Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — Investor Day (November 2020)
112 slides from Newjersey Resources's investor day presentation, Nov 30, 2020
Slide 1: 2020 Analyst Days
CONFIDENTIAL DRAFT 2020 Analyst Days NOVEMBER 30, 2020
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 Building Tomorrow’s Energy Future 5 Storage and Transportation Steve Westhoven | President & CEO John Bremner | VP, Storage & Transportation 2 Sustainability 6 Energy Services Amy Cradic | SVP and COO of Non-Utility Tim Shea | VP, Energy Services Businesses, Strategy and External Affairs 3
Slide 4: Building Tomorrow's Energy Future
Building Tomorrow’s Energy Future Steve Westhoven President & CEO 4
Slide 5: Well-Positioned for Significant Value Creation
Well-Positioned for Significant Value Creation Implementing Strategic Plan to Drive Continued, Organic Growth Across Portfolio 6-10% 6-10% ~20% LONG-TERM LONG-TERM ANNUAL CFFO GROWTH NFEPS GROWTH ANNUAL DIVIDEND GROWTH PER SHARE FY2020-FY2024 (AFTER FY2021) $2.6B ~11% RATE BASE CAGR PLANNED CAPEX FY
Slide 6: Fiscal 2020 Summary
Financial Review Fiscal 2020 Summary NJR reported NFEPS of $2.07*, EPS of S&T completed its acquisitions of the $2.05 for FY2020 and increased the Leaf River Energy Center and the annual dividend by 6.4% Adelphia Gateway project during the fiscal year and those assets contributed to earnings in line
Slide 7: NJR is a premier energy infrastructure company
NJR is a $2.07 357 premier energy Total megawatts of NFE per share in fiscal 2020 commercial and residential solar capacity infrastructure 25 53% company. Reduction in NJR Years of consecutive operational emissions dividend increases since 2006 New Jersey Natural Gas $200M 1.5% Total amount invested
Slide 8: Complementary Energy Infrastructure Platform with Predictable Earnings and Incremental Growth Opportunities
Complementary Energy Infrastructure Platform with Predictable Earnings and Incremental Growth Opportunities Retail Operations Wholesale Energy Markets and Customers Natural Gas Operations Distribution & Transportation Infrastructure New Jersey Clean Energy Storage & Energy Home Natural Gas Ventures
Slide 9: Fundamental Beliefs That Guide Our Strategy
Fundamental Energy markets, the Natural gas will continue Beliefs That U.S. and N.J. are shifting towards low carbon to perform a vital role in supplying reliable energy, Guide Our and renewables supporting economic growth and specifically in-home heating Strategy Existing infrastructure Solar power
Slide 10: Strategic Path Forward: A Focused and Disciplined Plan for Value Creation
Strategic Path Forward: A Focused and Disciplined Plan for Value Creation More Predictable and Invest in the Clean Grow Core Businesses Stable Earnings Energy Future • NJNG and CEV are NJR’s core • S&T and Energy Services focused • NJR’s long-term value focused on growth drivers on stable fee-based
Slide 11: NJNG and CEV Core Value Drivers
NJNG and CEV Core Value Drivers FY2024 and Long-Term Net Financial Earnings NJNG and CEV Composition make up ~90% 20%-25% CEV of NJR’s total 60%-70% business mix New Jersey 0%-5% ES Natural Gas 8%-12% S&T 0%-2% HS & Other 11
Slide 12: Increasing Sustainability and Growth Investments
Increasing Sustainability and Growth Investments FY2021-FY2024 CapEx of $2.6 Billion ~50% $248 of NJR’s total CapEx over the next 4 years allocated to sustainability investments $1,324 $2.6B $1,304 $840 $2.6B $1,540 Sustainability¹ Traditional NJNG CEV Storage & Transportation 1. Sustainability inve
Slide 13: Committed to Sustainable Business Operations & a Clean Energy Future
Committed to Sustainable Business Operations & a Clean Energy Future Operating a safe, reliable, regulated Educating customers Strengthening natural gas business Funding clean, Promoting a culture of about the emissions relationships with our with world-class renewable energy safety, well-being and
Slide 14: Proven and Experienced Team Focused on Execution & Value Creation
