New Jersey Resources A Premium Company Delivering Premium Results New York Financial Community June 13, 2012 Exhibit 99.1 |
2 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,” “intend,” “expect,” or “continue” or comparable terminology and 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 the Company 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) guidance for the 2012 fiscal year, the contributions to NFE by New Jersey Natural Gas Company (NJNG), NJR Clean Energy Ventures (NJRCEV), NJR Energy Services (NJRES) , the Company's Energy Holdings segment and NJR Home Services, expected contribution by new customers of New Jersey Natural Gas Company (NJNG) to utility gross margin, expected number of new customers of NJNG, the completion of NJRCEV's planned solar projects in fiscal 2012, estimated capital expenditures in fiscal 2012 by NJNG and NJRCEV, and NJ’s Energy Master Plan include many factors that are beyond the Company’s ability to control or estimate precisely. 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 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, liquidity in the wholesale energy trading market and the Company’s ability to recover all of NJRES’ funds in the MF Global liquidation proceedings; 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 o the Company's joint ventures and partnerships; risks associated with our investments in solar energy projects, 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), the future market for Solar Renewable Energy Certificates 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 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; the regulatory and pricing policies of federal and state regulatory agencies; 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; and the impact of natural disasters, terrorist activities, and other extreme events. The aforementioned factors are detailed in the “Risk Factors” sections of our Annual Report on Form 10-K filed on November 23, 2011, as filed with the Securities and Exchange Commission (SEC) and which is available on the SEC’s website at sec.gov. NJR disclaims any obligation to update and revise statements contained in these materials based on new information or otherwise. Regarding Forward-Looking Statements |
Disclaimer Regarding Non-GAAP Financial Measures 3 Management uses net financial earnings 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, 2011, filed on November 23, 2011. This presentation includes the non-GAAP measures net financial earnings (losses) 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) 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. |
4 Celebrating 60 years of service Total Revenue $3.2 million Net Income $351,ooo Assets $28.4 million Dividends Paid $66,391 Total Customers 90,000 |
Consistent Results + Higher Net Financial Earnings (NFE) for the six months ended March 31, 2012 $2.88 vs. $2.33 last year, a 24 percent increase + NFE guidance reaffirmed – range of $2.60 to $2.80 per share Two decades of improved financial performance + Increased dividend 5.6 percent effective January 3, 2012 Attractive yield of 3.5 percent + Strong results driven by core regulated utility 60 percent of total earnings from New Jersey Natural Gas + Positive earnings contributions from unregulated subsidiaries Strong results from NJR Clean Energy Ventures 5 |
Our Business Model We focus on the fundamentals We have a record of consistently delivering premium earnings and dividend growth Natural Gas Distribution Steady customer growth Infrastructure investment opportunities Regulatory incentives Clean Energy and Retail Services Residential solar programs Commercial rooftop and ground-mounted solar projects Service contracts, installations and repair services Wholesale Energy Services Energy marketer Asset management services Midstream investments 6 + Energy Infrastructure, Asset Management and Services + Disciplined Capital Allocation + Strong Financial Profile + Diverse Stakeholder Relationships |
The NJNG Advantage Primarily residential and commercial customer base Net plant, property and equipment of nearly $1.2 billion Collaborative regulatory relations Strong record of system safety and customer satisfaction We will achieve the half million customer milestone in the summer of 2012 7 |
3,492 new customers in the first six months of fiscal 2012, a 14 percent increase over fiscal 2011 261 existing customer heat conversions Customer growth through March 2012 to add about $1.9 million of utility gross margin annually Conversion breakdown: 68 percent oil 25 percent electric 7 percent propane Estimate 12,000 to 14,000 new customers over the next two years – a 1.3 percent growth rate Steady Customer Growth Strong demographics to support customer growth 8 New Customer Breakdown Conversions 59% New Construction 41% Gross Margin Contribution Residential 63% Commercial 33% Existing 4% |
Value for Customers Source: US Energy Information Administration Data as of March 2012. Based on 100,000 comparable BTUs 9 We have a strong price advantage in our service territory |
