Slide 1: Second Quarter Fiscal 2018 Update
Second Quarter Fiscal 2018 Update May 4, 2018
Slide 2: Forward-Looking Statements
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 Litigation Reform Act of 1995. NJR cautions readers
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation includes the non-GAAP measures, NFE and utility gross margin. As an indicator of the Company’s operating performance, these measures should not be considered an alternative to, or more meaningful than, GAAP measures, such as cash flow, net income, operat
Slide 4: Second Quarter Highlights
Second Quarter Highlights • Reported net financial earnings (NFE) of $142.1 million, or $1.62 per share compared with $104.1 million, or $1.21 per share in the second quarter of fiscal 2017 • Energy Services contributed $72.8 million in NFE this quarter, compared to $15.7 million in NFE in the secon
Slide 5: Reaffirmed Guidance Range of $2.55 - $2.65
Reaffirmed Guidance Range of $2.55 - $2.65 Projected Sources of Fiscal 2018 NFE Tax Reform* New Jersey 20-25% Natural Gas 35-45% NJR Clean Energy Ventures 5-10% NJR Home Services/ Other 1-3% NJR Midstream NJR Energy 5-10% Services 20-30% * Represents the impact of tax reform on FY2018 NFE 4
Slide 6: Dividend Strategy Supported by NFE Growth
Dividend Strategy Supported by NFE Growth • 6.9 percent increase to current $1.09 annual rate approved on September 12, 2017 • 24th dividend increase in last 22 years • Payout ratio target of 60 to 65 percent Dividends and Payout $1.20 70% $1.09* 60% $1.00 $1.02 $0.96 50% $0.80 $0.86 $0.92 $0.81 Pay
Slide 7: Strong NJNG Customer Growth
Strong NJNG Customer Growth New Customer Additions FYTD 2018A 10,000 • 4,656 new customers added 9,126* 9,000 • 3,224 new construction 9,000 • 1,432 conversions 8,000 New Customer Additions Forecast 7,000 6,000 Customers 5,000 4,656 4,130 4,000 35% 3,000 2,000 65% 1,000 0 FYTD 2017A FYTD 2018A FY201
Slide 8: NJNG Infrastructure Investment Programs
NJNG Infrastructure Investment Programs Safety Acceleration and Facilities Enhancement Program II (SAFE II) New Jersey Reinvestment in System Enhancement (NJ RISE) 600 552** 552 552 552 552 552 500 503 455 400 400 345 300 276* 200 100 0 2016A 2017A 2018E 2019E 2020E 2021E Miles Replaced Amount in Sy
Slide 9: Wind Asset Sales
Wind Asset Sales • On March 2, 2018, CEV entered into an agreement to sell its interest in the Two Dot Wind Farm for $18.5 million – Awaiting FERC approval – Expect pre-tax gain of approximately $1 million • CEV has committed to a plan to pursue the sale of its remaining wind assets – Currently enga
Slide 10: SREC Hedging Strategy Stabilizes Income
SREC Hedging Strategy Stabilizes Income 350 300 280 284 284 250 227 Thousands of SRECs 200 150 230 100 213 189 50 75 0 EY18 EY19 EY20 EY21 Hedged Unhedged Operational and Under Construction Pct. Hedged: 94% 82% 67% 26% Average Price: $222 $190 $186 $187 Current Price (FY): $232 $230 $208 $179 As of
Slide 11: Changes in Net Financial Earnings
Changes in Net Financial Earnings* Three Months Ended March 31, 2018 $150.0 $57.0 $142.1 -$2.9 $125.0 $104.1 $0.2 Millions $100.0 Higher Utility Gross Margin, Net of -$3.7 $75.0 Taxes, Offset by Lower Due to -$12.6 Higher O&M Increased Market AFUDC Catch-Up Expense Fewer Tax Credits Opportunities Du
