New Jersey Resources Corporation reported results for the fourth-quarter and fiscal 2021. Highlights include:
- Consolidated net income of $117.9 million for fiscal 2021 compared with $163.0 million in fiscal 2020
- Consolidated net financial earnings (NFE), a non-GAAP financial measure of $207.7 million for fiscal 2021, or $2.16 per share, compared with NFE of $165.3 million, or $1.74 per share, in fiscal 2020
- Affirmed fiscal 2022 net financial earnings per share (NFEPS) guidance range of $2.20 to $2.30 and narrowed long-term projected NFEPS growth rate to 7 to 9 percent, from previous range of 6 to 10 percent
- Increased annual dividend by nine percent to $1.45 per share
- New Jersey Natural Gas (NJNG) received approval from the BPU on the settlement of its rate case authorizing a $79.0 million increase to its base rates
- The Southern Reliability Link (SRL) was placed in service in fiscal 2021
- NJNG's Hydrogen project was completed and began producing green hydrogen in October 2021
Fourth-quarter fiscal 2021 net (loss)/income totaled $(1.1) million, or $(0.01) per share, compared with $32.7 million, or $0.34 per share, during the same period in fiscal 2020. Fiscal 2021 net income totaled $117.9 million, or $1.23 per share, compared with $163.0 million, or $1.72 per share, for fiscal 2020.
Fourth-quarter fiscal 2021 NFE totaled $6.6 million, or $0.07 per share, compared to NFE of $43.4 million, or $0.45 per share, during the same period in fiscal 2020. Fiscal 2021 NFE totaled $207.7 million, or $2.16 per share, compared with $165.3 million, or $1.74 per share, for fiscal 2020. The difference between GAAP earnings and NFE is due primarily to a $92.0 million impairment ($74.5 million after considering the related tax effects) of NJR's investment in the PennEast Project, which is excluded from NFE.
"Fiscal 2021 results exceeded the expectations we laid out at our Analyst Day last November, " said Steve Westhoven, President and CEO of NJR. "Strong execution against our plan positions our diversified portfolio of infrastructure assets for long-term growth, creating value for shareowners and meeting the needs of our customers."
In providing fiscal 2022 NFE guidance and narrowing our expected long-term NFEPS growth range, 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 fiscal 2021 NFE of $107.4 million, compared to NFE of $126.9 million during fiscal 2020. Fourth-quarter fiscal 2021 net financial loss was $24.2 million, compared to net financial loss of $15.3 million during the same period in fiscal 2020. The decrease for both periods was due to higher O&M expenses primarily related to increased bad debt.
NJNG added 7,854 new customers during fiscal 2021, compared with 8,349 in fiscal 2020. The lower customer growth was due primarily to the effects of the COVID-19 pandemic. NJNG expects to return to a more typical customer growth rate of 1.7% in fiscal 2022.
Base Rate Filing:
On November 17, 2021, NJNG received approval from the New Jersey Board of Public Utilities on its rate case settlement agreement and new rates will be effective on December 1, 2021. Under the approved rate case agreement, NJNG's total annual revenue is expected to increase by $79.0 million. The rate case agreement includes a return on equity of 9.60% with a 54.0% common equity ratio and reflects a rate base of$2.52 billion with an overall rate of return of 6.84%.
The Southern Reliability Link diversifies supply to our customers by providing a new intrastate feed into the southern end of NJNG’s distribution system. Construction was completed and the project was placed in service in August 2021. The recovery of our investment in this project was included in the recently settled rate case.
NJNG's Infrastructure Investment Program (IIP) is a five-year, $150 million accelerated recovery program that began in fiscal 2021 and consists of a series of infrastructure projects designed to enhance the safety and reliability of NJNG's natural gas distribution system. In fiscal 2021, NJNG spent $9.4 million under the program to begin work on various distribution system reinforcement projects.
The Howell Green Hydrogen Project delivers hydrogen through NJNG's utility distribution pipeline to heat customers' homes and businesses and began commercial operation in October 2021. The recovery of investment in this project was included in the recently settled rate case.
BGSS Incentive Programs:
BGSS incentive programs contributed $13.4 million to utility gross margin, compared with $9.5 million during fiscal 2020. The higher results for fiscal 2021 were due to improved margins in off-system sales and storage incentives compared to fiscal 2020.
On July 1, 2021, NJNG's new three-year, $259 million SAVEGREEN program became effective. SAVEGREEN invested $31.0 million during fiscal 2021 to help customers with energy-efficiency upgrades for their homes and businesses. NJNG recovered $12.4 million of its outstanding investments during fiscal 2021.
Clean Energy Ventures (CEV)
CEV reported fiscal 2021 NFE of $16.8 million, compared with NFE of $22.1 million during fiscal 2020. Fourth-quarter fiscal 2021 NFE was $40.9 million, compared with NFE of $44.8 million during the same period in fiscal 2020. The decrease in NFE for both periods was due primarily to lower SREC revenue, partially offset by lower depreciation expense. The decrease in depreciation expense is due to an increase in the useful life of CEV's assets.
Storage and Transportation
Storage and Transportation, formerly known as our Midstream reporting segment, reported fiscal 2021 NFE of $13.0 million, compared with NFE of $18.3 million during fiscal 2020. Fourth-quarter fiscal 2021 NFE were $2.4 million, compared with NFE of $7.4 million during the same period in fiscal 2020. The decrease in NFE for both periods was due primarily to lower equity in earnings contributions from our investments in Steckman Ridge and PennEast, and higher O&M, which was partially offset by increased operating revenues at Leaf River and Adelphia Gateway.
The NFE results exclude a $74.5 million after-tax impairment charge related to NJR's investment in the PennEast Project.
Adelphia Gateway - During fiscal 2021, Adelphia Gateway received all necessary permits for the second phase of construction on the South Zone. The second phase includes construction of laterals and interconnects.
Energy Services reported fiscal 2021 NFE of $71.1 million, compared with a net financial loss of $7.9 million in fiscal 2020. The increase was due primarily to higher natural gas price volatility in February 2021, as a result of cold weather in regions where Energy Services had contracted rights to storage assets. Fourth-quarter fiscal 2021 net financial loss was $14.4 million, compared with NFE of $1.4 million for the same period last fiscal year. The decrease was due primarily to increased compensation expense and higher O&M expenses related to charitable contributions compared to the same period a year ago.
Home Services and Other Operations
Home Services and Other Operations reported fiscal 2021 net financial loss of $0.8 million, compared with NFE of $5.8 million during fiscal 2020. Fourth-quarter fiscal 2021 net financial loss was $(1.1) million compared with NFE of $5.1 million for the same period in fiscal 2020. The decrease in both periods was due primarily to higher O&M related to increased compensation and technology expenses and one-time income tax benefits that occurred in the fourth quarter of fiscal 2020 that did not reoccur in fiscal 2021.
Capital Expenditures and Cash Flows:
NJR is committed to maintaining a strong financial profile.
- During fiscal 2021, capital expenditures were $682.9 million, including accruals, of which $468.3 million were related to NJNG, compared with $499.1 million ($1.0 billion including the acquisition of assets), of which $333.9 million were related to NJNG, during fiscal 2020.
- During fiscal 2021, cash flows from operations were $391.0 million, compared with $213.5 million during the same period of fiscal 2020. The increase was due primarily to increased NFE at Energy Services.