New Jersey Resources Corporation

Thank you, Valerie. Good morning, everyone.

Welcome to New Jersey Resources F3Q 2012 conference call webcast. I’m joined by Larry Downes, our Chairman and CEO; Glenn Lockwood, our Chief Financial Officer, as well as other members of our Senior Financial 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 control or estimate precisely, which could cause results to materially differ from the company’s expectations.

Most of these items can be found but are not limited to the items in the forward-looking statements section of today’s news release, filed on Form 8(k) and in our 10(q) filed last evening. All these items can be found at www.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 any future events.

I’d also like to point out that there are slides accompanying today’s presentation which are available on our website. With that said I’d like to turn the call over to our Chairman and CEO, Larry Downes.

Larry?

Thanks, Dennis. Good morning, everyone, and thanks for joining us.

As I always do I want to begin the presentation by pointing out that I will be making forward-looking statements this morning. Our actual results will be affected by many factors including those that are listed on Slide #2 and I will remind everyone that the complete list is included in our 10(k) so please review those carefully.

On Slide #3 you can see our disclaimer regarding non-GAAP financial measures. I will be referring to certain non-GAAP measures such as net financial earnings or NFE as I discuss our results this morning.

We believe that NFE provides a better measure of our performance; however, I want to stress that these non-GAAP measures including NFE are not intended in any way to be a substitute for GAAP. They are also discussed more fully in our 10(k) in Item #7 and again I would strongly encourage you to please take the time to review this information as well.

Turning to our results on Slide #4 I begin by pointing out that this has been a year of milestones for our company. In June we celebrated the 60th anniversary of the formation of New Jersey Natural Gas and you can see by some of the metrics on the slide here that we’ve certainly come a long way in the past 6 decades.

But we also are celebrating the 30th anniversary of the formation of our holding company, New Jersey Resources; the 30th anniversary of our listing on the New York Stock Exchange; and then finally in July we celebrated the addition of the 500,000th customer for New Jersey Natural Gas.

And as we move through F2012 we are continuing a record of very strong performance. We’ve highlighted a number of the key performance metrics thus far this year and our focus on enhancing value for our shareholders, starting with our financial earnings.

We announced this morning higher NFE for the nine months ended June 30, 2012, results of $2.98 per share compared with $2.56 per share last year which represented a 16% increase. This morning we are narrowing our guidance for F2012 to a range of $2.65 to $2.75 per basic share, and that would put us on track for our 21st consecutive year of improved financial performance as measured by net financial earnings growth.

Importantly, you can see that the majority of our total earnings are coming from New Jersey Natural Gas. Because of the strength of our financial profile we increased the dividend again.

It was the 19th increase in the last 17 years at a growth rate of 5.6%. When you look at our peer group their comparable rate is 3.7% and that is providing investors an attractive yield of 3.3% which certainly is a strong number given the interest rate environment we’re in right now.

Finally, because of our financial strength we’re continuing to return value to shareholders through our share repurchase program. We’ve repurchased more than 200,000 shares this year which has brought the total amount of repurchases since 1996 to over 7.5 million shares.

Moving to Slide #6 we give a little more detail on our results that we’re announcing this morning, and as I noted for the 9 months ended June 30 NFE per share was a strong $2.98 per share compared with $2.56 last year. The results as you can see from the chart were driven by solid performances by New Jersey Natural Gas and NJR Clean Energy Ventures as well as positive contributions from Energy Services, Energy Holdings, and Home Services.

Moving to Slide #7, as I indicated we’re updating our F2012 guidance. We are narrowing the range by a nickel on each end of the range and now estimate NFE in the range of $2.65 to $2.70 per basic share.

I think if we’re able to achieve these results it would once again underscore our reputation for being able to deliver consistent performance for our shareholders as well as consistent value.

On Slide #8 we give a little more detail on the earnings guidance. You can see from a segment perspective we currently expect that New Jersey Natural Gas will contribute between 60% and 70% of our earnings, which is obviously the majority.

Clean Energy Ventures will be in the range of 15% to 25%, NJRES will be between 5% and 15%, Energy Holdings 5% to 7%, and finally Home Services 2% to 4%. But when you look at it from an infrastructure perspective we are currently guiding that those businesses will contribute about 90% of our net financial earnings for F2012.

Slide #9 gives you some details on our capital expenditures, and as you can see we continue to invest significant amounts of new capital which is helping to build a foundation for future growth. The majority of the capital is being invested into NJNG.

As you can see when you look at those details, our accelerated infrastructure programs are expected to total almost $50 million for F2012.

it is the continued strength of our financial performance combined with our strong financial profile that has enable us to increase the dividend again this year, the annual rate by 5.6% to a rate of $1.52 per share, that was effective January 3, 2012. And again, as I pointed out it was the 19th increase in the last 17 years comparing favorably with our peer group, which has an average one-year growth rate of about 3.7%.

