New Jersey Resources Corporation (NJR) Earnings Call Transcript & Summary

Good morning, everyone. I'm Dennis Puma, Director of Investor Relations at New Jersey Resources, and I'd like to welcome you to our 2020 Analyst Day. I'm joined here today by Steve Westhoven, our President and CEO; Pat Migliaccio, our Chief Financial Officer; as well as other members of our senior management team, many of whom you'll be hearing from today. As you know, certain statements in today's webcast contain estimates and other forward-looking statements within the meaning of the securities laws. We wish to caution persons watching this webcast that the current expectations, assumptions and beliefs forming the basis for our forward-looking statements are beyond our ability to control or estimate precisely, which 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 today's earnings release, first on Form 8-K and in our most recent Forms 10-K and 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'll also be referring to certain non-GAAP financial measures such as net financial earnings or NFE; utility gross margin; financial margin; S&T adjusted EBITDA; adjusted funds from operations and adjusted debt. We believe these non-GAAP financial measures provide a more complete understanding of our financial performance and liquidity. However, they are not intended to be a substitute for GAAP. Net financial earnings, financial margin, utility gross margin are discussed more fully in Item 7 of our 10-K. We've also provided presentations of our most comparable GAAP financial measure and a reconciliation of these non-GAAP financial measures in the appendix of this presentation. You'll find an agenda on Slide 3 outlining our speakers for today. Then we'll take a short break and conclude with a question-and-answer period. All the slides accompanying today's webcast are available on our website and were furnished on Form 8-K filed with the SEC this morning. As always, I want to thank you for your interest and investment in New Jersey Resources. Please enjoy the day.

Good morning, everyone, and thank you for joining us today. I'm looking forward to this discussion and excited to share the progress we've made over the past 12 months and our plans for the future. I only wish we could have done this update in person. This is an important moment for NJR. We're holding this Investor Day to give an up close look at our company and who we are. We'll talk today about the opportunities we're pursuing. We'll give a detailed view of our plan to deliver predictable, sustainable growth and long-term value to our shareowners. We'll talk about how our strategy increases NJR's value and how we've positioned our assets and infrastructure to be a part of the clean energy economy, not only in the short term, but over the long term, as we transition to decarbonization. What you'll see is a diversified company with complementary businesses that began to provide strong profile for growth here. New Jersey Natural Gas, our core utility business, is the strongest it's ever been. We have projected double-digit rate base CAGR through fiscal year 2024. Clean Energy Ventures is poised to dramatically accelerate its growth given favorable market conditions. CEV will expand outside of New Jersey and nearly double the amount of capital to deploy annually by 2024. And we're also taking a number of strategic steps to derisk some aspects of our business. These actions will strengthen our ability to deliver more predictable NFE moving forward. I will detail a few of these changes in just a few minutes, but most importantly, what you'll see today is a company that has a clear understanding of its role in the clean energy landscape. Now there are some who will wonder what a company like ours could be part of this future. The reality is we have been pursuing it for a long time. NJR is delivering the cleanest available fuel today. We are already advancing efforts to use our infrastructure for the next generation of clean energy like renewable natural gas and hydrogen to meet society's emissions and sustainability goals. We will show you how the sustainability investments that we have made and continue to make with regulatory support translate into a competitive advantage for our company. As part of our plan to execute on our vision and increase our ability to compete and grow, we need to reset our NFE in fiscal 2021. This reset is mainly the result of the change in the finance and accounting method of our solar investments as well as some minor regulatory lag. But when looking past fiscal year 2021, we have significant growth. And going forward from 2022, we are increasing our long-term NFE growth rate to 6% to 10%. The midpoint of this range is above our previous range of 6% to 8%. This growth will be fueled by $2.6 billion in planned CapEx from 2021 through 2024, focused largely on our natural gas and solar businesses. So let me also be clear about the commitment to our dividend. There'll be no reduction in our current dividend. There'll be no reduction to our dividend growth rate. In fact, we are increasing our annual dividend growth range, 6% to 10%, and we plan to maintain a reasonable payout ratio along the way. Our dividend will be anchored by strong operating cash flows. We are targeting cash flows with a CAGR of about 20% over the next 4 years. Later today, Pat will take you through the financials and provide more details on our guidance range for 2021 and 2022 as well as our projected long-term growth. Before we talk about our future, let's briefly discuss the year that just ended, fiscal 2020. The strength of our diversified model and the dedication of our workforce delivered solid results despite a challenging environment. NJR delivered on our guidance range, generating $2.07 of NFE per share, a growth of almost 6%, when we raised our dividend for the 25th consecutive year. And most importantly, I want to thank and recognize our employees as they continue to work through the pandemic. Our team has never lost sight of the mandate to provide safe and reliable energy to our customers. And more than ever, our solid performance in 2020 is owed to these women and men. A deeper look at fiscal 2020 results will be included in Pat's section later today. At our core, NJR is an energy infrastructure company. For more than 6 decades, we have successfully built, acquired and operated energy assets to meet market needs and policy demands. Our reputation for acting responsibly with our regulators, suppliers and customers, along with our proven ability to execute, allows us to deliver value for our shareholders. Every day, we deliver energy that is the foundation of our customers' quality of life, and we do so in a safe, reliable and environmentally responsible way. Our portfolio includes complementary businesses that leverage our core utility experience. Clean Energy Ventures benefits from our expertise in public policy and our commitment to further climate goals in New Jersey. It's been a growth driver since 2009. To better position CEV for accelerated growth, we're expanding outside of New Jersey to pursue regional market opportunities in the Northeast. This region is one of the fastest-growing solar markets in the country due to public mandates and aggressive clean energy targets. Midstream is now Storage & Transportation, a name change meant to reflect the assets that we own. Our portfolio is largely comprised of lower-risk investments when compared to other midstream segments, and we believe it's important to differentiate them. Safely operating and managing natural gas infrastructure has always been a priority of NJR. Our Storage & Transportation business benefits from this expertise. We manage these assets with the goal of generating stable, fee-based revenue from long-term capacity commitments with high-quality customers. Our business looks to serve constrained or growing end-use markets with assets that offer organic growth opportunities through optimization and expansion. Our Energy Services business benefits from long-term customer relationships and a deep understanding of wholesale energy markets. It's rooted in our gas supply management experience. With years of strong performance, we have strategically used excess cash flows from this business as growth capital to strengthen our balance sheet and lessened the need for debt or equity issuances. And finally, our Home Services business benefits from our long history in retail operations. We serve approximately 115,000 customers with services that align with our core utility business, and that reinforces our overall brand strength and customer loyalty. So now let's talk about the energy transformation underway in our country and what that means for NJR. The landscape for energy companies is evolving as we all focus on reducing carbon emissions. I've been with this company my entire career, and I continue to see, with extraordinary clarity, the opportunities that come with the change in regulatory landscape. In the 1990s, we responded quickly to the interstate pipeline deregulation with the launch of Energy Services. When the state sought to become a leader in renewables 10 years ago, we created Clean Energy Ventures and became one of the most significant solar investors in the state. Both of these businesses have made material financial contributions to NJR since their inception. New Jersey Natural Gas as a driving force behind decoupling in New Jersey. And this change created a pathway for significant energy efficiency investments without compromising NFE. This year, we submitted the largest energy efficiency filing in our history. Today's clean energy transition offers even more opportunities for growth, and we'll capture them by doing what we've always done: aligning our strategy and investments with public policy. The world is moving towards a clean energy future. NJR has embraced this future, and we're ready to lead and thrive in it. Renewables will play a big role in achieving these goals, and CEV is poised to capitalize on those opportunities. But we also know that electrification and renewables alone are not the most reliable or the most cost-efficient path to reach these emissions targets. That's where natural gas infrastructure is steps in. Today in New Jersey, in most parts of the country, natural gas is the most affordable and reliable choice for heating homes and businesses. As innovations like RNG and hydrogen scale, the existing gas distribution system will deliver more and more decarbonized fuel, dramatically reducing emissions without a massive build-out of new infrastructure. This path is more economical and a reliable way to achieve the same emissions goals. Maximizing the benefit of existing infrastructure is the practical path moving forward. So let's talk about the fundamentals of the market that support this view. In New Jersey, 75% of the homes and businesses rely on natural gas service. In our service territory, that figure is 82% and growing. The whole electrification model for New Jersey would be extremely costly for residents, who are already paying some of the highest electric bills in the country. From an emissions perspective, the generation mix of the PJM grid, which serves New Jersey as a high penetration of fossil fuels, and that coupled with the inefficiency of electric heat pumps in colder climates, means electrification would actually increase carbon emissions in many scenarios. Over the past year, we've had productive conversations with our regulators and policymakers about how to use the infrastructure like ours to supply decarbonized energy sources, hydrogen and renewable natural gas. The environmental benefits of these fuels are clear, but it'll take some time for these solutions to scale and achieve competitive prices. And as that market develops for these fuels, our economy will still rely on traditional natural gas to grow and prosper. Customer demand will remain strong. And as it becomes more difficult to build new large-scale gas infrastructure, especially in the Midstream segment, these market fundamentals will cause existing assets to increase in value. Natural gas is not going away anytime soon. But we are investing today to prepare for and capitalize on the transition towards decarbonization. Amy Cradic and her team will provide additional details on these trends later in the presentation. So let's talk about the strategic path we'll follow to deliver results. First, we will focus on significant growth at our regulated utility and Clean Energy Ventures. These are our core businesses, and the growth prospects support significant deployment of capital. A substantial portion of our NFE and cash flow over the coming years is expected to come from these 2 businesses. Our regulated utility remain our largest segment, both in terms of capital allocation and NFE generation. And we expect about 11% rate-based CAGR through fiscal 2024 and NFE contributions in the 60% to 70% range over the long term. At CEV, as we extend our footprint outside New Jersey, we will allocate more capital to this business, reaching a level of $250 million in fiscal 2024. Lower costs, greater efficiencies, favorable public policies and market constructs with more predictable returns are all accelerating growth in this energy segment, making it right for increased investment. Second is our strategy to generate more predictable net financial earnings. Our clean energy business will benefit from New Jersey moving towards fixed price subsidies for solar, which we see now in the new TREC market. At the same time, states across the Northeast have adopted aggressive renewable portfolio standards and stable revenue models. In Rhode Island, for example, we are already moving several projects forward. And they have a 20-year feed-in tariff, along with power purchase agreements with local utilities. In the case of our Storage & Transportation segment, our large infrastructure investments will soon become operational, and our NFE will become more predictable as a result. To achieve this, our revenue profile will become more fee-based, supported by long-term capacity commitments from investment-grade counterparties. Our focus will be on growing this business through organic growth opportunities and not new acquisitions. At our Energy Services business, although NFE can be heavily impacted by weather, we'll pursue higher fee-based revenue that will better ensure coverage of fixed costs. This will reduce the chance of potential loss in the future. And importantly, we are also de-risking our financial guidance. NJR remains committed to the PennEast project, but we're removing it completely from our financial projections. PennEast is an important project for the Northeast, but the uncertainty around an in-service date requires us to take this action. CapEx spend will continue to be prudent and minimal as the project work towards approval and construction. Also, our financial guidance will rely minimally on NFE contributions from Energy Services group, lessening the influence of this business on the wider NFE performance. As we seek to deploy more capital at Clean Energy Ventures, we'll be changing our accounting and funding methodologies. We'll adopt the deferred method of accounting for investment tax credits, more commonly used approach, and we'll increase the use of tax equity, financing first solar projects. This change will increase predictability of NFE and make us more competitive. These are necessary steps to provide more certainty and a clear line of sight into our guidance and growth projections. Pat will provide more details in the financial section today. Finally, we are seeding investments to help define and achieve the clean energy future for emerging technologies in the decarbonization of our gas supplies. We're in the early stages of projects that will incorporate both renewable natural gas and hydrogen into our system. At CEV, we'll leverage our decade of clean energy market experience to become more active in emerging technologies. On the next slide, you can see that we expect NJR's long-term business mix will remain similar to what it is today. 90% of our NFE and cash flows are expected to be generated by New Jersey Natural Gas and Clean Energy Ventures, our core businesses. As mentioned before, we're removing PennEast entirely from our guidance. Instead, our commitment to the project offers the potential upside of NFE and cash flow beyond the long-term guidance we are providing today. We expect the Energy Services business will continue to contribute to NFE but will do so at a minimal level starting in 2021. Energy Services will also continue to offer the upside of additional cash flow in the years of natural gas price volatility. And as in prior years, we will use any excess cash from Energy Services outperformance as growth capital, decreasing our borrowing needs. In the near term, our plans at Storage & Transportation are focused on revenue strategies and organic growth. Supporting our strategic plan forward is our 4-year capital plan. Over the next 4 years, we expect to invest around 60% of our capital expenditures in New Jersey Natural Gas and 30% in CEV. We expect New Jersey Natural Gas to achieve 11% rate-based CAGR through fiscal 2024, as I mentioned earlier. And looking at our capital allocation in a slightly different way, we expect that approximately 50% of our capital expenditures will be allocated to sustainability investments. These are defined as investments in renewable energy, energy efficiency programs, renewable natural gas, power-to-gas, expenditures in our distribution system to reduce carbon emissions. Turning to Slide 13. I believe it's important for me to end on a broader sustainability note. Although you receive valuable facts about NJR's assets and financials during the remainder of this presentation, how we manage sustainability issues is core to our long-term value proposition. Long before many corporations started to focus on sustainability in a meaningful way, NJR's actions were guided by ESG's core principles. Environmental stewardship, corporate responsibility, sound governance, caring for the communities have been fundamental values for our company for decades. They influence how we operate and the way we work with our customers, regulators, business partners and employees. And transparency on these issues will become even more critical as we move through the significant changes during the energy transition. This will be the first fiscal year where we will communicate our sustainability goals and progress through SASB standards. We believe this will strengthen our dialogue with our investors and other stakeholders moving forward. And you will continue to hear more about the excellence of our safety record, support of our communities, volunteerism, charity efforts, the strength, independence and diversity of our Board and our environmental stewardship. The recent focus on social justice and racial equality has brought a new urgency to our commitment to diversity, equity and inclusion amongst our employees and the communities that we serve. NJR has a strong record of engagement on these issues, and we are committed to building on those efforts. Sustainability is a common thread that ties together all of our companies and the nearly 1,200 people behind them. You need good people, good governance and discipline and good relationships with the diverse communities you work in to get good results. And you'll find that at NJR and the way we think about ESG and our vision for a clean energy future. Finally, I'm joined by several members of our talented leadership team, who you will hear from today. Collectively, they bring decades of experience in energy markets, utility and midstream operations, regulatory and public service. Amy Cradic joined NJR in 2018 after a nearly 25-year career in policy and regulatory roles at the highest levels of state government. Amy has brought tremendous vision and leadership to NJR. Mark Kahrer is a third-generation utility employee with nearly 4 decades in the industry. Mark has extensive experience in accounting and finance. Mark Valori is a former United States Navy Officer, a well-known leader in the renewable energy markers here in New Jersey. John Bremner is a gas industry veteran with decades of experience managing natural gas infrastructure across the country. And Tim Shea has 3 decades of energy industry experience from up and down the natural gas value chain. Prior to joining NJR, he worked with producers and pipelines in the growing physical gas market. And Pat Migliaccio, our CFO, has over 20 years' experience in the energy industry across many segments, including merchant generation, retail and utilities. He's been with NJR for the past 11 years as we've grown from the diversified -- into the diversified energy business that we are today. This is a team that is driven and ready to execute on the vision we're outlining for the future. So with that, I'll turn it over to Amy Cradic to talk more about strategy and sustainability. Amy?

