Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — Wells Fargo Energy & Power Symposium 2015
35 slides from Newjersey Resources's conference presentation, Dec 9, 2015
Slide 1: Wells Fargo Energy & Power Symposium
WELLS FARGO ENERGY & POWER SYMPOSIUM December 9, 2015
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 . New Jersey Resources (NJR or the Company) cautions readers that the assumptions forming the basis for
Slide 3: Disclaimer Regarding Non-GAAP Financial Measures
Disclaimer Regarding Non - GAAP Financial Measures This presentation includes the non - GAAP measures net financial earnings (NFE), utility gross margin and financial margin . As indicators of the Company’s operating performance, these measures should not be considered alternatives to, or more meani
Slide 4: Our Business Model
Our Business Model 4 R e g u l a t e d New Jersey Natural Gas • Strong customer growth • Infrastructure investments to ensure safety and reliability • Regulatory incentives NJR Midstream • Steckman Ridge – 12 Bcf storage facility • 20 percent interest in PennEast Pipeline • 1.8 million Dominion Mids
Slide 5: Fiscal 2015: Highlights of Another Solid Year
Fiscal 2015: Highlights of Another Solid Year ▪ Net Financial Earnings (NFE) of $1.78 per share ▪ 6.7 percent dividend increase ▪ $179.2 million of infrastructure investments driven by customer growth and system reliability ▪ New customer additions were 3.4 percent higher than last year ▪ Constructi
Slide 6: Our Growth and Earnings Strategy
Our Growth And Earnings Strategy* Long - term average annual NFE goal remains 5 to 9 percent ▪ Invest in Utility infrastructure projects that drive rate base growth – Organic customer growth – System and Facilities E nhancement program (SAFE) ▪ Invest in Midstream projects such as PennEast Pipeline
Slide 7: Delivering Average Annual NFE Growth with Reduced ITC
Delivering Average Annual NFE Growth of 5 to 9 Percent with Reduced ITC * $1.36 $2.10 $1.78 $1.55 - $1.65 $1.70 - $1.97 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 FY13A FY14A FY15A FY16E FY17E FY18E NFE ITC 2015 Wells Fargo Energy & Power Symposium 7 * Base year is fiscal 2013. Total NFE Per Share
Slide 8: Dividend Growth and Payout Ratio
Dividend Growth and Payout Ratio ▪ Dividend growth goal of 6 to 8 percent annually ▪ 22 dividend increases in 20 years ▪ Dividend payout ratio goal of 60 to 65 percent ▪ 6.7 percent increase to current $.96 annual rate 8 $.72 $.77 $.81 $.86 $.92 $.96 0% 10% 20% 30% 40% 50% 60% 70% $0.00 $0.20 $0.40
Slide 9: Estimated Capital Expenditures at Regulated Businesses
We Expect 60 - 70 Percent of Estimated Capital Expenditures to Be At Regulated Businesses $336 $550 $540 $338 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 FY15A FY16E FY17E FY18E Millions NJNG PennEast Solar Wind 2015 Wells Fargo Energy & Power Symposium 9
Slide 10: Strong Fundamentals Drive the Majority of NJNG's Earnings Growth
Strong Fundamentals Drive the Majority of NJNG’s Earnings Growth Largest stand - alone natural gas utility in New Jersey ▪ 514,000 customers ▪ Growing customer base; balanced mix of new construction and conversions Reputation for Excellent Service ▪ Highest ranked in East Region in J.D. Power’s 2015
Slide 11: Strong Customer Growth
Strong Customer Growth ▪ 7,858 new customers added in fiscal 2015 compared with 7,599 in fiscal 2014 – a 3.4 percent increase — 3,966 new construction customers — 3,892 conversions from other fuels ▪ 636 existing customer heat conversions ▪ 90 percent of new customer additions are residential, which
Slide 12: Key Trends Support Future Customer Growth
Key Trends Support Future Customer Growth 0.0% 5.0% 10.0% 15.0% Morris Monmouth Ocean 6.3% 2.3% 14.1% Population Change 2000 - 2014 1 1. Source: US Census data, 2014 estimates 2015 Wells Fargo Energy & Power Symposium 12 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 NJNG Fuel Oil Propane Electricity $0.88 $1.
