EX-99.2 3 d722555dex992.htm EX-99.2

Fiscal 2014 Second Quarter Update May 7, 2014 Exhibit 99.2

Regarding Forward-Looking Statements 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/or beliefs as of this date or a prior 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 including, but not limited to, certain statements regarding NJR's NFE for fiscal 2014, forecasted contribution of business segments to fiscal 2014 NFE and to NFE beyond fiscal 2014, NJR’s long-term NFE per share growth rate goal, and earnings guidance, NJR’s future dividend growth rate and payout ratio, long-term benefits of increased NFE, future NJNG customer growth, future NJNG capital expenditures, NJNG incremental utility gross margin, the long-term outlook for NJRCEV, diversification of NJRCEV’s strategy, and NJR’s long-term NFE per share growth rate 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 on our access to capital; 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; regulatory approval of NJNG’s planned infrastructure programs; 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 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, including any impacts to utility gross margin and restoration costs. The aforementioned factors are detailed in the “Risk Factors” sections of our Annual Report on Form 10-K filed on November 26, 2013, as filed with the Securities and Exchange Commission (SEC) 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. 1

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, operating income as determined in accordance with GAAP. This information has been provided pursuant to the requirements of SEC Regulation G. 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 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 instead of 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 non-GAAP financial measures 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 NJR’s non- GAAP financial measures, please see NJR’s most recent Form 10-K, Item 7 and most recent Form 10-Q, Part I, Item 2. 2 2

Net Financial Earnings (NFE) 3 ($MM) Company 2014 2013 2014 2013 New Jersey Natural Gas $47.0 $45.9 $74.7 $71.4 NJR Energy Services 91.4 16.4 98.8 19.4 NJR Clean Energy 12.8 5.2 16.4 10.5 NJR Midstream 2.3 2.3 3.7 4.1 NJR Home Services/Other (1.6) (1.1) (1.8) (1.2) Total $151.9 $68.7 $191.8 $104.2 Per basic share $3.61 $1.64 $4.56 $2.50 Six Months Ended March 31, Three Months Ended March 31,

NJR Affirms Fiscal 2014 NFE Per Share Guidance $3.90 to $4.10 4 NJR expects NJRES to contribute 35-40 percent of Fiscal 2014 Earnings New Jersey Natural Gas NJR Clean Energy Ventures NJR Energy Services NJR Midstream NJR Home Services

Improved Earnings Growth And Financial Profile Earnings retention further strengthens our balance sheet and reduces the need for new equity issuances Supports our future capital expenditures Significant capital investment in regulated business to support customer growth and maintain safe, reliable and resilient service Additional flexibility to utilize our Share Repurchase Program Results in higher projected earnings and dividend growth rates Average long-term NFE growth of 5 to 9 percent Annual dividend growth of 6 to 8 percent Targeted payout ratio of 60 to 65 percent 5

Increased Long-Term NFEPS Guidance 6 NJR expects an average long-term growth rate of 5 to 9 percent annually

Goal is to grow dividend 6 to 8 percent annually Dividend Outlook Strengthened * Current annual rate ** Assumes 6-8 percent average annual dividend growth *** Based on NJR net financial earnings 7

New Jersey Natural Gas – Our Core Business Customer growth rate of 1.5 percent exceeds industry average Profitable balance in the new construction market Natural gas installed at 95 percent of new construction projects Healthy mix of new construction and conversions History of constructive regulatory relationships Sharing of customer and investor benefits 21 consecutive years with fewest customer complaints with the New Jersey Board of Public Utilities of electric and gas companies Infrastructure growth initiatives designed to strengthen distribution and transmission system are supported by regulatory riders Rate case to be filed by mid-November 2015 8

3,658 new customers added in the first half of fiscal 2014 1,769 new construction customers 1,889 conversions from other fuels 348 existing customer heat conversions 9 Strong Customer Growth Continues Over next two fiscal years, NJNG expects to add a total of 14,000-16,000 new customers

10 Key Trends Support Future Customer Growth Sources for new construction: Arthur D. Little, Harte Hanks and NJNG Source for Population change: US Census Bureau Source for Fuel Pricing: US Energy Information Administration. * Data as of March 2014. Based on 100,000 comparable BTUs Demographics Fuel Pricing

Capital of Over $1 Billion Drives Long-Term Growth NJNG Expects Base Rate Case Resolution by Fiscal 2017 11 NJNG Capital Investment Estimates ($mm) 2009- 2012 Actual 2013A 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 42.5 64.2 55.7 48.1 40.6 428.5 AIP/SAFE 136.7 45.3 31.6 33.7 39.1 - 286.4 Superstorm Sandy - 26.1 5.3 5.2 - - 36.6 NGV Advantage - 1.0 9.0 - - - 10.0 NJ RISE - - 4.6 13.0 12.0 12.0 41.6 Liquefaction/LNG - - 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 - - 145.5 Total $430.0 $163.4 $200.2 $204.3 $208.7 $112.9 $1,319.5

