equity December mandatory conversions, a adjusted communicated, million June Including at capitalization due ratio XXXX. XX.X% XX, XX, measure

That concludes back to my performance now sheet. balance concluding will financial it and our for his I of review remarks. turn Mike

Cielo. you Thank

I want day want strong to that and certainly component work do while the our the past to take Department you. full questions my is up before that But with agree growth that key we've review each execute you thank continue more permitting to Protection all could they do to a watch. Environmental their their outlined precedent conclude have with complete a of We they duration our complete year of we I application. year employees quickly. some New X,XXX path they will process The that approximately remarks, optimistic address the remain for partners our that we regarding may their to dedicated outstanding I it to of As Jersey And certainly for for PennEast. consider open the has up review, questions, for to

outcomes range for $X.XX of you our economic earnings including want to I various business remind guidance our the at delay to XXXX that from contemplates PennEast. said, a $X.XX That segments, potential

regulatory business our communicated, the receive pending we next example or we better-than-expected expect witness higher on of the our previously from spreads tight will of efforts would be transformation range outcomes As our to an level synergy a initiatives, of currently from XXXX end expansion higher if benefits winter. wholesale for achieve

important wholesale range, PennEast beyond of lower XXXX, or were to already be than low levels. on should timing remain be XXXX benefit savings Conversely, tighten into unchanged, for margins benefits from were significantly regulatory business the XXXX remember PennEast below It's expect face transformation the the we value of realizing if project more -- if delays SJI face of our pushed in-service but would expectations, the to the of our an cost outcomes XXXX. would delay, and would the to end additional ultimate realization or that

to our we ready prepared line that the for remarks and questions. Operator are now concludes open

first Capital. Chris from question comes Williams Our Ellinghaus Instructions] with [Operator

are morning. How Good everybody. you? Hello

Good morning Chris.

XXXX, as potential But you XXXX, can of I that range? this your what but would end range for were us know timing of And certainly a about talk range about to the inside you obviously, pushed the everything end. of that would be discussing sort want lower Mike put don't give PennEast the if little timing off was at color upper what you if into in reflects? it you

our get our which us does range XXXX construction would the a Yes. earlier past Sure. we than Upper we've be begin guidance. in end precedent would follow and would into DEP built that than year less enable to in of permits

that you XXXX as from the months date. just the operations or to anticipated months, XX certainly push back extent late little our it XX beyond bit And would those a if mentioned full commercial takes

months? of also couple delayed Okay. little did give you being color Can in of survey of you sort a us a by hurdles kind what see the work

we we're do as to that felt hurdles prudent the out as process completing play surveys. the any let We really far itself to face mean we just was didn't -- I completion we reaffirmed it way the in to poised sitting -- the the submit application when shortly. district think they court. And of very permits decision, when our I we the and FERC that accelerated

you on be Can on request the on types might docket? in getting us Or tenor us you the any color kind on seeing Can that about -- give you're talking process in you color the what Okay. Elizabethtown's any color were give that discovery you're of any case. the you're -- surprising? or of

Steve ask going Cocchi I'm answer Yes. to that. to

Chris. Hi

we're not out a discovery straightforward that as infrastructure We've case phase that the not So, anything ordinary. of at case and end this changed. point always seeing base viewed towards fairly has rate this the of

discussions entire hopefully, timeframe up cases. the hopefully, with the get discovery this the gets within have process we resolution wrapped a and soon. fall parties commence that to We'll So,

color seems is give sales. little that be assets? to last non-core What's dragging on bit. that process One thing on about Okay. on going for And asset us also proceeding? the those can how a market Mike you in any

have It's longer just you that's commercially some getting or tell worked approvals. of just these little of there's anticipated. that through have has had It's be sales I some we can what have that taken to delays than -- terms deals consents with. kind contractually. that that a necessary caused I'm conditions the and and these concerned of just And nothing the

solar frame third stuff well? quarter Okay. piece sort call I'll as is it the in time remarketing -- that that you're the of remaining including sort And the of of

Yes. are. We

Thanks guys. Okay, great.

Chris. Thanks

Chris. Thanks

Turnure next from with comes Our question Christopher JPMorgan.

Hi Chris.

