Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — AGA Financial Forum 2022
46 slides from Newjersey Resources's conference presentation, May 16, 2022
Slide 1: AGA Financial Forum Miami Beach
AGA Financial Forum Miami Beach May 16-19, 2022
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: 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 4: 2021 Sustainability Report
2021 Sustainability Report Highlighting our accomplishments: • Announced Net Zero by 2050 goal for New Jersey operations • First utility on the East Coast to blend green hydrogen into its fuel stream • Launched largest energy efficiency program in NJNG’s history • 7th consecutive J.D. Power Award to
Slide 5: Strong Track Record of Earnings and Dividend Growth
Strong Track Record of Earnings and Dividend Growth Net Financial Earnings per Share1,2 Dividends per Share 8.3% 7.3% $2.71 DPS CAGR NFEPS CAGR $2.16 $1.45 $1.33 $1.25 $1.74 $1.17 $1.57 $1.09 $1.45 $1.02 FY2017 FY2018 FY2019 FY2020 FY2021 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 7-9% 7-9% Long-Term
Slide 6: Fiscal 2022 NFEPS Guidance
Fiscal 2022 NFEPS Guidance* Net Financial Earnings per Share 7-9% LONG-TERM Guidance increase due to ANNUAL ES over-performance $2.30 - $2.40 GROWTH** $2.16 $1.74 $1.45 FY2019A FY2020A FY2021A FY 2022E * NFEPS guidance was increased on May 5, 2022 and is not being updated at this time. ** NFEPS long
Slide 7: NJR's Business Portfolio
NJR’s Business Portfolio Natural Gas and Hydrogen Distribution; Solar Investments, Wholesale Energy Markets & Customers; Storage & Transportation Infrastructure; Retail Operations Fiscal 2022 NFEPS Guidance by Segment Clean Energy Ventures 17%-20% $2.30 - New Jersey Natural Gas 60%-62% $2.40* Projec
Slide 8: Second Quarter 2022 Summary
Second Quarter 2022 Summary Quarterly Review NJR reported EPS of $1.00 and NFEPS of $1.36* for Q2 Fiscal 2Q22 Increased FY 2022 NFEPS guidance to $2.30 - $2.40 from previously issued guidance of $2.20 - $2.30; driven by outperformance at Energy Services (“ES”) New Jersey Natural Gas increased NFE by
Slide 9: Second Quarter Fiscal 2022 NFE by Business Unit
Second Quarter Fiscal 2022 NFE by Business Unit ($ in 000s) (Thousands) Three Months Ended March 31, Six Months Ended March 31, 2022 2021 Change 2022 2021 Change New Jersey Natural Gas $102,783 $80,541 $22,242 $153,863 $130,008 $23,855 Clean Energy Ventures (6,491) (8,872) $2,381 $(13,312) $(19,146)
Slide 10: NJR Review of Fiscal 2Q22 NFE Changes
NJR Review of Fiscal 2Q22 NFE Changes ($ in Millions) Fiscal 2Q21 – Consolidated NFE ($ in millions) $ 170.6 NJNG $ 22.2 Utility Gross Margin* $ 44.4 $22.2 $2.4 O&M $ (0.1) $(0.1) Depreciation & Amortization (D&A) $ (3.9) $170.6 Interest expense, AFUDC, Income Tax $ (18.2) Clean Energy Ventures $ 2.
