Prepared remarks
Hello, everyone. Thank you for joining us, and welcome to the New Jersey Resources Fiscal 2026 Quarter 3 and year-to-date Webcast and Conference Call. My name is Matthew, and I will be your moderator today. Please note that today's call will be recorded. Operator provided instructions. I will now hand the conference over to Adam Prior, Director of Investor Relations. Adam, please go ahead.
Thank you. Welcome to New Jersey Resources Fiscal 2026 Third Quarter and year-to-date Conference Call and Webcast. I am joined here today by Steve Westhoven, our President and CEO; Roberto Bel, our Senior Vice President and Chief Financial Officer; as well as other members of our senior management team. Certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities laws. We wish to caution listeners of this call that the current expectations, assumptions and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to materially differ from our expectations as found on Slide 2. These items can also be found in the forward-looking statements section of yesterday's earnings release furnished on Form 8-K and in our most recent Forms 10-K and 10-Q as filed with the SEC.
We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures such as net financial earnings, or NFE. We believe that NFE, utility gross margin, financial margin, adjusted EBITDA, adjusted funds from operations and adjusted debt provide a more complete understanding of our financial performance. However, these non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K. The slides for today's presentation are available on our website and were furnished on our Form 8-K filed yesterday. Steve will start with this quarter's highlights and a business unit overview, beginning on Slide 5. Roberto will then review our financial results. Then we'll open it up for your questions. With that said, I'll turn the call over to our President and CEO, Steve Westhoven. Please go ahead, Steve.
Thanks, Adam. NJR delivered a solid performance for this quarter, driven by disciplined execution across our complementary businesses. At New Jersey Natural Gas, we've taken important steps to balance affordability for our customers while continuing to invest in the reliability of our system. We reached a key regulatory milestone at S&T, receiving the first certificate for our expansion at Leaf River ahead of schedule, allowing us to advance the project and support the growth opportunities we see ahead. At Clean Energy Ventures, we continue to add in-service capacity and advance a deep pipeline of investment options while maintaining the flexibility to deploy capital where it generates the best returns. Overall, the consistent execution you're seeing across our businesses supports our outlook for the year and positions us well for continued growth. With that, I'll turn to New Jersey Natural Gas.
As we think about our role as a utility, our objective is to deliver the most affordable energy possible for our customers while also investing to ensure the continued reliability and resilience of our system. That philosophy is reflected in the filings we submitted to the BPU on June 1. Taken together, these filings are designed to provide our customers with meaningful bill relief ahead of this upcoming winter, while also supporting the long-term investments necessary to serve our customers safely and reliably. Importantly, we structured these filings as a cohesive package, combining adjustments to our gas supply, conservation and energy efficiency programs alongside our base rate case. From an overall bill perspective, the goal is straightforward: providing stability for our customers with bills expected to remain nearly flat once all elements of the filings are implemented. So when you step back, this is all about balance, delivering affordability today while continuing to make investments required to serve our customers over the long term.
From there, I'll turn to Storage and Transportation on the next slide. At S&T, the drivers of the business remain consistent with what we've discussed previously. In the near term, S&T's performance is supported by favorable recontracting, which provides strong visibility into earnings and reinforces the stability of the business. Looking ahead, we expect this uplift to support a doubling of earnings from fiscal 2025 to 2027. At the same time, we are making progress on future growth opportunities at Leaf River. Our capacity expansion project remains on track. We recently received our FERC certificate, a significant regulatory milestone that supports our expected development timeline. Overall, this is a business where we see a combination of near-term certainty and long-term growth, supported by both strong market fundamentals and disciplined execution through the investment in organic growth opportunities.
With that, I'll turn to Clean Energy Ventures on Slide 8. At CEV, we continue to make steady progress with additional capacity being placed into service. At the same time, we're focused on maintaining a portfolio that maximizes the value of our existing interconnections, and positions us well to help address growing capacity needs. Our project pipeline provides a broad set of investment opportunities with multiple ways to deploy capital, whether through new project development or by enhancing and optimizing existing sites. That flexibility is intentional. It allows us to remain disciplined in how we invest while maintaining the ability to adapt to evolving market conditions, regulatory changes and opportunities. So overall, we feel very good about both the progress we've made and the strength of the platform we're continuing to build. I'll turn the call over to Roberto for a financial review and then return for a few closing remarks. Roberto?
