New Jersey Resources Corporation

Thank you, Amy. Good morning, everyone.

Welcome to New Jersey Resources first quarter fiscal 2012 conference call and webcast. I’m joined today by Larry Downes, our Chairman and CEO; Glenn Lockwood, our CFO, as well as other members of our senior management team.

As you know, certain statements in our news release and in today’s call contain estimates and other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We wish to caution readers of our news release and listeners to this call that the assumptions forming the basis for forward-looking statements include many factors that are beyond NJR’s ability to estimate precisely or control, which could cause results to materially differ from the company’s expectations.

A list of these items can be found but is not limited to items in the forward-looking statements section of today’s news release filed on Form 8-K and on our Form 10-Q to be filed on or about February 7, 2012. All these items can be found at SEC.gov.

NJR does not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. I’d also like to point out that there are slides accompanying today’s discussion which are available on our website.

With that being said, I’d like to turn the call over to our Chairman and CEO, Larry Downes. Larry?

Thanks, Dennis. Good morning, everyone, and thank you for joining us.

This morning, I will be giving you an overview of our first quarter results. We will announce our guidance for fiscal 2012 and I will also review some of the key drivers of our performance.

But just to start out with the number of the key highlights, our financial results are strong. New Jersey Natural Gas is performing well.

We continue to make very good progress on our Clean Energy strategy. Our other non-utility investments are performing in line with our expectations.

And as you will see from our guidance we expect that fiscal 2012 will be another year of improved financial report -- results.

As Dennis mentioned, I will be using a PowerPoint today, hopefully you’ve been able to access that. So starting on Slide 2, during the presentation, I will be making forward-looking statements.

Our actual results will be affected by many factors, including those that are listed on the slide. The complete list is included in our 10-K and I would ask you as always to please review them carefully.

On Slide 3, we will also be referring certain non-GAAP measures such as net financial earnings, which I will refer to you as NFE as I discuss our results. We believe that NFE provides a better measure of our performance.

However, these non-GAAP measures are not intended to be substitute for GAAP and they are also discussed more fully in item 7 of our 10-K. Once again, I’d strongly encourage you to please take a look at that disclosure for more discussion of those non-GAAP measures.

So moving to Slide 4, just to give some additional insight on our performance for the first fiscal quarter of this year, our net financial earnings for the quarter increased by 54% to a $1.09 compared with $0.71 last year. We are announcing our net financial earnings guidance for fiscal 2012 at a range of $2.60 per share to $2.80 per share.

And we currently expect that 60% to 70% of that will come from New Jersey Natural Gas.

In January, we implemented a 5.6% dividend increase. We can see that -- continue to see strong results from New Jersey Natural Gas resulting from steady customer growth, the continuation of our AIP investments and higher margins from our BGSS incentives.

We also completed 4 commercial projects and over a 100 residential solar projects and we saw a very positive earnings contribution from NJR Energy Services.

Moving to Slide 5, is to look at the quarter little bit more detail. As I said, net financial earnings per share were strong $1.09 per share that compared with $0.71 last year.

The results were driven by our Clean Energy segment, which placed a number of projects into service as well as strong performance from New Jersey Natural Gas and the results of NJR Energy Services and what I will be doing is going through the details of each one of these businesses in just a moment.

Moving to Slide 6, for fiscal 2012 we are providing initial NFE guidance at a range of $2.60 to $2.80 per basic share. If we are able to achieve this, it would represent the 21st consecutive year of improved financial performance, which we believe is the longest streak in the utility industry.

As you can see, we expect that the extremely strong growth rate that we enjoyed in the first quarter will moderate throughout the balance of this fiscal year.

Moving to Slide 7, which gives us more details on our fiscal 2012 earnings guidance. We currently expect that, New Jersey Natural Gas will contribute between 60% and 70%.

Clean Energy Ventures were be between 15% and 25%. Energy Holdings, which is our midstream assets, which will contribute between 3% and 10%.