Moving on to Slide #11 where we talk about the payout ratio, you can see how our payout ratio compares with our peers. It is lower than average and that is not only helping our financial profile but allowing us to achieve an earnings retention rate that will support future growth and net financial earnings.

On Slide #12 we give you a little more detail on share repurchases. Again, it’s the strength of our balance sheet that has enabled us to make these targeted repurchases, repurchases as a means of further enhancing shareholder value.

Thus far this year we’ve invested about $8.7 million and if we go back to September of 1996 we’ve invested more than $227 million. We’ve repurchased about 7.5 million shares and we’ve done that at a split adjusted cost of about $30.31 so you can see where that compares with our share price today.

You may recall that New Jersey Resources was one of the first utility holdings companies in the industry to put a share repurchase program in place.

Let me turn now to our subsidiaries and their performance, beginning with New Jersey Natural Gas which as you know is our largest subsidiary in terms of assets, earnings, people, investment. We expect their earnings this year to contribute the majority of our overall net financial earnings.

That will be driven by steady customer growth in the growing service area and margin from our accelerated infrastructure programs. But as you’ll see as I go through the presentation our fundamentals remain strong, and I want to focus on some of those fundamentals beginning with customer growth.

You see on Slide #14 that we are continuing to record strong customer growth. For the first nine months we added almost 5000 customers and in addition 395 existing customers added heat to their homes.

Conversions are playing an important role in our new customer growth this year. They accounted for 57% of the total new customer additions, and by the end of this fiscal year we expect that there’ll be a 50/50 split between new construction and conversions.

Residential customers from a margin perspective contributed about 64% during the first 9 months. As we look forward during F2012 and F2013, we expect to add between 12,000 and 14,000 new customers which would represent a new customer annual growth rate of about 1.3% which I think you’ll agree is strong by industry standards.

The annual margin for those new customers should be about $3.5 million.

Moving to Slide #15 we give you a little bit more detail about the service territory, and in sum the service territory demographics remain strong with overall solid population growth. The chart that you see here on the left breaks down our customer distribution by county, while on the right side you can see the population growth by each county over the last decade compared with the state.

Clearly Ocean County stands out and is now accounting for about half of our growth, and remains one of the fastest growing counties in the state.

Moving to Slide #16, certainly the significant price advantage that natural gas currently enjoys has helped us in the conversion market. And if you look more closely at about where natural gas is positioned relative to the competing fuels that relationship for us is very strong, particularly in comparison with propane and electricity.

On Slide #17 you can see that our regulatory agenda remains very active. Two of our regulatory initiatives, our Conversation Incentive Program or CIP, and our Accelerated Infrastructure Program or AIP, continue to benefit both customers and shareowners.

CIP as you may recall is in place through September of 2013. It protects us from declining usage in weather; certainly that was important this year.

But a critical element of the CIP has been our efforts to encourage customer conservation. That has produced real savings for customers.

We estimate that it’s been over $225 million since inception in 2006.

AIP, again the Phase II that we’re working on right now was approved in March of 2011, and really those investments are helping us support system reliability. But it’s also helping to strengthen New Jersey’s economy, and you see the detail on the projects and spending for both AIP I and AIP II.

Moving to Slide #18, I think it’s important to comment on the Energy Master Plan because that has been established by the state, a key document for creating the framework for energy policy in New Jersey; and it is also driving a number of our own initiatives. If you look at the document you can see that it is very positive for natural gas as it supports natural gas bioelectric generation, alternative fuel vehicles, natural gas vehicles.

It expresses a preference for natural gas over oil and conversion markets, and it emphasizes the importance of strong and reliable infrastructure.

That leads us to Slide #19 where we discuss our SAFE program which was filed with the DPU on March 20 to replace about 343 miles of unprotected steel and gas & oil distribution main. That could ultimately lead to an investment of more than $200 million over a five-year period.

We’re looking to recover the costs associated with that investment at our weighted average cost of capital from our last rate case of 7.76%; and from an economic development point of view it should create more than 2000 jobs. But again, I go back to the Energy Master Plan which is supporting the increased use of natural gas and enhancements to infrastructure.

leaks per mile and pending leaks, both of which have declined significantly since 1996. In fact, when you look at the amount of new capital that we’ve invested in our system since 2002 it totals more than $800 million.

So we continue to focus on the issue of reliability and back that up with a lot of new capital going into the system.

On Slide #21 I want to talk about one of our latest regulatory initiatives and that relates to natural gas vehicles, which are referring to the NJNG/NGV Advantage. That was approved on June 18 by the Board of Public Utilities.

