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| 8-K - 8-K - NEW JERSEY RESOURCES CORP | d618894d8k.htm |
 Kansas City Financial Community
October 29, 2013
Exhibit 99.1 |
 Regarding Forward-Looking Statements
1
1
Certain statements contained in this presentation are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Words such as
“anticipates,” “estimates,” “expects,” “projects,” “may,” "will," “intends,” “expects,” "believes," or “should” and similar expressions may identify
forward- looking information and such forward-looking statements are made based upon
management’s current expectations and beliefs as of this date concerning future
developments and their potential effect upon New Jersey Resources (NJR or the Company). There can be
no assurance that future developments will be in accordance with management’s expectations
or that the effect of future developments on NJR will be those anticipated by management. NJR cautions persons
reading or hearing this presentation that the assumptions that form the basis for forward-looking
statements regarding NJR's net financial earnings (NFE) for fiscal 2013 through fiscal 2017,
forecasted contribution of business segments to fiscal 2013 and long-term NFE, long-term financial goals of NJR, expected contribution
by new customers of New Jersey Natural Gas Company (NJNG) to utility gross margin, expected number of
new customers of NJNG, new sources of utility gross margin at NJNG for 2013 through 2017, Solar
Renewable Energy Certificate (SREC) prices, NJR’s effective tax rate, estimated capital expenditures in fiscal 2013
and beyond by NJNG and NJRCEV, planned natural gas vehicle (NGV) stations, the diversification of
NJRCEV’s strategy, the impact of the Two Dot Wind farm on earnings, and expected dividend
payout ratio include many factors that are beyond the Company’s ability to control or estimate precisely, such as estimates of
future market conditions and the behavior of other market participants. The factors that could
cause actual results to differ materially from NJR’s expectations include, but are not limited to, weather and economic conditions;
demographic changes in the NJNG service territory and their effect on NJNG's customer growth;
volatility of natural gas and other commodity prices and their impact on NJNG customer usage,
NJNG's Basic Gas Supply Service incentive programs, NJRES' operations and on the Company's risk management efforts;
changes in rating agency requirements and/or credit ratings and their effect on availability and cost
of capital to the Company; the impact of volatility in the credit markets; the ability to
comply with debt covenants; the impact to the asset values and resulting higher costs and funding obligations of NJR's pension and
postemployment benefit plans as a result of downturns in the financial markets, a lower discount rate,
and impacts associated with the Patient Protection and Affordable Care Act; accounting effects
and other risks associated with hedging activities and use of derivatives contracts; commercial and wholesale credit risks,
including the availability of creditworthy customers and counterparties and liquidity in the wholesale
energy trading market; the ability to obtain governmental approvals and/or financing for the
construction, development and operation of certain non-regulated energy investments; risks associated with the management of
the Company's joint ventures and partnerships; risks associated with our investments in renewable
energy projects and our investment in an on-shore wind developer, including the
availability of regulatory and tax incentives, logistical risks and potential delays related to construction, permitting, regulatory approvals and
electric grid interconnection, the availability of viable projects and NJR's eligibility for federal
investment tax credits (ITC), and production tax credits (PTC), the future market for SRECs and
operational risks related to projects in service; timing of qualifying for ITCs due to delays or failures to complete planned solar energy
projects and the resulting effect on our effective tax rate and earnings; the level and rate at which