NJR Home Services will be between 1% and 5% and NJR Energy Services will be between 5% and 15%. But if you look at those numbers and you look at the components that are represented by our infrastructure businesses, they’re expected to contribute about 90% of fiscal 2012 net financial earnings.

And if you look in the press release you’ll see additional detail of the numbers behind those percentages.

On Page 8, looking at our dividend growth, again because of the strength of our performance and strength of our financial profile, we increased our annual dividend rate by 5.6% to an annual rate of $1.52 that was effective January 3, 2012 and represented the 19th increase in the last 17 years.

From a pay-out ratio perspective, you can see that our dividend growth rate remains higher than the peer group average, but we are maintaining the low peer group average pay-out ratio which is enabling us to maintain a strong financial profile and support future net financial earnings growth.

Moving forward to Slide 10, you can see the discussion of our capital expenditures. For the quarter, we spent a total of just more than $67 billion most of that coming from our Clean Energy Ventures, the utility just short of $20 million, compared with December 31, 2010 you can see a much higher level of spending, but I think importantly on this slide as we look at the estimate for the entire fiscal year, you can see that the total that we expect to spend about $208.3 million, the majority of that will come from New Jersey Natural Gas.

Second is Clean Energy and some other minor non-utility spending. So another healthy capital expenditure program to support our overall infrastructure businesses.

On Slide 11, turning to our subsidiary businesses now, first starting with customer growth during the quarter, we added 2001 customers which was a 22% increase over the same period of fiscal 2011 and another 104 existing customers added heating to their homes. We expect that these customers will add about $1.1 million of new utility gross margin each year.

Now if we look at the new customer breakout, you can see that conversions for the quarter accounted for about 66% of our total additions and we expect that over the fiscal year that number will move more towards a 50-50 split between conversions and new construction which was similar to where we were last year.

From a gross margin perspective, residential customers contributed more than 66% of our gross margin, but looking forward, we expect to add between 12,000 and 14,000 new customers during the next 2 fiscal years and the annual margin growth through these new customers is expected to be about $3.5 million. We continue to see the benefits of lower gas prices for our customers on Slide 12.

We have clear price advantage over competing fuels in our service territory, that is helping our marketing efforts and particularly on the conversion side because the price advantage between fuel oil, propane and electricity remain substantial.

Moving to Slide 13. As we look to the future, for customer growth, the outlook is still very positive on the new construction side.

We see potential new customers of about 90,000 and that is supplemented by potential conversions of almost 128,000 in total over the longer term. So the long-term customer growth outlook remains strong for the company.

And in the area of customer satisfaction, our team continues to do an excellent job. We’ve read over -- almost 6 million meters handled more than a million customer calls.

Last year invested almost $94 million to support customer growth and maintained our record with the board of public utilities for the lowest number of complaints per 1,000 customers. We’ve done that now for 19 consecutive years.

As you can see, we also won our third consecutive J.D. Power Award on the residential side and since 2002 we’ve won 6 J.D.

Power Awards in total.

On the regulatory side, the best way to describe our agenda, it’s not only active, but importantly, collaborative. Our conservation incentive program which is now in place through 2013 continues to work very well, benefiting both our customers and our shareowners.

Customers have saved more than $200 million since its inception a little more than 5 years ago, and at the same time New Jersey Natural Gas margins are protected from declining usage and weather.

On the infrastructure side, our accelerated infrastructure programs again continue to work well. They were extended on March 30, 2011.

You can see the total capital that’s been approved there, $131 million we expect that, that will be completed by the end of October of this year, and you can see the numbers in terms of the return on equity and the weighted average cost of capital.

Moving to Slide 16. Our BGSS incentives which have now been in place since 1992, almost 20 years, continue to benefit both our customers and our shareowners.

Customers have realized savings of more than $550 million since they started, and our shareowners have realized earnings of $1.80 per share an average of that $0.08 annually. We can see good performance in the first quarter from the incentive margins, slight increase over last year, $2.8 million versus $2.7 million.