It gives us the ability to invest up to $10 million to install, own, and maintain CNG infrastructure, and basically what we’re looking to do is to help grow the market for clean natural gas vehicles in New Jersey which is, as I said earlier, consistent with the Energy Master Plan. We have been pleased with the interest that we’ve received so far from package and beverage deliverers, waste haulers, and municipalities, and I really look forward to focusing on the NGV Advantage for the balance of the year.

On Slide #22 we have an update on our BGSS incentive programs which have been in place now for almost two decades and during that time have saved customers almost $600 million. Through June 30th of this year our shareowners have realized utility gross margin of 7.9%.

And I think from a strategy point of view, you can see not only the different incentives that are in place, and if you look at them they’ve certainly evolved over the past few decades.

But I think more importantly it’s been an excellent example of how we’ve been able to work with our regulators in a way that creates incentive structures that are benefiting our customers, our shareowners and our state overall. I would also note that in 2011 the BPU improved an extension of the existing incentive programs through October of 2015.

And then finally with New Jersey Natural Gas, it is important to focus on what our team has been able to achieve in the area of customer satisfaction because we remain best in New Jersey and the best in the Eastern Region in addition to what we have done in the area of JD Power awards including 7 since 2002, and this past year we won them for both residential and business customer satisfaction. We continue to have the lowest number of escalated complaints per thousand customers of any natural gas or electric utility in New Jersey.

That’s a record that we’ve held for almost 20 years; in fact, we’ve had the lowest number of escalated complaints according to that metric since they first started keeping those statistics back in the early ‘90s.

Let me change now and move on to Clean Energy Ventures, and start by talking about the Sunlight Advantage and giving a little bit of a summary there. Those investments contributed about $20.8 million during the first 9 months of this fiscal year.

We think as I stated earlier that they’ll contribute between 15% and 25% of our F2012 NFE. So far we’ve got 34 megawatts of installed capacity and over 20,000 SRECs have been generated.

And from a strategy point of view, in addition to being consistent with our core energy mission it has been creating meaningful energy earnings growth opportunities, providing customers with competitively-priced electricity; and has been supportive by a strong legislative commitment here in New Jersey as evidenced by the legislation that Governor Christie signed in July.

On Slide #25 we give you just a summary of that legislation which was designed to bring long-term stability to an industry in New Jersey that has been growing dramatically. The Governor has indicated his support to that legislation for the solar industry and he obviously recognizes the environmental job creation and energy cost benefits to New Jersey.

Two key areas in that legislation was first with regard to the renewable portfolio standard which was significantly increased starting in the energy year 2014. At the same time, adjustments to the Solar Alternative Compliance Payment, or SACP, which have been lowered to better reflect current market conditions.

But I think the important point from our perspective is that the legislation has provided the framework to promote the long-term sustainability of the solar industry in New Jersey.

On Slide #26 we give you some more specific detail on the renewables portfolio, where it was and where it is now. And you can see again how it has been frontloaded beginning in the energy year 2014.

Essentially it has now doubled for the energy years 2014 through 2016 and it’s higher than the previous standard through energy year 2022. But through that acceleration, reasonable restrictions on bridge and connected projects as well as new measures to improve the investments in the so-called “pipeline,” the new law is designed to bring balance to the market.

Looking at Slide #27, I think this is an important statistic because it shows since 1998 what has happened to the installed cost of solar. And as you can see, that installed cost has come down from about $11/watt about 14 years ago to today we’re estimating it’s closer to $4/watt.

So that’s been important in terms of the not only competitiveness of solar but it is also reducing the reliance on incentives which ties back to the state’s ability to reduce the SACP as was done in the legislation.

Going to Slide #28, let me just give you some of the details on our residential and commercial programs with the Sunlight Advantage. We’ve continued to make excellent progress in the residential solar program.

Year to date we’ve got 536 operational leases; the average size is about 7.4 kilowatts and that’s led to the deployment of almost $14 million thus far this year. We think that, that number for the year will be close to $20 million, and from a customer perspective we’ve been able to save customers over $0.5 million on their electric bills; and we think that’ll happen on an annual basis and will grow as we add more people to the program.

a Medford project, a ground-mounted system and an investment of about $20 million for a 6.7 megawatt project. We expect that to be in service in F1Q 2013.

And this morning we’re announcing the Wakefern Food Court project which is a rooftop system, an investment of $6.9 million. That will be a 2.4 megawatt project with an in service date planned for F2Q 2013.

Again, the market remains robust and our pipeline remains strong in terms of the valuations of new projects.

Let me touch on the balance of our non-regulated businesses. On Side #30 we talk about NJR Energy Services which contributed $18.1 million to our net financial earnings in the first 9 months of F2012.