Slide 13: Collaborative Regulatory Relationships
Collaborative Regulatory Relationships 2015 Wells Fargo Energy & Power Symposium 13 Regulatory and Incentive Programs ▪ Basic Gas Supply Service Incentives (BGSS) - 1992 ▪ Conservation Incentive Program (CIP) - 2006 ▪ Accelerated Infrastructure Program (AIP) - 2008 ▪ The SAVEGREEN Project® - 2009 ▪
Slide 14: Diverse Sources of Utility Gross Margin
Diverse Sources of Utility Gross Margin $33.6 $33.2 $34.0 $37.5 $0 $5 $10 $15 $20 $25 $30 $35 $40 FY15A FY16E FY17E FY18E Millions Customer Growth SAVEGREEN BGSS Incentives 2015 Wells Fargo Energy & Power Symposium 14
Slide 15: Base Rate Case Filed November 13, 2015
Base Rate Case Filed November 13, 2015 ▪ Timing of filing was established with the approval of SAFE in 2012 ▪ Requested an increase of $ 147.6 million ▪ Includes equity capital of approximately $860 million ▪ Proposed rate base of nearly $1.6 billion ▪ Overall Cost of Capital and Weighted Return: 20
Slide 16: Capital Associated with Base Rate Case
Capital Associated with Base Rate Case ($MM) 2009-2014A 2015A 2016P Total New Customer $134.1 $33.1 $35.2 $202.4 NJ RISE - 7.4 17.9 25.3 SAVEGREEN 91.6 26.1 42.0 159.7 Subtotal $225.7 $66.6 $95.1 $387.4 SAFE $63.8 $32.8 $31.7 $128.3 NGV Stations 5.6 4.9 - 10.5 Subtotal $69.4 $37.7 $31.7 $138.8 Maint
Slide 17: Regulatory Agenda – Post Base Rate Case
Regulatory Agenda – Post Base Rate Case Following the conclusion of the base r ate case ▪ Continue strong customer growth ▪ Continue existing programs – CIP – SAVEGREEN – BGSS Incentives ▪ NJ RISE – Complete “hardening” projects ▪ File for SAFE Extension – Approximately $200 million – Would complete
Slide 18: NJNG Key Messages
NJNG Key Messages Infrastructure projects improve safety, reliability and resiliency Customer growth outlook remains strong Collaborative regulatory programs generate earnings and customer savings NFE contribution expected to be 60 - 70 percent in fiscal 2016 and beyond 2015 Wells Fargo Energy & Pow
Slide 19: Our Midstream Portfolio
Our Midstream Portfolio ▪ Steckman Ridge – $127 million investment, 12 Bcf natural gas storage facility in southwest Pennsylvania – 50/50 joint venture with Spectra Energy – Direct access to Texas Eastern and Dominion Transmission pipelines and access to Northeast and Mid - Atlantic markets ▪ Domini
Slide 20: PennEast Pipeline
PennEast Pipeline ▪ Signed precedent agreements for 990 Mdth/day ▪ Current ownership: NJR, GAS, SJI, UGI at 20 percent and PSEG and SEP at 10 percent 2015 Wells Fargo Energy & Power Symposium 20
Slide 21: Midstream Key Messages
Midstream Key Messages Steckman Ridge storage facility provides steady annual earnings Dominion Midstream Partners diversifies portfolio PennEast investment development ongoing NFE contribution expected to be 5 - 10 percent in fiscal 2016 and beyond 2015 Wells Fargo Energy & Power Symposium 21
Slide 22: NJRCEV: Commercial and Residential Solar Portfolio
NJRCEV: Commercial and Residential Solar Portfolio Commercial Solar ▪ Projects include roof - and ground - mounted installations, both grid - connected and net - metered ▪ 22 projects in service ▪ 82.4 MW Residential Solar - The Sunlight Advantage® ▪ Approximately 4,000 customers added since incepti
Slide 23: Onshore Wind Portfolio
Onshore Wind Portfolio Two Dot Carroll Area Alexander Size 9.7 MW 20 MW 48 MW Location 93 miles SE of Helena, MT 65 miles NW of Des Moines, IA Rush County, Kansas Capital $21 million $42 million $85 million Contractor Mortensen Construction Mortenson Construction Mortenson Construction Turbines Gene
Slide 24: NJRCEV Capital Plan
NJRCEV Capital Plan Solar Investment Strategy ▪ Leverage current incentives and increase SREC production by maximizing solar construction ▪ Post - ITC reduction: Focus on residential solar in Sunlight Advantage® and commercial solar ▪ Cost of capital – 9 percent unlevered IRR; 15 percent ROE Wind In