And once again, the incentives are an example of our ability to work collaboratively with our regulators to create structures that benefit not only our shareowners, but our customers as well.

Moving to Slide 17. in December, the state released its new Energy Master Plan that is designed to provide a blueprint for New Jersey’s Energy future.

From a natural gas perspective, it was very supportive. It encourages natural gas-fired electric generation NGVs, the increased use of natural gas in conversion markets and the necessary infrastructure expansion to facilitate growth in these markets.

So our plan is to continue to work with our regulators to help the state achieve the goals that are laid out in the Energy Master Plan.

On Slide 18, switching now to our Solar Strategy, just to take a moment to go through the strategic rationale for our participation in that business. First of all, it’s important to focus on the significant long-term legislative commitment that the state has made to solar from the perspective of New Jersey resources that it’s consistent with our core energy strategy, allowing us to reduce energy usage and lower prices for our customers, again, which are 2 important elements of the Energy Master Plan.

It is supporting economic development and job creation, and it’s helping the bottom-line with a meaningful earnings contribution with a risk profile that we believe is manageable. In the first quarter of fiscal 2012, our Clean Energy invested -- investments contributed about $10.1 million to net financial earnings.

Moving to Slide 19, which shows the legislative renewal portfolio standard, and this is important information when thinking about why this is an appropriate business for New Jersey Resources. What it carves out is the amount of solar for each year going up to 2026.

The green bar that you see there, represent the amount of Clean Energy that must come from solar every year. And it’s the rapid increase in coming years is that level of solar investment ramps up, that gives us confidence that this business is indeed sustainable.

As we look at Slide 20, also very importantly as you can see what has happened to the cost of solar and the significant decline that has occurred really since 1998. We look at this has evidence that the incentives that are associated with this business are actually doing what they were designed to do and that it bring down prices, which has certainly helped the industry as a whole and we expect that continued progress will be made in that regard.

Going to Slide 21, let me switch to some of the specifics of our activities. Our Sunlight Advantage Residential Program continues to perform very well.

In the first quarter of fiscal 2012, we had 140 units that were operational, the average size at more than 7-kilowatts and we deployed about $3.8 million of capital. We currently project that capital associated with our residential program will be about $14.2 million, and to-date, all of the homeowners who have participated in the program are expected to save over $300,000 on their electric bills.

The bottom-line for this aspect of our program is that the level of residential solar demand remains strong.

Moving to Slide 22, talking about the commercial aspects of our Sunlight Advantage Program, you can see the completed projects in fiscal 2011-2012, total capital of more than a $123 million representing almost 28 megawatts of electricity that we’ve been able to install. But to look at it from a different perspective, the environmental perspective, which is certainly important from a policy point of view, you can see the equivalent of number of cards reduced is almost 4900, which is significant.

We placed almost $94 million into service so far in fiscal 2012, and as we look out to the future in 2012 and beyond, we still see strong growth opportunities.

Looking at Slide 23, just to give you a sense of magnitude of some of these projects that we put in place, I think you might be familiar with the McGraw-Hill project that we announced just about a year ago and that was put in service ahead of schedule at a lower cost than we originally expected. So from an operational point of view, logistics point of view, our team has done a good job bringing these projects online.

Moving to Slide 24, to talk about NJR Energy Services and NJR Energy Holdings, I think as everyone knows, market conditions have been changing in the natural gas market. NJRES has generated net financial earnings of $7.6 million that compared with $3.2 million last year, but as you think as we’re communicating through our guidance, the challenge of, we call some markets we expect will continue to affect this business is the value of our capacity in storage assets to reduce the number of optimization opportunities.

But we think in the context of that market environment, NJRES continues to do good job.