Proven and Experienced Steve Westhoven Amy Cradic Pat Migliaccio President & SVP & COO of SVP & Chief Executive Officer Non-Utility Business, Chief Financial Officer Team Focused New Jersey Resources Strategy & External Affairs on Execution & Value Creation Mark Kahrer Tim Shea Mark Valori John Brem
Slide 15: Sustainability
Sustainability Amy Cradic SVP and COO of Non-Utility Businesses, Strategy and External Affairs 15
Slide 16: Building Toward the Broader Clean Energy Shift
Building Toward the Broader Clean Energy Shift NJR has a strong track 1st utility in nation to purchase ~$850M of Methane Leak Reduction forecasted investment in solar TrustWell™ responsibly sourced Lowest number of leaks-per-mile record of natural gas market, with unlevered returns in the high sing
Slide 17: NJR's Sustainability Vision – Fundamental Beliefs
Fundamental Beliefs Energy markets, the Natural gas will continue Existing infrastructure Solar power is core U.S. and N.J. are shifting to play a vital role in will become more to public policy and cost towards low carbon and supplying reliable energy valuable as new will continue to NJR’s renewabl
Slide 18: Innovation Will Continue to Play a Critical Role in Clean Energy Trends
Innovation Will Continue to Play a Critical Role in Clean Energy Trends Over the Long-Term EIA Base Case is for Continued Growth for Natural Gas in U.S. U.S. Natural Gas Consumption by Sector1 Natural gas demand will continue to steadily increase and displace coal trillion cubic feet billion cubic f
Slide 19: New Jersey's Clean Energy Policy Landscape
New Jersey’s Clean Energy Policy Landscape The Energy Master Plan NJR Has Clear Opportunities to Capitalize on (EMP) establishes priorities Key EMP Goals – And Has Already Achieved for the use, management Significant Progress and development of energy in New Jersey Maximize energy efficiency and SAV
Slide 20: NJR is Well-Positioned to Capitalize on New Jersey's Decarbonization Goals
NJR is Well-Positioned to Capitalize on New Jersey’s Decarbonization Goals Comparative Costs of Modeled Pathways to Meet Emissions Goals Leveraging existing natural gas utility Billions (2017) infrastructure to distribute alternative $235 fuel solutions (i.e. RNG, hydrogen) and $35 broad energy effi
Slide 21: NJR's Natural Gas Infrastructure Can Help Drive Energy Affordability and Better Environmental Outcomes
NJR’s Natural Gas Infrastructure Can Help Drive Energy Affordability and Better Environmental Outcomes 36.6% • CO2 emissions impacts are 2019 PJM 2.9% largely dependent on local Fuel Mix climate and makeup of the % Annual Energy 5.6% regional electrical grid 23.8% 0.1% Water 0.2% Waste 0.3% • Increa
Slide 22: Reliability Challenges of the Clean Energy Transition
Reliability Challenges of the Clean Energy Transition Midcontinent ISO North Polar Vortex Impact on Annual Distribution Outage Events Wind Output (2019) Per Customer Per Year2 1.107 0.01586 Electric Gas Loss of about 75% of wind generation Natural gas 70x more reliable than electric grid 1. Source:
Slide 23: Strong Track Record of Emissions Reduction
Strong Track Record of Emissions Reduction NJR’s Emissions Reduction NJNG Main Replacement and We have already Since 2006 Emissions Metric Tons of CO2e Miles of Main 50% Overall Reduction achieved significant 8,000 60,000 operational emissions Elimination of cast-iron main, bare steel services and m
Slide 24: Putting NJR's Commitment to Sustainability into Action
Putting NJR’s Commitment to Sustainability into Action NJR’s Emissions Reduction Strategies to 2030 Setting an ambitious new Potential for Additional 10% Reduction goal to reduce operational Transition NJR’s New Jersey fleet to low- and 5.0-5.5% emissions in New Jersey to no-emissions alternatives i
Slide 25: Well Positioned to Capitalize on the Large and Growing Hydrogen Market Opportunity
NJR is Well Positioned to Capitalize on the Large and Growing Hydrogen Market Opportunity Global Energy Demand Supplied with Potential impacts of H2 Hydrogen1, (EJs2) 77 by 2050: 9 Power generation, buffering 6Gt Annual CO2 abatement 22 Transportation $2.5tn 11 Building heating and power Annual sale
