South Jersey Industries, Inc.
Q4 2017 Earnings Call Transcript

Published: 23 Feb 2018

[Operator:]

Good day, ladies and gentlemen and welcome to the Q4 2017 South Jersey Industries earnings conference call. My name is Mark and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to your host for today, Marissa Travaline, Senior Director of Stakeholder Relations. Please proceed.

[Marissa Travaline:]

Good morning. Thank you for joining us as we review SJI's fourth quarter and full-year results for fiscal year 2017. Joining me today to present on our call today are Mike Renna, President and CEO and Steve Clark, our CFO. We also have several additional members of our senior management team available to help address questions following our prepared comments. Our earnings release and the slide intended to accompany the call were issued yesterday after the close of the market and were posted on our website at www.sjindustries.com. The release and the associated 10-K provides an in-depth review of earnings on both a GAAP and non-GAAP basis using our non-GAAP measure of economic earnings. Reconciliations of economic earnings to the comparable GAAP measures appear in both documents. Let me note that throughout today's call, we will be making references to future expectations, plans and opportunities for SJI. Actual results may differ materially from those indicated by these statements as a result of various important factors including those discussed in the company's Forms 10-K and Q on file with the SEC. With that said, I would like to turn the call over to our CEO, Mike Renna, to discuss both current performance and future initiatives in the context of our strategic plan.

[Mike Renna:]

Thank you Marissa. Good morning everyone. 2017 marked another significant step forward in support of our long-term strategic objectives. Driven largely by strong performance in our utility and our wholesale businesses, we generated economic earnings per share of $1.23, which exceeded our guidance range of $1.14 to $1.20. South Jersey Gas' results reflect a combination of strong customer growth and our ongoing commitment to infrastructure modernization. For the year, gross customer count grew by more than 8,600 with 71% the result of conversions and 29% from new construction. On a net basis, year-over-year customer growth was 1.6%, well above the national average. This growth combined with growing demand from our commercial customers was worth roughly $2.4 million in incremental income. Over the past nine years, we have made substantial investments to modernize and reinforce our system under our proved infrastructure tracking programs. We are in the second year of our current accelerated infrastructure replacement program under which we will invest $302 million over a five-year period to replace the remaining bare steel and cast iron main in our system. Late last year, we also filed a petition with the New Jersey Board of Public Utilities to extend our storm hardening and reliability program. This extension proposes investment totaling $110 million through 2021 to further upgrade the distribution system along the Barrier Islands. We are hopeful this critical program will be approved in the coming months. Finally 2017 saw BPU approval of a base rate case filed earlier that year. The case resulted in annual revenues of $39.5 million, a return on equity of 9.6% and an equity ratio of 52.5%. It also brought our current rate base to $1.6 billion. The new rates are additive to our accelerated infrastructure programs and are expected to add nearly $15 million of net income in 2018. In our midstream segment, the PennEast pipeline marked another milestone when FERC issued a certificate of public convenience and necessity in January. With FERC's environmental and economic review now complete, customers are one step closer to receiving the significant reliability and cost savings that the PennEast pipeline affords. Benefits that will help