Thanks, Steve. Turning to Slide 10. Based on performance through the first nine months, we're tightening our fiscal 2026 NFEPS guidance range to $3.52 to $3.62 per share, narrowing the range while increasing the midpoint. This update reflects greater visibility into full year results and the ongoing benefit of our diversified model. With that context, let me walk through the quarter in more detail on Slide 11. Fiscal 2026 third quarter consolidated net financial earnings were $11.3 million, or $0.11 per share, an increase over the $6.2 million, or $0.06 per share, reported in the third quarter of fiscal 2025. Results for the quarter reflect improved contributions across several businesses with higher earnings at Clean Energy Ventures as additional projects have been placed into service, along with continued uplift at Storage and Transportation, driven by favorable recontracting activity.
For the year-to-date period, the higher net loss at CEV simply reflects last year's one-time gain resulting from the sale of our residential solar business. With that, let's turn to our capital plan on the next slide. We deployed approximately $630 million across our businesses year-to-date. New Jersey Natural Gas represented roughly two-thirds of total capital spend with increased investment focused on core infrastructure, particularly in safety and reliability as we continue to support system resiliency and customer growth. For fiscal 2026, we have increased our capital investment expectations to a range of $815 million to $950 million, up from our prior outlook of $775 million to $930 million. This increase is primarily driven by additional investments at the utility, reflecting our focus on safety and reliability initiatives. At Clean Energy Ventures, we're maintaining our current investment range, reflecting the depth of opportunities in our project pipeline and the flexibility we have in deploying capital.
Based on projects already underway, we remain confident in achieving the lower end of that range with project optionality that would move us towards the top end. We do not have any change to our estimates for fiscal 2027, and we're reaffirming our five-year CapEx outlook of $4.8 billion to $5.2 billion through fiscal 2030. This level of investment supports our 7% to 9% long-term NFEPS growth target while remaining consistent with strong credit metrics. Our capital plan remains highly visible and originates from a diverse set of investment opportunities across our complementary businesses rather than being dependent on any single project or outcome. We expect to provide further clarity as we roll our outlook forward in November. Turning to our balance sheet on Slide 13. The cash generation prevalent throughout our businesses is the main source of funding for our capital plan. We expect our adjusted FFO to adjusted debt ratio to exceed 20% in fiscal 2026, reflecting the stability of our earnings and our disciplined approach to capital allocation.
From a liquidity standpoint, we have substantial available capacity and maintain a well-laddered debt maturity profile that limits near-term refinancing risk and positions us well across different market environments. Together, these factors reinforce the strength of our financial position and our ability to execute on our long-term plan. Turning to Slide 14. We're tightening our fiscal 2026 NFEPS guidance range to $3.52 to $3.62 per share, reflecting improved performance through the year and raising the midpoint of our range. We tightened our expected segment contribution ranges with relatively minor changes compared to our second quarter conference call. As we look ahead, we expect to revisit our segment mix in November as we roll our fiscal 2027 outlook forward and normalize expectations, consistent with our approach each year. With that, I'll turn to Steve for concluding remarks on Slide 15.
Thanks, Roberto. Overall, NJR is executing well and remains on track to achieve our long-term growth objectives. Our outlook remains anchored by our regulated utility with continued capital investment in New Jersey Natural Gas, helping to ensure safe and reliable operations while supporting long-term growth. At the same time, natural gas remains one of the lowest cost ways to heat a home, reinforcing its value proposition for customers. Storage and Transportation is well positioned, supported by near-term earnings visibility and additional upside as expansion opportunities progress. At Clean Energy Ventures, our portfolio is scaling as expected, driven by a secured development pipeline and disciplined capital deployment. This consistent execution reflects the strength and durability of our business model and gives us confidence in the path ahead. Finally, I want to take a moment to thank our employees across NJR.
Over the past year, we've talked a lot about our performance during a demanding winter, speaking to the reliability of our system. And more recently, we were tested again by the extreme heat and severe storms. During these moments, the commitment of our people truly shines, such as our home services employees working through extreme heat to ensure customers remain comfortable and safe. When we perform through conditions like this, it reflects the strength of our infrastructure and the dedication of our people, and that's something we're incredibly proud of and thankful for. With that, let's open up the line for questions.
Questions and answers
Operator provided instructions. Your first question comes from the line of Elias Jossen of JPMorgan.
Just wanted to start on the rate case in New Jersey. Just thinking about some of the backdrops on affordability and some of the EO1 legislation that we've seen and the report from the BPU. How should we think about that filing in the context of the broader climate, recognizing that you guys have had pretty strong outcomes in the past. And obviously, gas is in a different position than electric, but just curious thoughts there.
