Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — American Gas Association Financial Forum 2021
56 slides from Newjersey Resources's conference presentation, May 19, 2021
Slide 1: American Gas Association Financial Forum
CONFIDENTIAL DRAFT American Gas Association Financial Forum s May 19 - 20, 2021
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Li
Slide 3: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 2
Slide 4: NJR’s Business Portfolio
NJR’s Business Portfolio Our complementary businesses create an Energy Infrastructure Platform that originates from our deep expertise across the energy value chain Retail Operations; Wholesale Energy Markets & Customers; Natural Gas Operations; Distribution & Transportation Infrastructure New Jerse
Slide 5: Covid-19 Update
Covid-19 Update • Non-essential employees continue to work remotely Our Team • Essential employees in the field or office are following CDC and state guidelines • Continue to suspend customer disconnects and late fees Our Customers • Energy assistance available for customers’ bills through assistanc
Slide 6: Second-Quarter 2021 Summary
Quarterly Review Second-Quarter 2021 Summary NJR reported EPS of $1.56 and NFEPS of $1.77* for NJNG received approval for SAVEGREEN 2020, Fiscal 2Q21 it’s new, $259 million energy efficiency program – investments are expected to begin in 2021 Increased FY 2021 NFEPS guidance to $2.05 to $2.15 from g
Slide 7: Fiscal 2021 NFEPS Guidance
Fiscal 2021 NFEPS Guidance Increased FY 2021 NFEPS Guidance to $2.05 - $2.151 Net Financial Earnings per Share $2.05 - $2.15 May 6 guidance $0.20 increase $0.50 of ES over- March 15 guidance $0.30 performance increase $1.76* $1.55 - $1.65 FY 2020A FY 2021E * Reported NFEPS for fiscal 2020 was $2.07.
Slide 8: Strong Cash Flows Supporting Dividend
Strong Cash Flows Supporting Dividend Energy Services’ contributions improve operating cash flows, strengthen the balance sheet and reinforce our commitment not to issue block equity Cash Flow from Operations Dividend as Percentage of CFFO Millions $600.0 ~25% $600.0 60.0% CAGR FY2020 – FY2024 $500-
Slide 9: Capitalizing on Clear Market Opportunities to Drive Organic Growth and Value Creation
Capitalizing on Clear Market Opportunities to Drive Organic Growth and Value Creation Fundamental Beliefs Key Business Initiatives De-Risked Financial Targets Shift to low carbon and renewables Grow Core Businesses, NJNG and CEV 6-10% 6-10% • ~11% rate base CAGR at NJNG Long-Term NFEPS Long-Term Ann
Slide 10: Putting Sustainability into Action – Q2 Highlights
Putting Sustainability into Action – Q2 Highlights ▪ Released NJR’s 2020 Corporate Sustainability Report on January 20, 2021 ▪ Furthering commitment to ESG transparency, 2020 report addresses Sustainability Accounting Standards Board (SASB) and American Gas Association (AGA) frameworks ▪ Launched NJ
Slide 11: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 10
Slide 12: Premier Natural Gas Utility
Premier Natural Gas Utility Operates and Maintains Over 7,500 Miles of Natural Gas Transportation and Distribution Infrastructure Serving Over 558,000 Customers Predominately in Monmouth, Ocean and Morris Counties $1.5B 561.5k $2.3B* Forecasted investments Total Customers Rate Base FY2021-FY2024 9.6
Slide 13: Supportive Regulatory Construct
Supportive Regulatory Construct Stable Rate Case Results Volume & Commodity Risk Mitigation • Rate case results are stable • Volume risk due to conservation and weather • Current ROE of 9.60% with an equity mitigated through the Conservation Incentive Strong and Stable Utility layer of 54% Program (
Slide 14: Growing Customer Base with Strong Demographics
Growing Customer Base with Strong Demographics Population1 thousands Attractive 1,600 1,700 1,740 1,840 service territory 510 580 600 640 with mostly 540 Ocean 470 490 510 MORRIS Morris • Parsippany residential 620 630 630 660 Monmouth NEW customer base 2000 Census 2010 Census 2019P 2029P YORK CITY
Slide 15: Delivering Value to Our Customers
Delivering Value to Our Customers Equivalent Customer Cost1 NJNG Average Natural Gas Bill Evolution2 Natural gas Energy Cost continues to be $4.00 the most affordable choice $3.20 for home heating $88 $2.30 $170 32% reduction in real $1.10 terms $115 October 2008 October 2020 NJNG Fuel Oil Propane E
Slide 16: Customer satisfaction with residential natural gas service
J.D. POWER In 2020, a lot has changed – 2020 Gas Utility Residential being here for our customers Customer Satisfaction StudySM has not. Overall Customer Satisfaction Index Ranking East Region: Large Segment #1 Customer satisfaction with residential New Jersey Natural Gas UGI 761 784 natural gas ser
Slide 17: Generating Superior Operational Results