protect customers from spikes in natural gas prices that drove costs $300 million higher in our region during 10 days in December and January and prices in the areas that the PennEast pipeline could access. Recently, NJDEP submitted a request for reconsideration with FERC citing the need for further environmental review. We expect that motion to be denied and remain committed to securing the state and bistate commission approvals needed to pursue construction of this vital project in late 2018. Our pending acquisition of Elizabethtown and Elkton Gas continues to move forward. Integration activities are ongoing as we work toward obtaining the approval of both NJBPU and Maryland Public Service Commission. This transformative transaction supports our commitment to earnings growth and earnings quality, providing visibility into the long-term growth opportunities that exist far beyond our current five-year plan. The acquisition remains on track to close in mid-2018 and we have started to execute financing beginning with a $250 million private placement which we agreed to in January and closing occurring over the next several months. We continue approach our financing plans with a focus on responsible mix of debt and equity as well as a consideration for other sources of funding. Within our nonutility businesses, the return of winter weather in the last few days of December provided a significant boost to our wholesale group offsetting the unseasonably warm weather experienced earlier in 2017. Our fuel management business continues to grow and we now serve six merchant generating facilities in three states. Looking ahead, we are encouraged by the process of this business with three additional projects coming online in 2018 and an attractive pipeline of prospects in development. In the energy services portion of our nonutility business, we have shifted focus from project development to optimizing production at our existing assets. As a result, 2017 represented the first time since 2009 that investment tax credits did not contribute to our earnings. Operationally, production from our flagship CHP project Marina Thermal as well as from our solar fleet continues to exceed expectations. However, we are also seeing declining production and performance from our landfill gas to electricity units as well as challenges to our renewable fleet stemming from a flatter trajectory from New Jersey, SREC and electricity prices. As we have noted in other investor communications, we continue to explore opportunities across our nonutility businesses that reduce risk, support our core strategy and accelerate our shift to high quality, regulated income streams. We recognize that our growth and long-term success demands that we remain agile as we drive progress in support of our broader corporate strategic objectives. The success of the last two years laid the foundation for a very strong 2018. As our business mix becomes more regulated, we are better able to targets full-year earnings sooner in the year and I am pleased to be able to share 2018 guidance with you. For 2018, we are targeting economic earnings per share of $1.57 to $1.65. This range is inclusive of both a $0.06 benefit related to tax reform and roughly $0.09 to $0.10 benefit related to our wholesale activities from the colder weather we experienced in January. Guidance is exclusive however of the impacts of the pending Elizabethtown and Elkton acquisitions. We are committed to updating our guidance to reflect the impact of the acquisition upon final approval. Finally, as a result of tax reform impacts within our business, we have also increased our 2020 economic earnings target to $160 million, up form the $150 million that we previously stated. Once again, we will update this number as well to reflect the benefits of the acquisition after the transaction closes. With that, I will turn over the call to Steve to detail our full-year 2017 and fourth quarter results.

