Newjersey Resources Corporation · NYSE:NJR
Newjersey Resources — AGA Financial Forum 2008
31 slides from Newjersey Resources's conference presentation, May 5, 2008
Slide 1: AGA Financial Forum
AGA Financial Forum Miami Beach, Fl May 5, 2008
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 Included in this presentation are the non-GAAP financial measures, Financial Margin and Net Financial Earnings. Financial margin represents operating revenues from the sale of natural gas sales less gas purchases, and excludes the accounting impacts o
Slide 4: NJR Today
Distribution Wholesale Energy Services Midstream Growing service area; close to NYC and Phila. Constructive regulatory environment Rate base and margin growth opportunities Transportation and storage portfolio Disciplined risk management Asset optimization Ancillary services Iroquois Pipeline equity
Slide 5: Financial Goals
Financial Goals • Achieve long-term NFE growth of 5 percent or better • Grow dividend a minimum of 5 percent annually – Increased dividend 10.5 percent • Use Share Repurchase Plan opportunistically • Achieve a total return in top 25 percent of peer group • Maintain a strong financial profile with a
Slide 6: Our Core Business
Our Core Business • Provide safe and reliable natural gas services to 478,000 customers in Monmouth, Ocean and Morris counties • $953 million of rate base • $224 million in gross margin in 2007 • Steady rate base growth opportunities • Approximately 4 million customer interactions per year • 16 cons
Slide 7: Profitable Customer Growth
Profitable Customer Growth • 3,125 new customers FYTD 2008 • 374 existing customer heat conversions • Expected annual gross margin of $1.7 million • 1.6 percent overall customer growth rate expected in FY 2008
Slide 8: Residential Growth Potential
Residential Growth Potential 2013-2023 New Customers = 106,296 Non-heat customers Non-gas off main Non-gas on main Conversions = 140,254 Sources: Arthur D. Little and Harte Hanks 2007-2012 Near main
Slide 9: Competitive Advantage
Competitive Advantage As of April 2008 Electric Equivalent Propane Equivalent Fuel Oil Equivalent $3,956 $3,308 $2,121 NJNG $1,288
Slide 10: Regulatory Relationships
Regulatory Research Associates rates NJ regulation as “Average 2” Regulatory Relationships
Slide 11: Base Rate Case Overview
Base Rate Case Overview • November 20 th petition filed • Requested an increase of $58.4 million, update $73.1 million • Includes equity capital of approximately $500 million • Return on equity requested - 11.375 percent • Proposed rate base of $953 million
Slide 12: Rate Case Schedule
Rate Case Schedule Phase Activity Date Filing of Testimony & Discovery Petition/Pre-filed testimony 11/20/07 Pre-hearing conference at OAL 1/25/07 & 2/14/08 Discovery period Ongoing Intervener Testimony filed 4/18/07, 5/09/08 & 5/30/08 Company Rebuttal Testimony filed 5/23/08 - 6/27/08 Hearings Days
Slide 13: Rate Counsel Testimony
Rate Counsel Testimony • Four subject areas – Return on Equity/Capital Structure – Depreciation – Cash Working Capital – Policy • Recommended 9.5 percent ROE (48 percent equity) vs. 11.375 percent (50 percent equity) • Recommended $14 million reduction in depreciation expense • Positions taken were
Slide 14: Existing Incentives
Existing Incentives $24 $34 $37 $43 $45 $24 $24 September March • Off-system sales and capacity release – In place since 1992 – Optimization of capacity assets – Sharing formula of 85 percent customer; 15 percent NJNG • Storage Incentive (SI) – In place since 2004 – Promotes long-term price stabilit
Slide 15: Proposed Incentive Structure
Proposed Incentive Structure • Part of 2007 base rate case • Remain in effect until next base rate case • No change to off-system/capacity release programs • FRM – Eliminate transaction cost limits/or double the amount – Tie volume to BGSS purchase requirement • SI program – Expand the volume from 1
Slide 16: Conservation Incentive Program
Conservation Incentive Program • Approved by the BPU on October 12, 2006 – Outside of traditional rate proceeding • Stabilizes NJNG gross margin from: – Declining usage – Weather 3-year pilot - effective October 1, 2006 – NJNG protected for all variations in customer usage – New customer programs be
Slide 17: NJRES Key Initiatives
NJRES Key Initiatives • Continuing to replace existing assets as they expire • Evaluating midstream opportunities • Continuing to bid for asset management opportunities • Expanding into new regions
Slide 18: NJRES Firm Portfolio as of March 2008
NJRES Firm Portfolio as of March 2008
Slide 19: No Speculation
No Speculation • NJRES has little commodity exposure • When commodity is purchased it is sold concurrently – For commodity injected into storage a future month is sold – For commodity purchased at one location, another location is sold • Both storage and transportation assets provide options • The a
Slide 20: Managing Risk
Managing Risk • Strictly natural gas operation - no electric exposure • Not a speculative trader – Manage assets for primarily hedged positions • Disciplined risk management guidelines – Strict internal controls and credit procedures – Daily compliance monitoring by financial department • IT Systems
Slide 21: Counterparty Credit Ratings
97 percent of net sales with investment grade companies Counterparty Credit Ratings * Credit exposure to non-investment grade companies is mitigated through the use of prepayments or Letters of Credit. months ended March 31, 2008 Updating numbers
Slide 22: Rockies Supply Steckman Ridge Project Overview
Rockies Supply Steckman Ridge Project Overview
Slide 23: Steckman Ridge
Steckman Ridge Status • Negotiating with potential customers • FERC filing on November 1, 2007 • Expectations moving forward – FERC certificate expected shortly – Begin construction June 2008 – Begin customer injections May 2009 – Commercial operations winter 2009/2010
Slide 24: Iroquois Pipeline
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
Slide 25: NJR Home Services
NJR Home Services • Created in 2000 • Spinout of NJNG Appliance Service – Flexibility of Pricing • Not capital intensive • Principally a service business (i.e., labor intensive) • Organic growth • High quality and service levels • High productivity
Slide 26: NJRHS - Growth in Services
NJRHS - - Growth in Services $11.3 million $27.1 million
Slide 27: Net Income
Net Income $3.0 $2.0 i] = $10 $08 $0.0 2004 2005 2006 2007 2003
Slide 28: Net Financial Earnings per Share
NJR estimates Net Financial Earnings of $2.17 to $2.23 per basic share in fiscal 2008 Net Financial Earnings per Share * Net of certain items * September March
Slide 29: Capital Expenditure Forecast
Capital Expenditure Forecast * Excludes MGP remediation costs, which are recovered through a separate rider
Slide 30: Dividend and Payout Ratio
Dividend and Payout Ratio Payout Ratio * Dividends per Share * Based on Net Financial Earnings ** Based on mid point of 2008 company guidance
Slide 31: Summary
Summary • Steady utility growth • Continued growth in utility plant • Constructive regulatory relations • Healthy financial profile • Demonstrated record of consistent financial performance