Good morning, everyone. I'm Amy Cradic. I have been with NJR for a few years now after many years working across Republican and Democratic administrations at the Department of Environmental Protection and in the governor's office as a senior policy adviser and as Chief of Staff. Steve just touched upon NJR's broad ESG agenda as well as the fundamental beliefs we hold as a company about the future of the U.S. energy economy. I'm going to focus today on the environmental aspect of that agenda. We will discuss the macro drivers that are shaping the way we produce, use and consume energy and why we believe NJR is well positioned to capitalize on those trends. We will focus on the New Jersey energy landscape where our core utility is located, and we'll share details about the innovative work we are doing to align with public policy and position ourselves to deliver long-term value. We know that tremendous opportunity exists for NJR in the broader clean energy transition. That's why we have embraced the shift to clean energy and have literally been building towards it for years, both in our utility and in CEV. For NJNG, with decades of investing in upgrading our infrastructure, we have one of the most environmentally sound delivery systems as measured by leaks per mile, both in the state of New Jersey and amongst our peers nationally. And as you can see in the number of environmental firsts we've outlined here, we continue to demonstrate leadership when it comes to taking action to drive lower emissions and control methane in our system while delivering safe, reliable service. In addition to the progress made by our utility, NJR was one of the earliest and continues to be one of the most significant investors in New Jersey solar market. To date, Clean Energy Ventures has invested approximately $1 billion in solar assets in all 21 counties across New Jersey. Supported by our beliefs about the future of the energy landscape, our vision for NJR is to be a leading energy infrastructure company driven by innovation to deliver clean, decarbonized fuel; to reliably heat homes and businesses; to operate high-integrity, environmentally responsible assets; to continue to strategically invest in solar; and to leverage our expertise to support emerging technologies and new market opportunities like battery storage and electric vehicles. As decarbonization continues to accelerate and we become increasingly reliant on renewables, NJR is making strategic investments today to support that transition. One of the most important points we will discuss is how our upgraded underground delivery network will provide a competitive advantage as we transition to a decarbonized fuel supply. Ultimately, we believe our infrastructure investments will become even more valuable and relied upon in both the near term, as natural gas continues to displace coal and oil, and over the longer term, as intermittent solar and wind become a more dominant part of the energy market. Alternative fuels and the delivery systems to dispatch them will need to step in to ensure energy reliability. In fact, prominent energy researchers, who we're now consulting with, believe that decarbonized, flexible fuel source delivered through our existing delivery systems is not only critical from an energy reliability perspective but also a necessity. Battery storage, given their short-term storage capabilities and the sheer volume of the limited natural resources needed to develop them, are not a sustainable solution on their own. Instead, in order to achieve society's aggressive emission reduction goals, we will need to explore new solutions like flexible clean fuel. Let's take a moment to dive deeper into the trends that are driving the clean energy transition and shaping our strategy. While these trends are well defined, they are evolving at different paces in different areas around the country. Some states are still transitioning from coal and oil to cleaner natural gas and will continue to do so for the foreseeable future. Other states like New Jersey have already transitioned and are reaping the emission reduction benefits of natural gas. These states are focusing their efforts over the next decade or more to incorporate wind and solar at scale into the power grid mix. Here's what we know today. Nationally and globally, natural gas demand continues to rise and is expected to grow over the next 30 years. That's primarily because it is one of today's cleanest available fuels that can be reliably and affordably delivered to our customers. At the same time, in many parts of the country, natural gas infrastructure is becoming harder to build from a regulatory perspective. From there, it's a simple supply and demand. Less infrastructure growth, coupled with strong demand, increases the value of the infrastructure that already exists. That's why we believe the value of our existing assets and delivery systems will continue to increase over time. This is especially pertinent to our transportation assets that serve a growing industrial center in Pennsylvania and with our storage assets serving the Gulf Coast region, a region bolstered by broader export needs. In terms of energy efficiency, we expect lower energy consumption per customer over time given broad public policy support. We are well positioned for the acceleration of this trend through the decoupling initiatives at the utility, which Mark will discuss in greater detail. Against this backdrop, identifying how to leverage the billions of dollars already invested in the existing natural gas network to deliver decarbonized fuels in the long term will remain a high priority. The European Union is a global leader in clean and renewable energy and is already making significant investments in this area. As an example, Germany just announced a $10 billion investment to support a hydrogen economy. We expect utilities across the United States to follow, and many are already advancing these efforts. As we have witnessed over the past decade, we will continue to see renewables grow because of benefits from technology and decreasing costs. And just as it did at the launch of solar, public policy, including financial incentives, is accelerating the electric vehicle market. NJR's widespread solar assets will offer opportunities to play an early role in fleet and mobile battery charging. Greater charging opportunities will help supply the green energy sought by a growing number of corporations with public sustainability goals, customers with whom CEV is already engaging. Let's now look beyond the national clean energy trends to focus on how our business aligns with New Jersey's policy landscape and where we see opportunity for long-term growth. NJR's corporate strategy and policy team actively weighed in on the development of the state's Energy Master Plan, or the EMP, which is one of the most progressive in the country. We are making real strides towards achieving the state's EMP goals, which aligned with many of our own business priorities. Our capital deployment in solar over the next 5 years will nearly double as we target investments in growing markets supported by favorable policy and stable incentives. Through our decoupling and energy efficiency programs at NJNG, we are helping customers save money and energy. And we are working towards decarbonization through the exploration of alternative fuel sources, which we'll go over in greater detail later this morning. This strategy is already driving investments in our utility after positive discussions with regulators and policymakers. Clearly, the EMP has aggressive goals, and we believe that a diversity of solutions must be considered to ensure affordability and reliability along the way. While electrification is an early trend in a 30-year-long transition, this single-source policy has cost, technology and reliability challenges. The most significant progress we made in the EMP development was the inclusion and importance of alternative fuels to achieving emission reduction goals. NJR has been studying these issues in-depth for some time. 3 years ago, we partnered with the consulting firm, ICF, to model carbon reduction strategies in New Jersey, identifying cost as a key factor. The economy-wide results are shown on the chart to the right. Leveraging existing gas utility infrastructure to distribute alternative fuel solutions, in addition to aggressive energy efficiency and more efficient [ SACP ], is a cost-effective way to meet the state's emission goals. The combination of these solutions provides the state the potential to achieve $100 billion of savings for ratepayers as compared to forced electrification alone. As more thought is given to this complex transition, innovation will be critical in achieving the EMP goals while addressing the things that are important to our customers, affordability and reliability. And by nearly 25 years in regulatory and policy roles in government, I've learned that any feasible solution to address even the most urgent public issues must take cost into account. That's why a successful clean energy transition must factor in affordability in terms of both implementation and end costs for our customers. [ SACP ] is the primary use for natural gas in New Jersey, and 75% of the state's homes are supported by natural gas. There are 2 main reasons for this: one, New Jersey has amongst the lowest delivered natural gas prices in the U.S., and gas prices are currently 4x less expensive than electricity on an equivalent energy basis; and two, while heat pumps work well in mild climates like the Southeast and California, they are less reliable, less comfortable and less efficient in cold weather climates like New Jersey. As you can see from the chart on the right, according to the federal Energy Information Administration, in addition to higher operating cost, the capital cost to install electric heat pumps are about 60% more today than for a comparable gas heating system. This cost premium trend is anticipated to be true over the next several decades. Added to that, there are no environmental benefits from making that shift. PJM's regional power grid, which supplies the power for -- to New Jersey, is largely supported by fossil fuels. So when looking at environmental outcomes, natural gas has home heating that is cleaner, producing significantly less emissions. Reliability is another critical consideration that we must account for during the clean energy transition. As lifeline service providers, utilities are mandated by law to ensure millions of residents are reliably served. However, increasing reliance of wind and solar to generate electricity can pose certain reliability challenges, specifically increased intermittency that is seasonally dependent. For example, the chart on the left shows how the loss of wind power in the winter can impact the delivery of electricity to customers. This chart depicts an actual situation in the Midwest in winter 2019 created by a polar vortex, which forced most wind turbines to shut down. The power stayed on only because fossil fuel power plants could be called upon and dispatched. These are challenges that we are developing solutions for today, and this is why our infrastructure will be counted on for years to come. On the right, we show data comparing the electric grid to natural gas, and natural gas is 70x more reliable than the electric grid. I'll give you a recent local example where natural gas is stepping in to help customers. On August 4 this year, a tropical storm moved up the East Coast, bringing wind gust of 75 miles per hour to Cape May and parts of Ocean County. Electricity outages reported in our service territory impacted hundreds of thousands of residents, some for nearly a week. Immediately following the storm, NJNG experienced a 53% increase in its normal summer send-out as more than 16,000 of customers turned to their natural gas generators to resume their quality of life. Once the storm ended, NJNG saw a fivefold increase in additional customers seeking to install natural gas generators. We have the obligation and duty to provide our customers with safe and reliable energy. And our underground network has the capability to ensure that they get the energy they need when they need it most. I talked a lot today about NJR's strong track record in preparing for a clean energy future. To further illustrate this point, I'd like to point out that NJR previously committed to New Jersey's initial Global Warming Response Act target of a 20% reduction in emissions by 2020. We met that goal for the reductions in our fleet, pipeline and facility emissions. The reductions were primarily accomplished with the replacement of cast iron and unprotected steel pipe materials in the utilities distribution system. These materials post the highest risk to environmental because they are more likely to develop leaks and release methane, a greenhouse gas that contributes to climate change. We set a goal for our company to voluntarily reduce our operational emissions in New Jersey to 50% of 2006 levels by 2030. I'm proud to share that we have already achieved that goal, and now we are going even further. NJR is now targeting a 60% reduction in emissions from 2006 levels by 2030, which is solidly in line with the state's 80% reduction target by 2050. We actively engaged environmental experts to set a baseline and measure our progress, and we will continue to develop specific emission reduction strategies based on innovation, technology and cost. Looking ahead over the next decade, our strategies to meet this new target will include continued emission reduction gains from our capital investments in NJNG's system, integrating decarbonized fuels and investing in a cleaner vehicle fleet. Looking further ahead, hydrogen will no doubt play a large role in attaining a decarbonized future. Many analysts have noted that we are in the early stages of a $2.5 trillion industry, and many of the largest energy companies and gas LDCs across the nation are beginning to study hydrogen. With expected cost reductions in renewables and the electrolyzers used to produce hydrogen, the cost of green hydrogen production is estimated to decline by more than half over the next decade and by half again to 2050. The cost reductions will make hydrogen increasingly competitive in a wide variety of uses, including long-haul transportation, heavy industry, power generation and space heating. Infrastructure businesses like ours will be at the forefront to competitively and affordably transport and store this resource. We believe we are well positioned to play a role in the early hydrogen market for 2 reasons. First, NJR focuses on maintaining a best-in-class distribution system, and we have modernized it to be one of the best in the country. These upgrades are important when transporting alternative fuels like hydrogen. Second, we are located in a state with very significant renewable power industry. New Jersey set an ambitious goal installing 7,500 megawatts of offshore wind by 2035, and a good portion of that will come ashore in our service territory. Our recently acquired transportation and storage assets built for natural gas today may gain value in the future as the hydrogen economy advances. Salt caverns have known capabilities and have already been put to use storing hydrogen, storage being a critical issue in helping hydrogen come to scale in the energy sector. The hydrogen opportunity before us has proven potential, which is why NJNG has initiated a power-to-gas project right here in our service territory. We are developing this renewable hydrogen project at our Howell, New Jersey facility, and we expect to reach commercial operation in 2021. It will be used to study blending capabilities and technology, create awareness with regulators and policymakers and build expertise to allow us to scale as the market continues to develop. Moving to Slide 27. I'd like to discuss pipeline quality biomethane, referred to as renewable natural gas or RNG. Biomethane's role in meeting decarbonization targets is underestimated. RNG is sourced through a variety of feedstocks, including landfill gas, which is in no short supply in New Jersey. Currently, many landfills flare their methane gas to reduce its impact on the atmosphere, but that gas can be captured, processed and injected into the pipeline. New legislation was recently passed in New Jersey that focuses on the energy potential produced from recycling food waste. It requires commercial establishments to recycle the significant waste stream so it can be used as a renewable energy source. The state is currently working on the implementation of this legislation, and NJR is participating in the stakeholder discussions. With these and other feedstocks being utilized, RNG can have a real impact on reducing carbon emissions in the state. ICF estimates that by 2050, RNG can represent nearly half of the New Jersey natural gas usage, economy-wide. Nationally, ICF has estimated that enough RNG can be produced to meet nearly all home heating needs. The team is currently analyzing multiple opportunities related to RNG, and we expect these discussions to progress through the coming year. Turning to Slide 28. Before I hand it over to Mark, I want to take a moment to reiterate some of the key sustainability themes we've discussed. We have great confidence that we will continue to deliver on the clean energy opportunities we are capitalizing on today and the new opportunities that we are already seeding investments for tomorrow. Natural gas demand will continue to grow over the next 30 years, and our storage and transportation assets are strategically located to capture value along the way. And as demand grows and fewer assets are built, the ones we have invested in will only increase in value over time. The intermittent performance of growing renewable energy mix will further drive the need for maintaining access to reliable natural gas. Gas heat has long-term competitive advantages, and our customers are loyal and growing. We are well positioned to participate in emerging clean energy markets that have good prospects for NJR, distributed energy that leverages solar, storage, electric vehicles and energy efficiency. Our infrastructure is part of the solution, and we will continue to harness new technology and innovation to help meet societal decarbonization roles. To conclude, since I joined NJR, I've seen firsthand how deeply rooted the values of conservation, responsibility and sustainability really are within this company. It's because of these values and our commitment to our stakeholders and to each other that our long-term vision to build and maintain energy infrastructure that is driven by innovation with improved environmental outcomes is well underway. Thank you. [Presentation]