NJNG's costs and expenses (including those related to restoration efforts resulting from
Superstorm Sandy) are incurred and the extent to which they are allowed to be recovered from customers through the regulatory
process; access to adequate supplies of natural gas and dependence on third-party storage and
transportation facilities for natural gas supply; operating risks incidental to handling,
storing, transporting and providing customers with natural gas; risks related to our employee workforce, including a work stoppage; the
regulatory and pricing policies of federal and state regulatory agencies; the possible expiration of
the NJNG Conservation Incentive Program (CIP), the costs of compliance with the proposed
regulatory framework for over-the-counter derivatives; the costs of compliance with present and future environmental laws, including
potential climate change-related legislation; risks related to changes in accounting standards;
the disallowance of recovery of environmental-related expenditures and other regulatory
changes; environmental-related and other litigation and other uncertainties; risks related to cyber-attack of failure of information technology
systems; and the impact of natural disasters, terrorist activities, and other extreme events on our
operations and customers, including any impacts to utility gross margin, and restoration costs
resulting from Superstorm Sandy. The aforementioned factors are detailed in the “Risk Factors” sections of our Annual Report on
Form 10-K filed on November 28, 2012, as filed with the Securities and Exchange Commission
(SEC) and our Quarterly Report on Form 10-Q, filed with the SEC on May 3, 2013, each of
which is available on the SEC’s website at sec.gov. Information included in this presentation is representative as of today only and while
NJR periodically reassesses material trends and uncertainties affecting NJR's results of operations
and financial condition in connection with its preparation of management's discussion and
analysis of results of operations and financial condition contained in its Quarterly and Annual Reports filed with the SEC, NJR does
not, by including this statement, assume any obligation to review or revise any particular
forward-looking statement referenced herein in light of future events. |
 Disclaimer Regarding Non-GAAP Financial Measures
This
presentation
includes
the
non-GAAP
measures
net
financial
earnings
(losses),
financial
margin
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
measures,
such
as
cash flow, net income, operating income or earnings per share. Net financial
earnings (losses) and financial margin exclude unrealized gains or losses
on
derivative
instruments
related
to
the
Company’s
unregulated
subsidiaries
and
certain
realized
gains
and
losses
on
derivative
instruments
related
to
natural
gas
that
has
been
placed
into
storage
at
NJRES.
Volatility
associated
with
the
change
in
value
of
these
financial
and
physical
commodity
contracts is reported in the income statement in the current period. In order to
manage its business, NJR views its results without the impacts of the
unrealized gains and losses, and certain realized gains and losses, caused by
changes in value of these financial instruments and physical commodity
contracts prior to the completion of the planned transaction because it shows
changes in value currently as opposed to when the planned transaction
ultimately is settled. NJNG’s utility gross margin represents the results
of revenues less natural gas costs, sales and other taxes and regulatory rider
expenses, which are key components of the Company’s operations that move in
relation to each other. Management uses net financial earnings (NFE),
financial margin and utility gross margin as supplemental measures to other
GAAP results to provide a more complete understanding of the Company’s performance.
Management believes these non-GAAP measures are more reflective of the
Company’s business model, provide transparency to investors and enable
period-to-period comparability of financial performance. For a full discussion
of our non-GAAP financial measures, please see Item 7 of our Annual Report on
Form 10-K for the fiscal year ended September 30, 2012, filed on
