South Jersey Industries, Inc.

SJI reported third-quarter economic earnings of a loss of $18.8 million versus a loss of $6 million in the prior-year period. Utility economic earnings were a loss of $17.2 million versus a loss of $18.4 million last year, while nonutility operations contributed $8.1 million versus $21.6 million last year; Energy Management was $4.4 million versus $6.6 million, Energy Production was $3.9 million versus $13.8 million, Midstream was a loss of $300,000 versus earnings of $1.2 million, and Other was a loss of $9.6 million versus a loss of $9.2 million. For the first 9 months, economic earnings were $112.1 million versus $100 million, and capex and clean energy investments were about $434 million, with more than 80% allocated to regulated utility investments. Management reaffirmed 2021 economic earnings guidance of $1.55 to $1.65 per diluted share, kept its long-term economic EPS growth target at 5% to 8%, and reaffirmed its 5-year capex outlook of approximately $3.5 billion through 2025.

Mike Renna struck an upbeat but measured tone, saying SJI delivered solid performance despite COVID challenges and remains on track for its strategic and financial goals. He emphasized strong utility margin growth, more than 12,000 new customers over the last year, and continued progress on infrastructure modernization that also lowers methane emissions. He also highlighted regulatory momentum on the LNG redundancy project and bipartisan support for legislation that could allow rate-basing of RNG and hydrogen investments in New Jersey.

Steve Cocchi focused on the mix of utility strength and nonutility timing effects. He said the third-quarter loss was driven by seasonal utility results offset by lower nonutility profitability, largely because of timing in recognizing ITCs from renewable investments, while year-to-date economic earnings reached $112.1 million. He cited improved debt and equity metrics, including GAAP equity to total capitalization of 35% and non-GAAP equity to total cap of 43.4%, plus roughly $1.3 billion in total cash credit capacity and about $1.1 billion available as of September 30. He also reaffirmed 2021 guidance, the 5% to 8% long-term EPS growth target, and the approximately $3.5 billion capex plan through 2025.

Analysts pressed management on how PennEast’s removal would be backfilled, and Steve Cocchi said the earnings contribution had already been reduced in the long-term plan, with replacement opportunities coming from both regulated safety/reliability spending and nonregulated RNG and REV LNG investments. On 2022, management declined to give guidance but said the company remained confident in the Investor Day outlook and expects RNG projects to start generating significant revenue later in 2022. Questions also focused on customer growth, tax credits, credit ratings, and RNG legislation; management said customer growth remains on track, tax credits would likely support the mix rather than materially change metrics, and the balance sheet strategy remains consistent with maintaining investment-grade credit quality.