[Steve Clark:]

Thanks Mike. As Marissa noted earlier, both the earnings release and the slide deck is made available to you to provide you with detailed information regarding GAAP earnings and I would encourage you to review that information as well. For the purposes of this call, as we normally do, we will focus our discussion on our non-GAAP measure of economic earnings as management believes that this measure provides valuable insights into the performance of our business. SJI's full-year economic earnings totaled $98.1 million as compared with economic earnings of $102.8 million in 2016. Economic EPS for the year totaled $1.23 as compared with $1.34 of the prior year. And do note that in the prior year, we were still reflecting the dilution that was associated with the equity offering that we made in May of 2016. For the fourth quarter of 2017, economic earnings were $40 million with economic EPS at $0.50 as compared with $33.2 million and $0.42 of economic earnings and EPS respectively for the fourth quarter of 2016. Quarterly and annual comparisons were heavily impacted by the planned strategic elimination of investment in solar development that resulted in the absence of investment tax credits to 2017 earnings. On a full-year basis, contribution from ITCs declined from $9.1 million in 2016 to zero in 2017. For the quarter, ITCs declined from $4.5 million in 2016 to zero in the fourth quarter of 2017. I do want to note from a GAAP perspective that based upon updated assumptions about future SREC and electric prices we recognized in the fourth quarter, impairments to our carrying values on several projects in our solar fleet. These impairments were primarily on our oldest projects and totaled $17 million after-tax. We also impaired the carrying value of our landfill fleet by $12 million after-tax which is reflective of a continuing lack of performance. I remind everyone that these charges are non-cash and are based upon the discounted value of forecasted future cash flows under a variety of assumptions. We continue closely following New Jersey's legislative efforts intended to drive the longevity of a successful solar market in the state and we also expect that these projects will continue providing significant cash flow to SJI over time. Now we will take a closer look at the key items that helped drive our year-over-year performance within our individual business lines. South Jersey Gas contributed earnings of $72.6 million for the quarter exceeding prior results of $69 million in 2016. For the fourth quarter, the utility contributed $29.6 million to earnings as compared with $22.9 million in the same period in 2016. Earnings growth was primarily supported by benefits from our base rate case settlement as the roll into base rates is effective November 1 and from infrastructure investments through our AIRP II and SHARP programs. We closed out 2017 with combined investments totaling $95.4 million within our two accelerated infrastructure programs. These investments produced a full-year aggregate incremental net income contribution of $4.2 million on top of a $5.2 million increase in 2016. We expect these programs to remain important drivers of growth within our utility as investments continue within our existing AIRP and we await approval of a SHARP extension. Customer additions remained strong in 2017. For the 12 months ended December 31, our customer base grew by 1.6% on a net basis bringing our total number of customers served to just under 384,000. This growth was derived through the successful execution of our conversion marketing program in our service territory complemented by a slightly strengthening experienced in our region's housing market. On the nonutility side, those businesses contributed economic earnings of $18.5 million for 2017 as compared with $34.2 million in 2016. For the fourth quarter, our nonutility businesses provided economic earnings of $8.9 million in 2017, as opposed to economic earnings of $10.6 million for the same period of 2016. I will address the significant drivers that impacted these results as I discuss our two primary nonutility business lines. First, our wholesale and retail commodity business, housed within South Jersey Energy Group, contributed $21.3 million in 2017 as compared with $17.7 million in 2016. For the quarter, this area contributed $11.7 million in 2017 versus economic earnings of $7.3 million in 2016. Economic earnings of South Jersey Energy Group were anchored by the recurring contributions from our fuel management businesses as well as our ability to optimize around our transportation assets. This optimization allowed us to take advantage of the very cold weather experienced in the last five days of December which helped us offset the negative impacts of the extremely warm weather we had in the first quarter 2017. Positioning our portfolio to maximize value from our transportation assets continues to improve and our performance at the end of December is a testament to that. While this ability to optimize remains extremely attractive benefit of our wholesale business, we have also expected meaningful addition to earnings from the three fuel supply management contracts projected to come online in 2018. These three fuel management contracts were the highest volume contracts we have operated to-date and will bring the number of active facilities we are serving from six to nine. Our energy production business, South Jersey Energy Services, posted an economic earnings loss of $2.8 million in 2017 as compared with economic earnings of $16.5 million in 2016. For the quarter, this business produced an economic loss of $2.8 million in 2017 versus economic earnings of $3.3 million in the same period in 2016. Most of the unfavorable comparison in this business was related to previously amended elimination of investment tax credits resulting from our decision to forego additional solar development in 2017 and a $4.3 million benefit from a legal settlement in 2016 which did not recur in 2017. Remainder of the variance was due to significantly lower SREC prices in Maryland, continued weak performance in landfill generation facilities and increased overhead in interest expenses allocated to the business. However, I do want to note that overall production from our solar facilities increased with just over 240,000 SRECs generated in 2017 compared to 224,000 in2016. With that, we will conclude our prepared remarks and open the line to answer any questions you may have.

[Operator:]

[Operator Instructions]. Your first question comes from Spencer Joyce from Hilliard Lyons. Please proceed.

[Spencer Joyce:]

Hi. Good morning guys. Thanks for taking the call and congrats on a good close to the year here.

[Mike Renna:]

Thanks Spencer.

[Spencer Joyce:]

Yes. I guess we know what solidly means now. A couple for me here. First, the $0.06 tax benefit included in guidance for 2018, is that sustainable? Is that part of the $10 million step-up in the 2020 plan? Or are there still some one-time items the drive that $0.06 in 2018?

[Steve Clark:]

There are no one-time items. That's from ongoing operations, obviously on our nonutility side. So that number will go from the $0.06 to the $10 million by the end of 2020 as a result of growth in Greg’s businesses.