Slide 26: NJNG's Power-to-Gas Project
NJNG’s Power-to-Gas Project O2 H2 O2 H2 Surplus Power Creates Stored in Pipeline Renewable Electrolysis Renewable System for Later Use Electricity Hydrogen Gas Hydrogen has been safely injected into local distribution company pipeline systems in Europe SoCalGas and the University of California use e
Slide 27: Development of RNG Presents New Opportunities for NJR
Development of RNG Presents New Opportunities for NJR Technical potential of annual RNG RNG production in U.S. is almost Capture waste from dairies, farms and landfills 90% of total U.S. annual gas consumption today1 Convert into biogas using anaerobic digestion By 2050 N.J. could supply up to Proce
Slide 28: NJR is Taking Action to Ensure a Clean Energy Future
NJR is Taking Action to Ensure a Clean Energy Future Shift Toward Decarbonization …and NJR’s Natural Gas Infrastructure is will Continue to Accelerate… Part of the Solution • Demand for natural gas will continue to • Capture value through NJR’s strategically located natural increase gas storage and
Slide 29: Representing NJR's Sustainability Values in Everything We Do
Representing NJR’s Sustainability Values in Everything We Do Strengthening delivery Strategically investing Exploring new sources network to capitalize on in solar and other areas of clean fuel decarbonization transition aligned with N.J.’s policy landscape Reducing emissions Embracing Empowering em
Slide 30: New Jersey Natural Gas
New Jersey Natural Gas Mark Kahrer VP, Regulatory Affairs, Marketing & Energy Efficiency 30
Slide 31: New Jersey Natural Gas Strategic Value Proposition
Strategic Value Proposition New Jersey Natural Gas Strategic Attractive service Stabilized utility gross margin territory and growing profile due to negligible infrastructure customer base commodity and volume investments and exposure accelerated Constructive recovery regulatory framework Incrementa
Slide 32: 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 558k $1.9B Forecasted investments Total Customers Rate Base FY2021-FY2024 9.6% 9
Slide 33: 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 34: Robust New Construction and Conversion Markets Fuel Customer Growth
Robust New Construction and Conversion Markets Fuel Customer Growth FY2020 Customer Residential New Construction Heating Market Conversion Additions = 8,349 Potential = 63,910 Potential = 98,700 Total building permits1 Number of potential customers2 4,800 17,245 3,012 29,300 36,900 5,337 46,665 27,7
Slide 35: 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 $88 for home heating $2.30 $170 32% reduction in real $1.10 terms $115 October 2008 October 2020 NJNG Fuel Oil Propane E
Slide 36: J.D. Power Customer Satisfaction Ranking
J.D. POWER In 2020, a lot has changed – 2020 Gas Utility Residential being here for our customers Customer Satisfaction StudySM Overall Customer Satisfaction Index Ranking has not. East Region: Large Segment #1 Customer satisfaction with residential New Jersey Natural Gas UGI 761 784 natural gas ser
Slide 37: 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 38: 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 39: Supportive Regulatory Construct, Operational Efficiency and Investments Drive Utility Gross Margin
Supportive Regulatory Construct, Operational Efficiency and Investments Drive Utility Gross Margin and Customer Savings Utility Gross Margin BGSS Incentives Stability and Energy Off-System Sales, Capacity Release & Efficiency Storage Strong and Stable Utility CIP & SAVEGREEN Gross Margin Profile • E
Slide 40: 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, 2024 Rate Cost of Base Removal & Other Assets earning
Slide 41: 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 $40 earn an accelerated IIP recovery $469 Maintenance ~$1,540M $214 Cost of Removal/Other $43 IT $64 SRL $135 $300 RNG & Hydrogen 41
Slide 42: Infrastructure Investments
