SJI - Earnings call transcript Q3 2017 | South Jersey Industries Inc

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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2017 South Jersey Industries Earnings Conference Call. My name is Lauren, and I will be your operator for today. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Marissa Travaline, Director of Investor Relations. proceed. Please

Marissa Travaline

an Good South you results Jersey year and Lauren. as joining for and business. XXXX review our we Industries provide morning, you, for thank us fiscal Thank on update third quarter

Joining me call Renna, Clark, and President Steve on of and CFO. are SJI; Mike CEO our to today present our

We also help of your following questions members address comments. management senior have our several our additional to team prepared available

are our was release an and to the at after and yesterday release non-GAAP close basis on the discussion earnings designed today's economic in-depth measures of comparable to on provide issued call. using Reconciliations media on is both and GAAP market the available a our website non-GAAP Our website appear of in economic XX-Q Also slides The earnings. www.sjindustries.com. to documents. GAAP earnings associated the review of support earnings both measure our on

call, company's future the Mike may opportunities be the that in a Let over will I'll SEC. said, With making our Forms turn of our and context important with the XX-Q both we XX-K that result file in note on CEO, from current of materially differ SJI. to references discuss these Renna, the for those indicated various initiatives those to throughout statements to performance me call and future plan. strategic discussed including by as and plans Actual our factors expectations, results

Mike Renna

everyone. Good Marissa. morning Thanks,

our made objectives. was strides quarter one The third of as South an eventful strategic significant Industries for in support Jersey we

the approximately gas to by long-term with Through announced Company natural contribution earnings customers. XX% But well-run business another the our importantly, it increasing base for most in on principal we foundation acquisition, XX% settled last to Gas, utilities approval. of family and SJI more to utility New Gas our with and base expand high-quality significant second service while supports this SJI largest the rate growth. reinforcing you provider become last October on transaction roughly Jersey growth, Gas Jersey another In assets XX% utility lower base XX%, South an strengthen month, our XXX,XXX than the efficient, bringing us upon from will our and strong, rate our Elizabethtown event, range and with many opportunity a of on Elkton agreement focusing earnings our Utility. Southern by customer about to Board an expanding in – As heard to our purchase call New today strategy adding the of Gas case Public by Jersey

which and brings homes As approved, gas significant $X.X The utility X.X% equity-to-cap and sustainable million our distribution core burning a us reliability, Currently, and rate Work putting investments substantial ROE increase upgrade well. project, ensure growth the reflecting Bcf cost an people in Program, XXXX. XX.X%. but same rate the and of have revenue are million forward. affordable resulting one increase base the the of improved to system $XXX also Marcellus PennEast which to come. phase aging FERC will at occur These over November of our reliably X.X%, in second greater our growth effect our as entire to After return the we effectively the infrastructure distribution our all in bare system, by modern into since only of than customer improve and billion, steel from operations. expand of case X while to optimistic help base replacing Infrastructure represents Replacement Pipeline infrastructure fuel most the $XX.X that going access, continues enhance approval we changes will in pipe cast will $XXX and before made year-end. investment and our the country. of result an clean will that to requires iron regulated of state service. our Xst. are The the in We New by natural more on system businesses ratio more million and the Accelerated in to distribution Efforts years last will of businesses advance to in Jersey the for and region's not our remain went in trajectory investments safety system, safely, This of

proposes The challenge that investment second we've the million, week system strengthen that to SHARP, drive active us tackle further growth earlier past unserved gas finding island or made from supply it's phase our contributions to of portfolio. barrier the positioned six contracts filed to this recurring online. Storm Plan, And investments strengthen in and in underserved XXth management service communities the of fuel like have within – August. and now X-year over expand our the solutions innovative we to our those bringing Reliability contracted to decade $XXX we resulted of contract and And seventh has our our the well supply our have area. that businesses, a serve. Hardening management our nonutility assets We communities fuel strong in Within executed resiliency

that approved. transaction to of SJI's the to after will achieving earnings strongly turn be to related Elizabethtown clarify a specific to Steve, Elkton but of provide additive, baseline. fully And target earnings, want the We economic is plan also additive. XXXX to is remain target that committed $XXX the over call and we Before I I million more

Let to I earnings and With in and deliver will year-to-date million and detail Steve addition quarter the ability Elkton our deliver we that me, results. to our significant call confident of third over to $XXX emphasize the XXXX baseline the incremental Elizabethtown will are plan. once turn to on our that again, that