Chris. Hey

range a XXXX that Good because your the midpoint operations I on speak wanted step-up such that midstream to is the to a million could bit you maybe date? follow-up morning there's of But I million XXXX outcomes predicated Has guidance comments. of certainly itself in segment little PennEast of the in there on commercial that year-over-year? about guys. respect more $XX perhaps a $XX guidance. just big a

would intent midpoint. of guiding XXXX Yes, the mean on we I I again operations range But mean million towards have commercial the a been the set date. the based $XX with

And a in that of midpoint put we as reflects assumptions there. could set as conservative

our that with the in range. still that we're anything positives believe range enough So, this towards offsetting maintaining of in guiding we the confident plan are lower We're point because at comfortable we're still not end there our the time guidance. XXXX or

Okay.

proceed I each PennEast in guess comfortable if segment's but your perhaps as are is fast that slides. hard guidance other where off, areas midpoint And stemming there things shouldn't and Midstream up So, we year-over-year the walk making kind as quickly to difference. might implied of in you the feel in not of stick kind certainly with do be from

say. Yes, that's Well what to meant I said.

my And equity question financing. second on Okay. is then Perfect.

in markets intentions there valuations slightly this that equity pulling better be remain that of pretty kind is by benefit getting clear guidance healthy, the anything if somewhat 'XX both case what than is might since just XXXX otherwise at time, might forward, general of 'XX there point You're healthy kind are. that given capital that of kind somewhat you're in remain and that utility acknowledging cost your you in you waited? But your and of need

those considered Yes. Chris. I mean of we've all certainly, factors

tied think is where project is for. right we to are approval I equity that getting specific a we anticipate that now

needs in to need build And so, at least approval would that the work and to prep the we done earnest would XXXX. for we begin be in project, construction

my I and let early, play equity So, far potentially the that we out the as make sure out certainly -- that skis attractiveness equity. I'd LNG to we're that rather over a there's get markets while and project need have do to goes have don't prematurely. as leaving itself for process an we want the it

on milestones what And looking there? Okay. that that just are key you're the for

submit -- and we'll some I to effectively system that seeding a the on be diameter the because request have upgrades be of is the the the We what the pressures think for BPU ultimately of would plant. increasing line

for And so, approval BPU that. need we'll

we really ultimately if So the quarter. is the third key not for approval that at point doing submission we turnaround. engineering that in quick BPU. milestone early the this be said a late anticipate study, of in time that And request finishing the quarter that's again, of from will that And that the fourth

guys. Thank Great. Okay. That to going was question. next my be you,

Chris. Thanks,

Our from Khanh next question Guggenheim. with Nguyen comes

Shahriar are How for actually Khanh. It's guys. you doing? Hey

Hi Shahriar.

a slide stuff maybe opportunity FFO targets? with there. And it's the It's start. Can to see lot today, so of an I hit balance good integration of the touched to BBB+ there sort sheet? is on You sort debt a you're little plan? to conversations well. tracking XX% your good are you just guys of of your going don't agencies? of the How sort going a on on bit ahead towards But is how see touch us

This Cielo. the do in is we note changes plan. Yes,

contemplates within to we time, to five the go As disclosed next our last back years. plan BBB

as different we are good to alternatives agencies had our speak. sheet conversations looking the strengthen have balance and We continue to with at we

to down break based our on assets. continue on sales of noncore our debt sales We

And going don't benefits more me ask are the that investors helpful. guys Mike value. divesting let Got because you frankly seeing of really -- regulated That's me it. then to -- let utility you assets obviously see really starting

have still business. a you gas So, wholesale

more is in management of an something fuel gas material, the thinking completely business. really like I'm and remaining business you light you're regulated? and the management businesses, kind there or to You've I more but curious seeing look XXX% opportunity a at less not growth at got guess? get the are super strategic It's of around core So how fuel that about businesses

they the although are is think distinction I a very between there two, obviously interrelated.

of business is deal I think not It's plays wild very the in that with very where the the It's much business may more attractive. our swings risk. on It low predictable. fuel are. contracts, management It's get you going to you're longer-term strengths. so depending kind prices wholesale the

general so, our human kind deploy a capital. really business And where strategy it's to financial that think capital I and like does whether that's of fit assets, or into our we

those The was the front the and lot wholesale, can of was value in of. of earnings business. it were last redeploy kind And are secret. of facing. -- generate and core can cash. into our Shar that grow It's It does our advantage a to produce look, tightening a volatility when saw there's some is the It out We it's we us. October to a lot we spreads does the challenges for continue challenge. to business then there earnings market utility take It no the of and of that

very So interested we're our else as then at opportunity obviously at and there's would have to assessing grow it capital for redeploy and if that. to strategy with we that again monetize core strengthen anything a be we our business us businesses and looking an

