Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — Non-Deal Roadshow (June 2003)
32 slides from Newjersey Resources's roadshow presentation, Jun 12, 2003
Slide 1: A Better Model for Shareowner Value
A Better Model for Shareowner Value Boston Financial Community June 12, 2003
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. NJR wishes to caution persons reading or hearing this presentation that the assumptions that form the basi
Slide 3: How We Run our Business
It all starts with integrity Know what you are - more importantly, know what you're not Focus on the fundamentals of the core business People make the difference How We Run our Business The ultimate test is sustained performance. NJR has produced an EPS CAGR of 7.1 percent over the last 10 years.
Slide 4: Our Strategy has not Changed
Our Strategy has not Changed In short, we have built a better model Our strategy is based on what can reasonably be delivered, not the strategy du jour Our strategy is based on two axioms: Maximizing the value of the core utility business Enhancing returns by leveraging core skills and assets with a
Slide 5: The Building Blocks of a Better Model
The Building Blocks of a Better Model Maximize the Value of the Core Business Service Area Margin Growth No Base Rate Cases Regulatory Partnerships Enhance Returns by Leveraging Core Skills and Assets Home Services Off-system Sales/Capacity Release Energy Services Operational Efficiencies Customer S
Slide 6: The Building Blocks: Maximize the Value of the Core Business
The Building Blocks of a Better Model Maximize the Value of the Core Business Service Area Margin Growth No Base Rate Cases Regulatory Partnerships Operational Efficiencies Customer Satisfaction
Slide 7: Maximizing Value: Our Service Area
Maximizing Value: Our Service Area Rapidly growing customer base Primarily residential and small commercial customers Demographic, economic and regulatory data confirm expectation of approximate 3 percent annual firm sales growth rate for foreseeable future
Slide 8: Maximizing Value: Improved Productivity
Maximizing Value: Improved Productivity The cost of adding a new customer has declined over 23 percent, while O&M productivity has improved by 16 percent since 1992. Primary drivers have been: Balanced marketing strategy Changes in work processes New Customer Cost O&M as a Percent of Margin
Slide 9: Maximizing Value: Productivity & Incentives
Maximizing Value: Productivity & Incentives Virtually every employee is a shareowner Incentives paid in cash and stock Bargaining Unit participates in the incentive plan Customers per Employee Margin per Employee
Slide 10: Maximizing Value: Avoiding Base Rate Cases
Maximizing Value: Avoiding Base Rate Cases A key part of our strategy Base rate cases are expensive, time consuming and antagonistic Avoiding that process has helped NJR develop and maintain positive relationships with the regulators Forces employees to be more creative Benefits both customers and s
Slide 11: Maximizing Value: Smart Growth
Maximizing Value: Smart Growth State initiative to plan for future growth by limiting sprawl and promoting redevelopment Asbury Park & Long Branch are the 1st communities in service area selected for the program NJNG will invest over $7 million in Asbury Park and Long Branch Plan proposes recovering
Slide 12: Maximizing Value: Our Regulatory Partnership
Maximizing Value: Our Regulatory Partnership By partnering with our regulators, NJNG has been able to: Avoid filing for base-rate increases Use the competitive energy marketplace to benefit both customers and shareowners Open new markets and offer customers new choices Focus on Governor's new energy
Slide 13: Customer Satisfaction: BPU Inquiries per 1,000 Customers
SJI NUI CIV GPU/FE PEG NJR 3.22 2.73 2.29 1.81 1.09 0.64 BPU Inquiries per 1,000 Customers NJNG is working toward its 11th consecutive year of having the best customer satisfaction rate in N.J. Customer Satisfaction March 2003 FYTD
Slide 14: The Building Blocks: Enhance Returns by Leveraging Core Skills and Assets
The Building Blocks of a Better Model Enhance Returns by Leveraging Core Skills and Assets Home Services Off-system Sales/Capacity Release Energy Services
Slide 15: Enhancing Returns: Wholesale Markets
Since 1992, off-system sales/capacity management margins have generated over $198 million in savings for customers and $1.17 per share for shareowners 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 3/1/2003 Customer Savings 0 4.4 12.6 15.9 18.3 22.3 21 22.3 22 25 24 12 Shareowner Margin 1.6
Slide 16: Enhancing Returns: Energy Services
Enhancing Returns: Energy Services Energy Services is a growing contributor of total earnings Early player in energy services Asset based business activity Storage and marketing Fuel management Portfolio optimization Wholesale FY00 0.11 FY01 0.15 FY02 0.24 Mar. 2003 0.41 NJR uses our knowledge of ma
Slide 17: Enhancing Returns: Managing Risk
