South Jersey Industries (SJIIU) 10 Nov 192019 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019 South Jersey Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session.[Operator Instructions] Please be advised that today's conference call is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker, Mr. Fidell. Dan ahead. go please Sir,

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

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

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

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

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

line continue on expectations, that Dan, am were our today. quarter pleased our I thank to and joining in that for efforts third track. to us transformation Thanks, report results our proceed and you with

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

on our integration track largely XXXX. including Southern, thanks in completed of employees the winding full efficient The QX well. down Elizabethtown the remains of work dedicated going very to with TSA services process, our and of hard is a to It with be integration of systems,

the primarily different Gas, growth by strong We by fueled continued encouraged Jersey serve. are remained we the national customer regions natural across solidly averages, above conversions. At gas South demand for annual

At am sales by across results, steadily sustained construction, gas encouraged expected highlighting growth demographics. our integrated I particularly teams. we Elizabethtown appeal numbers improving of our very in we across early as geographies Gas, new customer the and natural

Elizabethtown. front, you busy as regulatory X-year approved this several we iron executing a BPU Elizabethtown, authorizing the replacement the steel been of for million of and $XXX On XXX for miles bare aging year program have In know, important replacement long-term cast planning June, initiatives infrastructure pipe. and

of important to and increase are Recall, includes not Jersey currently very $XX rates. April, revenue is true-ups the Elizabethtown each filed BPU South in And in improvements with recover requesting program similar reflected AIRP a this Gas' $XXX million October. to in petition rate annual base modernization a million system program approximately that

proceeding track settlement is the recently we with pleased reached are case This with parties. all and on we

stages forward for soon. concluding memorializing review, BPU final settlement the and in the look are We to of case the

activities, non-core our improving our past over of sale as assets year the front, financial the as is sheet. on balance well refinancing Last, the our steadily

to As our using million you and assets, more previously assets repay sold than net gas solar know, retail in we $XXX proceeds our debt.

which we equity from XXXX. is due million September, agencies long an favorably subordinated $XXX The In completed notes rating successfully junior of perspective. by offering a viewed of duration

been of we've XXXX, focused regulated foundation solid a Throughout on performance. building

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

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

our do energy gases our of We reduce and lower of carbon commitment almost our advance region's goals. we to the greenhouse to the content forward, Looking in to remain part steadfast the effects energy.

U.S. the energy become has simultaneously Gas helping decade-long independence. played expansion a leader our role a role in both economic decarbonisation, playing and in while world integral key an in

infrastructure through utilities to carbon content energy. methane or it’d support biofuels the make allow are smarter uniquely us lower and modernizing and we with greenhouse a new of emissions in be reduction positioned natural sound energy to whether of will lower investments reduce technologies So, to transform help energy how the fugitive that policy, and gas, leverage develop consumption critical our customers to investments use our prepared gas that and use policy that

remain the of quarter final the into head priorities unchanged. year, we As our

our focused are savings significant on achieving to from regulatory effectively continuing cost business integrate pending effectively We and Elizabethtown, executing our proceedings. initiatives, transformation

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

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

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

morning. Good Thanks Mike.

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

will of discussion focus our call, economic non-GAAP we our insight For earnings. provides measure business our measure this believe performance. We this into on valuable

earnings of sales. results, was in largely $X.XX asset variance offset The reflects XXXX. and third non-core per with benefits per lower gas $X.XX with our due regulatory to which was initiatives a lower by with energy compared loss associated results associated share quarter of economic timing utility share SJI's group a driven loss

segment The in other in our sales our segments. Energy in reduced interest and drove related and assets expense Energy of improvement Service also those acquisition our segment

to loss of utilities compared on share gas of XXXX. per loss share, earnings $X.XX Our $X.XX per a in contributed a

our growth were consistent reflecting AFUDC SJG benefit offset October by programs. The variance customer X, true-ups on share tied PennEast with earnings to project. Midstream our infrastructure associated $X.XX at Pipeline largely reflects for initiatives, to modernization timing the per of freight related regulatory pending and partially new

weather, operations, legacy headwinds roll Turning pipeline which last mild earnings new variance and several spreads, to to in of compared out begin contributed our share Group lower economic wholesale per to The a XXXX. $X.XX from driven per operations non-utility by in contracts tighter results loss $X.XX rules operating year. share, reflects Energy from