Generating Superior Operational Results Strengthening System Integrity Ensuring Customer Safety Leaks per mile of system Average leak response time (minutes) 26.0 19.8 19.5 19.6 19.7 1.54 0.11 0.10 0.08 0.07 2017 2018 2019 2020 AGA 2019 2017 2018 2019 2020 AGA 2019 Benchmarking Benchmarking Median M
Slide 18: Most Environmentally Sound Natural Gas Delivery System in New Jersey
Most Environmentally Sound Natural Gas Delivery System in New Jersey1 Continuous Improvement on Pending Leaks Committed to reducing and minimizing Lowest number of leaks-per-mile of any natural gas utility in the state methane emissions from distribution system Pending Leaks Leaks per Mile $1.9B 1st
Slide 19: Rate Case Filing
Rate Case Filing Requested an increase to base rates of $165.7 million • Equivalent to an increase of $117.9 million in operating income Proposed rate base of $2.3 billion1 Nearly $850 million of invested capital since 2019 • Includes ~$300 million related to SRL Overall Cost of Capital and Rate of
Slide 20: Expanding Rate Base Through FY2024
Expanding Rate Base Through FY2024 Infrastructure Investment Driving Growth Rate Base Growth Billions ~11% $0.41 $2.99 CAGR $0.27 $0.14 $0.10 $0.04 $0.21 $0.06 $1.76 2019 Rate Base New Customer SAFE II/NJ Rise IIP Clean Energy IT SRL Maintenance, 2024E Rate Cost of Base Removal & Other Assets earnin
Slide 21: Capital Plan Leading to Double Digit Rate Base CAGR
Capital Plan Leading to Double Digit Rate Base CAGR FY2021-FY2024 CapEx Millions New Customer ~34% $173 $103 SAFE/NJ RISE of CapEx expected to SAVEGREEN earn an accelerated $40 recovery $469 IIP $214 Maintenance ~$1,540M Cost of Removal/Other $43 IT $64 SRL $135 $300 RNG & Hydrogen 20
Slide 22: SAVEGREEN Provides Energy Efficiency and Earns Return for NJNG
SAVEGREEN Provides Energy Efficiency and Earns Return for NJNG Most successful residential energy-efficiency programs in SAVEGREEN 2020 N.J. NJNG received approval for its new $259 million program in compliance with the Clean Energy Act Conducts home energy audits and provides The process specifies
Slide 23: Development of Alternative Fuels Presents Opportunities
Development of Alternative Fuels Presents Opportunities NJNG’s Power-to-Gas Project Hydrogen has been safely injected into local distribution company pipeline systems in Europe O2 H2 O2 H2 SoCalGas and the University of California use excess midday solar-generated hydrogen to provide campus power Su
Slide 24: An Industry Leader
An Industry Leader Named an Environmental Champion • Sixth time NJNG has been recognized for our dedication to the environment since 2014 Named Easiest to do Business With • Third consecutive year customers have recognized our commitment to delivering exceptional service According to the Cogent Synd
Slide 25: New Jersey Natural Gas
~11% rate base CAGR through FY2024 Attractive service territory Constructive regulatory framework New Jersey Natural Gas Stabilized utility gross margin profile Strategic infrastructure investments Incremental return from natural gas supply and accelerated recovery mechanisms optimization and energy
Slide 26: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 25
Slide 27: Leading New Jersey’s Clean Energy Future
Leading New Jersey’s Clean Energy Future NJR is the Largest Solar Owner-Operator in New Jersey1 Portfolio of Over 350MW of Installed Capacity, With 11% Commercial Residential Market Share in N.J.1 Largest segment of The Sunlight Total MW (owned or developed) the CEV portfolio Advantage® continues to
Slide 28: Long Track Record of Investing in N.J. Solar Market
Long Track Record of Investing in N.J. Solar Market NJR’s Solar Capacity in Service & Cumulative Investment $989 $1,000 ~$1B $850 of investment to $800 date with unlevered $706 returns in the high $584 $600 single digits $475 $394 357 $400 $297 290 80 $221 230 73 184 $159 149 65 $200 117 56 83 45 27
Slide 29: Significant Investment in Solar Will Continue to Drive Growth
Significant Investment in Solar Will Continue to Drive Growth Across NJR … Capital Investment (Millions) and Installed Capacity (MW) ~$850M $450 ~635 - 655 ~765 - 785 800 investment in $375 solar over the $300 ~520 - 540 600 next 4 years ~395 - 415 $239 - $261 $252 $24 - $26 $228 $27 $225 357 400 $2
Slide 30: Growing Solar Revenues by ~60% Through FY2024
…Growing Solar Revenues by ~60% Through FY2024 Solar Revenues Expected Evolution of Revenue Composition Millions FY2020 FY2024 $165-$170 3% 7% 8% $148-153 20% 10% $127-$132 20% $105-$110 $103 8% 80% 44% Wholesale Energy Revenue TREC Revenue Lease Revenue SREC Revenue FY2020A FY2021E FY2022E FY2023E
Slide 31: CEV Commercial Project Pipeline
CEV Commercial Project Pipeline $9 $27 ▪ Represents over 80% of targeted CAPEX for fiscal In-Service 2021 and 2022 $103 FY21 & FY22 Under Construction ▪ ~1/3 of pipeline capacity is Pipeline: Under Contract1 expected to be out-of-state $255 Under Exclusivity2 ▪ For NJ projects, average factor is ~0.