[Mike Renna:]

Spencer, that $0.06 is worth right around $5 million in 2018. So that's a pretty big South Jersey Resources group over the next two years.

[Spencer Joyce:]

Okay. Great. And I guess Steve, do you have a ballpark effective tax rate for next year? And related to that, I assume we will see some margin reduction on the utility side. No net income impact there, but we will at least see, simply from an income statement modeling perspective, some margin reductions as you work with the New Jersey Commission to pass some of that savings back to customers?

[Steve Clark:]

Yes. Spencer, the effective tax rate, we are probably in the range of about 28% for the year, for 2018 [indiscernible]. With regard to nonregulated business, obviously that's just a straight benefit for them, paid all our taxes. Your point is exactly right. Though it remains to be seen exactly how the BPU choose to sort out impacts of tax reform on the utility and the utility rate payers. We are in the process now of, I guess all the utilities in New Jersey are in the process of preparing a filing for the BPU as per the BPU's request and really the [indiscernible] conclusion on this are expected to be drawn probably a little bit more towards the [indiscernible].

[Spencer Joyce:]

Okay. If we do see some delay though in sort of the re-rate setting, if you will, you all will make some sort of adjustment to the income statement, though from a margin standpoint. I mean, we won't have, say, a first quarter with the reduced taxes but you are still passing kind of the full prior margin rates through there?

[Dave Robbins:]

Spencer, this is Dave Robbins. We expect this to be neutral to utility earnings. There might be a geography shift, in that you will probably see lower margins but you will also see lower corporate income taxes.

[Spencer Joyce:]

Okay. Perfect. Yes. That's what I was looking for. I just wanted to make sure we didn't have maybe one quarter where that would an anomaly. But that’s great, that's very helpful. Jumping over to the solar for a second. I know a couple of years ago, we had a couple old write-downs from New Jersey. Last quarter, we wrote down some stuff in Maryland. I guess I was a little surprised to see, albeit it is still a fairly small write-down for some solar in New Jersey, can you give me some comfort that that's done now. I mean how sensitive is the rest of the portfolio to potential write-downs in the future? I mean is there a big gap in quality, for lack of a better word, between what was written down in Q4 and what's still sort of at a full carrying value on the books? Just any sort of piece of mind you can offer on that front?

[Mike Renna:]

Well, I guess ultimately the answer, Spencer, is that the ones that we just took a charge on right now were primarily our oldest projects that were built at much higher cost levels than what the later projects were built at. So when you think about the ability of those to perform over time and the impacts or the benefit at the end of life, to get any salvage out of something or to continue to go on as a continuing operations, those are more challenging. One thing you have to step back and remember is and obviously it varies between companies, as to what their initial treatment was. But when you are doing these, we recognized from an income statement standpoint a lot of value from these, because we recognize the [indiscernible] upfront. But we are taking a lot of that value. When you do your impairment modeling, that doesn't count anymore. So you don't get any, even if you haven’t actually received a cash tax benefit from that, you don't really recognize that in the impairment modeling going forward. So I guess when I go back to it, we had updated our projections and we think we took a pretty strong pass at what was out there taken on a go-forward basis. Clearly things can change with regard to what SREC's values are in the marketplace and we will have to be open to that. But at the end of the day, these are non-cash impacts from a valuation standpoint and the entities contributed, despite the impairment, they continue producing cash at the same level they were producing before the impairment.

[Spencer Joyce:]

Okay. Yes. Point is well taken there. That's helpful. Sticking with energy services for a second, still assuming we can kind of get the landfills closer to breakeven there? And then as an extension, I mean is essentially breakeven for energy services a reasonable normalized base case as we look out a year or two? Or excluding maybe the landfills, is this year sort of an anomaly to the downside?