Good morning, everyone. My name is Mark Kahrer, and I serve as New Jersey Natural Gas's Vice President of Regulatory Affairs, Marketing and Energy Efficiency. I am a CPA, and as Steve said, I'm also a third-generation utility employee. I hope you enjoyed the short video you just saw of one of our construction projects. This was a remarkable installation of just over 9,000 continuous feet of distribution main built about 100 feet below the Barnegat Bay that now connects the mainland to the barrier island in Seaside Park. It illustrates how our engineers and construction crews bring to life the infrastructure investments that ensure our customers enjoy safe, reliable service. Our industry continues to change, and this project illustrates the quality and innovation that our associates deliver every day in creating value for our customers. Today, I will spend time talking about the value created at New Jersey Natural Gas as we contribute to the NJR story. New Jersey Natural Gas is the foundation upon which NJR was built. So let's look first at how NJNG delivers value. Our exceptional service territory will provide robust customer growth well into the future. In our history, a prudent investment and exceptional customer service contributes to the strong regulatory relationships which are built on trust, that trust that has allowed us to build one of the most environmentally sound distribution systems in New Jersey. Our territories' need for infrastructure investments to address supply diversity, system integrity and reliability will allow us to continue to grow rate base at a double-digit compound annual growth rate over the next few years. And this growth is expected to continue as we take steps to decarbonize the fuel we deliver through our distribution infrastructure. Further, our constructive regulatory environment also provides mechanisms that reduce commodity and volumetric risk posed by weather or energy conservation efforts. The margins on energy efficiency and gas supply optimization help to increase our returns above our traditional rate-based assets, making New Jersey Natural Gas a very attractive utility investment. But if you're still wondering, is this growth story sustainable well into the future, our answer is a resounding yes. The infrastructure that we use to deliver energy to homes has an unparalleled track record for reliability compared to electricity. Customers think about that when they encounter winter storms. Further, our environmentally sound infrastructure will enable our transition to renewable natural gas and hydrogen. I will get into all of these value drivers during my presentation. Turning to the next slide. When you look under the hood, you'll see that New Jersey Natural Gas is a premier natural gas utility. Specifically, you'll see that the allowed ROE in our last base rate case was very unreasonable. And while we have done an exceptional job at reducing infrastructure risk and eliminating fugitive emissions from our system operations, there is still work to do. And that will result in expected future rate base compounded annual growth rate of more than 11% through 2024. New Jersey Natural Gas proudly serves more than 1.5 million people in 3 desirable counties in New Jersey, with growth expected for the foreseeable future. So let's spend a few minutes talking about our service territory. NJNG has a very attractive service area that includes growing customer base with strong demographics. If you look at the map, you'll see the majority of our customers reside in Monmouth and Ocean Counties, which are situated along New Jersey Shore but are within commuting distance of both New York City and Philadelphia. Our northern territory serves Morris County. Monmouth and Morris Counties are among the top counties in the nation on a household income basis. But for many people in New Jersey, there's a saying, "I'm retiring, downsizing and moving down the shore." That shore is generally Ocean County, which was largely populated by active adult communities and where there has been robust growth for more than 30 years and whose residents' wealth is not shown in traditional measures. New Jersey Natural Gas customer base is comprised of 93% residential customers, along with the associated commercial establishments that serve their daily needs. We have low concentration risk associated with large customers. And again, our margins are largely protected from weather and usage variations. As we look at the forecasted population, according to the New Jersey Department of Labor, over 240,000 people are expected to move into our service area, boding well for new construction, especially in Ocean County, which remains one of the fastest-growing counties in New Jersey. Supporting our customer growth is new construction and conversion to natural gas. In fiscal 2020, we added 8,349 customers. Consistent with our recent history, about 65% of that growth came from new construction, and the other came from conversions. While this number was below our original forecast, the lower result was due to the pandemic as construction projects were delayed and potential conversion customers put off work in their homes. That being said, the mix of customers we expected was different. And we were able to add a few larger customers to the picture, and that helped us exceed our projected margin and revenue growth. So all in all, fiscal 2020 was a good year for NJNG growth. Regarding customer additions, we view this as a near-term delay and remain confident in reaching our 3-year target of 28,000 to 30,000 new customers by the end of 2023. Based on current rates, this will add cumulative utility gross margin of approximately $18 million over our 3-year planning period. But what makes us so confident about our outlook? Residential permitting remains robust in our territory. And based on our current experience, we expect more than 90% of those new residents will choose natural gas as their fuel source. We have also almost 100,000 customers that could potentially convert to natural gas. If you do some quick math, using our annual results and forecasts, you'll see that both the new and conversion markets have a sizable inventory to help us sustain our growth. That is why we can confidently predict that by the end of fiscal 2023, we expect to serve nearly 590,000 customers. When choosing an energy source to heat your home, it all comes down to economics and reliability. And for home heating costs, efficiency and reliability, natural gas is a clear winner. Let's take a closer look at the value we deliver to our customers on Slide 35. This is an important part of our success. In the chart on the left, comparing the cost to translate energy into BPUs, natural gas costs significantly less than its closest competitor. The chart on the right further illustrates this point. Over the past 12 years, New Jersey Natural Gas' average natural gas bill has declined by more than 32% in real terms. This is possible thanks to technology and innovation that has opened the additional shale region supplies to the Northeast with Marcellus being right next door. Keep in mind that over the same years, thanks to the support of our regulators and other process stakeholders, New Jersey Natural Gas has been able to accelerate investment in its infrastructure. By securing the lowest-cost supply and leveraging the Basic Gas Supply Service or BGSS incentive tools, we have been able to keep our costs low and dramatically improve safety, reliability, resilience and our environmental footprint. Combining these elements with a passion for customer service, it's no wonder why New Jersey Natural Gas has become synonymous with superior customer satisfaction. Earlier this year, we were proud to receive our 11th J.D. Power award, which marks 6 consecutive years of leadership in our segment. We are in the top spot in each of the 6 categories that J.D. Power rates. And we were also among the nation's leaders as well. Making sure that every interaction with our customer is handled expertly, actively supporting the communities and institutions in our service territory and living our mission to provide safe and reliable service, 24 hours a day, 7 days a week, is why NJNG has been a perennial leader in the J.D. Power customer satisfaction survey in the Large East category. We continually listen to our customers and look to improve how we serve and interact with them. And that is why our customers have also perennially made us a most trusted brand, as measured by Cogent Escalent. We truly value this feedback and take nothing for granted, especially when it comes to customer satisfaction and safe and reliable service. And this active engagement for improvement translates to all areas of our business. While our key mission is delivering safe, reliable service to our customers in the safest way possible, on Slide 37, you'll see that we favorably measure up against our peers in generating superior operational results. We take every leak reported seriously, responding to them on a timely basis, well under the AGA benchmarks. Further, we have 20x fewer leaks than a median AGA company. Nearly 100% of our system is composed of either plastic or protected steel. Having that environmentally sound system with limited leaks makes us an excellent candidate for the new decarbonization technologies such as hydrogen blending and renewable natural gas, and that will help us achieve our mission to bring safe and reliable energy to our customers in an environmentally responsible way. Part of that commitment has been a strong focus on leak reduction, and our targeted strategy is to continuously improve our system has served us well, and it's a key to our future success. You can see our long track record of continuous improvement in leak reduction and how we are the most environmentally sound natural gas delivery system in New Jersey. As Amy discussed earlier, we're committed to reducing methane emissions from our distribution system, and we will look to drive our pending leaks on our infrastructure to 0. We have invested more than $1.9 billion in our delivery system in the last decade, thus reducing the methane emission by more than 900 metric tons since 2015. That's equal to driving 2.2 million miles. That's like driving around the world 88 times. NJNG's commitment to action has also made us a company of first, eliminating cast iron in 2015, unprotected steel pipe next year, a one future membership, a TrustWell Responsible gas purchase and our goal of driving our pending leads to 0 shows that we're a company who recognizes practical next steps and takes immediate action to make it happen. Although our environmental record is outstanding, we believe there is still much work to do. And our commitment is to continue to reduce methane emissions, and we will target our infrastructure improvements prudently. NJNG's foresight and actions have also shown leadership on aligning with state policy, and this extends to many facets of our business. Converting these initiatives into rate recovery is achieved through a collaborative approach. And here on Slide 39, I'd like to touch on our strong regulatory relationships, operational efficiency and infrastructure investments that are driving margin growth for NJR, while also delivering savings to our customers. We're proud of the relationships that we've developed with the Board of Public Utilities and Rate Counsel. And these relationships, built on trust, have enabled our investors to share in the benefits with customers. When we seek their approval for programs and cost recovery, it is by no means a foregone conclusion. They hold us to task. But in the end, we all share our common goals of getting it right each and every day for our stakeholders. The Conservation Incentive Program enables NJNG's utility gross margin to be largely protected from usage variations due to weather or energy efficiency and our Save Green project investments earn a full weighted average cost of capital on amortized balances. Our infrastructure mechanisms provide timely recovery on specific investments. And our BGSS mechanism not only protects NJNG from commodity price risk but also incentivizes us to optimize the supply portfolio to, first, ensures 100% supply reliability; and second, to optimize those assets in a way that reduces our cost to customers. Through capacity release, off-system sales and storage optimization, we have saved customers more than $1 billion since inception. And annually, we contribute, on average, about $9 million in utility gross margin. But the key to our success in the past, present and future is the safety, reliability and resilience of our underground network, and that requires investment in our infrastructure beyond the accelerated mechanisms, and to recover those investments requires traditional rate cases. The rate base growth that Steve and I have both mentioned will come from a mix of accelerated rate infrastructure mechanisms and traditional base rate cases. Our last base rate case was settled with a rate base of $1.76 billion as of August 2019, with rates effective November 15, 2019. Between that case and fiscal 2024, we expect a rate base compound annual growth rate of more than 11% as we complete several of our major infrastructure and IT-related capital projects, like the Southern Reliability Link, and project mix, which is a major overall of our IT backlog. Those IT investments were clearly described in our infrastructure investment program, or IIP filing. As part of the approved settlement of the IIP, we agreed with BPU Staff and Rate Counsel that those IT investments would best be included in a base rate case filing. So in the future, we will pursue that even for recovery. In addition, we expect to continue to expand capital on our normal CapEx items such as customer growth, system reinforcement and end of life vessel replacements. Finally, we believe the new technologies that Amy has described today will also be included in our capital plans and rate base as we continue to work towards a clean energy future by decarbonizing our gas share. So as we turn to our capital expenditures on Slide 41, looking forward, our future CapEx seen on the chart shows the breakout of the $1.5 billion that we plan to deploy in the next 4 years to grow our system, fulfill our mission of providing safe and reliable natural gas service and prepare for the future. Let me provide you with the latest updates on our infrastructure in the Southern Reliability Link and our SAFE II, NJ Rise and new IIP. The SRL is making great progress. Our current plans expect completion of the project during 2021. Earlier this year, we encountered an issue with a directional drill that resulted in an inadvertent return and a temporary suspension of our Department of Environmental Protection, or DEP, permits related to the horizontal directional drills. The remainder of the traditional trenching construction was not impacted and proceeded safely during the suspension. Following a comprehensive review process of our drilling plans for the remainder of the project, which was less than 1 mile of construction, the DEP reinstated our permits, allowing us to fully proceed with our construction plans. We continue to work with local governments and our regulators as we proceed with the project in a safe and environmentally sound manner. We now have 26 of the 30 miles built. And upon completion, we'll put the SRL into service with timely recovery in rate base. Our infrastructure mechanisms are a clear indication of the progressive regulatory environment that we operated in. On October 28, the BPU approved $150 million infrastructure investment program, or IIP, as mentioned earlier. Our common goal is safe and reliable service to customer guides our path. And through these mechanisms, we positioned our infrastructure network to deliver the energy to heat homes most reliably. But keeping homes warm isn't just about the fuel. It's also about the whole house and helping our customers use energy wisely. And that's something we have been doing and hard at work for many years. For over a decade, we've been a leader in advancing energy efficiency. More than 62,000 customers have invested in energy efficiency. And we have helped create meaningful job by supporting over 2,700 contractors who participated in the program and generated over $550 million in economic activity in our state. To date, this program has successfully complemented the efforts of the state's Office of Clean Energy. But as a result of the 2018 Clean Energy Act, NJNG will take over many of the programs run by the state, beginning in July 2021. Recently, NJNG filed its new $258 million SAFEGREEN program that will effectuate that migration. By doing so, we'll be able to more effectively work directly with our customers to perform or manage the audits, provide rebates and financing, and we will be expanding incentives with the low to moderate-income customers to ensure that all customers will benefit from lowering their energy consumption. For our larger customers, we will have the ability to tailor our energy conservation initiatives along with financing alternatives to help them become more cost competitive. We will work through the process to be ready to approach our customers on July 1 of next year once the BPU approves our filing, and we expect that to be no later than May of next year. Our expectation is that approval of this filing will increase the amount of investment made by NJNG annually. From a historical perspective, our earlier savings program spend was about $5 million to $15 million. Our current program is about $30 million annually. If the filing is approved, we can invest more than double that in the future, turn on a full weighted average cost of capital on the unamortized balances, and those will be now amortized over 10 years versus the 7 years that's in our current program. This case is one of many cases that are on the regulatory agenda. And as we turn to Slide 44, our rate case filing assumptions, I want to remind you of the results of our last case. The improved ROE was 9.6%, with an equity layer of 54%, and we received full recovery of our planned investments to that date. We also saw a timely resolution of that case as we filed it on March 29, 2019, and rates became effective 7.5 months later. In terms of timing for future cases, it's important for you to see our estimates with some potential filing dates associated with our comp plans. We will file a base rate case to coincide with the in-service date of the Southern Reliability Link. The test year for that case will be timed to reduce regulatory lag on that investment. By fiscal 2024, our IT project should be completed to allow us to file a recovery of those costs. And again, we will time the filing to ensure that the assets are in service while reducing regulatory lag. While we try to reduce regulatory lag as much as possible, the attributes of New Jersey regulatory contract, where rates are based on fully historical test years with adjustments for known and measurable items, tend to reduce uneven NFE profiles. Our strategy is to time those rate cases with completion of our major investments and pursue infrastructure mechanisms where appropriate to reduce or minimize regulatory lag. Let me provide some of the key takeaways that summarize why New Jersey Naturals Gas is poised to continue on its growth trajectory and drive value at NJR. First and foremost, our strategic infrastructure investments and accelerated mechanisms will fuel an 11% rate base CAGR through 2024. We have an incredibly attractive service territory with strong demographics, and that will provide robust customer growth. Our regulatory construct is supportive of prudent investments and fair returns for our investors. It provides for margin stability against commodity price risk and usage variation, as well as incremental returns from gas supply optimization and energy efficiency investments. And our environmentally sound infrastructure provides an excellent pathway for our transition to RNG and hydrogen. At NJNG, being recognized for excellent results isn't our vision, it's our reality. And we continue and will continue each and every day to deliver on the promises we make. We will continue to work at transforming the energy that our customers reliably use to serve them in a cleaner, more sustainable future. Thank you.