partially were by fuel management results activities. Wholesale improved offset

sold With marketing gas operations, new last option since which of XXXX. of contracts several retail the becoming in were year addition late the operational and

economic Energy of compared improved portfolio, down reflecting per $X.XX results solar to year, a sale per agreement the $X.XX of Services CHP last our our share share XXXX. tied winding of earnings and with loss in contributed

economic non-core Our $X.XX debt per $X.XX driven other the of loss segment reflecting refinancing last of year, the benefit contributed a activities. sales share earnings in with repayment and of loss by asset debt a per compared share

spending spend And track in on we capital XXXX. year-to-date Turning $XXX now million. as more for to in than of XX, remain $XXX spending, million capital totaled our XXXX, September approximately

remain As improving metrics. strength to the our of sheet and mentioned, committed we credit Mike balance

reflects As issuance asset of January was XX, of in compared with repayments more equity forward XX% September $XXX XX.X% our XX, XXXX equity from sales. to December The than million debt total improvement at XXXX. and capitalization in the as

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

due junior period, $XXX notes we million successfully in subordinated the During an offering XXXX. completed in of latest

deeply equity credit and duration XX% subordinated the assigned S&P notes. to long nature the Given

additional assets calls, previous any further in we As discussed repayment used for of be have strengthening. will potential on anticipated balance debt from non-core we sale the proceeds sheet

now it Mike. I back will That concludes turn remarks. my to

Cielo. you, Thank

employees their growth thanks my work the execute we've always as to path for our conclude X,XXX you. I approximately my outstanding As outlined to remarks, for dedicated strong

lot quite I'm Before in a it which project questions, of the regarding news been we have open questions for you up lately. has sure some PennEast our

Jersey years gas and the continue five Let reliable gas on our along subscribed the me be very families announced who to companies clear. member the serious utilities is was remain other XX% the grown it affordable service will bring for residents. inability and and The This natural about reliably to PennEast nine then. concern region service. in was need lack New the committed including has an fully to state. of substantially project and depend capacity express with before vital PennEast million natural businesses serve ago project a the infrastructure project since to We Jersey New

citing In of for denied without state-owned application for October, eminent the In authority legal and Circuit pursuing both legal September, profoundly does lands. not the the that have Appeals were actions based the under prejudice on circuit are our wrong options. we third the precedent established believe Third NJDEP currently permits PennEast U.S. and Court other decision. domain We Natural several ruled Gas over Act,

PennEast. the As are project of we segments, earnings reaffirmed and to of XXXX to the guidance from call of today watch. repeating at I that various including key mentioned business the outcomes delay quarter legal our on our potential have components that $X.XX contemplates It the process now bears for economic $X.XX duration our second range permitting

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

beyond wholesale Conversely, or the range, or lower transformation expectations, regulatory PennEast significantly our already end if margins business were be we from of below delays tightened if face were levels. would to our XXXX, expect at cost to if extending outcomes low savings

ready That questions. concludes the And our to prepared now open we're remarks. for line

of Instructions] [Operator Williams. you first Ellinghaus Chris from comes Siebert Thank question Our

open. is line Your

Good afternoon, everyone.

Chris. Hi,

Hi, Chris.

asset sale us give additional you Can on non-regulated any color progress?

Steve?

assets. looking We're at Hi, We're options. Chris. continuously This those Steve. various evaluating is still

today. if announce when you and will know happens, to We let have that But nothing we

Okay. on Can you Elizabethtown give settlement? any color the us

Steve?

of are final that memorializing stages in the settlement. We

that that, publicly, more it for made an Once shortly. front terms it. is happens expectation be approval happy BPU the very and the to in Our speak are of about we'll will be

Okay.

positive Services as the far to for sizable led what CHP went, Energy and swings As solar? quarter the fairly

timing designed, profitable Chris. just to for the MTF remember just you asset. is contracts be a summer the way right now year, of months the CHP, to – the which of CHP, more our Well, function think as I are in the the We months tend it's tend

the behind I that's there. really So performance think

ultimately As part far of the transfer sale solar that believe that's just Goldman not as assets goes, two we did there – were Sachs. with as I

those as in interim, the still actively negotiating a associated SREC We held are those for sale, with revenues of the we are there sale do assets But book projects. assets.