Steve Clark

Mike, everyone. Thanks, and morning, good

detailed earlier mentioned information earlier, regarding released GAAP release Marissa earnings and provide deck As earnings. the both the slide

million to on we this on do earnings, economic from in the impacted after-tax we flows. exclude SREC from Consistent believes For from note we'll management earnings. our of solar Maryland impairment comparing a GAAP amount results practice, market. measures want quarter future stemming taken call, projected our impairments present of purposes as weak value book of the determined that the into The $XX net insights extremely impairment discounted this provides normally by valuable non-GAAP of were value economic up business. charge discussion measure past business, current as with focus our do, is cash by to the I performance

recognize the earnings as in our projects those reflect flow non-cash change any occurs. it of It economic future a the reflects projects, does Maryland in of is event via actually currently. it two periods produced solar While projects a impairment we write-down cash will by and not the performance

turning Now million Economic year-to-date EPS $XX.X XX, for September performance. period XXXX ending of the XXXX. economic year-to-date the with earnings SJI's as compared million $XX.X $X.XX, economic in for with period XXXX. same as $X.XX to period for of compared were same were the EPS

third and XXXX, earnings economic SJI with of million economic quarter quarter of XXXX. of $X.XX, economic the compared loss $X.X of reported an earnings $X $X.XX, an For respectively, as with the of third EPS million loss with

that Substantial a the Jersey same people Investments systems future factors. as also needed the utility the attributable for growth the months Two reduced with rate loss to is case with settled will quarter, support period compared investments a of were compared $X.X items uncollectible year-over-year in in the of lines. of investments our impacted we'll resolution periods base million at in our our addressed the the infrastructure contribute year economic variance. the interest in Quarter the new was XXXX Beginning in with These AFUDC $X.X reserves Now contributed expense depreciation and year. be the earnings third recorded $XX.X the South our higher a in third and also both rates earnings October. in of XXXX, $XX year further look with taken million in receiving several period. SJG's Gas to closer items XXXX. XXXX, of by from infrastructure performance to accounts last of of individual impacted impact. utility increased. as million benefit utility, take drive in compared a reflected The saw In as our and full loss XXXX quarter within results, through in million business economic prior rates variance in year-to-date from

base As each rates investments our in new noted changed, in into of under Accelerated this AFUDC we recent earn Infrastructure calls, methodology. has way October the on rolling made recognition program the based year through Program Replacement with

XX the of change made were ended SHARP. this AIRP consistent and reliability positively included expected October through make These future XXXX, changes X. or rates impact but impact as system our we XX, Investments September hardening programs in with these periods. for program, negatively We XXXX, to months

improving million system of million. first nine contribution the For towards incremental $X.X Infrastructure Accelerated our $XX XXXX, gas have months distribution income under producing we net an programs, of our invested

key of additions. Another for utility quarter is year component the earnings and customer

conversion main XX, with be ended customers total XXXX, growth to continued X.X% number at post the the period driver territory, are nine first up service last our the residential over the new of of year. both our activity we September to months Conversion additions approximately throughout continues months XX served For same and for additions significantly construction, rate, of a XXX,XXX. XXXX customer customer

investment FERC third approval. in interim, XXXX, in while project In $X.X reflected contribution We're AFUDC added an million waiting, Midstream. on Turning with from PennEast million quarter. to totaling we're our still earnings the year-to-date in $X.X waiting the

as $XX.X in million million businesses. Now in turning contributed non-utility $X.X total our to year-to-date same with XXXX, a for compared of earnings XXXX. economic the in They period

I’ll in quarter For earnings impacted the our our primary non-utility provided these the compared as I economic discuss of $XXX,XXX in million business aggregate significant to lines. non-utility results, businesses the XXXX quarter, $X.X third that two XXXX. third of factors address

period We Group despite weather loss earnings economic do XXXX housed within the Group retail the limited achieved million Year-to-date those and Energy gap full in year-to-date the Jersey businesses for million $X.X spreads. XXXX in capacity compared record-setting $XX.X Since of winter, at South XXXX. in economic $X.X in difficult Our as optimize ability with has the $XXX,XXX of our performance and closed business, wholesale impacted the were quarter to the same which year Jersey reduce a XXXX an versus in South significantly Energy Performance for and this start XXXX XXXX. warm exceed for third between commodity quarter results the experienced will XXXX, earnings that by year. loss in anticipate to million reflected XXXX. the significantly contributed this region SJEG the the winter, of

of balance positively Panda came online allow Energy year. which contract XXXX, sixth management sustained impact supply improvement for the continues Our the Group would fuel at our facility, business the to May In results. Stonewall for