Eli, thanks for the question. You saw our filing back in June where we combined our rate case with a number of other filings to really protect cost for consumers. That was done purposely. We're well aware of the cost issues for consumers. Moving forward, the process to date has been normal. As we move through this process, we expect a typical regulatory cycle. One other note: natural gas is the cheapest way to heat your home and business, so we feel like we're in a good position. We look forward to working through the process.
Awesome. And then maybe just thinking about some of the recent strength in the context of your guidance. Obviously, you guys are tracking well above where we would think 2027 would be. Can you just remind us how you think about rebasing? And obviously, just in the context of what implied 2027 numbers would be and when you might think about updating that rebasing?
This is Roberto. Thanks for the question. We're going to provide our guidance in November for the next year. As we usually do, we base our guidance on the 7% to 9% growth from a starting point, and that's not changing. If you remember, the starting point was $2.73 for 2025. From there, you can grow by 7% to 9%, and that's the range you should expect.
Your next question comes from the line of Constantine Lednev of Wells Fargo.
Congrats on a solid quarter. Maybe just a quick follow-up on some of the rate case questions. Any feedback that you have been receiving from the bill mitigation proposals? And do you see any structural differences with this cycle versus prior cycles? Another way to ask, is there opportunities to settle similar to prior cases?
This hasn't been any different than any other rate case. A little extra color: this is a normal, plain-vanilla rate case like we've had before. Really no differences, and we've just started the process, so not a lot of color to add. If anything, there are no notable differences to point out at this point.
Okay. And then maybe a follow-up on the EO1 utility business strategy review. The recommendations came out a couple of months ago. Do you see any core sticking points? Is there opportunities for more certainty through this process, such as multiyear or formulaic ratemaking? Does that create considerations for the BPU in the near term?
I think that needs to play out a bit more. To date, those executive orders have been focused on electric companies. We have not been closely involved, but we're certainly watching for opportunities. If we can make this a smoother process for all, we will seek to do so. Right now, we are being opportunistic with this process.
Understood. And then a housekeeping follow-up. On the incremental S&T capacity moving up and beyond the 55 Bcf, do you anticipate the same capital intensity going forward? Any color on recontracting or pricing data points you're seeing for contracting incremental capacity?
There is strong demand for the services our midstream facilities provide. I would expect that expansions would continue and that capital intensity would persist. There are opportunities: we have the ability to expand Adelphia Gateway, add compression and pursue other enhancements. None of these are in our capital plan currently, but we would expect to continue to invest in those assets because they are valuable to the market and those services are in demand. You can see that reflected in recontracting rates and the increases we're seeing there.
Right. Would that be covered by the roll-forward update next quarter? Or is there more contemplation embedded in there?
When we do our next year's outlook in November and present our capital plan, you'll see more detail then. I don't expect it to deviate from what I just described.
Your next question comes from the line of Gabe Moreen with Mizuho.
This is Dylan Lipner on for Gabe. Congrats on a good quarter. I want to pivot to CEV. How do you expect the ongoing debate around capacity markets, resource adequacy and interconnection reform to impact CEV's project pipeline and long-term returns?
We see opportunity with CEV. We've discussed the ability to use our existing interconnects and infrastructure to expand and add capacity to the markets. Capacity is more valuable; that's what we need to add to the grid to lower prices for consumers. We're looking at ways to participate. The cheapest way to add new capacity is through existing infrastructure, and we have considerable infrastructure in New Jersey and the Northeast. Adding to that should be a low-cost option for the grid. We're evaluating structures and investments; this CapEx isn't in our plan currently and would be additive. When we have more firmness around structure and investment, we'll share it. Suffice to say, we're optimistic about participating in this market longer term.
Are you garnering a lot more interest given how much of a topic this has become for CEV?
Yes. There is interest in adding capacity to the market. The load factor on our interconnects is not 100%, so there's room to use existing infrastructure. It's a matter of finding the right structure, the right investment, the right returns and the right risk profile for us to move forward. We're working hard on that.
Is this something we could potentially see on the next quarter call with the guidance revamp?
It's hard to predict exactly when we'll have a breakthrough. It would be nice to see in the next call, but I can't make a prediction at this point.
There are no further questions at this time. I will now turn the call back to Adam Prior for closing remarks.
Thank you, and I'd like to thank all of you for joining us. As always, we appreciate your interest and investment in NJR, and have a good rest of your day.
This concludes today's call. Thank you for attending. You may now disconnect.