projects there of Okay. behind Was of odd to that would the be are set projects some better-performing but – an – assets those leave maybe

number And were gaining newer determined exact don't had wanted sites they these acquire, of is the the that projects. just can but those assets not projects. some Each of were relatively There I deal. consent as each the sites some Goldman Sachs for imagine, were they mean, were I of of around the But part that to There you unique. differences. two were that remember issues ultimately contracts – they

lower projects portfolio. construct cost those to our on So was the the end in

performers. So strong they are

FERC from Natural maybe Okay. in what against last feedback in ruling? staff One have kind you the defending gotten any are Gas the thoughts terms thing, Act Court's of of their Circuit

I'm to We speak Melissa to have, and that? ask going to

Chris. Hey, you. Thank

filed that have declaratory communicated are a and we which We decision, expect order waiting FERC for shortly. and with

Okay. Thanks, the guys. appreciate color. I

Thanks, Chris.

you. Thank

Tate Our next from Maxim question Sullivan Group. comes of

Your line open. is

from comments growth it X.X%. expansions along you. you construction existing so quarter that earlier distribution thank the more can or that? Thanks sales that X% Oh, customer the about more you on mentioned just housing Is prior and ETG for the – to is talk Is lines?

I'll ask Dave do that. to

capitalize new morning, bit Elizabethtown been territory. quite in Tate. uptick territory, opportunities the with we're there's Northwest in a the to really in very an we've particularly Really, coming of that pleased that's seeing from able conversion Good the and growth union Sure. we're but that on at construction

and we So to expect construction continue. nice it's that a growth of new not trend conversion mixture really and

you engineering Great. plan? to Okay. Thank Is have redundancy you of in what can And internal the little designs a to storage Or talk finalize you. a there what the terms please? steps or LNG potential then tanker? layout the of are it the bit pipes

well. as one that take I'll So,

We have finalized our engineering studies.

the to getting is route make and third-party. redundancy expect staff. engineering and we year we which socialize soon that project by study performed end with a customary. socialize would the would again that very go We'll by socialize be for We backed we option that that to ready had probably filing of then a the a by are would Once, we

us. up So It's for the strategy like project really supply steam. is a We picking it. critical redundancy

mentioned XX-day supply as mainly we probably would Bcf tank about a would located be our on and As two a system peak serve it facility. strategically

refresh on you Thank last given of dividend looking increase as Okay. can year payout at and the just -- Mike XXXX for the well I in given that. just you're the you EPS and dividend timing potentially mean please? announcement in And how the

be doing review do it's policy annually and Yes. We again this board. a of it the Well our first decision we'll dividend November.

our XX% Our now XX% is ratio to range. right payout to policy bring down to

into at a growth reflect we'll while rate X% be rate for getting to expect dividend X%. our range our or rate. get EPS of a And dividend then range that -- around around paying be out would plan growth once that we're We that dividend we our to growth

Great.

you for that. thank So

next Our Instructions] of JPMorgan. [Operator you. comes question Chris Thank from Turnure

line is Your open.

morning, Good guys.

Hi, Chris.

I over here? otherwise? is follow a the with what on here of the headlines the legal kind And to major up path months, bit FERC kind different the are exactly of wanted PennEast at forward past two what and permutations just

legal which probably for us I'll -- en options. ask there turn be know Melissa question. as to you better it happy available group. Marissa denied. partners over legal Certainly it's answer to on But hearing her, a The to as before those to banc was answer that, have an was are but options Tuesday to one are exploring that I

as future I'll turn just Melissa. options to far it as go over So

out but PennEast don't certainly that project remains are of want we So exploring the do through. to -- board to we committed to ahead have we the consider seeing continue get and the board, options

can we will about more legal so. as the soon path clear be as we specific do So

of any not be prepared us would you as for but low level range your in been XXXX the touched the remarks, capital level your then to think remind capital still that's Okay. EPS at SJI next to project I project spent year? the through hit you if this And the -- the And was just current guidance of deploy end can able you additional on Mike well? at and