XXth continue As Mike our to last seek contract additional actively opportunities. noted, we quarter, announced and supply fuel management

Our contribution energy projects for business, $XX.X no earnings earnings of same million South as the to Jersey economic XXXX. provided economic period in for compared Services, Energy with XXXX, -to-date

For period Services results for our from earnings, in producing SRECs million Comparative million same and which $X.X production remained by with existing former period. settlement facility impacted production the strong, quarter, earnings solar in added significant the credits investment from of of the which our million it. energy produced $X.X Services associated Energy year-to-date heavily casino, Strategic period in elimination XXXX lot XXXX, the million Revel factors. assets tax full at and versus XXXX. $X.X related of two a year economic of also Energy were solar impacted of the a to Operational $X.X

conditions weakened SREC in prices in there. Maryland resulted market However,

answer QX you As economic lower $X.X the same in million QX XXXX $X.X in the million That our concludes as earnings versus with XXXX. totaled at At period of in questions million XXXX this happy we’d $X.X may to be contribution in Results prepared million have. remarks. is year-to-date such, time in XXXX. solar compared $X.X any

Operator

[Operator comes first of Chris. Please from the question Instructions] Our proceed. line

Unidentified Analyst

Hey guys good morning.

Mike Renna

Chris. morning Good

Unidentified Analyst

the XXXX intend you to you at of, don’t to point, on target? expect you earnings to extend Elizabethtown. Mike the some core revise do until target approval XXXX sort said But you get

Mike Renna

Yes we do.

Steve Clark

Chris. future, distant too Not

Unidentified Analyst

Okay.

Mike Renna

looking that expect upon a we again, – would will at approval. projection longer-term putting to be I out

Unidentified Analyst

response talk you could Steve, of have kind the to got? you you yet you us about Elizabethtown? Okay. And rating about – spoken can agencies tell what

Steve Clark

directly preliminary conversations And financing very due We're plan. be month. associated will up our specifics had later the on this to We’ve conversations. those with in guide there

still we're from that, ways little Chris. So a bit

Unidentified Analyst

Okay.

Steve Clark

I original I'd specifically guess, point ratings. the with the we've plan. we transaction when we our though, And eye announced at was an out, towards looked that financing defending announced what current

Unidentified Analyst

Right.

point? a expedient you that's filed? as Okay. you good than different Have any at docket? Elizabethtown's you It's described docket new idea, maintaining And thoughts a inning in little more than your Are docket? in this the that that on is SMART are you a a general what this got but what maybe thinking they have It's thoughts feel program of currently do expectations, already point? your

Steve Cocchi

Cocchi. This is business Those timing something Elizabethtown take that discussions program driver be replacement the infrastructure this need. is into effect Clearly, that look decision is hard come That's a a at. The to are our folks. ultimately we're we're the may Steve pursue of determined. having going with primary to when to still behind

focus regulatory deal. to approval primary is the Our right the close obtaining now on

Unidentified Analyst

what timetable look one idea And got any more revised last thing, your of filing refined Okay. have you or might like?

Steve Cocchi

before that. year can't you I it’s an are but through should [indiscernible] something certainly you not date, exact now We before expect end that give working diligently.

Unidentified Analyst

guys. lot a Thanks great. Okay,

Steve Cocchi

Chris. Thanks

Operator

Please the next question from comes [Hilliard of Spencer Our Lyons]. proceed. line

Spencer Everett

good Spencer morning. line. Everett guys Hey on

Steve Clark

you? are How

Spencer Everett

you answer it's those well, Maryland. there of there, is not with question the in solar state, asset what the no Maryland states? the by are extrapolations, any to the on if time capital Obviously, question New be in sort remaining of have the impairing we first Jersey? write-down is are out acquisitions the Obviously, Doing from SREC what okay. just excuse me, – is great very quick could to of And but of creep for here. there write-downs or in no, the base in each markets kind perhaps in a if that state extrapolation Steve, is