A Growing Service Area 10 Monmouth 44% Our service territory is among the fastest growing in the state with Ocean County accounting for half our growth |
Future New Construction Potential New Customers = 90,000 Sources: Arthur D. Little, Harte Hanks and NJNG 11 + New residential construction market improving Based on NJ Builders Association (NJBA) data, Ocean County produced the State’s highest annual average number of building permits (3,500) during the 2000 decade Rutgers University forecasts approximately 10,000 newly constructed homes for the three-year period 2013-2015 Through March 2012, residential new construction represented 34% of all new customer additions and 25% of total margin 2013 - 2017 |
Identify and target areas for conversion Proximity to existing natural gas lines Aggressive marketing to communities using a mix of fuels including oil, electric and propane To encourage conversions: Fuel cost comparisons Rebates and incentives Partner with contractors Direct marketing Long-term conversion growth outlook is strong Robust Conversion Markets With our new construction and conversion outlook, we see a potential of about 210,000 new customers 12 |
Conservation Incentive Program Regulatory Update Accelerated Infrastructure Programs (AIP) Constructive regulatory environment and support of public policy objectives creates potential growth investment opportunities for NJNG 13 Customers have reduced usage and saved over $219 million since inception in 2006 Filed for a 2.4 percent increase to its CIP rate to be effective October 1, 2012, due to significantly warmer- than-normal winter weather Protects NJNG from declining usage and weather; encourages customer conservation In place through September 30, 2013 Project spending: Accelerated capital projects support system reliability and helps strengthen the state’s economy Phase II approved on March 30, 2011 |
Safety Acceleration and Facility Enhancement (SAFE) Program 14 Infrastructure Investment Opportunities NJ Energy Master Plan supports increased use of natural gas as well as enhancements to system infrastructure Filed with the BPU on March 20, 2012 to replace approximately 343 miles of unprotected steel and cast iron distribution main Possible $204 million investment over a five-year period Seeking annual recovery of costs at NJNG’s weighted average cost of capital of 7.76 percent AFUDC accounting treatment similar to successful AIP programs Should create approximately 2,100 jobs |
System Reliability 15 NJNG average response time ranked in the top quartile nationally and best in New Jersey in 2011 |
+ Over 6 million meters read + More than 1 million customer calls handled + Invested almost $96 million to support customer growth and system reliability + Lowest number of BPU complaints per 1,000 customers for 19 consecutive years through March 31, 2012 + Highest in Customer Satisfaction With Residential Natural Gas Service in the Eastern U.S. among Large Utilities Customer Satisfaction Continuously working to meet customer expectations 16 Rolling 12-months through March31, 2012 New Jersey Natural Gas received the highest numerical score among large utilities in the Eastern U.S. in the proprietary J.D. Power and Associates 2011 Gas Utility Residential Customer Satisfaction Study SM . Study based on 62,711 online interviews ranking 10 providers in the Eastern U.S. (CT, DC, MD, MA, NH, NJ, NY, PA, RI, VA). Proprietary study results are based on experiences and perceptions of consumers surveyed September 2010 - July 2011. Your experiences may vary. Visit jdpower.com. |
Off-system sales and capacity release In place since 1992 Optimization of capacity and supply contracts Sharing formula of 85 percent customer; 15 percent NJNG Storage Incentive (SI) In place since 2004 Promotes long-term price stability Promotes efficient contract utilization Sharing formula of 80 percent customer; 20 percent NJNG Financial Risk Management (FRM) In place since 1997 Promote application of risk management tools Sharing formula of 85 percent customer; 15 percent NJNG Regulatory Incentives Since inception customers have saved over $573 million with total earnings of $1.85 per share, an average of $.08 annually Incentive programs in place through October 2015 17 |
Consistent with our core energy strategy Meaningful earnings growth opportunities Competitively priced electricity for customers Strong legislative commitment to solar in NJ Supports NJ’s Energy Master Plan Our Clean Energy Advantage Clean energy investments contributed $22 million to NFE in the first six months of fiscal 2012 18 |
Anticipated legislation in support of New Jersey’s solar industry is pending for vote in both State Assembly and Senate Governor supporting solar industry for environmental, job creation and energy cost benefits to New Jersey Renewable portfolio standard (RPS) significantly increased starting in energy year 2014 Solar alternative compliance payments (SACP) reduced to better reflect current market conditions Pending Solar Legislation NJR targeting $70 to $90 million of clean energy investments annually 19 |