[Mike Renna:]

I guess I would say, probably the way to think about the landfill, Spencer, is we wrote those down. They are on our books for about $6 million. So we wrote that down, almost down to the ground. So as we go forward, from a GAAP standpoint, we will be at a much lower level of depreciation going forward but the bigger factor is that these just haven't performed. We are obviously going to determine what the best way to address this is.

[Spencer Joyce:]

Okay. Just a final housekeeping one. Steve, you might have mentioned in the prepared remarks, but can you just kind of refresh me on some of the balance sheet leverage metrics exiting the year, before we kind of see the balance sheet, the 10-K?

[Steve Clark:]

I don't have the number right in front of me. If I remember correctly, I think we were a little bit over 51%, close to 51.5% at year-end at the utility and probably right down around 44% at the SJI level.

[Spencer Joyce:]

Okay. But is it down in equity [indiscernible] utility before - equity?

[Steve Clark:]

That reflects obviously the write-off.

[Spencer Joyce:]

Yes. Okay. All right. That's all I had. Congrats on a good close to the year here.

[Mike Renna:]

Thank you.

[Operator:]

Your next question comes from Chris Ellinghaus from Williams Capital. Please proceed.

[Chris Ellinghaus:]

Hi. Good morning everybody. How are you?

[Mike Renna:]

Great. How are you?

[Chris Ellinghaus:]

Steve, in terms of the previous guidance for the fuel supply management contracts, can we nearly adjust those for the change in the statutory tax rate to sort of get to our new thought process on what those are worth?

[Steve Clark:]

Yes. I think that will be correct.

[Chris Ellinghaus:]

Okay. Is there anything you can tell us about the private placement? Can we assume that was debt?

[Steve Clark:]

Yes. The private placement was debt.

[Chris Ellinghaus:]

Okay. I don't remember when this was but I want to say it the middle of last year you were going to install some new landfill gas equipment. Can you tell us - did that get done? And did that have any effect at all?

[Mike Renna:]

Yes. It did get done. It had some effect but not the desired effect that we wanted and hence we came to the conclusion that it was time to write this asset down.

[Chris Ellinghaus:]

Okay. In the 2018 guidance, which I appreciate immensely, are there any anticipated benefits or drags from things like litigation or tax benefits or anything?

[Steve Clark:]

No. There is nothing in there from any type of potential litigation of pending litigations.

[Chris Ellinghaus:]

Okay. And lastly, do you have a procedural schedule yet for the Elizabethtown docket in New Jersey?

[Steve Clark:]

We don't have one in New Jersey yet. We do have one in Maryland. There is a draft in New Jersey that all the parties have essentially signed off on. It's just not been formally approved yet by the Board.

[Chris Ellinghaus:]

Okay. Great. Thanks for the help.

[Operator:]

Your next question comes from Michael Gaugler of Janney Montgomery. Please proceed.

[Michael Gaugler:]

Good morning everyone.

[Mike Renna:]

Hi Mike.

[Michael Gaugler:]

Lots of changes, Mike, in New Jersey since the last call. New playful environment to some extent. Just wondering, if you are seeing any changes that could impact your projects, B.L. England and PennEast now versus last quarter's call?

[Mike Renna:]

Well, I mean certainly yes, between last quarter and this quarter, there has been a change in the administration. I don't think it's a surprise to anyone that administrations have very different views on the world. As far as our projects, the Governor, he has made a public statement that they intend on fully evaluating the merits of PennEast in the context of the their energy master plan. So I take him at his word. I think he is going to give a fair and due consideration and I would expect, again, if they look at it in a non-bias matter, they will see that the economic benefits and the environmental benefits of the project far outweigh any of the potential costs. And I think the same is true for B.L. England, although that right now is not a matter that's in front of the front office. It's with the appellate court.

[Michael Gaugler:]

Understood. I would certainly think with an extra $300 million in energy costs over a couple of days, end of December, early January, that should certainly impact that thought process. That's some serious money.

