Attached files
| file | filename |
|---|---|
| EX-99.1 - PRESS RELEASE DATED AUGUST 2, 2016 - NEW JERSEY RESOURCES CORP | pressrelease3q2016.htm |
| 8-K - CURRENT REPORT - NEW JERSEY RESOURCES CORP | form8-k.htm |
SAFE, RELIABLE NATURAL GAS AT OUR
CORE … AND SO MUCH MORE
Fiscal 2016 Third-Quarter Update
August 2, 2016
Fiscal 2016 Third Quarter Update
Regarding Forward Looking Statements
Certain statements contained in this presentation are 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 Litigation Reform Act of 1995. New Jersey Resources (NJR or the Company) cautions readers that the
assumptions forming the basis for forward-looking statements include many factors that are beyond NJR’s ability to control or estimate precisely, such as estimates of future market
conditions and the behavior of other market participants. Words such as “anticipates,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” “believes,” “should” and similar
expressions may identify forward-looking statements and such forward-looking statements are made based upon management’s current expectations, assumptions and beliefs as of
this date concerning future developments and their potential effect upon NJR. 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. Forward-looking statements in this presentation include, but are not limited to,
certain statements regarding NJR's Net Financial Earnings (NFE) guidance for fiscal 2016 and NFE growth beyond 2016, forecasted contribution of business segments to fiscal 2016
NFE and to NFE beyond fiscal 2016, future New Jersey Natural Gas Company (NJNG) customer growth, future capital expenditures and infrastructure investments, the effect of the
federal Production Tax Credit (PTC) and federal Investment Tax Credit (ITC) extension on NJRCEV, the long-term outlook for NJR Clean Energy Ventures Corporation (NJCEV),
diversification of NJRCEV’s strategy, NJRCEV’s future solar and wind projects, NJRCEV’s other potential renewable/distribution projects and future opportunities and the PennEast
Pipeline project.
The factors that could cause actual results to differ materially from NJR’s expectations, assumptions and beliefs include, but are not limited to, weather and economic conditions;
changes in the rate of NJNG’s customer growth; volatility of natural gas and other commodity prices; changes in rating agency requirements and/or credit ratings; 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 post-
employment benefit plans as a result of downturns in the financial markets, lower discount rates, revised actuarial assumptions or 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 and regulatory approvals, land-use
rights, electrical grid connection and/or financing for the construction, development and operation of NJR’s non-regulated energy investments and NJNG’s planned infrastructure
projects in a timely manner; risks associated with the management of the company's joint ventures, partnerships and investment in a master limited partnership; risks associated with
our investments in renewable energy projects, including the availability of regulatory and tax incentives, the availability of viable projects and NJR's eligibility for ITCs and PTCs, the
future market for Solar Renewable Energy Certificates (SRECs) and operational risks related to projects in service; timing of qualifying for ITCs and PTCs due to delays or failures to
complete planned solar and wind energy projects; the level and rate at which NJNG's costs and expenses are incurred and the extent to which they are allowed to be recovered from
customers through the regulatory process, including through the base rate case filing; 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; the regulatory and pricing policies of federal and state regulatory agencies; 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 or failure of information technology systems; and the impact of natural disasters,
terrorist activities, and other extreme events on our operations and customers. The aforementioned factors are detailed in the “Risk Factors” sections of our Annual Report on Form
10-K filed with the Securities and Exchange Commission (SEC) on November 24, 2015, 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.
2
Fiscal 2016 Third Quarter Update
Disclaimer Regarding Non-GAAP Financial Measures
This presentation includes the non-GAAP measure, Net Financial Earnings (NFE). As an indicator of the Company’s
operating performance, this measure 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.
NFE excludes 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 NJR
Energy Services (NJRES), net of applicable tax adjustments as described below. 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. An annual estimated effective tax rate is calculated for NFE purposes and any
necessary quarterly tax adjustment is applied to NJRCEV, as such adjustment is related to tax credits generated by
NJRCEV.