November 28, 2012. This information has been provided pursuant to the
requirements of SEC Regulation G.
2
2 |
 New Jersey Resources: Growth Initiatives
Infrastructure
Growth
–
Specific
plans
to
nearly
double
plant investment by fiscal 2017
Customer
and
Gross
Margin
Growth
–
Diversified
and
sustainable gross margin growth
Non-Regulated Investments –
Long-term plan to diversify
clean energy portfolio to reduce reliance on Investment Tax
Credits (ITCs)
Financial
Goals
–
Above-average
earnings
and
dividend growth
3 |
 4
to 7 Percent Average Long-Term Annual NFE Growth Strategies, with
65-80 Percent from
Regulated Businesses
Regulated Businesses
Significant increase in NJNG
regulated infrastructure
investments
Diversified sources of NJNG
gross margin
November 2015 base
rate filing
Targeted growth from
NJR Midstream
Non-Regulated Businesses
Diversify clean energy
portfolio
Prudently expand onshore
wind investments
Steady contributions from
NJR Energy Services
Expanded products and
markets at NJR Home Services
4 |
 7,456
new
customers
in
fiscal
2013,
up
11
percent
over
last
year
3,627
new
construction
customers,
up
27
percent
over
last
year
3,829
conversions
from
other
fuels;
51
percent
of
total
5
Strong NJNG Customer Growth Adds Gross Margin
Customer Growth Capital Investment Estimates
($mm)
2009-
2012
Actual
2013F
2014E
2015E
2016E
2017E
Total
$79.4
$24.5
$24.7
$25.6
$25.5
$25.5
$205.2
177.4
35.4
57.5
49.0
48.1
40.6
408.0
$256.8
$59.9
$82.2
$74.6
$73.6
$66.1
$613.2
Customer growth estimated to add $3.9 million
annually of
utility gross margin Customer Growth
Maintenance/Other
Total
619
existing
customer
heat
conversions
in
fiscal
2013
Over next two fiscal years, expected to add about 14,000-16,000
new customers |
 6
Key Trends Support Future Customer Growth
Sources: Arthur D. Little, Harte Hanks and NJNG
Source: US Energy Information Administration. * Data as of March
2013. Based on
100,000 comparable BTUs
Demographics
Support above average growth
Fuel Pricing
Supports natural gas advantage
0.0%
5.0%
10.0%
15.0%
NJ
Morris
Monmouth
Ocean
4.5%
4.7%
2.5%
12.8%
Population Change 2000-2010
$0.00
$0.75
$1.50
$2.25
$3.00
$3.75
$4.50
$5.25
NJNG
Fuel Oil
Propane
Electricity
$1.13
$3.20
$3.90
$4.40
Equivalent Cost Value for Customers *
2013-
2017
15,900
2018-
Buildout
71,600
Future New Construction
Non Heat
7,246
On Main
37,749
Near
Main
29,192
Off Main
49,800
Future Conversions |
 Current NJNG Infrastructure Investments
7
SAFE
(Safety
Acceleration
and
Facility
Enhancement
Program)-
$130 million over four years to replace 276 miles, or 50 percent, of cast
iron and unprotected steel main
Superstorm Sandy -
Range of $35 to $40 million over three years
NGV
Advantage
-
Total
investment
up
to
$10
million;
$6
-
$8
million
already committed to three refueling stations
Current Infrastructure Capital Investment Estimates
($mm)
2009-2012
Actual
2013F
2014E
2015E
2016E
2017E
Total
AIP/SAFE
$136.7
$52.0
$38.3
$40.4
$39.1
-
$306.5
Superstorm Sandy
-
26.0
5.3
5.2
-
-
36.5
NGV Advantage
-
1.0
9.0
-
-
-
10.0
Total
$136.7
$79.0
$52.6
$45.6
$39.1
-
$353.0 |
 Planned NJNG Infrastructure Capital Projects
NJ
RISE
(Reinvestment
in
System
Enhancement)
-
$102
million
NJNG storm response filing with NJ BPU on September 3, 2013
Additional pipe to barrier islands and excess flow valves
Liquefaction
Facility
-
$35.7
million
Reduces LNG transportation costs and creates customer savings
Southern
Reliability
Link
(SRL)
-
$130
million
Adding high-pressure natural gas pipeline to support reliability
Diversifies supplier base
Supports growth in Ocean County
8
Planned Infrastructure Capital Investment Estimates
($mm)
2009-2012
Actual
2013F
2014E
2015E
2016E
2017E
Total
NJ RISE
-
-
$4.6
$13.0
$12.0
$12.0
$41.6
Liquefaction
-
-
16.0
16.3
3.4
-
35.7
Southern Reliability
-
-
2.3
12.3
80.6
34.8
130.0
Total
-
-
$22.9
$41.6
$96.0
$46.8
$207.3 |
 Capital of Over $1 Billion Drives Long-Term Growth
Expected Base Rate Case Resolution by Fiscal 2017
9
NJNG Capital Expenditure Estimates
($mm)
2009-
2012
Actual
2013F
2014E
2015E
2016E
2017E
Total
Customer Growth
$79.4
$24.5
$24.7
$25.6
$25.5
$25.5
$205.2
Maintenance/Other
177.4
35.4
57.5
49.0
48.1
40.6
408.0
AIP/SAFE
136.7