12 NJRES: Strong Performance in Changing Markets Provides physical natural gas services for Utility, Power Generator, Pipeline, and Industrial customers across North America including the Marcellus Shale NJRES’ Asset Portfolio includes: Storage capacity – Approximately 40 Bcf in the United States and Canada Pipeline transportation capacity – Approximately 1.5 Bcf/day NJRES’ services include: Transport natural gas to customers Gas in storage available to serve customers when demand is high Manage other companies’ assets – Producer Services Long option strategy: Commodity hedges limit downside Creates upside when market conditions are volatile

NJR Clean Energy Ventures - Distributed Power Portfolio Strategy 13 Long-term goal to maintain NJRCEV at 10 to 20 percent of NFE Solar Demand driven by growing RPS in NJ Improving SREC Fundamentals Reduce reliance on solar ITC by January 2017 Wind 29 states and the District of Columbia have Renewable Portfolio Standards (RPS) Production-based tax credits (PTC) Long-term Power Purchase Agreements (PPAs) and PTCs provide annuity-like returns Combined Heat and Power Possible longer-term opportunities

NJNG Results Strong results from NJNG Added 3,658 new customers in the first half of Fiscal 2014 52 percent converted from other fuels $17.5 million spent on SAVEGREEN Program NGV stations on track for summer opening BGSS incentive margin increased 14 ($MM) 2014 2013 2014 2013 Gross Margin $116.0 $110.5 $199.4 $189.0 Operating Income $74.1 $71.4 $119.4 $114.1 Net Financial Earnings $47.0 $45.9 $74.7 $71.4 Total Customers 503,679 498,933 503,679 498,933 Six Months Ended Three Months Ended March 31, March 31,

Diversified and Growing Utility Gross Margin NJNG expects incremental utility gross margin to more than double by fiscal 2017 15

Contributed $2.3 and $3.7 million to three and six month NFE, respectively Steckman Ridge 12 Bcf Storage field, located in south central PA 50 percent joint venture with Spectra Energy Iroquois 5.53 percent ownership in pipeline from Canada to the northeast 16 NJR Midstream

NJR Energy Services Results Extreme weather created dramatic increase in natural gas demand Validated long-option strategy Producer Services NJRES expects to contribute 35 to 40 percent to fiscal 2014 NFE 17 ($MM) 2014 2013 2014 2013 Financial Margin $163.0 $29.2 $179.3 $38.0 Net Financial Earnings $91.4 $16.4 $98.8 $19.4 Gas Sold and Managed (Bcf) 175.0 161.4 342.1 305.3 Firm Transportation (Bcf/d) 1.6 1.2 1.6 1.2 Firm Storage (Bcf) 38.7 35.3 38.7 35.3 Six Months Ended Three Months Ended March 31, March 31,

18 Severe Winter Weather Validates NJRES Long- Option Strategy Firm Storage Firm Transportation Producer Service Area February 11, 2014, Chicago experienced low of -8 o compared to 5-year historic low for month of 19 o . January 7, 2014, Atlanta experienced low of 6 o compared with 5-year historic average for month of 34 o .

NJR Clean Energy Ventures 19 Forecast is to place into service $75 to $85 million of capital in fiscal 2014 Strong legislative commitment to solar in New Jersey Expected to contribute 5 to 15 percent to fiscal 2014 NFE ($MM) 2014 2013 2014 2013 Operating Revenues $2.7 $1.4 $4.9 $4.6 ITC Impact $15.0 $5.9 $20.6 $13.2 Net Financial Earnings $12.8 $5.2 $16.4 $10.5 SRECs Generated 10,996 8,422 26,155 18,083 SRECs Sold 11,314 7,362 20,678 32,362 SREC Inventory 16,828 14,079 16,828 14,079 Six Months Ended Three Months Ended March 31, March 31,

Improving SREC Fundamentals NJ increased solar RPS effective June 2013 Solar construction activity has moderated SREC prices have responded NJRCEV forecasts SREC inventory to grow from approximately 65,000 in fiscal 2013 to 174,000 in fiscal 2017 20

NJR Home Services 2Q fiscal 2014 loss of $1.1 million compared with a loss of $847,000 last year, Six month of loss of $1.7 compared with a loss of $1.1 million last year Majority of earnings derived from service contracts Approximately 119,000 service contract customers Contract revenue keeps growing due to Premier Heating and Cooling Plans Expanded array of services now offered Whole-house electric and plumbing contracts Standby generator contracts Air conditioning Generators Brand recognition provides confidence Moving from direct mail to Internet media Expected to contribute 2 to 5 percent of Fiscal 2014 NFE 21 Selling more to current customers

Deliver consistent net financial earnings and dividend growth Invest significantly in NJNG’s infrastructure to enhance system reliability Diversify and grow NJNG’s gross margin Committed capital to clean energy portfolio Grow other energy-related, non- utility businesses NJR Will Continue to Meet Investor Expectations 22 * Assumes dividends reinvested, period 3/31/04 to 3/31/14