start. Got it. a pretty on Terrific. good Congrats

you Shar. Thank

you. Thank

question next with Our Maxim comes Sullivan Group. Tate from

the agreement. give in Good what more planned the that baseline context with release about looking the are? additive I transition And you. Can the are the exit comment those of TSA to please? the mean, expenses just thank in quarter you costs the Hi, services to morning. at so press associated

is Sure. Tate for is about the think Dan. level looking costs you're are at them. what I there at certain exit, we're as talking this Yeah, O&M. ETG piece of one trends TSA TSA the

some your costs the question, will normal you're ETG we with to sort trying ETG. if how had genesis this a associated sort with on a last along piece So is of expect runway -- much higher ETG. O&M weighing quarter we bit of and of I would get understand in period if This think to be I how of much TSA normally much lift O&M, a than for option how of

some I right So $X.X to you're somewhere neighborhood expect million with for in the might $X.X total cost basis. of asking additional specifics, a think for in on lift million that normalized you

that variability closing agreement? services XQ Okay, Or for to thank XXXX? is steadfast does you. there is that transition And -- then the

a and getting as far concerned exit -- from SJI we and committed to of on in on fully As and -- mobilized are support it QX. I'm resources I we've QX are track Southern lot steadfast. it's and mean, early exit to Elizabethtown we've

Tate Robbins. this is Dave

been year. the So through. of two-thirds exiting throughout way about the We're the agreements we've portions of service

the will of service rest agreements We be through the in QX.

completely on track the in XXXX. TSA and agreements service early then So we'll be we'll to system the exit exit

Mike as on by to QX. said be So out totally track we're

put Okay, -- then you around in -- detail. Are talk if the year? conversion you customer in the can? in about Elizabethtown Elizabethtown prior you thank more the for is please making what X%. the that there or territory? versus you rate you And of growth Any disclose context was it progress that effort Can in

of this continue We're sales year place. in product and calls Jersey for and as and Elizabethtown. for system, up very making the progress construction, of only conversions more customer successful for to functions put there. our we're territory we in the demand not numbers that's far new as marketing but we more our the as And and getting there's out Gas great northwest staffed particularly build significantly South excellent forecast. growth are We've ahead at been model up We've

much. Thank you very Okay.

Thanks, Dave.

Dave. Thanks,

of Coleman Dennis comes [Operator Instructions] from Our America. next Bank with question

Dennis. Derek for Walker This on Hi. is

Derek. Okay,

Hey, Derek.

you my A are redundancy addressed kind How have guys. but lot projects answered. of believe question, a But of there's couple been Mike, storage works. LNG you doing? project other Hey, questions the the of I in

one And the the legal I a you're kind there? to you compression related projects, speak alternative line permitting the through upgrade. those I and bit if hurdles just kind and of of and of little think working BL maybe can just there's -- some project think transition a to England that

Sure.

help that is to we amount we're It LNG from again said, a I work of of do. As the really impact redundancy, us And contemplated prolonged what project event prep we've in that that will supply the designed do up in interruption. kind project any there's issue the gives reduce in of to wrapping potential advance the Jersey. that's all large-scale supply need Southern New tremendous of some us of

evaluating potential kind as term are although longer in We nature. Elizabethtown well for solutions the of and needs those are

there in need that a service this redundancy that nearly would to that have Cape years then XX us customers is maintain Lower about are off X-inch served County point of is And we distribution believe time. old to I system Atlantic that XXX,XXX-plus a line of County May at and in continuity allow single

and we to and is economic do to we the it, for order that I that path. continue assess our project. maintain we a And really on expeeding again, have It's of service evaluate to this something – continuity a in So, customers. perspective critical most guess permitting intend we from believe

get approval. Commission us likelihood, or require it's That to require all going get a to -- us to Pinelands in will

From plan. built next that timing able So, to that's the I anticipate done get something or Derek, a expect three we're a the we on of two years. that five-year be as perspective, would lot latter kind It's and that to something momentum towards starting think the you not effort could well. get in we that of seeing part up of line

it Appreciate That’s it. me. for helpful. Thanks Mike. That’s

Thanks.

further Dan. turn And showing this question to at I'm time. call to any back the I'd not like over

thank for joining morning. this us Well, you all

be As website. a reminder, a available recording today our of our will call on

Eric either Marissa or investor for please to questions or As myself, inquiries. Dan always, analyst Jacobson free and feel Travaline media contact for Fidell

concludes your earnings on interest joining in thank day. continued our Again, and call. information Have release investment and for materials. good earnings our you today Our maybe and a found us presentation contact This SJI. for

gentlemen, conclude and Ladies presentation. this today's does

have now You may disconnect, and wonderful a day.