Slide 25: Post-ITC Investment Opportunities
Post - ITC Investment Opportunities Sunlight Advantage provides customers with 25 - 30 percent savings versus current utility rates ▪ O fferings in 2017 likely to offer 15 - 20 percent savings Solar panel and inverter prices are projected to decline ▪ More efficient panels help to control labor cost
Slide 26: Improved SREC Fundamentals
Improved SREC Fundamentals 10.4 - 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 85.0 2015 Wells Fargo Energy & Power Symposium 26 $70 $50 $100 $150 $200 $250 $300 $275 Installs (MW) SREC Prices NJRCEV forecasts SREC production to grow to 216,000 by fiscal 2018 Source: of Monthly Capacity Additions: N
Slide 27: NJRCEV Is Actively Hedging SRECs to Reduce Future Price Uncertainty
NJRCEV Is Actively Hedging SRECs to Reduce Future Price Uncertainty 153 103 79 172 195 216 0 50 100 150 200 250 FY16 FY17E FY18E Thousands of SRECs Hedged Expected Generated Current Generation 2015 Wells Fargo Energy & Power Symposium 27 Pct. Hedged: 89% 53% 37% Average Price: $208 $218 $229 As of N
Slide 28: NJRCEV Key Messages
NJRCEV Key Messages Long - term prospects for wind and solar are solid NJ SREC market has stabilized and moving towards balance Regulatory Outlook ▪ State RPS policies will drive project development post - tax credits ▪ Clean Power Plan favors renewables, but impact appears to be long term even if l
Slide 29: NJR Energy Services Strategy
NJR Energy Services Strategy ▪ Create value from a diverse portfolio of physical gas assets and services ▪ Provide physical, producer and asset management services to wholesale customers across North America Business Lines ▪ Firm storage (40 Bcf in the US and Canada) ▪ Firm transportation (1.4 Bcf/d
Slide 30: NJR Energy Services
NJR Energy Services ▪ In business since 1995 and generated NFE every year ▪ Realistic NJRES earnings forecast for fiscal 2016 and beyond ▪ Expected FY2016 - 2018 performance to mirror FY2011 - 2013 2015 Wells Fargo Energy & Power Symposium 30 $0 $30 $60 $90 FY11A FY12A FY13A 3 Yr Avg FY14 FY15A FY16
Slide 31: NJRES Key Messages
NJRES Key Messages Potential upside, while managing downside risk NFE not assumed to match record fiscal 2014 and 2015 performance NFE contribution expected to be 5 – 15 percent in fiscal 2016 and beyond 2015 Wells Fargo Energy & Power Symposium 31
Slide 32: Our Path to Continued Growth
Our Path To Continued Growth 2015 Wells Fargo Energy & Power Symposium 32 Fiscal 2016 NJNG x Customer Growth x CIP x BGSS Incentives x Infrastructure Programs x SAVEGREEN x NJ RISE x SRL x Rate case filing x Liquefaction plant in service Midstream x PennEast continued progress Clean Energy x Decreas
Slide 33: NJR At A Glance
NJR At A Glance Our Financial Goals: 1. Average annual NFE growth of 5 to 9 percent 2. Dividend growth of 6 to 8 percent 3. Maintain appropriate metrics to support our credit rating Ticker Symbol (NYSE): NJR Price Range (52 Weeks) $33.73 - $26.77 Enterprise Value: $3.3 billion Market Capitalization:
Slide 34: Strong Internal Cash Generation To Support Capital Programs
Strong Internal Cash Generation To Support Capital Programs $MM FY15A FY16E FY17E FY18E Cash Flow from Operations $386.8 $127.9 $319.9 $340.2 Uses of Funds Capital expenditures - NJNG ($167.8) ($291.1) ($230.5) ($184.0) Capital expenditures - Penn East (5.8) (41.7) (160.2) (32.4) Capital expenditure
Slide 35: Capital Expenditures
Capital Expenditures ($MM) 2015A 2016P 2017P 2018P Total NJNG New Customer $33.1 $35.2 $32.6 $31.5 $132.4 Maintenance/other 79.0 81.1 81.8 87.7 329.6 SAFE/SAFE Extension 32.8 31.7 33.3 31.3 129.1 Sandy 2.4 - - - 2.4 NJ RISE 7.4 17.9 27.5 33.5 86.3 NGV Stations 4.9 - - - 4.9 Liquefaction 16.7 5.8 - -
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