The performance of our midstream assets has been steady, contributing about $1.8 million to our net financial earnings in fiscal 2012, compared with $1.7 million last year. Steckman Ridge, which is our joint-venture with Spectra Energy now has about 30% of its capacity under long-term contracts, which provide the measure of stability there.

So moving to Slide 25, just to wrap up, we continue our strong focus on performance. Certainly we have a track record of growth and providing consistent results to our shareowners.

The fundamentals are in place to deliver long-term NFE growth, the combination of solid customer growth, progressive regulation and disciplined solar investments. Our ability to work with a diverse group of key stakeholders in a collaborative way remains one of the strengths of the company.

We also maintain a strong financial profile which will certainly be important as we pursue our capital plans and we have demonstrated our commitment to dividend growth, the 17 year history of increasing our dividend. And when you bring all of that together that is up to a record of consistent performance and a positioning of the company for long-term growth.

And as I close, I just want to say thanks to our employees. They continue to do just an outstanding job executing the strategy that we put in place.

And with that we will be happy to take any questions. Thank you.

A couple of quick questions here. So I guess just looking at the guidance for new capital on a solar side, I think maybe guidance was around $104 million and now your slides are at about $86.5.

Is there any impact there from projects coming out or is that all total cost of your activity already this year?

Mark, let me have Glenn explain those differences for you.

Yes, Mark, the only difference is timing. Several projects started construction in fiscal ’11 and had capital spend last year, but not finished yet.

And some of that capital then spilled into 2012 as far as capital placing service. So from a cash flow perspective, last year was in the $70 million range and this is year it’s going to be around $87 million or about $150 million plus or so in total.

The placement service will be skewed more towards ’12 versus ’11.

Okay. And also are you anticipating, with Steckman Ridge -- it’s a pretty good quarter.

Are you anticipating kind of higher earnings over the balance of 2012 as well or do you think maybe there is going to be some impact from just maybe some declining drilling activity, the warmer temps so far this year?

Mark, it’s Glenn again. I think if you look at the numbers, Steckman Ridge was pretty -- just slightly better than last year.

And if you looked at our guidance for the year, I think we are guiding towards pretty flat year-over-year in the old mid-stream segment basically for both Iroquois and Steckman Ridge.

Okay, I appreciate that. Just last thing, I know this is a small part of business at the moment, but with announcements of kind of declining drilling activity that a lot of producers maybe are sitting a lot of gas and not sure what to do with, do you think this might be about opportunity on the services side?

Mark, you are referring to NJRES?

Yes, I’m sorry, NJ...

What we’ve been trying to do is just that, in addition to our base activities is to focus more on providing producer services in the area. So the answer to your question is, yes we continue to see that as an opportunity.

Okay. I guess -- I mean with the announcements that lot of -- there is a lot of gas that producers don’t really know what to do with.

I guess in general, I was wondering it maybe the low gas cost today actually are kind of an opportunity for that business or how I should think about that?

Let me ask Steve Westhoven to give you some inside on that. Steve?

Mark, yes, we think there is opportunity just because there has been a lot of changes going on relative to a lot of the infrastructure in and around all the new natural gas that’s being produced in the shale plays. And we’re pursuing that, as we speak, putting together producer [ph] services-type transactions and trying to grow that side of the business because obviously -- because there has been a decline in the value of some of our assets, it’s a good place to place our efforts.

A couple of questions and obviously knowing there is still a lot of uncertainty out there. But you give the 260 to 280 and you give the breakdown for each segment, which gives the much wider range.

I guess can you kind of just talk through some the key drivers obviously in solar, it would be -- when I think about $8 employed does it become the service in ’12 versus ’13 and are there any transmission constraints [indiscernible]. If you can just kind of point me towards the utility, I think, I guess is the main drivers, but you have a pretty wide range for both solar energy services and energy holding.

If you could just walk through kind of where you’re thinking the -- what pushes you towards each end there, that would be helpful.

Yes. I think the widest range we gave was with energy services and I think the driver there again will be what, if any, volatility thus come about, for example with the summer and heat and things like that.