Good morning. I'm Mark Valori, Vice President of NJR Clean Energy Ventures. In 2010, I joined NJR and have over 30 years of experience in the energy field. Prior to joining CEV, I was the Renewable Energy Lead with the Honeywell CSG market manager team at New Jersey's Clean Energy Program. The video we just saw highlights the importance of the Clean Energy Ventures business here at NJR. CEV is a direction, a path, a future for New Jersey resources and complementary to the work being performed at our utility, NJNG. When we started this business over a decade ago, we were looked at as a disruptor. People were questioning why a natural gas company would get into clean energy. But clean energy has always been at the core of NJR. Since then, we have persevered and invested approximately $1 billion in this business. That investment has provided significant returns, and CEV is now a major contributor to NJR's overall earnings profile. But more importantly, it's a growth engine of the future. Off of that past success, the future for NJR is clean, sustainable and profitable. Turning to Slide 47 and how CEV is driving value as part of NJR. For a decade now, we have successfully operated solar energy infrastructure to serve our customers. This pursuit has delivered profitable growth, aligned us with New Jersey's sustainability goals, including the New Jersey Energy Master Plan and promoted economic development and job creation. We believe that the market opportunity in solar is growing, fueled by lower costs, greater efficiencies and the need to reduce carbon emissions. Clean Energy Ventures can capitalize on this opportunity by significantly increasing the capital invested in the sector and aligning that investment with policy and sustainability goals. We are expanding our solar footprint beyond New Jersey, optimizing our current portfolio, in-sourcing key development and operating activities and capitalizing on emerging generation technologies, such as battery infrastructure and electric vehicle charging stations. Notably, we will be prioritizing tax equity financing to enable our solar investment strategy. We will get into greater detail on this shortly. NJR CEV is the largest in-state solar operator in New Jersey with about 11% of total market share in the state, and we are leading in New Jersey's clean energy future. CEV's portfolio totals about 350 megawatts of installed capacity that produces energy each and every day. That represents enough energy to light a small city. Our commercial solar projects represent the largest segment in our portfolio with 276 megawatts of installed capacity across 49 active projects in the state. These projects span the gamut, from grid-connected to net metered, rooftop to ground mounted. We even have the largest floating solar array in the country. On the residential side, our portfolio accounts for 74 megawatts of installed capacity. Through our Sunlight Advantage Leasing Program, NJR CEV owns, operates and maintains each residential system with over 8,600 customers enjoying savings of 20% to 30% off of their electric utility rate. Here, you can see, over the past decade, CEV has invested approximately $1 billion in New Jersey solar market. While these investments have continued to provide clean renewable energy for our customers, they also have provided high single-digit unlevered returns for the company, which continues to grow over time and has become an important part of the NJR story. This long track record will be important in determining our success into the future, a future full of opportunities where NJR is particularly well suited to succeed. Looking ahead on Slide 50, let's talk about the future of the U.S. solar industry. The U.S. solar market is forecasted for continued expansion, making up a larger and larger contribution of the overall U.S. energy mix. Over the next 5 years, we expect to see more solar installed than what we saw in the last 10. This expansion will be driven by public policy and technological advances. As governments try to tackle climate change, they will continue to create programs such as aggressive renewable portfolio standards and mandates that support solar growth and the decarbonization of energy. We expect continued innovation in photovoltaic technologies with efficiency and cost improvement gains propelling the industry forward. And finally, we will see the pairing of these solar facilities to battery storage and electric vehicle technologies, creating additional value. This environment offers NJR a large market opportunity for continued profitable investment. And importantly, it also allows us to advance our environmental objectives in close alignment with policy objectives. With that as a backdrop, how is CEV positioned to succeed going forward? We will continue to take advantage of this large and growing market opportunity to drive profitable growth across NJR. Here, we can see that NJR CEV expects to invest $850 million over the next 4 years. This essentially doubles our rate of investment when compared to the last 10 and will then double our installed capacity from approximately 350 megawatts today to approximately 770 megawatts in only 4 years. This incremental investment will be allocated primarily to the commercial solar space where our investment expands rapidly. On the next slide, we can see that as a result of this investment, we expect that by the end of 2024, CEV revenues will be approaching $170 million, an approximate 60% increase compared to fiscal year 2020 revenues. More importantly, if we look at the makeup of this investment, we can see that by 2024, a vast majority of that revenue will be derisked. As SREC's exposure declines, more revenue will be locked up in PPAs hedged in the marketplace or in more standard fixed revenue environments as CEV expands into adjacent markets. Turning to Slide 53. Clearly, CEV has had great success over the past decade, but we recognize that we must adapt to changing marketplace conditions in order to extend that track record into the future. To touch on some of the points Steve described earlier, if we examine some of the headwinds that the industry is facing, one of the most prominent is the scheduled decline of the investment tax credit, or ITC. Today, it's projected that ITCs for the solar industry will decline from a high of 30% down to 10% in the near future. We believe that although a headwind, this will not overcome our ability to invest profitably in the solar space. In fact, over the planned period, other factors will more than overcome this headwind, allowing NJR to maintain and even improve our project returns. Pat Migliaccio will get into this in much greater detail shortly. I've talked a lot today about the opportunities ahead of us in the solar market. Now let's look at how exactly we are capitalizing on a future that is built on rapid solar expansion, while at the same time, maintaining or improving our profitability. We'll do this by pursuing a clear strategy with 4 distinct pillars. First, we will expand into solar markets outside of New Jersey. Second, we will continue to improve how we do business by optimizing our investments and insourcing many of our activities to reduce reliance on third parties. Third, we will prioritize tax equity financing to accelerate cash returns. And finally, we will invest in and adopt emerging technologies such as battery storage and electric vehicle infrastructure, which we can leverage for additional value out of existing solar assets as well as new ones moving forward. Let's examine each of these more closely. Our first strategy pillar is shown here on Slide 55, to expand into adjacent markets that offer attractive returns. Specifically, we're focused on markets that are growing rapidly and where revenues are contracted with investment-grade counterparties. With CEV solar capacity almost doubling over the next 4 years, CEV will grow into a regional player in the renewable energy business going beyond the boundaries of New Jersey. Expanding beyond New Jersey into the Northeast will enable CEV to organically build scale while leveraging our skill sets and relationships to create value. We will pursue projects in the areas of grid supply, landfill and brownfield project sites, also net metered projects, community solar and other operating projects, all areas where we have experience. Ultimately, we are relying on deep expertise, our strong track record and our reputation for quality, to compete for solar business in these new markets. This effort is already underway, as CEV is currently in the midst of constructing projects in Connecticut and Rhode Island. Projects like the one in Rhode Island, where our $20 million investment has revenue streams fully contracted with an investment-grade utility. The second pillar of our growth strategy is to continue to improve how we conduct business. We will do this by optimizing our existing investments and taking more control of the commercial solar value chain by insourcing certain development and operating activities. The optimization opportunities shown on this slide are twofold: one, physical, that is deploying technical solutions to improve project returns. Examples include minimizing site losses to increase the available energy generated from a site. The second, contractual, or repositioning assets in the marketplace to achieve a more valuable revenue stream. An example would be migrating grid-connected projects to net-metered alternatives. Some of these efforts are already underway, and we believe they will accelerate with the adoption of new technologies. Further means of optimization can be achieved by changing how we continue to invest in the renewable energy space. CEV has traditionally been a solar owner operator, sourcing our projects from solar developers once the projects had been permitted. CEV has developed skill sets to take on more and more of the activities along the value chain. We are now ready to extend our reach up and down the value chain to optimize investment. First, moving upstream, driving down costs on the development side of the house, reducing our reliance on third parties and thus enhancing returns. And then moving downstream on the implementation side of the business, where we are internalizing more and more construction and O&M activities, building scale, deploying new technologies, such as robotics and aerial surveys to bring down costs. On Slide 58, you could see this strategy at work. Here, we show that the optimization and in-sourcing of these key activities will drive CEV to become more efficient in the deployment of solar capital. On the construction side, we will see continued downward pressure on installed cost per watt, which will help us overcome the ITC decline. And in regard to operating costs, CEV has driven down operating costs over the past, and will continue to do so into the future, maximizing the use of available technologies to do so. On Slide 59, we could see the benefits of tax efficiency, the third pillar of our strategy. We can accomplish this by prioritizing tax equity finance in the form of leasebacks. This is a necessary step for us to be able to increase our level of solar investment. Pat Migliaccio will be discussing this strategy in more depth. Today, we are witnessing a solar industry that is growing and maturing, migrating from a non-dispatchable energy position to being a core asset in the future of the production of energy. Yes, solar facilities will continue to be built. But what we are seeing is public policy moving beyond that. Policy decisions are being made with the goal of transitioning solar from a fringe technology to a core energy source used to power homes to power transportation and to power additional distributed energy resources. Through the deployment of energy storage opportunities, battery storage and electric vehicles, we believe that solar will move into position as the preferred source of energy. CEV solar facilities, when combined with battery infrastructure and charging infrastructure, will help us capture a more profitable market opportunity and help CEV become a higher-margin business. Successfully penetrating these markets will generate a potential uplift in our revenue, since we would be able to provide energy to parties interested in reliable solar power at more retail rates. CEV has begun to pursue these new business models. The future is here. In summary, let me leave you with a few key takeaways. We are making a significant investment to take advantage of a large and growing market opportunity in commercial solar. We are using that investment to expand beyond our solar footprint beyond New Jersey and invest in new technologies that will allow us to leverage our existing portfolio of assets. We are also optimizing our current portfolio and in-sourcing key activities. As I said, we expect installed and operating cost per watt to decrease as a result. In tandem with our plans to increase our solar investment, we are pursuing tax equity financing. This will accelerate the cash benefit of incremental solar ITCs and increase our return on equity. We also plan to continue to take advantage of our business' deep alignment with public policy goals. Ultimately, we believe that this strategic plan will enable us to drive profitable growth across the business and maintain current project returns even after ITCs reduce to 10%. In this future, CEV is well positioned to succeed as we continue to evolve, to expand and to compete in a changing solar landscape. Thank you.

