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3rd PennEast partner has doubts about 2020 pipeline start date

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3rd PennEast partner has doubts about 2020 pipeline start date

A third utility company partner in the roughly $1 billion PennEast Pipeline Co. LLC project to connect the Marcellus Shale to New Jersey signaled its expectation that permit delays could push the 120-mile natural gas line's opening date into 2021.

South Jersey Industries Inc. CEO Michael Renna told analysts on his company's Aug. 8 earnings conference call that while the company hoped that New Jersey regulators would follow precedent and approve a needed permit in 2020, he was prepared for further delays. Developers had originally planned for a 2019 in-service date.

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South Jersey built $12 million in 2020 income from PennEast into its earnings guidance, but Renna said other segments of the gas utility holding company would make up for any PennEast delays and keep 2020 earnings between $1.53 and $1.60 per share, a 42% increase over expected 2019 earnings.

"Upward of that [2020 guidance] range would be that [the New Jersey Department of Environmental Protection] does follow past precedent and we would get our permits in less than a year, which would enable us to begin construction earlier in 2020," Renna said. "If that takes the full 12 months or … a little beyond those 12 months, it would push commercial operations back from our anticipated late-2020 date."

South Jersey has a 20% stake in the project being developed with partners Enbridge Inc., Southern Co., New Jersey Resources Corp. and UGI Corp. Executives from UGI and New Jersey Resources told investors on their Aug. 6 earnings calls that they expected PennEast's opening to be delayed until 2021.

"It's important to remember that should PennEast face an in-service delay, the ultimate value and benefit of the project for [South Jersey Industries] would remain unchanged," Renna told analysts.

Renna said South Jersey's transition toward owning regulated businesses was progressing and that most of its 2020 capital spending and 42% jump in earnings would be driven by customer growth at its three gas utilities. "The repositioning and monetization of our noncore, nonregulated businesses continue at a steady pace, all of which support our transition to a more regulated company with highly visible cash flows and earnings."

After the Aug. 7 market close, South Jersey reported an economic loss of $12.2 million, or 13 cents per share, in the second quarter, compared with economic earnings of $5.5 million, or 7 cents per share, in the prior-year period but warned the periods were not comparable because the company had acquired two gas utilities and shed solar and other nonregulated business segments. Economic earnings strips out changes in the value of the energy derivatives used by South Jersey's energy supply management segments.

The S&P Global Market Intelligence consensus normalized EPS estimate for the second quarter was a loss of 4 cents. The consensus normalized estimate for South Jersey's fourth quarter comes in at 40 cents per share. In the first quarter, South Jersey reported $1.09 per share in economic earnings.

South Jersey reported a GAAP loss of $13.3 million, or 14 cents per share, against a loss of $93.8 million, or $1.12 per share, in the year-ago quarter. Total operating revenue was $266.9 million, an increase from $227.3 million a year earlier.

South Jersey Industries' regulated natural gas utility business, SJI Utilities Inc., serves about 690,000 customers in New Jersey and Maryland.