So by

its very nature, that business’ results are still somewhat -- it’s going to be driven by the amount of volatility. So clearly we placed the widest range on that business.

And Solar is going to be on the ability to continue to find the appropriate investment and be successfully negotiated and completed with the goal again, of us spending about $70 million to $90 million a year on an annual basis from a capital budget perspective. So those are clearly the biggest drivers on those 2 businesses and then in Steckman Ridge and Iroquois, again they’re somewhat subject to the same issues that impact energy services as far as the value of those assets.

As Larry mentioned, the good news with Steckman Ridge is about 30% of the capacity is under the long-term contracts which generated about 66% of the revenue at Steckman Ridge for the quarter. So that gave us confidence to guide as we did pretty flat with last year despite the challenge in the wholesale market.

Okay. And on Solar can you comment on just where we stand in the SREC market and additionally for the larger projects are you seeing any delays from transmission interconnect times, I know that, your peers down the road had seen some transmission interconnect delays, are you seeing the similar or no?

Well, I think, first of all I can't comment on South Jersey but the issue of interconnection is something that we factor into or a process when we’re making a decision to go forward, so you can avoid that to the best of our ability. I think the SREC market as you know there’s a lot going on with legislation in New Jersey right now.

The good news from our perspective is, what has been expressed through all of the conversation is really the need to add stability to the SREC market. There has been no discussion in any way of reducing, for example, the renewable portfolio standard.

So I think those issues have to work themselves out. I think from the perspective of the customer, I’ll go back to the slide which talks about what has happened to the cost of Solar particularly -- recently which I think goes to the value if you will that the incentives in the SRECs have provided, but I’ll ask Rick Gardner or Stan Kosierowski to comment on that further.

This is Rick speaking now, go ahead.

Yes, Larry you’ve covered this all in. There had been interconnect issues, you hear that anecdotally our projects we put in place, and we really haven’t had any major issues because since Larry mentioned we’ve put it in the planning process.

So right now we’re in good shape, and we’re out looking for profits every day.

Is there anything going on in the energy master plan that would help expedite the transmission interconnect or help facilitate them?

I think the way we look at it is the energy master plan is the overall level of support for solar, it does suggest certain changes. But through the -- if you look at the regulatory process and issues that the BPU is responsible for, they are aware of that issue, and from my understanding, considering different proposals to deal with that issue.

But again Rich or Stan, you may want to add something to that?

Okay, and I guess one last question with regards to whether Steckman Ridge or storage you procure through these [indiscernible] given the moderate winter we’ve had -- on either side, are we bumping up against limits where there might be forced withdrawals and/or penalties?

At Steckman, this is Rich, at Steckman Ridge, inventory has been stifled to a point where there is no issues with having any forced withdrawals or penalties.

Okay. And the same from the utility side -- are you facing that, you maybe haven’t drawn down enough storage that there might be any forced withdrawals and/or penalties?

No, not at all.

I actually found it interesting to see your customer addition numbers, and I was wondering if there is one area of our service area that had better customer growth over the others or has the growth been spread across all of your counties?

I’ll let Kathy Ellis to answer that question, Joanne.

The Ocean County has historically been our area of greatest growth and that continues, but also with hurricane Irene coming through northern divisions, we’ve seeing quite a lot of conversion activity around the flooded area of Morris County. So I’d say the aberration is the activity in Morris County.

Okay. Okay and you said that, I guess, was because of some of the flooding last fall, in last summer?

It is a result of the flooding, but we also have initiated a fairly aggressive marketing campaign in that area. In fact, we set up a mobile office Joanne and we’ve quite a bit of success in both neighborhoods.

Okay, thank you Amy. We’d like to thank you all for joining us this morning.

As a reminder, there is a recording of this call which will be available on our website. Again, we appreciate your interest and investment in NJR.

Thank you very much. Have a good day.

Bye.