Infrastructure Investments Southern Reliability Link (SRL) Accelerated Recovery Mechanisms • SAFE II - Enables NJNG to completely remove • 30-mile high-pressure pipeline designed to diversify unprotected steel main from the system natural gas supply What • Delivery of 180,000 Dths/day What • NJ RISE
Slide 43: 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 filed its new $264 million program in compliance with the Clean Energy Act Conducts home energy audits and provides The process specifies programs expecte
Slide 44: Rate Case Filing Assumptions
Rate Case Filing Assumptions FY2020 FY2022 FY2024 Rate case returns are stable • Current ROE of 9.60% with an equity layer of 54% Key Project General Case SRL IT Infrastructure • Full recovery of plant investments to date Rate Base $1.8B1 $2.4B $3.0B Resolution of cases has been timely • Last case f
Slide 45: New Jersey Natural Gas Key Takeaways
~11% rate base CAGR through FY2024 Attractive service territory Key Takeaways Constructive regulatory framework New Jersey Stabilized utility gross margin profile Natural Gas Incremental return from natural gas supply optimization and energy efficiency investments Environmentally sound infrastructur
Slide 46: Clean Energy Ventures
Clean Energy Ventures Mark Valori VP, Clean Energy Ventures 46
Slide 47: Clean Energy Ventures Strategic Value Proposition
Strategic Value Proposition Clean Energy Ventures Investing ~$850 Expanding solar footprint Aligning investment with beyond New Jersey sustainability goals, million over 4 including N.J.’s energy years to capture master plan robust solar Optimizing solar portfolio opportunity, while and insourcing k
Slide 48: 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 49: Long Track Record of Investing in N.J. Solar Market
Long Track Record of Investing in N.J. Solar Market $989 NJR’s Solar Capacity in Service & Cumulative Investment $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 50: Outlook is Strong for the U.S. Solar Energy Industry
Outlook is Strong for the U.S. Solar Energy Industry Cumulative U.S. Solar Capacity1 Expect installation GW of >80 GW 180 154 of new solar 150 140 generation 125 capacity between 120 108 2020-2025 90 90 72 This is more than 59 the total solar 60 49 41 capacity installed 30 21 33 in the prior 10 6 11
Slide 51: Significant Investment in Solar Will Continue to Drive Growth Across NJR
Significant Investment in Solar Will Continue to Drive Growth Across NJR … Capital Investment (Millions) and Installed Capacity (MW) ~$850M $450 ~ 765-785 800 investment in $375 ~ 635-655 solar over the ~ 520-540 600 next 4 years $300 ~ 425-445 $252 $228 $27 $225 357 $201 $26 400 $165 $25 $139 $150
Slide 52: 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 53: Maintaining Project Returns Even After ITCs Reduce to 10%
…While Maintaining Project Returns Even After ITC’s Reduce to 10% ITC RATES Cost FY2021 FY2022 FY2023 FY2024 FY2025 improvements Statutory ITC rate 22% 10% 10% 10% 10% more than offset Expected Safe-Harbored ITC rate 26% 26% 22% 22% 10% ITC decline Impacts on Projects ROE Over Time Illustrative exam
Slide 54: Four Strategic Pillars to Accelerate Profitable Growth
Four Strategic Pillars to Accelerate Profitable Growth Advance partnerships and new business development outside 1 Expand Into Other Markets 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 55: Expand Into Other Markets
1 Expand Into Other Markets Invest in Commercial and Utility Scale Offerings in Attractive Markets Focused on Leveraging economies of scale, • Grid supply: landfills / brownfields expertise in asset management and • Larger net metered public policy • Community solar support • Operating projects Exis
Slide 56: Optimizing Existing Portfolio
2 Optimizing Existing Portfolio • Engineering and technical improvements to minimize electrical line losses and maximize production, including Physical repowering Optimization • Installation of battery storage to firm/increase capacity and participate in additional PJM markets Contractual • Wholesal
Slide 57: In-Sourcing to Reduce Reliance on Third Parties