[Mike Renna:]

Well, it is. And I think longer term, the ability for New Jersey and the residences and the businesses of New Jersey to be able to access some of the least expensive cost of gas in the country is an incredible benefit that again really supports the project.

[Michael Gaugler:]

Have you heard any chatter in places that matter to you since that $300 million was spent on extra energy that perhaps some of the people that were on the fence might be coming more your way? I mean I would think that size of number has got to get some people's attention and start some re-thoughts.

[Mike Renna:]

I would agree with you, although it's sort of my impression of today's world that things are still polarized. I am not sure there is anybody on the fence anymore. There is one camp and another. So I think those that understand the benefits of the project and how it will impact the economy in New Jersey and all of again the ways in which it will help to improve the New Jersey economy, they are going to really understand the value what happened in that 10-day period. And those that are against it, I am not sure that $300 million is going to convince them otherwise.

[Michael Gaugler:]

Okay. That's all I had. Thank you gentlemen.

[Mike Renna:]

Thank you.

[Operator:]

Your next question comes from Chris Ellinghaus. Please proceed.

[Chris Ellinghaus:]

Hi. Sorry guys. I have got a couple. Have you updated your thinking on the PennEast capital budget at all?

[Greg Nuzzo:]

Yes, this is Greg. Yes, I mean we continually evaluate our capital budget, but obviously as we talked about before, a lot of the dollars aren't spent during construction. So while this has been pushed out versus original, it really doesn't move the needle much in terms of the returns and economics. There will be some additional cost. We are continually looking at it, but nothing really significant to really talk about at this point.

[Chris Ellinghaus:]

Okay. And you have got a couple of casinos coming back in Atlantic City. Given that you are sort of netting in your customer numbers, I don't know what word you want to use, but some dubious customers or transitory customers, with that number of jobs potentially coming back to Atlantic City, should we anticipate that your customer growth rate would accelerate a little bit?

[Mike Renna:]

Yes. I mean certainly it's going to be a benefit to the economy. I believe it's 4,000 to 5,000 jobs coming with Hard Rock when they had opened. And then again there is now, there has been announcement that Revel was purchased by a company out of Colorado and they are intending on reopening it as a casino. There has been some other rumors out there about more casinos returning to the region. So certainly that's going to have a benefit to the economy and the housing market. So I would expect that that would lead to a modest uptick in the potential for us in terms of customer growth.

[Chris Ellinghaus:]

Steve, have they resolved the issues about when some of the casinos closed, there were some state tax issues in terms of their ability to reopen? Have any of those things been resolved?

[Steve Clark:]

I think what you are talking about is Showboat and there were some issues in terms of the way the deed was written. I don't know whether or not those issues have been resolved. Although I would suspect that if there is enough momentum behind it and the opportunity is there to reopen a property as a casino, that folks are going to go to the negotiating table and work out those differences.

[Chris Ellinghaus:]

Okay. And sure following up on the casino customer growth question a little bit, are there any significant inactive meters that could theoretically be filled by those possible new employees coming back to the region?

[Mike Renna:]

Well, I mean inactive meters, yes, certainly there has been, I will put it this way. Dave can certainly talk to it, but I think that one of the things you are likely to see is potentially an uptick in new construction in an area that's been relatively flat. The Atlantic and Cape May County regions that typically are where aware of the housing stock had been in terms of new construction prior to the recession, I think that there is the potential to see a real uptick in new construction in those two counties. Except Chris, first and one further thing, one thing that we do monitor is our check for usables, which is when a meter that's been dormant for a year comes back online. And as expected, we are seeing an uptick in those numbers as you mentioned. So it's very promising for what that could do to our customer growth numbers.

[Chris Ellinghaus:]

Great. Thanks for the color, guys. I appreciate it.

[Operator:]

Your next question comes from the line of David Frank. Please proceed.

[David Frank:]

Yes. Hi. Good morning.

[Mike Renna:]

Good morning.