Slide 12: Recent Updates Impacting Timing of Earnings
Recent Updates Impacting Timing of Earnings FY 2019 and FY2018 NFE Event Impact to: beyond NFE Impact Impact PennEast Project NJR Midstream AFUDC Schedule Update SRL Project Schedule AFUDC Update Lower Tax Rate Tax Reform SREC Revenues Recognition of ITCs 11
Slide 13: NJR Capital Plan
NJR Capital Plan FYTD 2018A 2018E 2019E 2020E 2021E ($MM) New Customer $21.4 $38.5 $40.0 $41.0 $42.0 Maintenance 20.9 108.1 56.9 84.4 87.6 Cost of Removal/Other 17.8 57.1 46.9 35.4 35.4 SAFE II 16.5 35.9 39.1 38.0 44.0 NJ RISE 5.5 28.2 24.8 0.0 0.0 SRL 1.8 4.8 176.5 0.0 0.0 Total NJNG $83.9 $272.6 $
Slide 14: NJR Sources and Uses of Capital
NJR Sources and Uses of Capital 2018E 2019E 2020E $1,000 $900 $800 $700 Millions $600 $500 $400 $300 $200 $100 $0 Sources Uses Sources Uses Sources Uses LT Debt/Asset Sales Equity CFFO Capex Dividends Capital Plan Supports Infrastructure Investments, While Maintaining Strong Balance Sheet 13
Slide 15: u IN
© OCUSED u IN
Slide 16: Appendix
New Jersey \\ Resources FOCUSED ON THE ENERGY FUTURE Appendix
Slide 17: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures A reconciliation of NFE for the three and six months ended March 31, 2018 and 2017 to net income is provided below: 16
Slide 18: Fiscal 2018 Second Quarter and Year-to-Date NFE
Fiscal 2018 Second Quarter and Year-to-Date NFE Three Months Ended Six Months Ended Net Financial Earnings ($MM) March 31, March 31, Company 2018 2017 Variance 2018 2017 Variance New Jersey Natural Gas $60.4 $60.2 $0.2 $94.6 $90.6 $4.0 NJR Midstream 1.3 5.0 (3.7) 18.8 7.3 11.5 Subtotal $61.7 $65.2 (
Slide 19: New BPU Regulations for Infrastructure Programs
New BPU Regulations for Infrastructure Programs • Voluntary program approved in December 2017 • Allows accelerated recovery of infrastructure investments for safety, reliability and resiliency • New Infrastructure Investment Programs (IIPs) can be up to 5 years • BPU will establish a baseline for ca
Slide 20: Factors Supporting Future Customer Growth
Factors Supporting Future Customer Growth New Construction Conversions 2017 Building Permits Issued1 Equivalent Customer Cost2 7,000 $4.50 $4.17 $4.10 6,000 5,747 $4.00 $3.50 5,000 $3.00 4,000 $2.30 $2.50 3,147 3,000 $2.00 $1.50 2,000 1,560 $0.95 1,010 $1.00 1,000 $0.50 0 $0.00 NJNG Monmouth Ocean M
Slide 21: SREC Hedging Strategy Stabilizes Income
SREC Hedging Strategy Stabilizes Income Hedged Unhedged Operational and Under Construction 350 300 285 285 245 Thousands of SRECs 250 200 150 100 213 208 189 50 0 FY18 FY19 FY20 Pct. Hedged: 87% 73% 67% Average Price: $217 $189 $186 Current Price (FY): $231 $223 $198 As of March 31, 2018; Source: In
Slide 22: NJR Projected Cash Flows
NJR Projected Cash Flows ($MM) 2018E 2019E 2020E Cash Flow From Operations $347.3 $301.9 $308.4 Uses of Funds Capital Expenditures – NJNG/Other ($272.6) ($384.2) ($198.8) Capital Expenditures – PennEast (18.9) (44.4) (168.7) Capital Expenditures – CEV (137.3) (135.6) (104.0) Capital Expenditures - A