Management uses NFE as a supplemental measure to other GAAP results to provide a more complete
understanding of the Company’s performance. Management believes this non-GAAP measure is more reflective
of the Company’s business model, provides transparency to investors and enables period-to-period
comparability of financial performance. In providing fiscal 2016 earnings guidance, management is aware that
there could be differences between reported GAAP earnings and NFE due to matters such as, but not limited to,
the positions of our energy-related derivatives. At this time, management is not able to reasonably estimate the
aggregate impact of these items on reported earnings and therefore is not able to provide a reconciliation to the
corresponding GAAP equivalent for its operating earnings guidance without unreasonable efforts. For a full
discussion of our non-GAAP financial measures, please see NJR’s most recent Form 10-K, Item 7. This
information has been provided pursuant to the requirements of SEC Regulation G.
3
Fiscal First Quarter 2016 Update 4Fiscal Third Quarter 2016 Update
4
Net Financial Earnings*
($MM)
Three Months Ended
June 30,
Nine Months Ended
June 30,
Company 2016 2015 2016 2015
New Jersey Natural Gas $3.6 $7.2 $83.5 $84.0
NJR Midstream 2.3 2.5 6.9 7.2
Subtotal 5.9 9.7 90.4 91.2
NJR Energy Services .3 (5.3) 27.6 47.5
NJR Clean Energy Ventures 2.4 (3.8) 21.9 18.2
NJR Home Services/Other 2.3 1.9 .3 (.1)
Total $11.0 $2.5 $140.1 $156.7
Per basic share $.13 $.03 $1.63 $1.84
Fiscal-Third Quarter 2016 Results
* A reconciliation form NFE to net income is set forth on slide 25 in the Appendix.
Our fiscal 2016 NFE is guidance $1.55 to $1.65 per share
Fiscal 2016 Third Quarter Update
Recent Highlights
Financial Results
Net Financial Earnings (NFE) of $.13 per share
Strategic Actions
NJNG
Liquefaction project operational
Base rate case in settlement discussions
The SAVEGREEN Project® extended
Ongoing infrastructure investments
NJR Midstream
FERC issues draft environmental impact statement on PennEast Pipeline
NJRCEV
Three commercial solar projects totaling 10.9 MW placed into service
Added 323 residential customers through Sunlight Advantage® program
Construction continues at Ringer Hill, our fourth onshore wind project
5
Fiscal 2016 Third Quarter Update
Base Rate Case Update
November 2015 base rate case filing established with
approval of SAFE in 2012
Parties are actively engaged in settlement talks
Suspension of schedule was granted by the Administrative
Law Judge
Working toward resolution with new base rates expected to
be effective in early fiscal 2017
6
Fiscal 2016 Third Quarter Update
Southern Reliability Link (SRL)
30-mile pipeline to support improved system integrity and
reliability in Monmouth, Ocean and Burlington Counties, the
southern portion of NJNG’s service area
Construction and route approved by BPU in January 2016
March 2016 BPU order found SRL reasonably necessary for
service, convenience, or welfare of the public
New Jersey Department of Environmental Protection recently
deemed SRL administratively complete. Public comment and
technical review will follow
NJNG continues to progress through the SRL permitting
process
7
Fiscal First Quarter 2016 Update 8Fiscal Third Quarter 2016 Update
8
Our Long-Term Average Annual NFE Growth Strategy
Remains 5 to 9 Percent
How will we achieve this?