52.0
38.3
40.4
39.1
-
306.5
Superstorm Sandy
-
26.0
5.3
5.2
-
-
36.5
NGV Advantage
-
1.0
9.0
-
-
-
10.0
NJ RISE
-
-
4.6
13.0
12.0
12.0
41.6
Liquefaction
-
-
16.0
16.3
3.4
-
35.7
Southern Reliability
-
-
2.3
12.3
80.6
34.8
130.0
SAVEGREEN
36.5
24.0
42.5
42.5
42.5
16.2
204.2
Total
$430.0
$162.9
$200.2
$204.3
$251.2
$129.1
$1,377.7 |
 Infrastructure Investments Already Earning a Return
10
NJNG currently earning a return on 53 percent of these investments
Currently
Earning a
Return -
$726mm
Future
Returns -
$652mm |
 Customer Growth: NJNG Gross Margin
11
Annual 1.5 to 1.6 percent
customer growth
Improving new
construction
Strong conversion
market
NJNG has decoupled
rates (Conservation
Incentive Program)
Provides gross
margin stability
11
$0.0
$6.0
$12.0
$18.0
$24.0
FY13F
FY14E
FY15E
FY16E
FY17E
$3.7
$8.1
$12.8
$17.4
$22.1 |
 The SAVEGREEN Project
®
: NJNG Gross Margin
12
Promotes customer
investment in high-
efficiency heating
equipment
BPU approved a
significant program
expansion in June 2013
NJNG earns 9.75 to
10.3 percent Return on
Equity (ROE)
NJNG expects to invest $85 million over the next two years
12
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
FY13F
FY14E
FY15E
FY16E
FY17E
$8.2
$10.1
$10.6
$2.9
$5.7 |
 The NGV Advantage: NJNG Gross Margin
13
Total potential
investment of up
to $10 million
$6 -
$8 million
committed on three
contracts
NJNG earns 10.3
percent ROE
13
$0.0
$1.0
$2.0
$3.0
FY13F
FY14E
FY15E
FY16E
FY17E
$1.8
$1.8
$1.8
$0.6
$0.7
$0.8
Infrastructure
Throughput
$.01
$.2
$2.3
$2.5
$2.6 |
 NJNG Gross Margin: Basic Gas Supply
Service
(BGSS) Incentives
14
Programs in place
through October 2015
to benefit customers
and shareowners
Adds about $.08
annually to NFE
per share
BGSS has saved customers ~$621 million since 1992
14
$0.0
$2.0
$4.0
$6.0
$8.0
FY13F
FY14E
FY15E
FY16E
FY17E
$7.3
$6.5
$6.0
$6.0
$6.0 |
 Diversified and Growing NJNG Gross Margin
Incremental utility gross margin expected to triple over five years
15
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
FY13F
FY14E
FY15E
FY16E
FY17E
$20.3
$29.3
$36.0
$41.3
$14.1
Customer Growth
SAVEGREEN
NGV
BGSS Incentives |
 Targeted Growth from Regulated NJR Midstream
Current investments provide 5 to 10 percent of NFE
Strategic Marcellus location enhances value
Leveraging customer contacts for growth opportunities
16
Iroquois Pipeline
5.53 percent interest in gas pipeline to
transport Canadian natural gas to Northeast
Steckman Ridge
50/50 joint venture with Spectra Energy
12 Bcf natural gas storage facility in SW PA |
 4 to 7 Percent Average Long-Term Annual NFE
Growth Strategies, with 20-35 Percent
from
Non-Regulated Businesses
Regulated Businesses
Significant increase in NJNG
regulated infrastructure
investments
Diversified sources of NJNG
gross margin
November 2015 base
rate filing
Targeted growth from
NJR Midstream
Non-Regulated Businesses
Diversify clean energy
portfolio
Prudently expand onshore
wind investments
Steady contributions from
NJR Energy Services
Expanded products and
markets at NJR Home Services
17 |
 Clean Energy Portfolio Strategy
Renewable Portfolio Standard (RPS) provides a growing
source of demand
62 MW inventory of grid-connected projects over next four years
Sunlight Advantage residential solar program
Gradual decline in solar capital spending by 2017
ITCs reduce to 10 percent in January 2017
How will growth continue?
Increase SREC revenue; higher prices and volume
Invest in onshore wind projects and other clean energy
investments; e.g. ,Combined Heat and Power (CHP)
Grow regulated earnings contribution
18
Long-term goal to maintain NJRCEV at 10 to 20 percent of NFE
|
 Improving SREC Fundamentals
NJ increased solar RPS effective June 2013
Solar construction activity has slowed
SREC prices have nearly doubled
SREC sales expected to grow from approximately 65,000 in fiscal
2013 to 174,000 in fiscal 2017
19
ICAP/KARBONE Average
$80
$90
$100
$110
$120
$130
$140
$150
$160
Energy Year 2014 SREC Prices
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
$80
$90
$100
$110
$120
$130
$140
$150
$160
SREC Prices and Construction Activity
Installed MW
Average SREC Price |
 Clean Energy Portfolio Diversification: Onshore Wind
Why are we doing this?