Steve Clark

markets individualized. are The very Spencer, right. you're actually

building there's there the you are what what down in where – looking time justifying where a – really of of Maryland a a overbuilt perspective, people, at it's values from actually frankly, SREC situation are building the is values at been not we're market lot So people and aren't current seeing new. our

million those that would market. me to The have about that's specific market. of – That SREC future million it current of had about expect the New up And When and I that Maryland second at that of sense a curves value set a we taken asset back discounted let then doesn't asset $XX prices – worth down upon takes actions lot some being make be to of based worth impairment it $XX for off So right will to values. now. said, the for normalize impairment, project of cash there. flows to look you are a the value. Jersey, just in

Maryland, in than There Jersey, are is is So our being also you're a standpoint New for Jersey's to from little of been little the looked in New that XXXX considerably a powers with EBIT really lower what has regard has of dealing be in encourage with typically in a That the Jersey that bit in past field. regulatory move that that pretty model Jersey there – kind is to – legislative are but a the standpoint. or it's But it's a We values time something future – the properly that at you at by from New and that. the look market New Jersey draconian. New addressed period. formulaic development done, that's how bit manage is solar demonstrated they to better and in position when think a values said,

its a from different market any particular expect stands in you market. creep – So own. don't a Each market anything on into

Spencer Everett

mean, solidly press kind thanks. to guidance second. range. guidance in Okay, you Is looking earnings maybe for That's that to or case settled, that now a in implying implying skew the the for solidly be terminology perhaps to or could – of the The helpful. you Mike, release with more I the it if rate for the end? is see range little is be the higher resilient a you towards tightening, will?

Mike Renna

going quantify my is end. confidence Solidly fall a right we start where range. is the not to I reflection whether solidly of I'm strong lower strong, to at word. But inside pretty think want we're a at a higher that I point or will be now solidly to the

Spencer Everett

of pertaining Chris' guidance bit, of the with far little Is Fair of, may what couple come as enough. all just out over off possible, as a year all years. question time typical piggyback to Or guidance, it might you XXXX the despite that with than guidance with? Sticking you to kind we to time along earlier March the frame? see next little you line, be for would guide else a looking come out normal whatever

Mike Renna

– if just get on efforts May point that interest I and and like in that good approval really It of in that getting of should approval in the I want to this, be time point best are but I in is be frame. to would approval approval don't really the that the we what have time, looks look at going at would kind time of think probably like. everyone's financial given committal the this going a we stayed what into Because would indication whatever are. impacts –

Spencer Everett

Yes, sorry, March there. May, Okay. misspoke. I and I not meant

one filing, Finally, that are be fair some PUC the assessment? assume be you of would have Would the phase Hardening kind here. the there. preliminary to like to items pretty there. a plan second I of, the spend Or as of would that Good with Storm you filed you comfortable about is? had see with discussions that some all

Mike Renna

say, of negative utility need had on don't the Board we've this Utilities. resiliency to a overall, I is Yes, filing. there in SJI strong in reaction with very any the would I response or still infrastructure. Public prefiling conversations focus for anticipate

Spencer Everett

thanks there, taking good call. looks operationally. a quarter the color and pretty like Okay, the for for Thanks

Mike Renna

Great, thanks Spencer.

Operator

line of Please Michael [Janney from proceed. comes question Our next Scott]. Montgomery

Michael Gaugler

everyone. morning, Good

Steve Clark

morning. Good

Mike Renna

Mike. morning, Good

Michael Gaugler

this Just noticed up quarter. ticked operations one question. expense the nicely I pretty housekeeping

what behind that. wondering was Just

Steve Clark

believe that’s the Mike, impairment I number.

Michael Gaugler

a wanted just as much, Okay. but clarification. get to Thought

Steve Clark

big jump. that’s Yes, the

Michael Gaugler

guys. Okay. Thanks

Steve Clark

Mike. Thanks,

Operator

from Capital of proceed. question the comes Our Dan line Advisors]. next [U.S. Please

Dan Fidell

guys. morning, Good

Mike Renna

Hi, Dan.

Dan Fidell

but give on Most stands, this a some me. Antero to Antero. resolve next steps my questions sort similar you as with where this color final of the just asked has been have us of at answered WGL the dispute, ongoing and from one point, legal you Can item? currently process the one contract dispute, know,

be I So it. ought we appreciate and Thanks. any on how thoughts have about to this you just would thinking

Steve Clark

us, reversed some they change Dan, our Steve. appeal about to there’s once follow. they upon. you necessitate must motions. to it think be that, will we it’s intent is us ruled necessitate still It Once Antero, those motions When they’re outstanding I think. If

intent our up it’s on So follow to that.