Good morning, everyone. I'm John Bremner, Vice President responsible for NJR's Storage & Transportation business. While I'm a relative newcomer to NJR, I've spent my entire 38-year career in the natural gas industry. I manage natural gas distribution, storage and transmission businesses in Canada, U.S. and Mexico. Throughout my career, I've been amazed by the vast, complex and almost invisible network of pipelines that today safely and seamlessly delivers 1/3 of the primary energy requirements that power our economy, an industry that provides an essential logistics service, transporting fuel for homes, hospitals, factories, power generators, restaurants and chemical plants. This is the business of NJR Storage & Transportation. So let me begin with what we see as the value proposition for Storage & Transportation or S&T. We see S&T investments as a logical extension of NJR's core competencies into another attractive segment of the gas value chain. As Steve said earlier, NJR has been an active participant in gas markets for decades, building and operating energy infrastructure, contracting for capacity and serving wholesale end-use markets. Our S&T business targets investments in low risk, gas infrastructure serving long-term end-use customers or market pull assets, as opposed to infrastructure providing basins' takeaway capacity or producer push assets. In other words, we're focused on the part of the gas value chain that is aligned with our core competencies and investment criteria. We're not focused in gas processing, gathering, liquefaction or liquid assets given their exposure to production and commodity pricing fundamentals. Our S&T business creates value by connecting economic, flexible, reliable, gas-supplied end-use markets where it's needed most in growing supply-constrained areas of the pipeline grid. The portfolio generates stable, predictable, fee-based revenue, primarily from long-term commitments with a diverse mix of high-quality and creditworthy customers. The attractive organic expansion options of our assets create additional layers of value upside for NJR. And we see decades of service ahead for our assets, even as certain sectors move aggressively towards decarbonization. As Amy mentioned in her remarks, natural gas demand is expected to continue to grow in the markets we serve and beyond as a preferred choice for home heating, as the cleanest available fuel today displacing coal and oil, many industrial demand where substitutes do not exist, and supporting the transition to renewable electricity generation. As the U.S. Department of Energy stated in its September 2020 U.S. Oil and Natural Gas Report, natural gas has a critical role to play in supporting the increased prevalence of renewables. Natural gas provides a secure and reliable energy source during interruptions in renewable energy supply. Given all these characteristics, we expect the value of our difficult to replicate assets to grow over time. Now let me give you an overview of our attractive and highly strategic assets. NJR has built a portfolio of S&T assets through selective acquisitions and joint ventures. Our investments include 2 storage facilities, Leaf River and Steckman Ridge; and 2 pipelines, Adelphia Gateway and PennEast. Leaf River serves the regions with the fastest-growing demand for natural gas anywhere in North America, the Gulf and Southeast. The Southeast, in particular, is increasingly dependent on storage and regional gas imports delivered through heavily utilized pipelines to ensure supply reliability for growing and variable markets. Steckman Ridge serves the Northeast region, which relies on increasingly constrained pipeline grid and storage to meet and balance growing peak day end-use demand. Our pipeline investments, Adelphia Gateway and PennEast, provide some of the most advanced options to bring incremental Appalachian supply, growing end-use markets in Pennsylvania and New Jersey, markets that are currently served by a constrained and difficult to expand regional pipeline system. And as Steve mentioned earlier, PennEast is not included in any of our financial projections. On the next slide, you'll see we are projecting strong EBITDA growth from our assets over the next 4 years, mainly due to the expected in-service of Adelphia's South Zone project, which is now under construction. Beyond fiscal 2024, we see EBITDA upside potential related to organic expansions of Adelphia Gateway and Leaf River, and increased storage and transportation rates. So before I dive into the specifics of each asset, let me share more detail about our customers and revenues. Here, you can see the quality of the revenue our portfolio generates from an attractive mix of creditworthy customers paying predominantly take-or-pay fees to reserve capacity 365 days a year. High percentages of our fiscal 2020 revenues came from utilities, power generators and pipelines, investment-grade customers and take-or-pay fees. These metrics will look even better at the end of next year when the Adelphia South Zone project is completed. On this slide, you can see our top 10 customers, which is an attractive mix of utility, pipeline, power, producer and marketer companies that our assets have served continuously for many years. This reflects the long-term nature of the relationships that we strive to build and maintain, founded on the trust and confidence that we stand ready to provide flawless, reliable service whenever called upon by our customers. In addition, our contracting profile is very manageable, with an average remaining contract term of 4.5 years and the majority of our revenue in future years locked in under take-or-pay contracts. We expect this profile will look very similar going forward as we continue to grow contracted revenue with each successive year of recontracting activity. Now let's take a closer look at our assets beginning with Leaf River. Leaf River is a salt cavern storage facility, a type of storage which makes up only 10% of total U.S. storage capacity. Salt cavern storage is highly valued for its unique ability to rapidly withdraw and inject gas, making it a powerful asset to balance supply and variable demand. 6 interstate pipeline connections provide access to the key supply basins in a large market for storage services with the region's major utilities, power and LNG companies. The region's interstate pipelines have experienced significant growth over the last decade, placing increasing operating strain on their systems. Shippers and pipelines have turned to storage operators like Leaf River for help managing supply and system reliability. For example, Southern Company, who, from 2007 through 2019, increased gas source generation from 15% to 50%, are reducing coal source generation from 70% to 22%, is Leaf River's largest customer. Similarly, Leaf River recently executed a long-term contract with an Alabama power generator to support a new gas power plant that will replace a retiring coal plant. Further, the growing LNG export business will require additional storage capacity to manage its feed gas supply. These growing demands will drive the need to increase storage capacity, which Leaf River is well positioned to satisfy with designed-in economic options to increase capacity as supported by market needs. Turning to our other storage investment. Steckman Ridge is situated along a key supply corridor that moves gas to northeast demand centers. Its 2 interstate pipeline connections provide access to the heart of Appalachian supply and regional markets, including utilities and power generators. Steckman's flexible market-based storage services offer an alternative to the region's largely interstate pipeline cost of service storage offerings. Its revenues were 88% fee-based and anchored by long-term utility customers, ConnEd and New Jersey Natural Gas. As Amy mentioned earlier, material amount of coal generation remains in the PJM region. This is expected to be partially replaced with gas generation whilst coal units are retired over time, and there is a broader shift to cleaner energy sources. We expect this, along with utility demand growth, and little or no increase in regional storage capacity to continue to support the value of Steckman Ridge. Now let's take a look at our transportation assets, starting with Adelphia Gateway. Adelphia will provide an attractive transportation path for Marcellus supply to reach growing markets in Southern Pennsylvania, New Jersey and Delaware. Adelphia is 1 of only 2 authorized and under construction capacity expansion projects into a region primarily served by capacity constrained interstate pipelines. Project capacity is fully committed, allowing Adelphia Gateway to generate 97% fee-based revenue, with an average remaining contract term of 7.1 years beginning in fiscal 2020. Looking beyond the completion of the South Zone project, we see 3 opportunities for Adelphia's value to grow: The opportunity to capture increased transportation value when contracts begin to roll over in 2025; an attractive compression expansion option; and the potential for expanded supply access from either the PennEast or Transco REA projects. On the next slide, let me provide a status update on Adelphia's South Zone project. When NJR acquired the former oil pipeline, the North Zone was already in gas service, supplying Talen Energy power plants, while the South Zone was yet to be converted. In October of this year, having received all the required FERC and state authorizations, we began construction of the South Mainline conversion, 2 compressor stations and the associated market interconnections. We're currently awaiting final authorizations for the Tillman and Parkway laterals, which are scheduled to commence construction next spring. And the project is on schedule to achieve full commercial in service late in calendar 2021. I will note that 2 of Adelphia's authorizations are currently under appeal. However, these appeals are not expected to impact construction or the in-service date of the project. Finally, let me provide you a brief overview of the PennEast project. PennEast is a 120-mile greenfield pipeline, which will create an attractive new path for Northeast Pennsylvania Marcellus supply to reach Atlantic region utility markets. PennEast is predominantly a marketable pipeline with commitments from investment-grade utility companies for over 2/3 of its capacity. PennEast is currently planned to be constructed in phases, with construction of the first 68 miles in Pennsylvania commencing in 2021, pending receipt of final FERC and state authorizations. And final plans for construction of Phase 2 are to be determined, pending the resolution of a PennEast petition for a U.S. Supreme Court review of a lower court ruling. CapEx spend on the project will continue to be minimal as the project advances toward approval and construction. And while we have removed PennEast from our guidance, our commitment to the project offers the upside on earnings and cash generation on its completion. So to summarize, our S&T portfolio consists of expandable, hard to replicate, low-risk infrastructure investments that serve capacity constrained, growing end-use markets that generate stable, predictable, fee-based revenue and that serve a diverse mix of long-term creditworthy customers. We believe these assets will be valuable for decades to come, serving markets with long-term needs for safe, reliable, essential natural gas storage and transportation services. Thank you.

