Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — New York Financial Community Meetings 2010
38 slides from Newjersey Resources's conference presentation, Apr 27, 2010
Slide 1: New York Financial Community Meetings April 27, 2010
New York Financial Community Meetings April 27, 2010
Slide 2: Regarding Forward-Looking Statements
Regarding Forward-Looking Statements Certain statements contained in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also be identified by the use of forward-looking terminology such as "may,"
Slide 3: Disclaimer Regarding Non-GAAP Financial Measures
Disclaimer Regarding Non-GAAP Financial Measures This presentation includes the non-GAAP measures net financial earnings (losses) 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
Slide 4: Current Business Landscape
Current Business Landscape Falling Natural Gas Costs Abundant supplies; more liquefied natural gas (LNG) Lower prices benefit customers Economy Stabilizing Inflation not a current risk Short-term interest rates remain relatively low Housing Market Improving Housing inventories declining; may spur ne
Slide 5: Consistent Performance
Consistent Performance New Jersey Resources is a company with ... 18 consecutive years of improved financial performance; an industry record A five-year average annual return of 8.1 percent An three-year average dividend growth rate exceeds 10 percent A strong financial profile (S+P: A, Moody's: Aa3
Slide 6: NJR's Business Model
NJR's Business Model Steady customer growth Constructive regulatory environment Rate base growth opportunities BGSS incentive Programs SAVEGREEN Programs Natural Gas Distribution Clean Energy and Retail Services Residential Solar Programs Commercial solar projects and ground mount solar farms Reside
Slide 7: Consistent Financial Performance
2005 2006 2007 2008 2009 2010E 2008 2009 1.85 1.88 2.11 2.24 2.4 2.5 0.77 0.66 Consistent Financial Performance * Based on midpoint of NFE guidance September 30 NJR estimates net financial earnings of $2.45 to $2.55 per basic share in fiscal 2010 CAGR: 6.2% December 31
Slide 8: Comparative Forecasted Earnings Growth Rates
Comparative Forecasted Earnings Growth Rates Peer average growth rate based on reported company earnings for fiscal years 2004, 2008 and consensus expectations for 2009
Slide 9: 2010 Earnings Guidance
2010 Earnings Guidance How? NJNG Accelerated Infrastructure Program BGSS incentive programs Customer growth - strong conversion markets Lower interest rates/Bad debt expense Midstream Assets Steckman Ridge and Iroquois NJRES Results affected by lower volatility NJR estimates net financial earnings o
Slide 10: Dividend Growth
2005 2006 2007 2008 2009 2010 0.907 0.96 1.013 1.12 1.24 1.36 Average three-year growth rate exceeds 10 percent Dividend Growth * Effective January 4, 2010
Slide 11: Comparative Dividend Growth Rates
Comparative Dividend Growth Rates NJR Peer Average 1 Year 0.077 0.035 NJR Peer Average 1 Year 0.097 0.032 Growth rate based on indicated rates for period ended September 30, 2009
Slide 12: Payout Ratio
Payout Ratio 2003 2004 2005 2006 2007 2008 2009 East 0.51 0.5 0.49 0.51 0.48 0.5 0.52 Relatively low payout ratio provides continued dividend growth opportunities Based on Net Financial Earnings
Slide 13: Comparative Payout Ratios
NJR Peer Average 1 Year 0.5 0.6 Peer average payout ratios based on indicated dividend rates and consensus earnings estimates for 2010 and actual dividend paid and reported earnings for 2005 through 2009. Comparative Payout Ratios
Slide 14: Strong Financial Profile
Equity 722.9 LT Debt 438.4 ST Debt 228 Strong Financial Profile Equity 602.6 LT Debt 388.4 ST Debt 87.5
Slide 15: NJR's Business Model: Focused Business Model
NJR's Business Model Focused Business Model Steady customer growth Constructive regulatory environment Rate base growth opportunities BGSS incentive Programs SAVEGREEN Programs Natural Gas Distribution Disciplined Capital Allocation Strong Financial Profile Consistent Earnings & Dividend Growth Focu
Slide 16: Steady Customer Growth
487,000 retail customers $953 million of rate base 100 percent residential & commercial customers Favorable demographics to support customer growth Close proximity to New York City/Philadelphia Steady Customer Growth Steady Customer Growth NYC Phila. Atlantic City
Slide 17: New Conversions
New Conversions 1250 1241 2,491 new customers in the first six months of fiscal 2010 284 additional existing customer heat conversions New customers and existing customer conversions will contribute approximately $1.3 million of new NJNG gross margin annually Estimate 12,000 to 14,000 new customers
Slide 18: Fuel Price Comparison
NJNG Fuel Oil Propane Electricity 1.32 2.36 3.91 4.98 NJNG enjoys a distinct price advantage in its service area Fuel Price Comparison Data as of January 2010. Based on 100,000 comparable BTUs
Slide 19: Future Growth Potential
2009-2013 9975 2013-Buildout 85741 2014-Build Out Non Heat 8326 On Main 39881 Off main 56162 Near Main 29750 New Customers = 95,716 Non-heat customers Non-gas off main Non-gas on main Conversions = 134,119 Sources: Arthur D. Little and Harte Hanks 2009-2013 Near main Future Growth Potential
Slide 20: Constructive Regulatory Relationships
Conservation Incentive Program extended Protects NJNG from variations in weather and usage 2008 rate case settlement Return on equity set at 10.3 percent Incentive programs Add 1 to 2 percent to ROE Accelerated Infrastructure Program (AIP) SAVEGREEN Project Constructive Regulatory Relationships
Slide 21: Conservation Incentive Program
