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South Jersey Industries, Inc. (SJI)

SJI 
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South Jersey Industries Inc. (SJI)

Q1 2017 Earnings Conference Call

May 09, 2017 11:00 ET

Executives

Marissa Travaline - Director, IR

Steve Clark - CFO

Mike Renna - President & CEO

Greg Nuzzo - SVP

Analysts

Spencer Joyce - Hilliard Lyons

Chris Ellinghaus - Williams Capital Group

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Quarter One 2017 South Jersey Industries Earnings Conference Call. My name is Mark and I will be your operator for today. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded.

I would like to turn the call over to Marissa Travaline, Director of Investor Relations. Please proceed, ma'am.

Marissa Travaline

Thank you. Good morning and thanks for joining us to review SJI' first quarter results for fiscal year 2017. Joining me, present on our call today Mike Renna, President and CEO; and Steve Clark, our CFO. We also have several additional members of our senior management team available to help address questions following our prepared remarks. Our earnings release and the slides intended to accompany the call were issued earlier today and are also available on our website at www.sjindustries.com.

The release and its associated 10-Q provide an in-depth review of earnings on both the GAAP and non-GAAP basis, using our non-GAAP measure of economic earnings. Reconciliations of economic earnings for the comparable GAAP measures appear in both documents.

Let me note that throughout today's call we will be making references to future expectations, plans and opportunities for SJI. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Company's forms 10-K and 10-Q on file with the SEC.

With that said, I'd like to turn the call over to our CEO, Mike Renna, to discuss current performance and future initiatives in the context of our strategic plan.

Mike Renna

Thanks Marissa. Good morning, everyone. To effectively weigh our performance for the first quarter of 2017 it's important to evaluate it against the priorities of the strategic plan we've shared with you over the last two years. While our overarching goal is to achieve economic earnings of $150 million by 2020, it's vital to our long-term success and we deliver this earnings growth from high quality sources or maintaining our balance sheet and preserving the quality of our risk profile. These measures in mind, I'm proud of the progress we've made. Homage [ph] in the first quarter of 2017 produced economic earnings growth with zero contribution from investment tax credits and in the face of an extremely warm winter one in which New Jersey experienced it's warmest February on record.

During the first quarter we also continue to advancing key initiatives, securing approval for the BO England project and updating the final environmental impact statement for the pennies by flight. I think it's important again to emphasize that this quarter's results for the first time in seven years are absent any contribution from my GVs. 2017 earnings composition represents another critical milestone as we continue to execute on our long-term strategy. Number 2017, 75% to 80% of economic earnings are projected to come at regulated sources representing the highest quality, lowest risk earnings available. With another 5% to 7% coming from our long-term contracted assets, including the marina thermal facility serving Borgata and our fuel supply management.

Fuel supply management represents one of the fastest growing areas of our business where we currently supply five facilities in the region with the six set to begin taking gas in the second quarter. Four more facilities are under contract expected to come online over the next eighteen months. And we have an attractive pipeline of potential deals, several of which are in advanced stages of negotiation. Further fuel management contracts require minimal capital outlay, helping maintain the strength of our balance sheet or delivering meaningful results.

Cash flow is further improved from the decision of forgo additional solar development sharply reducing capital requirements on our non-utility businesses and positioning SJI to use the cash from our not-utility operations in support of our significant regulated investments. For the last 18 months we've taken actions to strengthen our business, reduce risk and volatility in our results, maximize operating performance and improve cash flow from operations; all designed to reinforce the foundation of the core businesses that make up SJI. With that in mind we announced guidance with our results that targets economic earnings per share for the full year of a $1.14 to $1.20.

In addition to the impact of the extremely warm winter, guidance reflects the elimination of ITCs from earnings and the issuance of more than 8 million additional shares last May as part of our equity offering. And at the core of our business is more than $1.7 billion of capital investment projected to occur between 2016 and 2020. 93% of that investment is focused on utility and for regulated initiatives. Investments in the safety and reliability of our transmission and distribution systems, investments that will ensure our region has an affordable supply of natural gas to fuel their energy needs, and investments to support the region's economic viability.

I'm very pleased with the progress we've made towards the commitments in our five-year plan and I'm every bit as confident that we will fulfill all of them.

With that I'll turn over - turn the call over to Steve for detailed results for the quarter.

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