Slide 11: Second Quarter 2022 Key Takeaways
Raised guidance for FY 2022 due to better-than- expected performance from Energy Services Strong NFE performance at New Jersey Natural Gas Key Takeaways Solar project pipeline exceeds 680 MWs of projects under contract, construction or exclusivity Second Quarter 2022 Adelphia Gateway is flowing gas
Slide 12: New Jersey Natural Gas
Operates and maintains over 7,500 miles of Natural New Jersey Gas transportation and distribution infrastructure serving approximately 568,000 customers Natural Gas Constructive regulatory framework Stabilized utility gross margin profile Strategic infrastructure investments and accelerated recovery
Slide 13: The Value of our Natural Gas Infrastructure
The Value of our Natural Gas Infrastructure An asset in the clean energy transition New Jersey’s Pipeline Network Today, our pipeline network can integrate and deploy low and zero carbon fuels, such as Renewable Natural Gas and hydrogen, driving lower emissions $17 Billion 35,000 Miles of >75% of 70
Slide 14: Howell Green Hydrogen Project
Howell Green Hydrogen Project First project on Project Status the east coast • Commercial operation achieved October 2021 to deliver green hydrogen • Entire project located within NJNG’s Howell facility through a utility distribution • System expected to offset ~180 US tons of CO2 per year pipeline
Slide 15: Steadily Growing Customer Base
Steadily Growing Customer Base Population1 thousands 1,790 1,835 1,600 1,700 Attractive 637 644 510 580 service territory Ocean MORRIS with growing 470 490 509 536 Morris • Parsippany population 620 630 644 655 NEW Monmouth YORK CITY 2000 2010 2020 2029 Census Census Census Projected MONMOUTH NJNG C
Slide 16: Supportive Regulatory Construct
Supportive Regulatory Construct Stable Rate Case Results Decoupled Rates for majority of customers • Rate case results are stable • Volume risk due to weather or energy conservation mitigated through the Conservation Incentive Program • Current ROE of 9.60% with an equity (CIP). This decoupling mech
Slide 17: New Jersey Natural Gas
New Jersey Natural Gas Solid Performance in First Full Quarter Since New Base Rates Fiscal YTD Capital Expenditures* ~40% of capital expenditures earning a near Regulatory Updates real-time return Maintenance $49 • On March 31, 2022, NJNG filed its first- IIP Developments rate recovery request for i
Slide 18: Clean Energy Ventures
Focus on contracted cash flows Clean Energy Ventures Expanding footprint beyond New Jersey CEV develops, invests in, owns and operates energy projects that generate clean power, provide low Optimizing and in-sourcing carbon energy solutions and help our customers save energy and money in a sustainab
Slide 19: CEV: Succeeding in an Evolving Solar Industry
CEV: Succeeding in an Evolving Solar Industry Creating a Broader Opportunity Set for Projects 2020 - 2023 Long-term Fundamentals 2009 - 2019 Remain Strong Rapid Industry Growth Strategic Shift / Near-Term Delays / Regulatory Lag Policy transition, interconnect delays and supply chain Nascent market
Slide 20: CEV: Robust Pipeline in Solar
CEV: Robust Pipeline in Solar Taking Advantage of a Considerable Decarbonization Opportunity MWs Installed Capacity Pipeline of Total of 1200 of 371MW Plus… ~680 MW 1.1 GW 1000 In Service Over $1B of Under Construction investment to 800 date Under Contract or Exclusivity 605MW Unlevered 600 Under Co
Slide 21: CEV: Breaking down the Pipeline in Solar
CEV: Breaking down the Pipeline in Solar By Location By ISO NJ, 364 Non-PJM, 605 MW under 100 contract or exclusivity PJM 605 605 Approved, MW MW 50 • 145 MW of low- risk PJM projects Outside Other PJM, PJM "Fast NJ, 241 360 Track", 95 • 100MW of Non- PJM projects 20
Slide 22: Clean Energy Ventures
Clean Energy Ventures New Project Innovation (Under Construction) CEV Revenue 8.9MW 9% 2Q Fiscal 2022 Milburn, NJ 33% SRECs* Floating Solar TRECs Array $11.8M Electricity Sales 34% Sunlight Advantage 24% With the completion of an 8.9MW facility in 2022, CEV will have developed the two largest floati