2 In-Sourcing to Reduce Reliance on Third Parties DEVELOPMENT CAPITAL OWNER OPERATOR Design & Final Project Project Site Control Installation Permitting Engineering Closeout Operation CURRENT PARTICIPATION LEVEL CURRENT PARTICIPATION LEVEL CURRENT PARTICIPATION LEVEL LOW MEDIUM HIGH • Grow project p
Slide 58: Optimize and In-Source
2 Optimize and In-Source Expect Installed and Operating Cost per Watt to Decrease at an Annual Rate of 3%-4% Over Next 4 Years Commercial Installed Cost per Watt1 Commercial Operating Cost per Watt2 5.2% 8.5% ANNUAL REDUCTION THROUGH 2020 ANNUAL REDUCTION THROUGH 2020 ~4% ~3% ANNUALIZED ANNUALIZED R
Slide 59: Financing in the Form of Sale Lease-Backs Provides a Path for Increasing Solar Investments
3 Financing in the Form of Sale Lease-Backs Provides a Path for Increasing Solar Investments Use of tax equity financing accelerates cash Incremental solar investment Implementation of benefit of increases NJR’s tax credit Tax Equity Financing incremental solar carryforward balance ITCs and increase
Slide 60: Invest In & Adopt New Technologies
4 Invest In & Adopt New Technologies New Jersey Entering a period where state incentives and improved economics are expected to incentivize distributed load technologies (i.e. battery storage and EVs)1 is… New Jersey Building a comprehensive solar solution … Resources is… Solar Facility Solution …by
Slide 61: Clean Energy Ventures Key Takeaways
Significantly increasing investment in solar Expanding footprint beyond NJ Key Takeaways Clean Energy Optimizing and in-sourcing Ventures Aligning investment with public policy Prioritizing tax equity financing and maintaining current returns after ITCs reduce to 10% 61
Slide 62: Storage and Transportation
GRAPHICS: CAN WE CHANGE IMAGE TO ONE OF THE NJR SPECIFIC ONES VS. STOCK? Can pick any of the pipe ones you like best Storage and Transportation John Bremner VP, Storage & Transportation 62
Slide 63: Storage and Transportation Strategic Value Proposition
Strategic Value Proposition Storage and Transportation Generating stable Portfolio of low-risk Links flexible, reliable and fee-based revenue infrastructure investments that economic natural gas supply from diverse mix of capitalize on long-term role of with constrained physical high credit-quality
Slide 64: Attractive Portfolio With Incremental Growth Potential
Attractive Portfolio With Incremental Growth Potential SOUTH ZONE IN DEVELOPMENT NORTH ZONE FULLY OPERATIONAL FULLY OPERATIONAL UNDER Excluded from financial OPERATIONAL CONSTRUCTION projections Description • 32.2 mmdth high • 12.6 mmdth reservoir • 0.9 mmdth/d interstate pipeline • 1.1 mmdth/d inte
Slide 65: 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 66: Underpinned by Stable Customer Base with High Quality Credit Profiles
…Underpinned by Stable Customer Base with High Quality Credit Profiles… 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-Pay Variable Power Gen Pipeline 66
Slide 67: Producing Stable Fee-Based Revenue
…Producing Stable Fee-Based Revenue Contracted Revenue Forecast Top 10 Customers FY2020 Manageable FY2021 – FY2024 Years as a Credit % of Annual contract renewal Shipper Entity Customer Quality Revenue profile with average Southern Company LR 7.5 IG 24.6% remaining contract 19% 21% 28% 35% Atlanta G
Slide 68: Leaf River
Leaf River Premier Southeast Salt Cavern Storage Facility Southeast Natural Gas Flows & Gas Power Generation FY2020 revenue is Value Drivers Appalachian Supply 81% • Attractive supply access; connection to major Gulf and fee-based Southeast utility, power and LNG markets 90% • Flexible, reliable ser
Slide 69: Steckman Ridge
Steckman Ridge Storage Facility on Northeast Key Supply Corridor FY2020 revenue is Value Drivers 88% • Situated between Appalachian supply and fee-based Northeast demand centers • Flexible, market-based 85% storage services in of revenue with increasingly constrained investment-grade area of regiona
Slide 70: Adelphia Gateway
