New Jersey Reports First-Quarter Fiscal 2021 Results

Source: www.gulfoilandgas.com 2/4/2021, Location: North America

New Jersey Resources reported results for the first-quarter of fiscal 2021. Highlights include:

- Consolidated net income of $81.0 million, compared with $75.8 million in the first-quarter of fiscal 2020
- Consolidated net financial earnings (NFE), a non-GAAP financial measure, of $44.7 million, or $0.46 per share, compared with $34.9 million, or $0.38 per share, in the first quarter of fiscal 2020
- Reaffirmed NFE per share (NFEPS) guidance of $1.55 to $1.65 for fiscal 2021
- Increased NFEPS guidance for fiscal 2022 by $0.15 to a range of $2.20 to $2.30
- Entered into Asset Management Agreements (AMAs) to release certain natural gas transportation contracts of NJR Energy Services for aggregate cash proceeds of approximately $500 million payable over 10 years
- New Jersey Natural Gas (NJNG) received approval from the New Jersey Board of Public Utilities (BPU) for the five-year, $150 million Infrastructure Investment Program (IIP)

NJNG filed for SAVEGREEN 2020, a three-year, $264 million energy efficiency program
First-quarter fiscal 2021 net income totaled $81.0 million, or $0.84 per share, compared with $75.8 million, or $0.82 per share, during the same period in fiscal 2020. First-quarter fiscal 2021 NFE totaled $44.7 million, or $0.46 per share, compared with $34.9 million, or $0.38 per share, during the same period in fiscal 2020.

"Our strong results for the first-quarter were consistent with our expectations and put us on track to meet our guidance for the fiscal year," said Steve Westhoven, President and CEO of New Jersey Resources. "By entering into the AMAs at Energy Services, we are delivering on our commitment to generate more stable fee-based revenue. Our outlook for the fiscal year is supported by our core utility business, New Jersey Natural Gas, and our growing portfolio of clean energy assets at Clean Energy Ventures."

NFE is a financial measure not calculated in accordance with Generally Accepted Accounting Principles (GAAP) of the United States. It is a measure of earnings based on eliminating timing differences surrounding the recognition of certain gains or losses, net of applicable tax adjustments, to effectively match the earnings effects of the economic hedges with the physical sale of natural gas, Solar Renewable Energy Certificates (SRECs) and foreign currency contracts. NFE/net financial loss eliminates the impact of volatility to GAAP earnings associated with unrealized gains and losses on derivative instruments in the current period. For further discussion of this financial measure, please see the explanation below under “Non-GAAP Financial Information.”

GAAP requires NJR, during the interim periods, to estimate its annual effective tax rate and use this rate to calculate the year-to-date tax provision. NJR also determines an annual estimated effective tax rate for NFE purposes and calculates a quarterly tax adjustment based on the differences between its forecasted net income and its forecasted NFE for the fiscal year.

NJR Reaffirms Fiscal 2021 and Increases Fiscal 2022 NFE Guidance:
NJR reaffirmed fiscal 2021 NFE guidance range of $1.55 to $1.65 per share, subject to the risks and uncertainties identified below under “Forward-Looking Statements.” The following chart represents NJR’s current expected contributions from its subsidiaries for fiscal 2021:

NJR also increased its fiscal 2022 NFE guidance to a range of $2.20 to $2.30 from its previously issued guidance range of $2.05 to $2.15. The increase to fiscal 2022 NFE guidance is due to the expected impact of the recently announced AMAs at Energy Services.

In providing fiscal 2021 and fiscal 2022 NFE guidance, management is aware 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. Management is not able to reasonably estimate the aggregate impact or significance 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.

New Jersey Natural Gas
NJNG reported first-quarter fiscal 2021 NFE of $49.5 million, compared to NFE of $43.9 million during the same period in fiscal 2020. The increase in the first-quarter was due primarily to a full quarter of increased base rates from NJNG's fiscal 2020 rate case settlement, compared to a partial quarter a year ago.

Customer Growth:
NJNG added 1,948 new customers during the first quarter of fiscal 2021, compared with 2,282 during the same period in fiscal 2020. The lower customer growth was due to the effects of the COVID-19 pandemic.

Infrastructure Update:
NJNG's Infrastructure Investment Program is a five-year, $150 million program approved by the BPU on October 28, 2020. The IIP consists of a series of infrastructure projects designed to support the enhanced safety and reliability of NJNG's natural gas distribution system.