Good morning. My name is Tim Shea, Vice President of NJR Energy Services. Over a 30-year career in the energy industry, I have worked for LDCs, a gas-fired generator, a natural gas producer and, for the past 22 years, at NJR's energy services. The broad industry knowledge and experience I gained over my career are invaluable in leading energy services through a volatile and dynamic energy market. At energy services, we contract or acquire physical assets in opportunistic locations, and we have developed strong customer relationships across the upstream, midstream and downstream natural gas markets. We work with producers in order to move their natural gas to the highest priced markets. We work with utilities in managing their assets so they can achieve savings and bring the most economic natural gas to their customers in the most reliable way possible. And we work with electric power generators that, unlike the utilities that want firm capacity, like to buy just-in-time natural gas with the electricity that they need to generate. Our long option strategy provides significant upside potential with limited downside risk, leveraging natural gas market volatility to drive value. And we have a proven track record with disciplined risk management strategies. Optimizing value while reducing risks are core to our trading strategies at energy services. Ultimately, we are focused on generating consistent profitability through higher fee-based revenue that will better ensure the coverage of fixed costs. We maintained contractual rights to a diverse portfolio of physical natural gas storage and transportation assets. These assets are connected pipeline transportation and storage capacity that allows us to strategically move and provide natural gas to serve our customers across North America. Our portfolio of physical assets capitalizes on changing market conditions, driven by factors such as weather, demand growth and supply constraints. Our assets are chosen for their opportunistic locations where we believe a higher level of volatility can exist, allowing us to serve our customers while creating trading strategies around them. This business was launched 25 years ago on the expertise gained in managing our utilities gas supplies. With strong and effective risk management strategies and controls in place NJRES is one of the longest established energy service companies in the industry and has consistently contributed to the company's NFE. Let's put that into context. Energy Services serves our customers by committing to purchase or deliver natural gas, and in certain cases, by managing storage and transportation assets through asset management agreements, or AMAs. Energy Services may generate fee revenue in exchange for its management services. It may also obtain operational control of storage and transportation assets from customers in exchange for a fee. These assets complement the assets in our existing storage and transportation portfolio. Energy Services generates value through what we call long option strategy. It provides significant upside potential with limited downside risk and minimal long-term capital commitments, leveraging natural gas market volatility to drive value. The physical storage and transportation assets that energy services controls provide optionality to capture location and time spreads whose value can be locked in with the use of financial instruments. Downside risk equivalent to an options premium is limited to the difference between demand charges and the value locked in. The geographic diversity of Energy Services assets increases the chances of generating significant returns in at least some of the assets. Given the dynamic nature of the energy markets, we have seen a regular cycle of significant outperformance years that more than offset the years with less optimal market conditions. Let's look at fiscal year 2021. NJRES is already in a stronger market position than last year. The supply and demand fundamentals for natural gas this fiscal year are constructive. We are seeing lower natural gas production as a result of less capital investment by gas producers. At the same time, demand for gas is increasing with more LNG exports. As my colleague John Bremner mentioned in his presentation, the EIA shows that natural gas demand is rising and will continue to rise in the long term. Fueled by low gas prices and accelerating coal plant retirements, the electric generation sector continues to rely on natural gas; and our work with power generators continues to be productive. The anticipated growth in North America's aggregate natural gas demand, particularly in the Gulf Coast region, is supported by industrial expansion, exports and gas-fired electric generation. NJRES maintains assets that are well positioned to benefit from this growing demand. Moving forward, NJRES sees several key strategic opportunities emerging in the energy landscape. With increased cost cutting, efficiencies, consolidation and growing financial pressures on producers, we see increased potential to expand fee-based transactions and producer service agreements. Our fee-based transactions and producer agreements support stable, more consistent revenues for NJRES, which is a go-forward priority for the business as it reduces the risk of not covering our fixed costs. And in markets where the supply-demand balance continues to tighten, creating higher pricing volatility, we will continue to pursue our successful long option strategy. NJRES has achieved significant value from our transportation portfolio by selling peaking supply services to Northeast utilities. It is widely known that the increased difficulty in building new gas infrastructure and with growing customer demand, New York and other states in the region are experiencing severe capacity constraints. These utilities secure incremental gas supply delivered to their city gates in order to satisfy peak system requirements during high-demand winter months. NJR has the assets to enter agreements with these utilities to supply gas for the winter season. The utility will pay a significant demand fee to NJRES for the right to call on this gas. And when called on, the gas is priced at a fixed premium to index, which in this region could be Transco Zone 6 New York for example. To put it simply, Energy Services sells the peaking service to the utility, ensures it has the capacity to cover the commitment and earn its money on the transaction. Ongoing challenges to building greenfield infrastructure projects continue to raise long-term value of our existing assets, particularly in the Northeast, and continues to contribute to market volatility in already constrained regions facing growing demand. Now turning to Slide 79. Let's discuss what our natural gas portfolio looks like today. We currently have firm storage capacity of about 34 Bcf, and we hold about 1 Bcf a day of firm transportation capacity in multiple connected regions. We positioned our portfolio across the eastern half of the country to serve the largest U.S. gas supply and demand centers. With our transportation connectivity, NJR profits from interregional supply and demand variability. Our portfolio of assets can change over time based on market conditions. For example, a few years ago, we had a West Coast presence. And due to increasing asset costs, combined with operational uncertainty in the West region, we shifted focus to other regions and chose to release our western-based contracts. We have the ability to hedge and lock in most of our storage contract demand charges with seasonal summer-winter positions. And injection and withdraw flexibility allows us to participate and add value in daily spot market volatility. On the transportation option side, hedging most of our forward market area transportation position locks in margin that exceeds the demand charges that we pay for these assets. The small remaining open position gives NJR significant upside potential during high-demand periods when prices typically increase. Peak market conditions can increase the value of market area transportation to over $100 a dekatherm. Contract segmentation creating 2 or more transport paths on the same contract and secondary transport services also add value to our transportation portfolio. Trading strategies around our storage and transportation assets have made NJR Energy Services a consistently profitable business. NJRES has a proven track record of success and profitability since 1995. This chart goes back 10 years to 2010, over which time, Energy Services has averaged $64.75 million in financial margin. Over these 10 years, this cash generation has reduced our overall funding needs. You can also see the upside potential of the long option strategy that has contributed to several outsized years, such as 2014, 2015 and 2018. Sustained high-demand periods in each of those years increased price volatility in the spot market. This allowed us to use our storage and transportation portfolio to deliver and sell gas into extremely high-priced locations. 2020 was the first time in 25 years of our history that we've lost money on a net financial earnings basis. Even then, we were able to cover the demand charges for the year. That is, despite this being our worst year in terms of financial performance, we were still able to cover all the fees that we owe to pipelines and storage providers for the right to transport and store gas utilizing their assets. Fiscal 2020 performance was a result of a unique combination of market conditions that included one of the warmest winters on record, combined with one of our key pipelines, implementing a rare integrity testing program heading into winter, the potential disruption of operations on Texas Eastern, which has since been addressed. Risk reducing the volume of physical gas that Energy Services could contractually deliver in the winter high season, this impacted our ability to hedge a larger portion of our transportation capacity. 2020 was an anomaly. And as highlighted earlier, we have a clear path to profitability moving forward, which incorporates significant derisking opportunities, particularly around increased fee-based agreements and producer contracts. Our Energy Services business benefits from extensive experience and a deep understanding of wholesale energy markets and customers' needs. We have 25 professionals with expertise in trading, operations, risk, asset acquisition, contracting, regulatory affairs and information technology. We've built a strong foundation for our future by focusing on reducing business risk and create a more predictable NFE profile while executing our long option strategy to drive value. We are targeting a higher percentage of fee-based revenue from structured transactions and optimizing the value of certain contractual storage and transportation agreements within our portfolio. The future is bright for NJR. With a measured and conservative approach to the market, Energy Services will continue to make positive contributions to corporate NFE. Thank you.