Conservation Incentive Program Extended by the BPU in January In place through September 30, 2013 Encourages customer conservation Protects NJNG gross margin from: Declining usage Weather Has saved over $135 million for customers since inception
Slide 22: BGSS Incentives
Off-system sales and capacity release In place since 1992 Optimization of capacity contracts Sharing formula of 85 percent customer; 15 percent NJNG Storage Incentive (SI) In place since 2004 Promotes long-term price stability Promotes cost efficiencies Sharing formula of 80 percent customer; 20 per
Slide 23: Accelerated Infrastructure Program (AIP)
Accelerated Infrastructure Program (AIP) Approved by BPU on April 16, 2009 Investment of up to $70.8 million on infrastructure projects $3.5 million spent in FY2009 $44 million to be spent in FY2010 Creates or sustains up to 100 new jobs Rate recovery of program spending annually at WACC of 7.76 per
Slide 24: Objectives of the SAVEGREEN Filing
Objectives of the SAVEGREEN Filing Expansion of current SAVEGREEN Project Expands current energy-efficiency programs Supports economic development and job growth Offers residential customers a competitively priced leased solar product Proposed $102 million total expenditures Recovery through existin
Slide 25: SAVEGREEN Filing - Solar Program Economics
SAVEGREEN Filing - Solar Program Economics Solar program Leased residential systems (15-year term) 10-year recovery period Value creation from three distinct revenue sources: Lease payments Investment Tax Credits SRECs Alliance model using third-party contractors for solar installations Mitigates en
Slide 26: NJR's Business Model: Clean Energy and Retail Services
NJR's Business Model Disciplined Capital Allocation Strong Financial Profile Consistent Earnings & Dividend Growth Focused Business Model Residential Solar Programs Commercial solar projects and ground mount solar farms Residential and commercial service contracts, installations and repair services
Slide 27: Clean Energy Strategy/Market Landscape
Clean Energy Strategy/Market Landscape Supports Federal and State initiatives to reduce greenhouse gas emissions Supports economic development value Job creation Reduced energy costs for businesses Business growth Provides the potential for long-term earnings growth Focus on moderately sized commerc
Slide 28: Attractive Economics
Attractive Economics Three sources of cash flows Investment Tax Credits (ITC) Energy sales SRECs Tax credits reduce capital at risk 30 percent ITC in place through 2016 Premium SREC value in NJ Closed trading within NJ borders Higher trading prices than neighboring state programs Established Solar A
Slide 29: NJRHS Residential Solar Program
NJRHS Residential Solar Program A solar lease program targeting up to 130 homes with no upfront cost to homeowner Investment of up to $4 million Return on Investment will come from four sources: SRECs Investment Tax Credits Available NJ Clean Energy Rebates Homeowner's lease payments Earnings impact
Slide 30: NJR's Business Model: Wholesale Energy Services
NJR's Business Model Disciplined Capital Allocation Strong Financial Profile Consistent Earnings & Dividend Growth Focused Business Model Physical natural gas marketer Producer services Manage storage and transportation assets Synergistic midstream investment opportunities Wholesale Energy Services
Slide 31: How NJRES Makes Money
How NJRES Makes Money Contract with wholesale customers to deliver natural gas, together with reliable products and services Optimize transportation and storage capacity Manage other companies' assets Manage hedged positions Monetize volatility
Slide 32: NJRES Business Model Issues
NJRES Business Model Issues Value of capacity and transportation has been affected by changing markets and additional supplies Resulted in lower margins Strategy of no-speculation has proven correct Disciplined risk management Greater focus on Producer Services Storage remains a strategic focus
Slide 33: Producer Services
Producer Services Producer Services encompasses two distinct efforts Service Based New gas resource plays have created a growing need for small to mid-sized exploration and production companies to retain outside marketing services to ensure flow assurance Term gas supply purchase Management of pipel
Slide 34: Margin Opportunities from Producer Services
Embedded demand fees Discounted commodity pricing Purchase natural gas from producers at a discounted price in areas where NJRES has capacity Asset management of producer capacity Managing and optimizing transportation capacity on a daily basis Fees and compensation for producer services Fixed fee f
Slide 35: Midstream Investments: Steckman Ridge
Up to 12 Bcf storage facility in southwestern Pennsylvania $122 million investment; 50/50 Joint Venture with Spectra Energy Contributed $1.3 million to first quarter NFE Steckman Ridge is expected to provide 2 to 6 percent of 2010 NFE Midstream Investments: Steckman Ridge
Slide 36: Midstream Investments: Iroquois Pipeline
411-mile pipeline system running from the Canadian border at Waddington, NY to Long Island & NYC 78,100 HP of compression 1.2 Bcf/d of peak deliverability Commenced operations in 1991 Commenced operations in 1991 Commenced operations in 1991 Commenced operations in 1991 Commenced operations in 1991
Slide 37: A Record of Consistent Performance
We have: The fundamentals in place to increase NFE Customer growth AIP and SAVEGREEN Steckman Ridge NJR Energy Services Clean Energy Programs The ability to increase dividends A strong financial profile A collaborative relationship with regulators A track record of growth and consistent results A Re
Slide 38: New
New Investor Presentation April 27, 2010
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