Slide 32: NJR CEV – SREC Hedging Strategy Stabilizes Revenue
NJR CEV – SREC Hedging Strategy Stabilizes Revenue As of April 21, 2021 Percent Hedged Average Price Current Price (EY) EY 2022 389 14 97% $200 $233 Percent Hedged Average Price Current Price (EY) EY 2023 389 12 97% $202 $218 Percent Hedged Average Price Current Price (EY) EY 2024 369 30 93% $196 $2
Slide 33: Four Strategic Pillars to Accelerate Profitable Growth
Four Strategic Pillars to Accelerate Profitable Growth 1 Expand Into Other Markets Advance partnerships and new business development outside of New Jersey Optimize performance of existing solar portfolio 2 Optimize and In-Source Drive down development, operating and capital costs to maximize returns
Slide 34: Clean Energy Ventures
Significantly increasing investment in solar Expanding footprint beyond NJ Clean Energy Optimizing and in-sourcing Ventures Aligning investment with public policy Investing ~$850 million over 4 years to capture robust solar opportunity, while also maintaining current returns even after ITCs reduce t
Slide 35: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 34
Slide 36: Strong Growth Outlook Across Projects…
Strong Growth Outlook Across Projects… S&T Adjusted EBITDA1 • Strong Adjusted EBITDA profile supported by long-term capacity Millions $62.0 - $67.0 $64.0 - $69.0 $59.0 - $64.0 commitments with highly rated entities Incremental revenues from • Mitigating Adelphia Gateway’s organic execution risk as i
Slide 37: Underpinned by Stable Customer Base with High Quality Credit Profiles
…Underpinned by Stable Customer Base with High Quality Credit Profiles Producing Stable Fee-Based Revenue FY2020 Revenue FY2020 Revenue by FY2020 Revenue by by Customer Type Credit Quality Fee Type 21% 10% 80% 84% 51% 11% 16% 10% 10% 8% Utility Marketer Producer IG Credit Support Non-Rated Take-or-P
Slide 38: Storage and Transportation
Stable fee-based revenue from diverse mix of high credit-quality customers Portfolio of low-risk natural gas infrastructure investments that are difficult Storage and to replicate Transportation Serving constrained physical end-use Generating stable fee-based markets revenue from diverse mix of high
Slide 39: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 38
Slide 40: Proven Track Record of Success
Proven Track Record of Success Consistent Profitability Since 1995 with Strong Financial Margins and NFE; Able to Cover Physical Asset Demand Charges Even During Extremely Unfavorable Market Conditions (FY2020) Millions $172 $122 $118 $117 $107 $97 $100 $90 $92 $91 $89 $80 $80 $80 $73 $60 $56 $55 $4
Slide 41: NJRES – Takeaways from February Weather Event
NJRES – Takeaways from February Weather Event • Significant upside from opportunistic storage sales MID CON STORAGE • In February, the affected regions ASSETS experienced unprecedented “peak • Michcon • Union Gas day pricing” for natural gas • Wash10 Mid-Continent Market • NJRES capitalized by makin
Slide 42: AMAs with Utility De-Risks Business and Drives Value
AMAs with Utility De-Risks Business and Drives Value 10-Year Asset Management Agreements (AMAs) • Entered into AMAs to release certain natural gas transportation contracts of Energy Services for aggregate cash proceeds of approximately $500 million payable over 10 years (~$260 million through FY2024
Slide 43: Revenue Recognition for AMAs
Revenue Recognition for AMAs The Transaction: The Accounting: The Result: AMAs feature initial and ASC 606 revenue recognition Disproportionate value is permanent capacity standard requires that allocated to the permanent releases with cash revenue be allocated to both release periods in FY 2024 pay
Slide 44: Energy Services
Connected assets in opportunistic locations Strong customer relationships Energy Proven track-record and risk management strategies Services Pursuing more fee-based Pursuing higher fee-based earnings: announced 10- transactions that would better year AMAs for aggregate proceeds of ~$500 million ensu
Slide 45: Agenda