Good morning, everyone. I'm Patrick Migliaccio. I've been with NJR for 11 years now and my role as CFO for 5. As Steve stated in his opening remarks and my colleagues have reinforced in their presentations, our businesses have strong growth prospects. NJNG's major infrastructure projects are moving forward with regulatory support. Customer growth remains strong, and the investments in our underground energy delivery system will position NJNG to play a lead role in the clean energy transition by carrying decarbonized fuels in the future. We expect CEV to nearly double its investment in solar, supported by market constructs that provide long-term, stable net financial earnings. Renewable portfolio standards adopted by states across the region are accelerating solar growth. And to ensure success and capitalize on these market strengths, NJR is creating a more competitive platform for the business by changing our accounting policy and adopting more efficient financing to support increased capital deployment. S&T and Energy Services play a smaller role in our overall story but are also building a solid foundation from which they'll contribute. As you can see, we're taking steps today to strengthen our ability to create long-term value for our shareholders. We do this by following the principles that are outlined on Slide 83. As Steve mentioned earlier, we're investing $2.6 billion of capital over the next 4 years, almost 90% of it into our utility and solar energy projects. This coupled with the completion of our RDM progress investments support significant increases in our cash flows that we reinvest in our businesses but also used to provide an attractive dividend to our shareholders, all the while ensuring that our capital structure provides access to the financial markets for both NJNG and NJR. Before we get into NJR's financial outlook, I'll take you through the highlights of fiscal 2020 on Slide 84. For fiscal 2020, NJR reported NFE of $196 million or $2.07 per share compared to NFE of $175 million or $1.96 per share in 2019. NJNG saw an NFE improvement year-over-year of approximately $49 million due to higher base rates and lower O&M expenses, principally resulting from COVID-19. S&T saw an improvement of $3 million during the year, driven by increased operating income from Leaf River and Adelphia, slightly offset by higher O&M and interest expenses related to those assets. CEV saw a decrease of $24.5 million primarily due to lower ITC eligible capital expenditures as compared to the prior year as well as the absence of contributions from the wind portfolio, which was sold in 2019. Energy Services decreased about $11 million due to lower natural gas pricing volatility resulting from the warmer-than-normal winter compounded by operational issues on a key interstate pipeline. Finally, NJR Home Services and other increased $4 million, mainly due to lower O&M expenses and income tax benefit associated with the revaluation of certain deferred state tax liabilities. As Steve mentioned in his remarks, fiscal 2021 will be a reset year. We're setting our initial guidance at a range of $1.55 to $1.65. There are a few factors that are driving this as outlined on Slide 85. The most significant component of the NFE reset is the change in accounting for investment tax credits and expected use of tax equity financing for our solar projects. As I'll discuss in greater detail, while this results in a short-term decline, these changes provide the foundation for increasing our investment in solar and should result in stable and predictable NFE from Clean Energy Ventures. There are a few other items that result in a decline as compared to performance in fiscal 2020, principally at New Jersey Natural Gas. As Mark Kahrer noted in his materials, we expect to spend north of $200 million to replace the IT infrastructure that supports New Jersey Natural Gas, including our work in asset management and customer billing systems. While we're able to capitalize most of the costs associated with these implementations, there are certain activities that must be classified as O&M, which will seek to recover in our fiscal 2021 rate case. With the significant decline in interest rates as compared to last year, we saw a large increase in the cost of our pension and other post-employment benefits. In addition, as a result of COVID-19 and the warmer-than-normal winter, employee wages and benefit expenses were much lower in fiscal 2020 than we expect in '21. These items taken together total range of approximately $0.12 to $0.16. Importantly, as we look forward, we expect our O&M growth to average less than 2% through 2024. We're making every effort to align the conclusion of our rate case with the expected in-service date of SRL. Construction of the project is currently approaching completion and based on the current time line, will likely be in service prior to the end of the fiscal year. In addition, in fiscal year 2020, we placed approximately $159 million of utility infrastructure into service. These activities support our double-digit rate base CAGR over the long term but in the short term, result in some regulatory lag as we're beginning to appreciate the plant before it's in our rates. These items will be included as part of our revenue requirement and our upcoming rate case. We expect to recover them. Running out the comparison between fiscal 2021 and 2020, we expect NJR Energy Services to provide a nominal contribution to fiscal year '21. Reflecting an improvement over the prior year, the contribution will be less than 5% of our guidance for this year. Before I move to our fiscal 2022 expectations and our long-term NFEPS growth guidance, I'd like to take a few minutes to recap what will drive our future growth and why we believe that we can achieve it. As a general comment, across the presentation today, we're providing capital plans through fiscal 2024, a step further than we've gone in the past, which reflects confidence in our ability to execute on those plans. With the top quartile rate base CAGR of 11-plus percent, NJNG will have a strong NFE and cash flow growth. As Mark Kahrer mentioned, this rate base growth is tied to investments in customer growth, maintaining our system reliability and finding the replacement of our aging IT systems. While our next case is tied to SRL, beyond that, our capital plans now include large individual projects to drive rate base growth. For CEV, with the financing and accounting changes behind us, we expect to grow our capacity at a CAGR of 21%, resulting in more than 400 megawatts of additional capacity. We have a long track record of success in our solar business. Our near-term capital budgets are not much larger than the past and also do not rely on large individual projects to achieve the goals. Moreover, we expect to invest in projects which the revenue will largely be anchored by long-term fixed price subsidies like TRECs in New Jersey or long-term power purchase agreements. As Mark Valori noted in his presentation, we have nearly $20 million of projects under construction in Rhode Island that have long-term power purchase agreements. For S&T, with Adelphia Gateway construction underway and our asset acquisitions behind us, we'll be able to focus on organically increasing the bottom line contributions from that segment. We're also moving PennEast from a long-term NFEPS outlook, derisking the potential growth in that segment. Finally, as you'll see, NJR Energy Services is expected to contribute a much lower level than the past. And as Tim mentioned in his remarks, we're taking steps to minimize the risk of downside while preserving some of the potential upside. As a reminder, this business requires no long-term capital and its periods of outperformance have improved our balance sheet and reduced equity needs. By now, you should be detecting a theme. With the forward progress on our large infrastructure projects and other changes to our segments, these steps provide for more stable, predictable future. Moving to Slide 87. And as I said earlier, fiscal 2021 is a recent year for NJR with NFEPS guidance of $1.55 to $1.65. Supporting the growth in fiscal 2022 is the successful conclusion of our rate case at New Jersey Natural Gas, the expected completion of Adelphia Gateway and our solar investments. This should result in NFEPS growth of over 30% from 2021, so that our financial results are back in line with 2020, even though we're using a different method to account for our risk and tax credits. Our guidance for fiscal 2022 is a range of $2.05 to $2.15. We expect to grow at a rate of between 6% and 10% thereafter. One thing that is not changing is our commitment to our growing demand. On Slide 88, you can see we're targeting a dividend growth rate of 6% to 10%, in line with our long-term NFEPS growth rate. In fact, the midpoint of this growth rate is higher than our prior dividend growth guidance. This is supported by strong cash flow from operations growth, which you can see on the chart on the right. There are a number of reasons why this is the case. As I mentioned a few times, the eventual completion of our large infrastructure projects, SRL and Adelphia Gateway, result in cash flows from the SRL rate case and the take or pay contracts on Adelphia Gateway. This reflects a change in the complexion of NJR's NFE. For the last couple of years, a large portion of our NFE came from investment tax credits and AFUDC equity. We're planning to invest nearly $2.6 billion over the next several years at NJNG and at CEV. For New Jersey Natural Gas, an increasing portion of the spend will earn near real-time returns and near real-time cash flows as a result of the annual recovery mechanisms that NJNG has. While we're ramping up the investment at CEV, we will be using same leaseback financing, which should and surely monetize the tax attributes on a timely basis. Also, in contrast to our large pipeline projects, the average construction cycle for our solar projects is approximately 4 months, ensuring a quick turnaround from construction to cash. Now on Slide 89, you could see why we're extremely confident in our ability to continue to grow the dividend. As you can see from this slide, while our payout ratio temporarily increases in the near term, it normalizes over time. Looking at our dividend payment as a percentage of cash flows, paints an even stronger picture. On Slide 90, we provide the expected segment contributions for fiscal '21, 2022 and beyond. For all of our outlooks, we expect that NJNG will continue to be most significant contributor to our NFEPS. Our steadily increasing investment in solar will continue to support CEV's role as the second most significant segment. While our S&T segment will largely stay at levels consistent with '21 and '22. And as I've noted in my remarks, we're not placing much reliance on NJRES. As Steve mentioned earlier in his remarks and as shown on Slide 91, we changed our accounting policy for investment tax credits or ITCs. I'm going to spend a fair bit of time on this topic because it's important. Under the accounting guidance for investment tax credits, there are 2 acceptable methods. Through fiscal 2020, we utilized the flow-through method under which the value of the investment tax credit flows through as a reduction in income tax expense in the year in which a project was placed into service. We're changing our accounting method to the deferral method. This will result in the value of the ITC being amortized over the life of our solar assets, usually between 20 and 35 years, in essence, a reduction of depreciation expense. I want to emphasize, this change is strategic and not the result of an error. The deferral method is considered the preferred method by the FASB and, in fact, is the more common method of accounting for investment tax credits among public companies. This change is permanent and applies to all of our solar assets. This will change the NFE profile of our assets. Historically, the recognition of the ITC resulted in a significant front-loaded tax benefit, and that will be a more even loaded profile. There's no change to the economics of the solar investment because there's no change in the underlying cash flows. You may be asking yourself why is NJR making this change. The benefit is shown on the chart on the right. The change will result in less NFE volatility from the investment tax credit recognition. Under our current policy, the amount of the ITC fluctuates significantly based on the level of our capital investment and qualified projects. Moreover, this accounting change eliminates a source of quarterly NFE volatility as the timing of when projects are placed in service will no longer impact our effective tax rate each quarter. Additionally, while there may be federal legislative action to extend the investment tax credit at its current levels, this change eliminates the NFE cliff that will result from a declining ITC even as we look to increase investment in solar assets. All that being said, for those solar assets that we finance from a sale leaseback, the recognition of the ITC will grow over 5 years. I realize this is a complex change, so in connection with our Analyst Day today, we're posting a white paper to our website that includes the relevant details to assist in modeling. As Mark Valori mentioned earlier, we expect to grow our investment in commercial solar assets from $140 million today to $225 million in fiscal year 2024 to take advantage of a significantly growing opportunity for investment and to drive growth for NJR. Over the last few years, we've accumulated a balance of investment tax credits, principally as a result of tax law changes in 2018. Currently, we've been able to make investments that exceed our hurdle rate after factoring in the tax delays. However, to stay competitive and grow our level of investment, some form of tax equity is necessary. We've experienced using sale-leaseback financing on a more opportunistic basis in the past. But starting this year through fiscal 2024, we expect to finance all of our commercial solar assets with this form of tax equity. Given our tax position, this will create economic value for NJR by allowing us to monetize the tax attributes more quickly than we otherwise would. This is illustrated on Slide 92. On the table on the right, you can see the projected ITC sale will be significantly greater than today if we continue to finance our solar assets on balance sheet. As you can see, migrating of the tax equity should allow us to utilize our tax assets credits, which in turn results in better returns and increases our ability to compete. Let me take a moment to remind you how the structure works. This sale for tax purposes only. NJR retains the revenue, expenses and even the book depreciation of the asset. However, instead of recognizing the value of the ITC through income tax expense, as was the case under the flow-through method, or as an offset depreciation expense, as will be the case under the deferral method, 20% of the economic value of the ITC is recognized each year in other income, beginning on the 1-year anniversary of the solar projects in-service date. From a cash flow perspective, the economic benefit of the ITC is factored into the debt service on the financing arrangement that results in a higher net present value as compared to on balance sheet financing. Before I leave this slide, I remind you that the accounting and financing changes we made for our solar projects result in more stable, predictable net financial earnings and improved returns. Our utility New Jersey Natural Gas is the only NJR-rated entity, and both Moody's and Fitch have stable outlooks with A1 and A+ senior secured ratings, respectively. As we conclude the fiscal 2022 rate case with SRL on service with the support of accelerated recovery mechanisms, NJNG will generate strong cash flows that will support our existing credit ratings. NJR is not a rated entity. We issue the majority of our debt of the private placement markets. That said, we're committed to a strong investment-grade credit rating equivalent for NJR. As you can see on Slide 93, our FFO-to-debt ratio rises to the high teens by 2024, which would support a strong investor grade equivalent. Furthermore, we have no plans to issue equity beyond the incremental amounts raised through our DRIP program and the equity forward repriced in December of last year. As you can see from Slide 94, we manage the debt needs of NJNG separately from NJR and in either case, have ample liquidity to support the businesses and have no meaningful long-term debt maturities in the near term. And on Slide 95, you see that approximately half of our funding needs through fiscal 2024 are expected to be supplied from cash flow from operations. And as I mentioned before, our financing activities include no block equity needs. I'd like to summarize a few of the key financial items that I reviewed. First, while our guidance range for 2021 is lower than the prior year, this is principally due to a change in accounting and financing method for our solar investments. Further, the accounting change is noncash in nature, and there's no impact on the expected returns of our solar projects at Clean Energy Ventures. Second, following that reset, we have strong NFEPS growth of over 30% into 2022 and then 6% to 10% thereafter, with the midpoint above our prior guidance range. And we have eliminated reliance on large infrastructure projects to drive our growth rate. Third, we're committed to growing our dividend at a rate of 6% to 10%. And finally, we have the cash flow growth and liquidity to support the continued investment in our businesses and the dividends to our shareholders. Before I turn it back to Steve, I'd want to thank my team for the hard work that they have put in this year to implement our new financial system on time during this pandemic. Thank you.