Supports NJR’s electric strategy
Earnings growth opportunities supported by long-term Power Purchase
Agreements (PPAs) with annuity-like returns
29 states and the District of Columbia have RPS
Tax credits are production based
NJR’s Strategic Partnership with OwnEnergy, Inc.
OwnEnergy focuses on small to mid-sized projects; current project pipeline
totals 1,300 MW
Estimated minimum unlevered IRR of 8.75
percent;
estimated ROE of 15 percent
NJR has “first refusal”
purchase option
Will evaluate project financing
20 |
 Clean Energy Portfolio Diversification: Two Dot Wind Farm
Purchased from OwnEnergy, Inc.
9.7 MW utility scale wind farm project
located in Montana, east of Helena
Approximately $22 million investment
25-year PPA in place to sell power
to NorthWestern Energy
Start up expected summer 2014
Strong partners -
GE, Mortenson
Construction, etc.
21
Expected to contribute $.02-$.04 per share annually
beginning in fiscal 2015 |
 NJRES: Growth Opportunities in a Changing Market
Portfolio restructured to reflect current market realities
Growth opportunities from physical natural gas and
producer services
Providing energy solutions for customers in the Marcellus
Shale and other natural gas regions
Producers, Utilities, Power Generators,
Pipelines
and Industrials
5 to 15 percent of total NFE
22
Holds 1.1 Bcf/day of firm
transportation and more than
33 Bcf of storage throughout the
U.S. and Canada |
 NJR Home Services: Retail Solutions for Customer Comfort
Expanded array of services now offered
Whole-house electric and plumbing contracts
Standby generator contracts
Air conditioning
Generators
Pursuing geographic expansion
Currently marketing in Sussex,
Warren and Hunterdon Counties
2 to 5 percent of total NFE
23 |
 24
Consistent and Sustainable Financial Performance
* Assumes a range of 4-7 percent average annual growth
24
$1.61
$1.73
$1.80
$1.88
$2.11
$2.24
$2.40
$2.46
$2.58
$2.71
$2.70 –
$2.75
$2.75 –
$2.95
$3.21 –
$3.49
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013E
2014E
2017E*
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
$3.40
$3.60
Net Financial Earnings Per Share |
 Fiscal
2014
NFE
Per
Share
Guidance
-
$2.75
to
$2.95
25
Regulated businesses expected to contribute 65-80 percent of total NFE
New Jersey
Natural Gas
60-70%
NJR Midstream
5-10%
NJR Clean Energy
Ventures
10-20%
NJR Home
Services
2-5%
NJR Energy
Services
5-15% |
 Payout ratio goal is 60 –
65 percent
Growing and Sustainable Dividend
* Current annual rate
** Assumes 5 percent average annual growth
*** Based on NJR Net Financial Earnings
**** Peer group average based on 2013 earnings estimates and indicated dividend
from Bloomberg. Peer group: ATO, GAS, LG, NWN, PNY,
SJI, SWX, VVC and WGL 26
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
2007
2008
2009
2010
2011
2012
2013
2014*
2017E**
$1.01
$1.12
$1.24
$1.36
$1.44
$1.54
$1.62
$1.68
$1.92
Dividend Growth
0%
16%
33%
49%
65%
2005
2006
2007
2008
2009
2010
2011
2012
Peer Group****
49%
51%
48%
50%
52%
55%
56%
57%
63%
Payout Ratio*** |
 NJR’s Long-Term Financial Goals
Achieve average long-term NFE growth of 4 to 7 percent
Significant capital investment in regulated business to support customer
growth and maintain safe, reliable and resilient service
New customers and regulatory initiatives generate significant
NJNG gross margin growth
Provide annual dividend growth of at least 5 percent
Targeted payout ratio of 60 to 65 percent
Expect at least 65 to 80 percent of earnings
from
Regulated Businesses
Supported by constructive and collaborative regulatory relationships
27 |
 Kansas City Financial Community
October 29, 2013 |