Adelphia Gateway Pipeline Serving Supply Constrained Southeast PA. and N.J. Markets PA. N.Y. FY2022 revenue Value Drivers expected to be 97% • Connecting Marcellus supply to growing, but capacity constrained, southern PA, DE and N.J. N.J. fee-based markets • Fully contracted with 97% take or pay rev
Slide 71: Adelphia Gateway South Zone Conversion and Expansion Project
Adelphia Gateway South Zone Conversion and Expansion Project Project Overview Project Status Project Facilities Scope Construct Martin’s Creek Booster • North zone operational at • FERC certificate and Partial Construct UGI Lateral & Interconnect Compression acquisition serving Talen Notice to Proce
Slide 72: PennEast
PennEast Pipeline from Northeast PA. to Central N.J. While excluded Value Drivers from financial • Connecting attractive Marcellus projections, NJR supply to growing but supply remains constrained, regional markets committed to • 86% contracted, long-term PennEast and commitments retains significant
Slide 73: Storage and Transportation Key Takeaways
Stable fee-based revenue from diverse mix of high credit-quality customers Portfolio of low-risk natural gas Key Takeaways infrastructure investments that are difficult to replicate Storage and Transportation Serving constrained physical end-use markets Attractive organic expansion opportunities 73
Slide 74: Energy Services
Energy Services Tim Shea VP, Energy Services 74
Slide 75: Energy Services Strategic Value Proposition
Strategic Value Proposition Energy Services Pursuing more Contract or acquire physical Disciplined execution based on fee-based assets in opportunistic proven track-record and risk locations management strategies transactions that would better ensure coverage of fixed costs Strong customer relations
Slide 76: Energy Services Overview
Energy Services Overview Managing a Diversified Portfolio of Physical Natural Gas Transportation and Storage Assets to Serve Customers Across North America Long Option Strategy Launched 25 years ago, Generates value Providing significant upside potential with limited making it one of the through a l
Slide 77: Market Fundamentals and Go-Forward Strategy
Market Fundamentals and Go-Forward Strategy CONSTRUCTIVE MARKET FUNDAMENTALS GO-FORWARD STRATEGY • Producers Structured fee-based deals • LDCs AMAs Low capital investment Lower natural • Power by producers gas production Peaking transactions generators • LNG Exporters Fuel management • Higher LNG ex
Slide 78: Peaking Option: Valuable Transportation Trading Strategy at Work
Peaking Option: Valuable Transportation Trading Strategy at Work The market need for these services is Northeast LDC needs LDC enters into a peaking Even after entering into increasing due to to secure natural gas option agreement with ES, the peaking option, ES Stabilized, supply to the city- who h
Slide 79: North American Footprint
North American Footprint Connectivity Adds Value to Portfolio Options Foothills Nova Significant NORTHERN STORAGE ASSETS Northeast and Northern Border • Columbia • Northern Gulf Coast Midwestern • Tetco SS1 • Steckman presence that MID CON STORAGE ASSETS Nexus Tetco Iroquois optimizes storage • Mich
Slide 80: 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 81: Energy Services Key Takeaways
Connected assets in opportunistic locations Strong customer relationships Key Takeaways Energy Proven track-record and risk management strategies Services Pursuing higher fee-based earnings Long option strategy provides significant upside potential with limited downside risk 81
Slide 82: Financial Review
Financial Review Pat Migliaccio SVP & Chief Financial Officer 82
Slide 83: Financial Priorities to Drive Organic Growth and Value Creation
Financial Priorities to Drive Organic Growth and Value Creation Balance Maintain Focus on Emphasis on investment in NJNG’s solid Target strong highest growth CFFO to drive business & investment NJR capital opportunities – growth and fuel returning capital grade credit structure NJNG & CEV dividend t
Slide 84: Review of FY2020 NFE Changes
