South Jersey Industries, Inc. (SJI)

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South Jersey Industries Inc. (SJI)

Q2 2017 Earnings Conference Call

August 04, 2017, 11:00 AM ET


Marissa Travaline - Director, IR

Mike Renna - President & CEO

Steve Clark - CFO

Greg Nuzzo - SVP

Steve Cocchi - SVP, Strategy and Growth


Spencer Joyce - Hilliard Lyons



Good day, ladies and gentlemen. And welcome to the Q2 2017 South Jersey Industries Earnings Conference Call. My name is Jasmine and I'll your operator for today. At this time, all participants are in listen-only mode. Later we'll conduct a question-and-answer session. [Operator instructions]

I'd now like to turn the presentation over to your host for today Marissa Travaline. Please proceed.

Marissa Travaline

Thank you. Good morning and thanks for joining us as we review South Jersey Industries' second quarter results for fiscal year 2017 provide an update on our business. Joining me to present on the call today are Mike Renna, President and CEO of SJI; and Steve Clark, our CFO.

We also have several members of our Senior Management team available to help address questions following our prepared comments. Our earnings release and the slides intended to accompany the call were issued to the media yesterday after closed and posted this morning online. They're available on our website at www.sjindustries.com.

The release and the associated 10-Q provide an in-depth review of earnings on both a GAAP and non-GAAP basis, using our non-GAAP measure of economic earnings. Reconciliations of economic earnings to 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 now turn the call over to our CEO, Mike Renna, to discuss both current performance and future initiatives in the context of our strategic plan.

Mike Renna

Thanks Marissa. Good morning, everyone.

As we take a look at year-to-date, second quarter performance, I think it's important to weigh not only actual results, but also the progress of performance against our strategic plan. We've accomplished a lot. Our balance sheet is strong. We've achieved strong growth in our core businesses. We've made significant progress toward our goal of $150 million of economic earnings through 2020.

We knew there would be near-term challenges, but that the long-term benefit of a strategic shift one that's focused on regulated investments, contracted assets and customer growth will position us on a more sustainable growth trajectory as we move forward.

Central to our strategy is renewed focus on regulated investments. From 2013 to 2016, we've invested over $141 million in the first phase of our accelerated infrastructure replacement program, placing 362 miles of main 18,000 services across 117 municipalities we serve.

In collaboration with the New Jersey Board of Public Utilities, we've extended this program, commencing through $300 million of new investment over the next five years. When these investments are complete, we will have one of the most modern distribution systems not just in the state but in the entire country.

We don't intend to stop there. We believe that critical investments are also needed to both in-state and interstate transmission, best is designed to minimize service disruptions to our customers and to ensure that they have access to the most cost-effective supply.

Through investments like our pipeline, we'll help repower the BL England generating station. So, we could provide a growing Southern New Jersey with a clean economical and reliable electric supply and we've committed to the PennEast partnership.

It's critically important project that will bring over Bcf of Marcellus supply to the residents of our region. This means inexpensive supply, not just today on a warm August day, but on record cold days like we saw in February 2014 when supply can be in such demand and capacity could be so constrained that prices can reach a $100 back in just a few days.

Our business we can focus on short-term solutions or investments. We have 381,000 utility customers to whom we are accountable each and every day. So within our regulated businesses, we will remain focused on optimizing the investments in our AARP on uncovering innovative ways to supply the unserved and underserved customers in our territory, to reinforcing the more portable areas of our system through a second phase of our Storm Hardening and Reliability Plan on ensuring a safe, reliable, affordable supply of natural gas for all of our customers and on investing in the people, processes and technology that will allow us to provide the best service possible to our customers.

Within our non-utility businesses, we have maintained our commitment to achieving earnings from repeatable and reliable income streams. This commitment is reflected in the contracted assets like those within our fuel supply management.

With our six contracts having come online in May and 11 contracts just executed this week, this niche business is positioned to remain a long-term driver of earnings well into the future. We've already exceeded the assumed growth that was built into our 2020 plan and continue to build an attractive pipeline of new business opportunities.

Our existing solar assets also continue to perform well with year-to-date production up 7% as compared with same period last year, when coupled with a strong renewable energy credit, abstract prices in our primary markets, we remain confident that this piece of business will continue to be a positive contributor for the foreseeable future.

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