Our expectations are that NJRES will contribute between 5% and 15% for the entire fiscal year. NJRES continues its focus on long option strategies and at this point risk management as well as providing asset management services to producers.

On Slide #31 we have an update for you on our NJR Energy Holdings which is our midstream assets, Steckman Ridge and Iroquois. NJR Energy Holdings contributed about $5.4 million during the first nine months of F2012; Iroquois was about $2.1 million of that.

And again, our expectation is it will contribute between 5% and 7% for the entire fiscal year.

And then finally on Slide #32, Home Services which has continued to experience a strong growth rate, contributing about $750,000 to net financial earnings so far this year, a 32% increase over last year. We think that they’ll contribute between 2% and 4% of F2012 net financial earnings.

And right now in addition to our focus on the service territory we have been doing geographic expansion and we’re currently marketing in the counties of Sussex, Warren and Hunterdon outside of our service territories. As you can see from this slide we’ve been putting more emphasis on advertising, marketing and branding.

So to summarize as we do on Slide #33, we continue to deliver premier results. Our strategy is straightforward; focus on making sure that New Jersey Natural Gas is providing the majority of our earnings, pursuing complementary non-regulated businesses, understanding the importance of working constructively with regulators, policymakers and a broad group of stakeholders; and given the capital intensive nature of our business to maintain a strong financial profile.

We have the foundation for continued growth driven by core customer growth in New Jersey Natural Gas, additional regulated infrastructure opportunities, our clean energy investments and an expanding array of retail energy services; and then finally performance, which is really where we’ve developed I think a strong reputation.

We have a very attractive track record of consistent results. We’ve been able to increase the dividend while maintaining a payout ratio that enables us to reinvest in the business to support our future financial results.

When you look at our returns over the last five years they’ve been greater than the peer group average, and we’ve been able to do that by really understanding the importance of maintaining strong customer service and safety which is what our customers really look for in terms of what New Jersey Natural Gas and New Jersey Resources gives them.

So that’s how we’re doing. It has been a strong year so far.

We expect that will continue for the balance of the year, and as always I want to say thanks to our employees because it’s really because of everything that they do that I’m able to report these results to you today. So thank you and we’ll be happy to take any questions.

Just a couple of quick questions here and then I may have to circle back with you this afternoon. But I noticed we didn’t have any SREC sales in this quarter.

Is that basically in anticipation of a rebound in the market with new legislation going through or does that possibly reflect maybe a large number committed through forward sales or contracts there?

No, it’s the former. We believe that the current market is very oversupplied and therefore prices are depressed, so we made a risk management decision to now not sell those SRECs that we’ve generated.

Okay, yes, that makes sense. Another one, kind of keeping with the solar: just sort of sequentially from F2Q, can you talk about what projects may have come online?

I know we obviously will see greater generation during the summer but can you just talk about which projects, I’m thinking maybe McGraw-Hill maybe gave some impact to F3Q that it maybe didn’t in F2Q.

I think virtually all of our larger commercial projects were put in service by the end of December, and the activity really since then has been our residential program. So the only incremental controlled capacity since very early in the fiscal year has been the continuation of our residential program.

So I know last quarter it was a little too early to comment on where your discussions are around the SAFE filings stood and around timing, but do you have any further clarity on that here in August?

Mark, we’re just going through the normal process regarding responding to questions that are being asked by the parties. So it’s just going through its normal process.

Okay. So you don’t really have any kind of a target there on timing?

Yeah, I wouldn’t speculate on that at this point.

Okay. Just shifting gears here- - obviously you mentioned a new project this morning.

Can you talk about that residential pipeline, I don’t know which slide that’s in but can you talk about maybe some details on that and some demand and how you expect the demand for the residential side of things to move given the change in legislation?

What I’ll do is I’m going to ask Stan Kosierowski who heads that business unit for us to just give you some additional insights on the market dynamics. Stan?

Yes. If you’re talking about the residential program as far as the residential pipeline is relatively strong and I think the lease model we have has proven to be very successful.

We continue to not experience any sluggishness in getting customers to sign the lease. We expect that program to be pretty robust for the coming years on the residential side.

Do you want to talk about the commercial side as well?

Sure, yes -- any comments would be great.

Well in the commercial market I think a lot of the legislation has certainly helped provide some sustainability in the long term in New Jersey. And we have projects in the neighborhood of about 180 megawatts that we’re looking at for the future.

Okay, thank you Valerie. We appreciate all your time this morning.

As a reminder the recording of this call is available for replay on our website. Again, we appreciate your interest and investment in New Jersey Resources.

Thank you very much, have a good day. Bye-bye.