Enhancing Returns: Managing Risk Strictly natural gas operation - no electric exposure Not a speculative trader Manage assets for primarily hedged positions Selected fee-based services Trade around "assets" "Assets" consist of transportation and storage capacity Physical assets reduce risk Our "asse
Slide 18: Risk Management Guidelines
Risk management guidelines Limited open positions = low VAR Provides internal controls Credit procedures in place Daily compliance monitoring by financial department Minimal mark-to-market income (Less than 1 percent) Trader compensation not based on sales volumes or revenues Netting agreements pote
Slide 19: Enhancing Returns: Energy Services Portfolio Strengths
Manage over 40 Bcf of storage and transport in excess of 1 Bcf/d Major positions Columbia Gas Transmission Columbia Gulf ANR Pipeline Dominion Transmission Iroquois Tennessee Gas Pipeline Texas Eastern Transmission Corporation Union Storage - Dawn Enhancing Returns: Energy Services Portfolio Strengt
Slide 20: Enhancing Returns: How Storage Adds Value to the Portfolio
Enhancing Returns: How Storage Adds Value to the Portfolio Flexible supply and demand Monthly, Daily, Hourly Ability to act as additional supply basin Reliability Intrinsic Value Time spreads Extrinsic Value Options against volatility Ability to buy from multiple sources Improves price Improves reli
Slide 21: Enhancing Returns: Stagecoach Storage
Located in Owego, NY 11.9 Bcf high- deliverability storage capacity Connects to Tennessee Gas Pipeline NJRES is the marketing agent for Stagecoach 10-year term - began April 1, 2002 NJRES compensation - Management fees and incentives Enhancing Returns: Stagecoach Storage
Slide 22: Enhancing Returns: Our Assets and Skills Create New Opportunities
Enhancing Returns: Our Assets and Skills Create New opportunities Core Customers Off-System Sales Capacity Release Retail Marketing Energy Management Core Customers Off-System Sales Capacity Release Retail Marketing Energy Management 1991 51 1992 52 12 1993 55 21 1994 58 27 20 1995 57 25 38 5 7 1996
Slide 23: Enhancing Returns: Home Services
Appliance service contracts Duct cleaning HVAC equipment replacement Plumbing services Service contract enhancements Enhancing Returns: Home Services NJR is consistently seeking new, low risk opportunities
Slide 24: A Better Model: Earnings Growth Consistency
Fiscal 2003 off to a good start: Weather colder- than-normal Customer and Margin Growth Gas Price Volatility 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2002 2003 1.07 1.13 1.24 1.28 1.37 1.48 1.56 1.67 1.81 1.97 2.12 2.04 2.39 A Better Model: Earnings Growth Consistency September 30, Mar
Slide 25: A Better Model: Superior Return
Our highest level in 18 years Allowed ROE of 11.5 percent Balance from regulated and unregulated wholesale activities 1997 1998 1999 2000 2001 2002 0.139 0.142 0.145 0.148 0.153 0.153 A Better Model: Superior Return Return on Equity
Slide 26: A Better Model: Rewarding Shareowners
1995 1996 1997 1998 1999 2000 East 1.52 1.56 1.6 1.64 1.68 1.72 1997 1998 1999 2000 2001 2002 2003 1.07 1.09 1.12 1.15 1.17 1.2 1.24 Eight increases in seven years NJR's dividend growth rate was 2002 is 3.3 percent vs. 1.4 percent for the peer group 1996 1997 1998 1999 2000 2001 2002 0.75 0.72 0.7 0
Slide 27: A Better Model: Disciplined Capital Allocation
A Better Model: Disciplined Capital Allocation New Customer 10.2 System Integrity 6.2 Other Utility 1.1 Non-Utility 1 Economic Value Added Process Margin from new customers must cover associated capital costs System integrity spending up to depreciation level Other project evaluated on EVA basis Est
Slide 28: A Better Model: Share Repurchases
Share Repurchase & DRP Programs Plan implemented Shares authorized Shares purchased on open market Total cash investment ($MM) Average investment per share Share Repurchase Program Dividend Reinvestment 9/96 7/96 2,000,000 1,560,253 $55.3 $24.72 1,650,000 422,813 $12.8 $20.21 March 31, 2003 A Better
Slide 29: A Better Model: Balance Sheet Strength
NJR Capital Structure Common Equity 258919 Preferred 21004 LT Debt 352227 Common Equity 361453 LT Debt 370628 1995 2002 Credit Rating: Moody's A-2 S&P A A Better Model: Balance Sheet Strength NJR's Strong Balance Sheet has improved significantly over 7 years
Slide 30: Summary
Summary Focused strategy Excellent core business Commitment to Stakeholders Significant growth form leveraging core assets and skills Consistent higher returns for shareowners NJR Peer Group Energy Distribution Electric Utilities S&P 500 0.08 0.019 0.018 0.003 -0.033 Annualized 5-Year Total Return
Slide 31: Gross Margin
Gross Margin Gross margin is a non-GAAP measure. Gross margin is defined as gas revenues less gas purchases, sales tax and a Transitional Energy Facilities Assessment (TEFA), which is included in Energy and other taxes on the Consolidated Statements of Income. NJNG believes that gross margin provide
Slide 32: A Better Model for Shareowner Value
A Better Model for Shareowner Value Boston Financial Community June 12, 2003