[David Frank:]

In your prepared remarks, you talked about maintaining balanced financing with equity and debt and you said something to the extent, I am going to paraphrase, in considerations of other sources of financing. Could you elaborate on that?

[Mike Renna:]

I will give you the best non-answer I can. Everything is on the table. I think what we are trying to do right now is, obviously we got financing needs to satisfy us as it relates to the Elizabethtown acquisition. But at the same time, we want to be very mindful of our strategy and where our growth is coming from in the future. And that is primarily in the regulated businesses. So it's something we had also addressed to some of the questions that Spencer asked before that some of the underperforming assets, they are not really core in our strategy going forward. So we are exploring opportunities, again, to accelerate a shift to more regulated earning streams in our company.

[David Frank:]

So you are kind of talking about selling non-core and maybe substituting some of your debt and equity considerations. Is that -- or substituting that for --

[Mike Renna:]

I didn't necessarily say selling. But we are exploring.

[David Frank:]

Got it. Question, I know Elizabethtown and Elkton Gas companies are currently owned by an out-of-state company and New Jersey sometimes has these quirky rules about out-of-state companies owning in-state companies. And I am just wondering, if there is any rate base that the utilities are excluded from earning on right now that because of their ownership is an out-of-state company that you might get to earn on if you purchase when you close on the companies?

[Steve Clark:]

There wouldn't be any change in Elizabethtown's rate base by virtue of them being moved back under New Jersey ownership. There is nothing that's excluded by virtue of an out-of-state company owning that. It's a standalone entity underneath the Southern umbrella with its own rate base that doesn't get impacted by that.

[David Frank:]

Okay. So they are currently earning on full rate base and that it will shift over to you. No, nothing, there is no increase because you are purchasing them.

[Steve Clark:]

Correct.

[David Frank:]

Okay. And when I think of growth drivers over the next few years in my mind, if I had to line them up, I would say your biggest driver and maybe you can fill me in if I am missing anything here, would be your planned merger in New Jersey, the PennEast pipeline and then I would say pipeline replacement program and then normal customer growth, utility growth. Am I missing something? Is there something else you would put in there?

[Mike Renna:]

No. I think that's pretty fair. I think I wouldn't just make number one the acquisition. I would think it's kind of a combination of regulatory opportunities of both utilities is really our primary growth driver. So we have obviously very significant capital spending programs laid out for both utilities. So that will really drive growth. You are correct. The accelerated infrastructure investments would be another one. Customer growth is a third. Midstream investment is one. And then of course I think the fuel management contracts is another niche business that we have had a tremendous amount success and each one of those drop somewhere around $1 million to $1.5 million to the bottomline. We have got 11 that will be online by 2020 and we continue to see a lot of very attractive prospects out there and I feel pretty m confident that we will be able to add one or maybe two a year for these next several years.

[David Frank:]

Okay. I guess finally, your stock trades at a very significant discount to its peers and has underperformed tremendously recently. Is this all because of the planned equity that you talk about it? And how would you ease investor's fears? Or what would you do to close this gap?

[Mike Renna:]

Yes. I think certainly a lot of it has to do with the equity overhang. But I think we had a very strong 2017. We put out a guidance that would indicate very strong growth. We are well on our way to achieving our target of $150 million or $160 million by 2020. We continue to significantly improve the quality of our earnings as we shifted to the more regulated or a greater emphasis on regulated businesses. Generally, I think we are very undervalued.

[David Frank:]

Okay. Thank you very much.

[Operator:]

[Operator Instructions]. I would now like to hand it to Marissa Travaline for closing remarks. Please proceed.

[Marissa Travaline:]

Well, thanks everybody for joining us today. And before we wrap up, please remember that you can always contact me if you have any additional follow-up questions. I am available at 609-561-9000, extension 4227 or via email at [e-mail]. You can also contact our Treasurer, Ann Anthony. Ann can be reached at extension 4143 or via email [e-mail]. I really appreciate your time and have a great day.

[Operator:]

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.