Overview of New Jersey’s Clean Energy Initiatives (GWhrs) Current proposed legislation supports a sustainable solar industry in New Jersey 20 |
Declining Solar Material Costs 21 Solar industry costs are reducing to competitive levels Source: Lawrence Berkeley National Laboratory (Behind the meter weighted average installed cost) * Industry estimate for 2011 and 2012 |
Fiscal 2012 Q2 results: 272 operational in fiscal 2012 Average size: 7.4 kilowatts $7 million of capital deployed Capital projection of approximately $20.5 million in fiscal 2012 To date, homeowners have saved over $390,000 on their electric bills annually The Sunlight Advantage Pipeline for residential solar leases remains strong Residential 22 |
+ Expanding NJR brand beyond traditional service territory + Completed projects in fiscal 2011 and 2012: The Sunlight Advantage Commercial + $96.4 million placed in service in fiscal 2012 + Medford project announced $20 million, 6.7 MW project In service date planned for Q1 fiscal 2013 Additional project opportunities for fiscal 2012 and beyond 23 Project Capital (MM) MW 1 - Adler 2 - Vineland 3 - Manalapan 4 - McGraw Hill Total $24.4 22.3 17.2 59.5 $123.4 5.2 4.7 3.6 14.1 27.6 |
+ Changes in volatility and increased shale production have changed the competitive landscape Successfully taking advantage of emerging opportunities Physical participants with a conservative approach remain profitable + Focus on long-option strategy and disciplined risk management Provide asset management services to producers Focus on growing demand for electric generation and petrochemicals NJRES NFE expected to be 5 to 15 percent of fiscal 2012 total NJR Energy Services |
Midstream investments contributed $3.8 million in the first six-months of fiscal 2012; Expected to contribute between 3 and 10 percent of total 2012 NFE Steckman Ridge 50 percent joint venture with Spectra Energy Up to 12 Bcf storage facility in southwestern Pennsylvania 66 percent of Steckman Ridge revenue from long-term contracts Iroquois 5.53 percent ownership in pipeline from Canada to the northeast NJR Energy Holdings |
Home Services Advantage Consistently delivers high-quality products and service levels 26 Serves nearly 140,000 customers with Premier Service Plans, service contracts and equipment installations Geographic expansion Currently marketing in Sussex, Warren and Hunterdon counties Fiscal 2011 revenue of more than $36 million, an 18 percent increase over last year Expected to contribute 1-5 percent of fiscal 2012 NFE |
Delivering Results 27 ($MM) Company 2012 2011 Change New Jersey Natural Gas $70.9 $68.4 $2.5 NJR Energy Services 23.5 19.2 4.3 NJR Clean Energy 22.0 5.2 16.8 NJR Energy Holdings 3.8 3.9 (0.1) NJR Home Services/Other (0.8) (0.5) (0.3) Total $119.4 $96.2 $23.2 NFE per basic share $2.88 $2.33 $0.55 FYTD March 31, |
A Record of Consistency NJR currently estimates net financial earnings of $2.60 to $2.80 per basic share in fiscal 2012 28 $1.50 $1.80 $2.10 $2.40 $2.70 2008 2009 2010 2011 2012 Current Range $2.24 $2.40 $2.46 $2.58 $2.60-$2.80 Net Financial Earnings |
2012 Earnings Guidance Infrastructure-based businesses expected to contribute about 90 percent of fiscal 2012 NFE 29 |
Dividend Growth 19 dividend increase in 17 years; 1-year growth rate of 5.6 percent compared with 3.7 percent for peers * Effective January 3, 2012 ** Based on current indicated dividend rates 30 th $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 2007 2008 2009 2010 2011 2012* $1.01 $1.12 $1.24 $1.36 $1.44 $1.52 |
Payout Ratio* Strong reinvestment to support future growth * Based on NJR Net Financial Earnings ** Peer group average based on 2011 earnings estimates and indicated dividend from Bloomberg. Peer group: ATO, GAS, LG, NWN, PNY, SJI, SWX, VVC and WGL 31 0% 16% 33% 49% 65% 2005 2006 2007 2008 2009 2010 2011 Peer Group** 49% 51% 48% 50% 52% 55% 56% 61% |
Capital Expenditures Capital expenditures support future growth 32 ($MM) Fiscal 2012 2012 2011 Estimate NJNG New Customer $10.8 $10.2 $20.6 System Integrity 11.6 10.8 33.3 AIP Projects 14.9 15.8 49.9 Technology & Other 5.1 6.8 8.4 Cost of Removal 6.8 3.6 9.0 Sub-total NJNG 49.2 47.2 121.2 Clean Energy Ventures 61.9 11.5 103.2 Other Non-Utility 0.3 0.4 0.7 Total $111.4 $59.1 $225.1 FYTD March 31, |
Delivering Premium Results We have the fundamentals in place to achieve continued operational excellence, consistent results and long-term growth 33 Strategy Performance Growth Core utility provides majority of earnings Pursue complementary non-regulated businesses Work constructively with regulators and policymakers Maintain strong financial profile A track record of consistent results Increasing dividend while maintaining low payout ratio Five-year total return greater than peer group average A tradition of outstanding customer service and safety Core customer growth Regulated infrastructure opportunities Clean energy investments Retail energy services |
New Jersey Resources A Premium Company Delivering Premium Results New York Financial Community June 13, 2012 |