Review of FY2020 NFE Changes FY2019 – Consolidated NFE (millions) $175.0 Millions NJNG $48.8 Utility Gross Margin $67.7 $3.6 $24.5 Increase in D&A ($13.9) $48.8 Increase in Income Taxes ($17.6) $10.8 O&M and Other $12.6 $4.1 $196.2 Storage & Transportation $3.6 $175.0 Operating Income from Leaf Rive
Slide 85: Net Financial Earnings per Share Reset in Fiscal 2021
Net Financial Earnings per Share Reset in Fiscal 2021 FY2021 is a reset year with ($0.08)- ($0.12)- a significant decrease in ($0.10) ($0.16) $1.55- ($0.05)- NFE mainly driven by: ($0.07) $1.65 • Change in ITC accounting methodology ($0.05)- $0.18- ($0.07) $0.20 • Impact of non-recurring expenses as
Slide 86: Key Business Drivers Overview
Key Business Drivers Overview NJNG Rate Base Growth NJR’s Solar Capacity in Service Billions Installed Capacity (MW) ~11% $2.99 ~20% 775 CAGR CAGR 644 529 $1.76 435 357 2019 Rate Base 2024 Rate Base FY2020A FY2021E FY2022E FY2023E FY2024E Storage &Transportation FY2020 Revenue by Fee Type Energy Ser
Slide 87: Attractive Long-Term NFEPS Growth
Attractive Long-Term NFEPS Growth Reset Year in FY2021 Followed by ~30% Growth in FY2022 and 6%-10% Annually Thereafter Net Financial Earnings per Share $2.07 $2.05 - $2.15 6%-10% $0.32 ~30% LONG-TERM ANNUAL GROWTH $1.55 - $1.65 $1.75 FY2020A FY2021E FY2022E NFEPS Pro forma impact of accounting chan
Slide 88: Committed to Maintaining and Growing Dividend Supported by Strong Cash Flow
Committed to Maintaining and Growing Dividend Supported by Strong Cash Flow from Operations Long-Term Annual Dividend Growth of 6%-10% Dividend per Share Cash Flow from Operations Millions ~20% $500.0 CAGR FY2020 – FY2024 $460-$480 6%-10% $1.41 - $1.46 $450.0 $400.0 LONG-TERM ANNUAL $340-$360 DIVIDE
Slide 89: Higher Quality of Payout Ratios
Higher Quality of Payout Ratios1 Dividend as Percentage of NFE Dividend as Percentage of CFFO Dividend payout ratio increases in FY2021 $300.0 160% $500.0 170% due to NFE reset and 140% $450.0 150% quickly normalizes to $250.0 $400.0 130% ~70% due to strong 120% $350.0 $200.0 110% NFE growth 100% $3
Slide 90: Segment Contributions
Segment Contributions NJNG Continues to Generate Majority of NFE Net Financial Earnings Per Share Net Financial Earnings Segment Contributions $2.07 $2.05-$2.15 FY 2022 and $0.06 FY2020 FY2021 Long-Term $0.19 $1.55-$1.65 6%-10% LONG-TERM NJNG 65% 65%-72% 60%-70% $0.56 ANNUAL GROWTH CEV 27% 15%-20% 2
Slide 91: Impact of Change in Accounting Policy for ITCs
Impact of Change in Accounting Policy for ITCs Deferral Method Results in More Stable, Predictable NFE Flow-through Deferral Method Tax Equity Under Deferral Method Accounting will Reduce Annual and Preferred Method methodology Any Method Quarterly NFE Volatility Millions Immediate ITC amortized ITC
Slide 92: Maintaining Efficient Monetization of ITCs through Tax Equity Financing
Maintaining Efficient Monetization of ITCs through Tax Equity Financing Prioritizing Tax Equity Financing in the Form of Sale Lease-Backs Provides a Path for Increasing Solar Investment Tax Credit Carryforward Cash Benefit of ITCs ITC Carryforward, Millions Balance Sheet Financing 2021 NJR switches
Slide 93: Strong Balance Sheet Provides Financial Flexibility
Strong Balance Sheet Provides Financial Flexibility NJNG to Maintain Strong Investment Grade Ratings; NJR Improving Investment Grade Profile with No Block Equity Needs in the Foreseeable Future Current Credit Ratings Adjusted FFO/ Adjusted Debt1 ~18.5% NJNG NJR ~16.0% (Secured (Unsecured Rating) Rat
Slide 94: 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 significant maturity $170 $117 $47 towers in any $150 $150 particular year $250
Slide 95: Sources & Uses of Funds Forecast
Sources & Uses of Funds Forecast More than Half of Funding Needs Generated from Internally Generated Cash Flows FY2021- FY2024 Sources ~$3.0B Uses ~$3.0B ~47% ~19% ~81% Dividend ~3% ~50% Financing Cash on Hand Activities Capital Cash Flow from Expenditures Operations 95
Slide 96: Well-Positioned for Significant Value Creation