The Southern Reliability Link (SRL) will diversify supply to our customers by providing a new intrastate feed into the southern end of NJNG’s distribution system. Construction on SRL began in the first quarter of fiscal 2019 and is nearly 90 percent complete. The total cost of SRL is estimated to be approximately $270 million. NJNG expects the project to be placed in service in 2021.

Safety Acceleration and Facilities Enhancement (SAFE) II is the five-year, $158 million program approved by the BPU in September 2016 to replace the remaining unprotected bare steel main and associated services in NJNG’s distribution system. In the first-quarter of fiscal 2021, NJNG invested $8.7 million to replace six miles of unprotected bare steel main and services.

BGSS Incentive Programs:
BGSS incentive programs contributed $4.6 million to utility gross margin in the first-quarter of fiscal 2021, compared with $2.7 million during the same period in fiscal 2020. The higher results in the quarter were due to higher natural gas storage spreads in the first quarter that benefited the storage incentive program compared to the same period last year.

Energy-Efficiency Programs:
SAVEGREEN invested an additional $4.8 million during the first-quarter of fiscal 2021 to help customers with energy-efficiency upgrades for their homes and businesses. NJNG recovered $3.3 million of its outstanding investments during the first three months of fiscal 2021.

On September 25, 2020, NJNG filed a petition with the BPU for an additional three-year SAVEGREEN 2020 program consisting of approximately $127 million of direct investment, $113 million in financing options, and $24 million in O&M expenses, effective July 1, 2021. NJNG is currently in settlement negotiations with the BPU. Clean Energy Ventures (CEV)

CEV reported a net financial loss of $10.3 million during the first-quarter of fiscal 2021, compared with a net financial loss of $8.2 million during the same period in fiscal 2020. The decrease was due primarily to higher O&M expenses related to project maintenance costs and additional lease expense associated with new projects placed in service, which was partially offset by a decrease in depreciation expense.

Solar Investment Update:
- In the first-quarter of fiscal 2021, CEV acquired the Mt. Laurel Solar Facility, adding 2.9 MW to total installed capacity.
- CEV has three commercial projects under construction in Connecticut and Rhode Island that will add 8 MW to total capacity.

Storage and Transportation
Storage and Transportation, formerly known as the Midstream reporting segment, reported first-quarter fiscal 2021 NFE of $3.5 million, compared with $3.0 million during the same period in fiscal 2020. The higher NFE was due to increased operating income from Leaf River and Adelphia Gateway (acquired in January 2020), partially offset by increased interest expense related to those assets.

Infrastructure Updates:
Adelphia Gateway - On October 5, 2020, Adelphia Gateway received a Partial Notice to Proceed from the Federal Energy Regulatory Commission (FERC) to begin construction. The construction includes the conversion of 50 miles of the existing 84-mile pipeline from oil to natural gas to bring much-needed supply to constrained markets in the Philadelphia region.

PennEast - On February 3, 2021, the U.S. Supreme Court granted PennEast's petition for a writ of certiorari seeking to overturn the September 10, 2019 Third Circuit decision vacating the New Jersey Federal District Court's December 13, 2018 condemnation order. The case will be set for argument in April 2021. Energy Services

Energy Services reported first-quarter fiscal 2021 NFE of $1.5 million, compared with a net financial loss of $5.1 million for the same period last fiscal year. The increase in NFE was due to increased natural gas pricing spreads as compared to the prior period.

On December 16, 2020, Energy Services entered into a series of Asset Management Agreements (AMAs) with an investment grade public utility, under which the utility will provide certain asset management services and Energy Services may deliver natural gas to the utility in exchange for aggregate contracted fees of approximately $500 million payable in cash to Energy Services over 10 years. The AMAs include a series of initial and permanent releases commencing in November 2021. NJR will receive an aggregate of approximately $260 million in cash from fiscal 2022 through fiscal 2024 and $34 million per year from fiscal 2025 through fiscal 2031 under the AMAs.

Home Services and Other Operations
Home Services and Other Operations reported first-quarter fiscal 2021 net financial loss of $0.1 million compared to NFE of $1.1 million for the same period in fiscal 2020. The decrease in NFE in the first quarter was primarily due to decreased operating revenue and increased interest expense compared to the prior period.

Capital Expenditures and Cash Flows:
NJR is committed to maintaining a strong financial profile.

During the first three months of fiscal 2021, capital expenditures spent and accrued were $119.3 million, of which $83.9 million were related to NJNG, compared with $111.7 million, of which $76.7 million were related to NJNG, during the same period in fiscal 2020.

During the first three months of fiscal 2021, cash flows from operations were $31.7 million, compared with cash flows used in operations of $43.1 million during the same period of fiscal 2020. The increase was primarily due to changes in working capital.


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