Agenda 1 Strategic Update 2 NJNG Business Update 3 CEV Business Update 4 S&T Business Update 5 Energy Services Business Update 6 Appendix 44
Slide 46: Fiscal 2021 and 2022 NFEPS Guidance
Fiscal 2021 and 2022 NFEPS Guidance Increased FY 2021 NFEPS Guidance to $2.05 - $2.15* Net Financial Earnings per Share FY 2021E FY 2022E $2.20 - $2.30 NJNG 51%-55% 60%-65% $2.05 - $2.15 Impact of ES’ AMAs $2.05 - $2.15 6%-10% $1.76** Over-performance of ES LONG-TERM CEV 9%-14% 20%-25% $1.55 - $1.65
Slide 47: Selected Investments
Selected Investments Southern Reliability Link (SRL) Accelerated Recovery Mechanisms SAVEGREEN • SAFE II - Enables NJNG to completely • Most successful residential energy-efficiency • 30-mile high-pressure pipeline designed to remove unprotected steel main from the program in N.J. diversify natural
Slide 48: NJR Capital Plan
NJR Capital Plan* (Millions) FYTD 2021A FY2021E FY2022E Near Real Time Return? New Customer $24 $52 - $54 $56 - $59 Yes New Jersey Natural Gas Maintenance & Integrity $47 $92 - $95 $142 - $150 SAFE II/ NJ RISE $17 $28 - $32 - Yes IIP $1 $6 - $7 $10 - $11 Yes SRL $63 $100 - $110 - IT $1 $15 - $18 $58
Slide 49: NJR Projected Cash Flows
NJR Projected Cash Flows (Millions) FY2020A FY2021E FY2022E FY2023E & FY2024E Cash Flow from Operations $213 $320 - $340 $385 - $410 $915 - $965 Uses of Funds Capital Expenditures* $470 $639 - $698 $610 - $661 $1,055 - $1,166 Acquisition - S&T Assets $534 Dividends $118 $127 - $132 $135 - $140 $308
Slide 50: Impact of Change in Accounting Policy for ITCs
Impact of Change in Accounting Policy for ITCs Deferral Method Results in More Stable, Predictable NFE Deferral Method Deferral Method Accounting will Reduce Annual and Flow-through Preferred Tax Equity Under Method methodology Any Method Quarterly NFE Volatility Millions Immediate ITC amortized ITC
Slide 51: NJR CEV – SREC Hedging by Fiscal Year
NJR CEV – SREC Hedging by Fiscal Year As of April 21, 2021 Percent Hedged Average Price Current Price (FY) FY 2022 396 6 99% $202 $228 Percent Hedged Average Price Current Price (FY) FY 2023 386 13 97% $201 $213 Percent Hedged Average Price Current Price (FY) FY 2024 314 84 79% $193 $197 Percent Hed
Slide 52: Liquidity and Term Debt Maturity Schedule
Liquidity and Term Debt Maturity Schedule • Manageable debt Term Debt Maturity Schedule Available Liquidity as of September 30, 2020, Millions1 as of September 30, 2020, Millions repayment $1,089 $1,089 schedule with no $170 $117 significant maturity $47 towers in any $150 $150 particular year $250
Slide 53: Second Quarter NFE by Business Unit
Second Quarter NFE by Business Unit (Thousands) Three Months Ended March 31 Six Months Ended March 31 2021 2020 Change 2021 2020 Change New Jersey Natural Gas $80,541 $86,336 ($5,795) $130,008 $130,192 (184) Clean Energy Ventures (8,872) (8,829) (43) (19,146) (17,008) (2,138) Storage and Transportat
Slide 54: Reconciliation of NFE and NFEPS to Net Income for Fiscal 2Q21
Reconciliation of NFE and NFEPS to Net Income for Fiscal 2Q21 Net Financial Earnings, Fiscal 2Q21 • NFE is a measure of earnings (Millions) based on eliminating timing Net Income $149.8 differences surrounding the Add Back recognition of certain gains and Unrealized gain on derivative instruments an
Slide 55: Reconciliation of S&T’s Adjusted EBITDA to Net Income for FY2020
Reconciliation of S&T’s Adjusted EBITDA to Net Income for FY2020 S&T Adjusted EBITDA, FY2020 • Adjusted EBITDA is earnings, (Millions) including equity in earnings of S&T's Net Income (GAAP) $18.3 affiliates, before interest, income taxes, depreciation and Add Back amortization, and Other Income, In
Slide 56: Reconciliation of Energy Services Financial Margin to Operating Income for FY2020
Reconciliation of Energy Services Financial Margin to Operating Income for FY2020 Energy Services Financial Margin, FY2020 (Millions) Energy Services Operating (Loss) Income (GAAP) ($11.7) Add Back Operation and maintenance $17.4 Depreciation and amortization $0.2 Unrealized (gain) loss on derivativ
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