Yes.

as far around the us it's for total capital we've amount spent As of I PennEast, million. for that believe individually $XX

targets be $XXX slide would So guess, We again, guidance midpoint And but as this how Chris. correct far rather set is the of XXXX do it I the you're the our as wide partnership at impacts our about as million, a a math. range. partners,

XXXX at that that caveat can things delay did one If that years did say negative guidance both this And it And us. ahead in we you past risks a there's May. the two we was of construction. a that of with remember we said were the happen over time PennEast it those of and positive nearly lot and

It's fair to delayed XXXX. us expectations to quarter But end in of of activity project right occur. going it's think, to respect I of We could say better until There came be as decision not and it's -- a certainly, are XXXX. when the of fourth might us where to going of service there we're the revising we're the But the also by of that are it's timing exact Tuesday, Third legal be year. that capital that in just the to in get strategy spend the could an front now on given Circuit we process for PennEast. out our early sense be is the be we're with of kind next delayed and are difficult -- that on there settle the front as a -- options into pinpoint us in where little options and

below any we in synergies does prepared do could to things we're can far respect fast regulatory PennEast that new does impact get offset our any unable outlined our to if the again to yes, PennEast were affect that those some As be preparation and either be expectations investment then quarter delayed fourth we opportunities PennEast delayed in and the the construction. earnings to would is But remarks the on in three as there of happen exceed to the or accomplish if we a of a how with I categories we're able track outcomes be begin activities delay or if is we extent that -- to in of -- midpoint.

fair. That's Okay.

I think there. the message kind of understand

in better but segments. for certainly for and material of puts materialize you kind kind takes the keep range would lot XXXX negative other for and PennEast So guidance range? that itself, in so And or on of of into a overall based of XXXX kind should midpoint of rough you're built the business of far what you've the other a within those seeing at

Yes.

that Is fair?

is. It

remind especially financing kind again of if that what and of you've done then that upon underlying And Okay. me guidance now is contingent XXXX plan the subs? junior your anything the

last flexible We that issued with since up have that a our back $XXX the disclosed was along now We've move design. that ago that was The built would long-term its project number it size And also equity being equity into is Dave of on project in terms million XXXX. about. just project. in October the so or year little depending of a we that plan and of redundancy further in tied point over to had spoke that was said roughly down the --

So capital we ultimate be what the project. have that a better sense outlay of would for

there's moving a But some and potential third sell the to of pieces still project mostly a that to around the but upsize around also timing, few capacity party.

So for plan around capital utility number a reflect final so the construction final out of that. our can basically we once and that the have equity we traditional would cost assume structure sort there a you announce

you And that of amount would your need there's capital a to Okay. next delayed not reason minimal in is for equity tied message whatever year? that or XXXX is if that

No, I think we would still.

strategy regulatory over premature. seven at are a things right out of issue possibly of years. we're we Company to as in exploring to significant still equity it's little we'll five the in it's the but is Again particular South project accelerating such could in going there's now Jersey Elizabethtown. just be our some that plan investment things be Gas advance we lay because These the Our -- kind next also

the last now and support the project master of year -- projects things that unplanned spending significant some of what forward of on utility. on capital largely was objectives. to in at assuming were driven be October that move by we actually could plan bit a energy this were complement a original and utility I our touched doing energy the plan the if in not But part utility again some of that we'll with the be have the in state's little other We we which we

the -- balance we're equity So the sheet we'll to to going raise utilities. support of

that original certainly projects equity will we are there the XXXX. drive amount that the degree ultimately need equity, the to fell that but of of outside will So in plan

you, That’s Okay. very clear. Thank Mike.

Thanks, Chris.

Thank you.

Our from comes next Pourreza Partners. Guggenheim question of Shar

Your line is open.

Hey, good morning, Mike.