Well-Positioned for Significant Value Creation Implementing Strategic Plan to Drive Continued, Organic Growth Across Portfolio 6-10% 6-10% ~20% LONG-TERM LONG-TERM ANNUAL CFFO GROWTH NFEPS GROWTH ANNUAL DIVIDEND GROWTH PER SHARE FY2020-FY2024 (AFTER FY2021) $2.6B ~11% RATE BASE CAGR PLANNED CAPEX FY
Slide 97: Closing
Closing Steve Westhoven President & CEO 97
Slide 98: 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 6-10% 6-10% and CEV Long-Term NFEPS Long-Term Annual Growth after Dividend Grow
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Slide 100: Appendix
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Slide 101: Reconciliation of NFE and NFEPS to Net Income for FY2020
Reconciliation of NFE and NFEPS to Net Income for FY2020 Net Financial Earnings, FY2020 • NFE is a measure of earnings (Millions) based on eliminating timing Net Income $193.9 differences surrounding the Add Back recognition of certain gains and Unrealized loss (gain) on derivative instruments and r
Slide 102: 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 103: Reconciliation of Adjusted Funds from Operations to Cash Flow from Operations
Reconciliation of Adjusted Funds from Operations to Cash Flow from Operations for FY2020 Adjusted Funds from Operations, Adjusted Debt, FY2020 • Adjusted funds from operations is cash FY2020 (Millions) (Millions) flows from operating activities, plus components of working capital, cash paid Cash Flo
Slide 104: Fourth Quarter and Fiscal 2020 NFE by Business Unit
Fourth Quarter and Fiscal 2020 NFE by Business Unit (Thousands) Three Months Ended September 30 Twelve Months Ended September 30 2020 2019 Change 2020 2019 Change New Jersey Natural Gas ($15,258) ($18,402) $3,144 $126,902 $78,062 $48,840 Clean Energy Ventures 55,840 52,676 3,164 53,023 77,473 (24,45
Slide 105: Key Business Assumptions
Key Business Assumptions 6%-10% Annual NFEPS Growth From FY2022-FY2024 FISCAL 2021 NJNG FISCAL 2022 • SRL in-service • SRL rate case filed1 NJNG FISCAL 2023 • Customer Growth • New base rates (SRL) • IIP approved • Customer Growth NJNG FISCAL 2024 • IT rate case filed2 CEV CEV • Customer Growth NJNG
Slide 106: NJR Capital Plan
NJR Capital Plan (Millions) FY2021 FY2022 FY2023 & FY2024 Near Real Time Return? New Customer $52 - $54 $56 - $59 $98 - $109 Yes New Jersey Natural Gas Maintenance & Integrity $92 - $95 $142 - $150 $218 - $241 SAFE II/ NJ RISE $36 - $38 $3 - $3 Yes IIP $6 - $7 $10 - $11 $82 - $90 Yes SRL $63 - $66 I
Slide 107: NJR Projected Cash Flows
NJR Projected Cash Flows (Millions) FY2020 FY2021 FY2022 FY2023 & FY2024 Cash Flow from Operations $213 $300 - $320 $340 - $360 $830 - $870 Uses of Funds Capital Expenditures1 $470 $761 - $792 $555 - $589 $1,055 - $1,166 Acquisition - S&T Assets $524 Dividends $118 $127 - $132 $135 - $140 $308 - $31
Slide 108: 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 109: Environmental, Social and Governance Efforts are Key Priorities
Environmental, Social and Governance Efforts are Key Priorities Environmental Social Governance Reduce operational emissions Continually adopt and promote best Promote strong corporate • Achieved our goal of reducing New Jersey operational practices in human capital management governance practices e
Slide 110: Additional Quarterly Financial Drivers
Additional Quarterly Financial Drivers FY2021E NJNG Utility Gross Margin FY2021E REC Revenue 1% 1% 13% 12% 29% Q1 Q2 18% Q3 Q4 86% 40% 110
Slide 111: NJR CEV – SREC Hedging Strategy Stabilizes Revenue
NJR CEV – SREC Hedging Strategy Stabilizes Revenue As of November 18, 2020 Energy Year 2022 Energy Year 2023 Energy Year 2024 28 158 309 86 239 371 Hedged Unhedged Hedged Unhedged Hedged Unhedged Percent Hedged Average Price Current Price (EY) Percent Hedged Average Price Current Price (EY) Percent
Slide 112: Certain Acronyms Used
Certain Acronyms Used AFUDC Allowance for Funds Used During Construction NJR New Jersey Resources Corporation ERP Enterprise Resource Planning AG Adelphia Gateway NJRCEV NJR Clean Energy Ventures Corporation ESG Environmental, Social, Governance AMA Asset Management Agreement EV Electric Vehicle NJR