Before we turn to Q&A, I'd like to spend a few minutes summarizing some of the key takeaways from our presentation today. As I said in the beginning, the world is moving towards a clean energy future. New Jersey Resources is invested in it, and our strategy is centered upon it. New Jersey Natural Gas is already an incredibly strong business and will remain our largest both in terms of capital allocation and NFE generation. We expect an approximately 11% rate base CAGR through fiscal 2024. At CEV, we'll be investing $850 million in solar over the next 4 years. Our focus is also in generating more predictable NFE across all of our businesses and derisking our financial projections. These projections will rely minimally on the NFE contributions from our Energy Services group, and we are removing PennEast completely from our forecasts. As we look to 2024, we're increasing our NFEPS growth rate to 6% to 10%, and we are also increasing our dividend growth range up to 6% to 10%. Our dividend will be anchored by strong operating cash flows with a CAGR of around 20% over the next 4 years. We look forward to delivering on these projections and creating significant long-term value for our investors. Thank you for your time this morning. We'll now take a 5-minute break and then start on Q&A.

[Operator Instructions] [Break]

Welcome back to the 2020 NJR Analyst Day webcast. We will now proceed with our question-and-answer period. [Operator Instructions] Our first question is from Travis Miller with Morningstar.

Can you hear me?

Yes.

Thanks for the presentation. And yes, sorry that we can't be in person for this. Would have enjoyed the live version as well.

Absolutely.

But would have -- just real quick off the top. The 6% to 10% growth range, why choose 6% to 10% instead of doing something like 7% to 9% or even 8% to 10%? And give me some thoughts around why the low end and the high end.

So Travis, this is Steve. Yes, I wish we were able to do this in person as well, but we'll certainly make this work today. The 6% to 10% largely reflects the capital that we're going to be able to deploy and the range of outcomes from deploying that capital. You can see from the growth rate at the utility, we're looking at a double-digit CAGR rate base over that time period. SRL is going to be completed and in rates for fiscal year 2022. Adelphia Gateway, being under construction, will come to contribute to NFE as well soon. And then looking at CEV, we're able to deploy capital into that market due to the favorable climate with policy and certainly aggressive clean energy standards. When we put all that together, the range of outcomes that we felt comfortable with was the 6% to 10%, and we believe it's very achievable over the period that we're outlining.

Okay. And it seems like the investment in NJNG, after you get through SRL and the IT stuff, would seem pretty steady, kind of a tighter range of growth is a wider range, suggesting the CEV potential investments outside and kind of base case.

I'm not clear on the question, Travis.

Yes. So just, again, thinking about the wide range. It seems like at NJNG, the capital deployment is fairly steady and assuming constructive regulatory treatment would be fairly consistent in terms of growth. Is the wider range then reflective of the capital investment and deployment at CEV even more so than at the utility?

Yes. I think that could be considered. We're ramping up in CEV, where the capital that we're deploying in that space over the next 2 years is similar to what we've done in the past. Obviously, in '23 and '24, it increases significantly. But I think, like I said before, we've got a good base of growth. Our capital deployment have a clear path towards it, and the range largely reflects what we believe we can achieve.

Okay. Great. And then one other question here on the hydrogen. You had quite a bit of talk in there about that. What would hydrogen within your system and incorporating that over coming years mean in terms of CapEx. And then related, would you think about breaking that out in future years? I know we're talking about 3, 5, possibly 10 years down the road. But what would that look like in terms of CapEx? And again, would you consider breaking that out would be substantial enough, do you foresee?

So we're still early in the stages on hydrogen in our system and doing a demonstration project and seeing how that would work. We do think it's going to be very important for us in a pathway for our infrastructure to be serving our company -- our customers far into the future. But I'm going to ask Mark Kahrer to comment on how that will proceed going forward and the impacts to our CapEx at the utility. Mark?

Right. Thank you, Steve. So Travis, as you can see, right now, we baked in the initial plan that we're going to be installing at the Howell LNG facility, which will be operational next summer. After that, we will continue to work with our regulators to make sure that what we're doing makes sense with respect to heading towards the clean energy future. And as we grow that, then we can be more concrete with respect to some of the future CapEx plans around that. Right now, what we're trying to do is get that plant up and operational. Again, from our perspective, it's new to us, so we want to do that and then scale it up as we begin to go forward. And there'll be other opportunities going forward, potentially in transportation and in some other areas where hydrogen can be useful in the economy. So that's what we're really looking to do going forward.