Shar. Hi,

why immunity So just curious a I'm I couple with There's for own and of big on. appeal path applicable going actually state going an you claim But versus Circuit but but Melissa to in, to and owns, there's states applicable avenue and they the doesn't what have to delineate state land interest is where reroute claims right question is are it's -- this So because next difference and land jumped simply decision, look -- steps. a applies in a situation more that versus of states the second own. as they when late. just on sovereign maybe what it's simple obviously, avenue actually like fee just around her. the didn't a a right? not curious land sort the about is But the calls it and if want own equally the guys that really to an process, the you in I'm Third talk But at to you're like you probably like a really

guys that And are potential? angle I'm So is that kind you that's if an at? a looking of curious

this question. great options. tell what can we that is all Yes, are you comment. at And that's looking at a that point I for you Thank

Okay.

do Okay. really And you that so you the... agree just read delineate? I'm -- they when But but curious like didn't

the read you're I've drawing. see the I distinction decision and that

do So other decision a I'm action at pursue banc. to have certainly -- looking so It's as options its and issued en legal Third the operational. procedural the as well we Circuit on

right? to -- on properties, XX remind two the just and on And us owns is right just that claims properties state curious

between That's XX, and approximately correct yes. XX

question. Okay, was That great. procedure for start the

for you Thank it.

great. Thanks Shar. Sounds

Thank you.

from Maxim Our Sullivan of next Tate question comes Group.

Your is open. line

update printed of talk the Or follow-up. Thank quick But back mentioned you can of and you. A a please? there the eight Can bit. Are fuel contracts. see the on XX fuel you can management about are I schedule give last management renewals up? operating? go coming you've an

don't front they have right know in me. years. Absolutely. schedule of I to ranged XX-plus I from the four

online early process Some somewhere years are of of development -- are in couple up would in for -- brought the renewal. that the ones that the next coming be we

those discussions been facilities. have with active We in

think to can continue say the I I well. go conversations that

We for them. continue to perform a critical service

that job I we're think plant really critical we're and that plant's reliability. to and doing an excellent

we'll think able cases, there's high that confidence likelihood. it And able many so extend better be And do in these have I a I we'll be strong contracts. to very under to a that level terms.

into be imagine can value and the to as fair you you these it's you As bring bring. that for think us things, I we you value compensated get see where for

day. Mike. Thank good a Okay. Have you,

you. Thank

you. Thank

next of Our Chris comes Siebert question from Williams. Ellinghaus

line open. Your is

far one for the saying do incremental you're -- guys. be the revenue Is covered of And But as guidance those projects. support the sort Mike, of projects, of definitely would levers contemporaneous under to the timing you to as of of the XXXX the in capital one equity? is equity of riders? potential were terms any the going Hey levers

to It's it sure. timing, a going and in in going timing of great regulatory up the equity again, levers form equity the would with outcome. one do want that the to And Chris. the question, to way such we're match be Yes, for of a the we're both

to and start making sensitive high I want significant also a equity. side. around So to we I But on before have we're progress and dilution to interval around there the that regulatory we flexibility think sure have some is flexibility confidence form timing. issuing there's some would very

not rider or as whether could far a As of sure. some these in be

state's the plan at to it energy look you is when decarbonization. think master I fundamental

hope be sensitive of to bury goals have in can't head operating state utility a as this goes are. think the sand the what New to in Jersey, and I our We stuff that the we away. And

content to we the projects to the that things efficiency smart are be would to degree you that think the lower I see the partner to for there things those we can with base. form I carbon a To expect those relate the in rate of or we through energy flowing That state. There our system. of have kind gas can do would say I meters kind relate are that the that example that would things do think of are tracker. of

Okay. And lastly that traction place have there's into? through that you renewable and landfill of experience. looking the a little and gas is some bit gas on something taking industry the Is company

is Yes landfills lower Elizabethtown service looking of content. mentioned content that territories situated the ways to means near South the Gas carbon absolutely. we we right identifying are at infrastructure can assessing When and which our a biogas lower our as both carbon actively are And I RNG gas, Jersey with potential of now them. that and one and

a again we and state the partner for as SJI think that state to the betterment the the is industry can to I as obstacle gas everything position of to do ourselves an general. in to opposed

Appreciate Mike. Thanks, it.

showing to to Dan over turn questions the this you. remarks. I'm like I'd Thank for conference at back time. any further closing Fidell no

much very morning. you this for Valerie. all Thank Thank us you joining

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

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

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

you. and Thank Thank concludes Ladies you conference. participating. gentlemen for today's this

disconnect. now may You