Slide 23: NJR CEV – SREC Hedging by Fiscal Year
NJR CEV – SREC Hedging by Fiscal Year As of April 25, 2022 Percent Hedged Average Price Current Price (FY) FY 2022 464 100% $203 $235 Percent Hedged Average Price Current Price (FY) FY 2023 395 7 98% $201 $223 Thousands Percent Hedged Average Price Current Price (FY) FY 2024 365 36 91% $193 $208 Per
Slide 24: Storage and Transportation
Storage and Transportation Portfolio of low-risk natural gas infrastructure Generating stable fee-based revenue from investments that are difficult to replicate diverse mix of high credit-quality customers Serving constrained physical end-use markets Attractive organic expansion opportunities 5-8% o
Slide 25: Attractive Portfolio With Incremental Growth Potential
Attractive Portfolio With Incremental Growth Potential NORTH ZONE SOUTH ZONE FULLY OPERATIONAL FULLY OPERATIONAL OPERATIONAL 90% COMPLETE Description • 32.2 mmdth high deliverability • 12.6 mmdth reservoir storage • 0.9 mmdth/d interstate pipeline from NE salt cavern storage facility in facility in
Slide 26: Storage and Transportation: Adelphia Gateway
Storage and Transportation: Adelphia Gateway South Zone Conversion and Expansion Project Martin’s Creek Booster Compression Sherry Lane Lateral UGI Easton Road Interconnect Project Updates • 90% of total construction completed; expect completion by end of North Mainline the year • Nearly fully contr
Slide 27: Contracted Revenue Underpinned by Stable Customer Base
Contracted Revenue Underpinned by Stable Customer Base with High Quality Credit Profiles for Adelphia and Leaf River FY20231 Revenue by FY2023 Revenue by FY2023 Revenue by Customer Type Credit Quality Fee Type 80% 87% 88% 10% 12% 3% 2% 3% 9% 6% Utility Marketer Industrial IG Credit Support Non-IG Ta
Slide 28: Energy Services
Strong customer relationships Energy Pursuing higher fee-based revenues. Entered into 10- Services year $500 million contract with investment grade utility Launched 27 years ago, Additionally, long option strategy provides significant making it one of the longest upside potential with limited downsi
Slide 29: Evolving Business Model
Evolving Business Model As a % of ES’ 2022 FYTD Financial Margin • Producers AMAs and structured • LDCs fee-based deals Utility Asset ~75% Management • Power Peaking transactions Agreement generators Fuel management • LNG Exporters Other Energy Markets with Services tight supply- Price Long option s
Slide 30: Long Option Strategy: Proven Track Record of Success
Long Option Strategy: Proven Track Record of Success NFE/Financial Margin History The Value of Energy Services’ $ in Millions Long Option Strategy $200 Financial Margin NFE Avg. Financial Margin Avg. NFE $180 $172 NJR’s NFE growth projections exclude the $160 $146 potential for ES’ long-option strat
Slide 31: North American Footprint
North American Footprint Managing a Diversified Portfolio of Physical Natural Gas Transportation and Storage Assets to Serve Customers Across North America; Connectivity Adds Value to Portfolio Options CANADA STORAGE Significant ASSETS NORTHERN STORAGE ASSETS Northeast and Gulf Northern • Union Gas
Slide 32: NJR Capital Plan
NJR Capital Plan1 ($ in Millions) YTD Near Real Time 1Q FY2022A 2Q FY2022A FY2021A FY2022E FY2023E FY2022A Return? New Jersey Natural Gas New Customer $12 $11 $23 $65 $52 - $56 $54 - $58 Yes Maintenance & Integrity $27 $16 $49 $252 $125 - $140 $114 - $118 Cost of Removal / Other $9 $18 $21 $66 $34 -
Slide 33: NJR Projected Cash Flows
NJR Projected Cash Flows ($ in Millions) FY2021A FY2022E FY2023E Cash Flow from Operations $391 $265 - $285 $430 - $450 Uses of Funds Capital Expenditures1 $625 $534 - $610 $481 - $658 Dividends2 $117 $127 - $132 $135 - $140 Total Uses of Funds $742 $661 - $742 $628 - $736 Financing Activities Commo
