3. ACQUISITION

On July 27, 2017, NJR, through its wholly owned subsidiary NJRRS, signed an asset purchase agreement with Talen to acquire certain of their retail and wholesale natural gas energy contract assets. The acquisition included sales agreements with large commercial and industrial retail customers, pipeline and storage capacity agreements on various pipelines, and various wholesale transportation contracts. The final purchase price totaled $55.7 million upon satisfaction of certain conditions as set forth in the asset purchase agreement.

The following table summarizes the purchase price allocation for the fair value of the assets acquired and liabilities assumed as of July 27, 2017:



(Thousands)	Estimated Fair Value
Total purchase price consideration transferred	$	55,661
Identifiable assets acquired
Wholesale energy contracts ⁽¹⁾	$	41,846
Retail energy contracts ⁽²⁾	13,815
Net assets acquired	$	55,661


(1)	Wholesale energy contracts are presented within Intangible assets, net on the Consolidated Balance Sheets.


(2)	Retail energy contracts are presented within the Derivatives, at fair value line items on the Consolidated Balance Sheets.

The purchase price equaled the estimated fair value of the net assets acquired and, therefore, no goodwill or bargain purchase was recorded as of September 30, 2017. Identifiable assets were recorded at their estimated fair value as determined by management and were based upon significant estimates and assumptions that are judgmental in nature, including the projected amount and timing of future cash flows, a discount rate reflecting risk inherent in the future cash flows and future natural gas prices. During fiscal 2017, the Company incurred approximately $300,000 in acquisition related transaction costs, which are recorded in operations and maintenance expense on the Consolidated Statements of Operations.

The useful lives of the acquired assets are based upon the terms of the contractual arrangements. The acquired wholesale energy contracts have useful lives ranging from 1 to 9 years, and the acquired retail energy contracts have useful lives ranging from 0 to 4 years. The acquisition date fair value of the wholesale contracts is presented as an intangible asset on the Consolidated Balance Sheet and is amortized based upon the pattern of expected future cash flows. The related amortization expense totaled $762,000 during fiscal 2017, and is included in gas purchases on the Consolidated Statements of Operations. The acquired retail contracts consist of natural gas physical forward sales agreements and therefore are subsequently measured and accounted for in accordance with ASC 815, Derivatives and Hedging. Accordingly, the acquisition date fair value of the retail contracts is presented within the Derivatives, at fair value line items on the Consolidated Balance Sheets and is relieved in subsequent periods as the underlying physical forward contracts settle. During fiscal 2017, operating revenues of approximately $20.5 million, and operating income of approximately $281,000 attributable to the acquisition are included in the Consolidated Statements of Operations.

As the assets were acquired from a non-public company that did not prepare financial information for the specific assets involved in the transaction, historical financial information was impracticable to obtain. As a result, pro forma results for the acquired assets are not presented.