Invest in infrastructure to support
customer growth and system
reliability and resiliency
Develop Midstream projects including
PennEast Pipeline
Invest and develop wind and solar
distributed power projects
Provide physical and producer
services to wholesale customers
60-70% 10-20%
5-15%
5-10%
1-3%
New Jersey Natural Gas NJR Midstream NJR Energy Services
NJR Home Services NJR Clean Energy Ventures
Fiscal 2016 Third Quarter Update
NJNG’s Regulated Growth Model
9
• Growing service area
• Healthy conversion
market
Customer
Growth
• SAVEGREEN
• CIP
• SAFE
• NJ RISE
• Off-system sales
• Capacity release
Energy
Efficiency
BGSS
Incentives
Utility
Gross
Margin
Infrastructure
Target 60 – 70 percent of Annual NFE
Fiscal 2016 Third Quarter Update
NJR Midstream’s Growth Model
10
• 50 percent interest in
12 Bcf storage facility
in southwest PA
• PennEast Pipeline
• FERC issued DEIS on July 22, 2016
• Currently anticipated in service date the last
quarter of fiscal 2018 or first quarter of fiscal
2019
• Investment value $51.7
million*
• Current annual distribution
rate of $0.854 per unit
Steckman
Ridge
Midstream
Projects
NFE
* Based on 1,838,932 units at closing price of $28.13 on June 30, 2016
Dominion
Midstream
Partners
Target 5 to 10 percent of Annual NFE
Fiscal 2016 Third Quarter Update
NJR Clean Energy Ventures’ Growth Model
11
• Three operating wind farms
• Additional 39.9 MW-Ringer Hill
under construction
• Fiscal 2016 wind capital
expenditures - $102 million
• 4,576 Sunlight Advantage®
customers
• Fiscal 2016 residential solar
capital expenditures - $34 million
NFE
• Additional 10.9 MW to come on
line by calendar year end 2016
• Fiscal 2016 commercial solar
capital expenditures - $75 million
Residential
Solar
(40.6 MW)
Onshore
Wind
(80.4 MW)
Commercial
Solar
(93.5 MW)
Target 10 to 20 percent of Annual NFE
Fiscal 2016 Third Quarter Update
NJR Energy Services’ Growth Model
12
Pipeline
Capacity
(1.6 Bcf/d)
NFE
Storage
Capacity
(45 Bcf)
Target 5 to 15 percent of Annual NFE
Producer
Services Utility Asset
Management
Electric
Generation
Supply
Fiscal First Quarter 2016 Update 13Fiscal Third Quarter 2016 Update
13
Net Financial Earnings (NFE) by Business Segment
Fiscal First Quarter 2016 Update 14Fiscal Third Quarter 2016 Update
14
Customer Growth Drives Higher Utility Gross Margin
Fiscal 2016 Third Quarter Update
Customer Growth Continues
15
5,289 new customers added in
first nine months of FY2016
• 2,884 new construction
customers
• 2,405 conversions
545 heat conversions
We expect these new and
conversion customers to
contribute approximately $3.9
million annually to utility gross
margin
On track to add 8,150 new
customers this year
Three-year forecast of 24,000 - 28,000 new customers
1.6 percent annual new customer growth rate
Fiscal First Quarter 2016 Update 16Fiscal Third Quarter 2016 Update
16
NJNG Capital Investment June 30, 2016 Update
CAPITAL INVESTMENT
($MM)
FYTD 2016E STATUS
NJNG
Customer Growth $24.6 $35.2 Added 5,289 customers in first nine months; on target to add 8,150 customers in FY2016
Maintenance/Other 64.2 70.4 Capital spending on track to enhance system safety and reliability
SAFE 23.8 38.4 SAFE extension of $200 million to complete replacement of unprotected steel pipe pending at BPU
NJ RISE 9.4 17.9 Installation of excess flow valves and engineering work continues
Liquefaction Project 9.6 9.8 Project began operation
Southern Reliability 1.8 31.7
Planned 30-mile route approved by BPU in January 2016. March 2016 BPU Order
found SRL reasonably necessary for service, convenience or welfare of the public.
Appeals pending. NJNG is confident that the order will be upheld by the Appellate
Court. July 2016 NJDEP deems NJNG’s permit applications administratively
complete, which is followed by public comment and technical review.