Slide 34: Investor Value Proposition
Investor Value Proposition ~3% 7%-9% Dividend Long-term Yield1 ~10 -12 % % NFE Growth Total Shareholder Return 1Based on dividend per share of $1.45 and closing share price of $43.66 on 5/12/2022 33
Slide 35: Appendix
Appendix 34
Slide 36: Reconciliation of NFE and NFEPS to Net Income
Reconciliation of NFE and NFEPS to Net Income ($ in 000s) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2022 2021 2022 2021 NEW JERSEY RESOURCES • NFE is a measure of earnings based on eliminating timing A reconciliation of net income, the closest GAAP financial measure, to net
Slide 37: Other Reconciliation of Non-GAAP Measures
Other Reconciliation of Non-GAAP Measures ($ in 000s) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2022 2021 2022 2021 A reconciliation of gross margin, the closest GAAP financial measurement, to utility gross margin is as follows: NJNG Utility Gross Margin • NJNG's utility gr
Slide 38: Raising FY 2022 NFE Guidance to $2.30 - $2.40 Per Share
Raising FY 2022 NFE Guidance to $2.30 - $2.40 Per Share NFE Expected Segment FY2022 Expected NJNG FY2022 Expected FY2022 Expected ES Contributions Utility Gross Margin CEV Revenue Financial Margin Distribution Distribution Distribution Q4E Q3E (~8%) FY2022E Q3E Q4E (~11%) ~17% ~13% Q1E NJNG 60%-62%
Slide 39: Review of Fiscal 2022 YTD NFE Changes
Review of Fiscal 2022 YTD NFE Changes ($ in Millions) $5.8 YTD Fiscal 2021 – Consolidated NFE ($ in millions) $ 215.3 $23.9 $(0.6) NJNG $ 23.9 Utility Gross Margin* $ 52.2 $215.3 O&M $ 7.1 $2.1 $196.0 Depreciation & Amortization (D&A) $ (7.6) Interest expense, AFUDC, Income Tax $ (27.8) $(50.5) Clea
Slide 40: Base Rates – December 1, 2021
Base Rates – December 1, 2021 Overall Cost of Capital and Weighted Return Approved Weighted Percent Return Cost Long-Term Debt 46.0% 3.60% 1.66% Common Equity 54.0% 9.60% 5.18% • Rate base of $2.5 billion o Southern Reliability Link and Howell green hydrogen facility included Total 100.0% 6.84% in r
Slide 41: NJR CEV – SREC Hedging Strategy Stabilizes Revenue
NJR CEV – SREC Hedging Strategy Stabilizes Revenue Based on Energy Year, as of April 25, 2022 Percent Hedged Average Price Current Price (EY) EY 2022 398 8 98% $201 $238 Percent Hedged Average Price Current Price (EY) EY 2023 398 5 99% $203 $227 Thousands Percent Hedged Average Price Current Price (
Slide 42: Revenue Recognition for AMAs
Revenue Recognition for AMAs ($ in Millions) 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 period
Slide 43: AMAs with Utility De-Risks Business and Drives Value
AMAs with Utility De-Risks Business and Drives Value… 10-Year Asset Management Agreements (AMAs) with Investment Grade Utility • Entered into AMAs to release certain natural gas transportation contracts of Energy Services for Overview aggregate cash proceeds of approximately $500 million payable ove
Slide 44: While Retaining the Long Option Strategy
… While Retaining the Long Option Strategy Managing a Diversified Portfolio of Physical Natural Gas Transportation and Storage Assets to Serve Customers Across North America Providing significant upside potential with limited downside risk and minimal long-term capital commitments Leverage natural g
Slide 45: Leadership and Board of Directors
Leadership and Board of Directors Executive Officers Directors Stephen D. Westhoven Patrick Migliaccio Gregory E. Aliff* President and Chief Executive Officer Senior Vice President and Chief Operating Officer Partner, Deloitte & Touche LLP (Retired) New Jersey Resources New Jersey Natural Gas Donald
Slide 46: Shareholder and Contact Information
Shareholder and Contact Information Stock Transfer Agent and Registrar Corporate Headquarters The Transfer Agent and Registrar for the company’s common stock is Broadridge Corporate Issuer Solutions, Inc. (Broadridge). 1415 Wyckoff Road Wall, NJ 07719 Shareowners with questions about account activit