As Antero were Contract experienced ago. real we I to, look impacts at that dispute couple overall, runs the October of years out of XXXX. of a believe,

So months left more bit a little we’ve XX than actually got that, that. on about or

that, Our taken actions basically, more our to of have response some positions. become – pretax dramatically has even to few if dollars exposure see expect We because a we impact as we and on spread favorable get a to our much million potential appeal. wouldn’t that don’t a than thinner protect

Dan Fidell

that Okay, how And I ask – great. is do this. this something guess, I

something a sort the Elkton you before for with or a see is proceeding something bed transaction? even move this forward Etown of hope that you kind and this that period of on time is of issue lingering we put So to to

Steve Clark

they items. time Their driven rule set by the they choose to on Frankly, to that’s frame different – the when courts. as

not – it’s to time to within a control. quite I’d be frame. frankly, give it’s But So you love able our set

Dan Fidell

appreciate your the comments Thanks guys. go Eagles. right, for All I and always thanks. it. as Got color

Steve Clark

Thank you.

Operator

from [Williams Chris line Capital]. proceed. comes question Please of the Our next

Chris Ellinghaus

it’s again, Hey, guys. me

Mike Renna

Hi, Chris.

Chris Ellinghaus

Mike, you on to next Elizabethtown’s how growth Maybe solidly. or of to different see I sense can us look means. There’s it for I dictionary.com compare like? if plenty And little quarter. see a get a word does give – how their solidly you their conversions sense what up of better any would what’s growth, yours? looked Steve, just it

Mike Renna

their I’m so is a a focused do is talk – X%. still little place, about ours. sales I happy on they’ve to have in their decoupling around that. customer not been guess, throughput. strategy – They’re convergence Their different than growth mechanism historically, They

ours of the I some the service – eastern have or it’s in going over are the territory. area. I there’s They’re Their what what the very to heavily the ours been very probably is similar be to opportunities pretty the to side, on saturated Western growth in has – think been similar years. part growth that think opportunities conversion last particularly over seven the

seven of So is that duration have to if I out think of in type say of that infrastructure you we previous XX- and years it’s Elizabethtown. project through fair this the on it kind growth take trackers the place, to at solid side long-term, XX-year opportunity the a

Chris Ellinghaus

It to fair say… is

Steve Clark

would ago the a for they you their – got program, because put a that that very did when filing acquisition. add side a bit of I to few large look little infrastructure years and Southern

work bare that be So that our basically, them. to cast of still needs from prospective, all and steel done ahead iron is

opportunity significant stretching that. see we well over So there,

Chris Ellinghaus

saw Yes, of acquisition it’s a obvious in came from the that piece the value economic pretty big you right? programs, that those

Steve Clark

they’re made And deployed what same of programs today. have the already that and is successful Yes. our it we’ve types system

Chris Ellinghaus

were supporting And aside, they sort it pretty the where that put clear they programs got BPUs of up the to point their right? made

Steve Clark

correct. That’s

Chris Ellinghaus

And a reason I I didn’t is asked I little I’d Mike, you just of say Steve want Steve. out to get solidly. more thought the

Mike Renna

situation the can’t I’m a amount believe that getting heat I of over word. of

Chris Ellinghaus

guys. lot Thanks a right. All

Mike Renna

feel really that? I about good. But How

Chris Ellinghaus

I That’d good. better. get be Really good.

Mike Renna

All right.

Steve Clark

Thanks.

Operator

There like Marissa. over call proceed. Please would hand now are no to time. additional questions I back the at to this

Marissa Travaline

you. Thank

can Before me our reached or interest I convenience by we at Thank contact free email wrap at or continued be today reached your SJI. for aanthony@sjindustries.com. great in investment Ann joining mtravaline@sjindustries.com. Have and your you XXXX at as Ann us for always, day. XXX-XXX-XXXX, a feel again email be and can extension at Treasurer, XXXX please or Anthony. questions; to extension up, any via with

Operator

conference. gentlemen, you participation. for today’s and concludes your that Thank Ladies

have You disconnect, and may day. now a great

South Jersey Industries (SJIIU) 3 Nov 172017 Q3 Earnings call transcript