Total NJNG $133.4 $203.4
Fiscal First Quarter 2016 Update 17Fiscal Third Quarter 2016 Update
17
Steckman Ridge
12 Bcf natural gas storage facility in
southwest Pennsylvania
50/50 joint venture with Spectra Energy
Dominion Midstream Partners, LP
1.8 million units
Current annual distribution rate of $.854
PennEast Pipeline
20 percent ownership in 118-mile
transmission pipeline connecting
Marcellus shale region supply to
Northeast
Pipeline capacity of up to 1.1 MMdth/day
Draft Environmental Impact Study issued
by FERC on July 22, 2016
45 days for response from PennEast
NJR Midstream
Fiscal 2016 Third Quarter Update
NJR Clean Energy Ventures - Solar
18
Commercial
25 projects in service; 93.5 MW
The Sunlight Advantage
Nearly 4,600 customers; 40.6 MW
Fiscal 2016 Third Quarter Update
NJRCEV Is Hedging SRECs to Reduce Exposure to
Market Volatility
168 166
147
173
197
214
0
50
100
150
200
250
FY16E FY17E FY18E
Th
ousa
n
ds
of SR
EC
s
Hedged Expected Generated Current Generation
Pct. Hedged: 97% 84% 67%
Average Price: $214 $230 $227
As of June 30, 2016
19
Fiscal 2016 Third Quarter Update
NJR Clean Energy Ventures - Growing Onshore Wind
20
Project
In Service
Date PPA/Hedge
Size
(MW)
Capital
($MM) Location Contractor Turbines
Ringer Hill Year-end 2016 Majority of energy produced
will be hedged under 15-year
agreement with Iron
Mountain
39.9 $84 Pennsylvania
60 miles SE
of Pittsburgh
Mortensen
Construction
General
Electric
Two Dot June 2014 25-year PPA with
Northwestern Energy
9.7 $21 Montana
93 miles SE
of Helena
Mortensen
Construction
General
Electric
Carroll Area January 2015 25-year PPA with
MidAmerican Energy
20.0 $42 Iowa
65 miles NW
of Des
Moines
Mortensen
Construction
Siemens
Alexander December
2015
PPAs and financial hedges
with Kansas City BPU and
Yahoo!, Inc.
50.7 $85 Kansas
Rush County
Mortensen
Construction
Siemens
Total 120.3 $232
Over $230 million invested, four projects located in four states
Fiscal First Quarter 2016 Update 21Fiscal Third Quarter 2016 Update
21
Serves wholesale customers across North America
Diverse portfolio of physical natural gas assets
Firm storage (45 Bcf in the US and Canada)
Firm transportation (1.6 Bcf/day)
Services include:
• Transporting natural gas
• Selling storage gas during peak periods
• Asset management agreements
• Producer services
Fee-based service; located primarily in
the Marcellus shale region $0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2010 2011 2012 2013 2014 2015 3Q15 3Q16
$M
M
Financial Margin NFE
NJR Energy Services
Fiscal First Quarter 2016 Update 22Fiscal Third Quarter 2016 Update
22
Impact of Volatility
▪ Warmer weather has caused less volatility in fiscal 2016 than past two years
Source: Platts, a division of McGraw Hill Financial, TETCO M-3
Fiscal 2016 Third Quarter Update
Total Return Periods Ended June 30, 2016
44.1%
34.9%
4.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
NJR Dow Utilities S&P 500
1 Year Total Return
13.2%
9.8%
7.4%
0.0%
5.0%
10.0%
15.0%
NJR Dow Utilities S&P 500
10-Year Annualized Total Return
Assumes reinvested dividends
23
Fiscal 2016 Third Quarter Update
24
APPENDIX
Fiscal First Quarter 2016 Update 25Fiscal Third Quarter 2016 Update
25
Reconciliation to Non-GAAP Measures
A reconciliation of NFE for the three- and nine- months of fiscal 2016 and 2015 to net income is provided below:
Three Months Ended Nine Months Ended
June 30, June 30,
(Thousands) 2016 2015 2016 2015
Net (loss) income $ (17,363) $ (7,460) $ 106,272 $ 176,763
Add:
Unrealized loss (gain) on derivative instruments and related transactions 55,875 1,188 57,910 (19,010)
Tax effect (20,282) (294) (21,021) 7,132
Effects of economic hedging related to natural gas inventory (11,380) 16,464 (8,621) (15,751)
Tax effect 4,130 (5,937) 3,129 5,908
Net income to NFE tax adjustment (8) (1,484) 2,475 1,687
Net financial earnings $ 10,972 $ 2,477 $ 140,144 $ 156,729
Weighted Average Shares Outstanding
Basic 85,960 85,449 85,823 85,110
Diluted 85,960 85,449 86,691 86,128
Basic (loss) earnings per share $ (.20) $ (.09) $ 1.24 $ 2.08
Add:
Unrealized loss (gain) on derivative instruments and related transactions .65 .02 .67 (.22)
Tax effect (.24) — (.25) .08
Effects of economic hedging related to natural gas inventory (.13) .19 (.10) (.19)
Tax effect .05 (.07) .04 .07
Net income to NFE tax adjustment — (.02) .03 .02
Basic net financial earnings per share $ .13 $ .03 $ 1.63 $ 1.84