New Jersey Resources Reports Fiscal 2017 Results and Announces Fiscal 2018 Earnings Guidance

WALL, N.J.–(BUSINESS WIRE)–Today, New Jersey Resources (NYSE:NJR) reported results for fiscal 2017.
Key highlights for the fiscal year include:

• Consolidated net income was $132.1 million, compared with $131.7
  million in fiscal 2016.
• Consolidated net financial earnings (NFE), a non-GAAP financial
  measure, were $149.4 million, compared with $138.1 million in fiscal
  2016.
• Increased annual dividend rate by 6.9 percent to $1.09 per share.
• Higher base rates and customer growth led to 14.2 percent NFE growth
  at New Jersey Natural Gas (NJNG), compared with fiscal 2016.
• Southern Reliability Link approved by New Jersey Pinelands Commission;
  the final regulatory milestone.
• NJR Clean Energy Ventures (NJRCEV), a leading solar provider in the
  state, completed five commercial installations with a total capacity
  of 27.1 megawatts (MWs); strong demand for residential solar continues.

“New Jersey Resources delivered strong results in fiscal 2017, thanks to
the efforts of our talented employees,” said Laurence M. Downes,
chairman and CEO of New Jersey Resources. “Our performance was primarily
driven by higher utility gross margin and customer growth, as well as
strong contributions from our clean energy and midstream segments.”

Fiscal 2017 net income totaled $132.1 million, or $1.53 per share,
compared with $131.7 million, or $1.53 per share, in fiscal 2016. Fiscal
2017 NFE totaled $149.4 million, or $1.73 per share, compared with
$138.1 million, or $1.61 per share, in fiscal 2016.

Net losses for the fourth quarter of fiscal 2017 totaled $36.5 million,
or $(.42) per share, compared with net income of $25.4 million, or $.30
per share, during the same period last year. Fourth-quarter fiscal 2017
net financial losses totaled $12.5 million, or $(.14) per share,
compared with a net financial loss of $2.1 million, or $(.02) per share,
during the same period last year.

A reconciliation of net income to NFE for the three and twelve months
ended September 30 of fiscal years 2017 and 2016, is provided below.

NFE is a financial measure not calculated in accordance with generally
accepted accounting principles (GAAP) of the United States as it
excludes all unrealized, and certain realized, gains and losses
associated with derivative instruments, net of applicable tax
adjustments. For further discussion of this financial measure, please
see the explanation below under “Non-GAAP Financial Information.”

A table summarizing our key performance metrics for the three and twelve
months ended September 30 of fiscal years 2017 and 2016, is provided
below.

A table detailing NFE for the three and twelve months ended September 30
of fiscal years 2017 and 2016, is provided below.

NJR Announces Fiscal 2018 NFE Guidance:

NJR announced fiscal 2018 NFE guidance of $1.75 to $1.85 per share,
subject to the risks and uncertainties identified below under
“Forward-Looking Statements.” NJR expects its regulated businesses to
generate between 55 to 75 percent of total NFE, with NJNG continuing to
be the largest contributor. The following chart represents NJR’s current
expected contributions from its subsidiaries for fiscal 2018:

In providing fiscal 2018 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 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.

Regulated Business Update:

New Jersey Natural Gas

Reported fiscal 2017 NFE of $86.9 million compared with $76.1 million
during the same period in fiscal 2016. Strong results for the fiscal
year were driven primarily by higher base rates and utility gross margin
from new customer additions. Net financial losses for the fourth quarter
of fiscal 2017 and 2016 were $9.6 million and $7.4 million,
respectively, and reflect the seasonal nature of the business.

Customer Growth:

• Added, 9,126 new customers for the fiscal year — its highest total
  since 2006 — compared with 8,170 last year; new customer additions
  contributed $5.5 million to annual utility gross margin.
• NJNG expects to invest approximately $40 million per year in capital
  expenditures to support new customer growth through fiscal 2020. NJNG
  expects to add 26,000 to 28,000 new customers through fiscal 2020,
  representing an annual growth rate of 1.7 percent and a cumulative
  increase in utility gross margin of approximately $16 million through
  fiscal 2020. For more information on utility gross margin, please see
  “Non-GAAP Financial Information” below.

Infrastructure Update:

The Southern Reliability Link (SRL) is a proposed
30-mile transmission pipeline designed to provide a secondary interstate
feed into the southern end of NJNG’s delivery system to enhance
resiliency and supplier diversity.

• Approved by New Jersey Pinelands Commission on September 14, 2017; the
  final regulatory milestone.
• We are actively pursuing the remaining easements and road opening
  permits. Once approved, the construction process will begin and the
  SRL is expected to be in-service in the first quarter of fiscal 2019.

New Jersey Reinvestment in System Enhancement (NJ RISE) Program is
a five-year, $102.5 million investment that began in 2014 to enhance
system resiliency and improve NJNG's service disruption response
capabilities.

• Completed the reconstruction of the Ship Bottom Regulator Station on
  Long Beach Island.
• Installation of a secondary natural gas distribution main in the
  northern section of the Seaside barrier island in Ocean County, New
  Jersey has begun, along with improvements to the associated primary
  and backup regulator stations.
• Two additional NJ RISE projects are in the permitting phase, with
  expected completion dates in fiscal 2019.

Safety Acceleration and Facilities Enhancement (SAFE) Program II
is a five-year program designed to replace the remaining 276 miles of
unprotected steel main and associated services in NJNG’s distribution
system. As a condition of the New Jersey Board of Public Utilities'
(BPU) approval, NJNG is required to file a base rate case no later than
November 2019.

• In fiscal 2017, $39.8 million was invested to replace 69.7 miles of
  unprotected steel main and services.
• NJNG earns an Allowance for Funds Used During Construction (AFUDC) on
  its invested capital during construction, and requests base rate
  increases for the approved $157.5 million of SAFE II spending in
  annual filings.
• BPU approved a $4.1 million base rate increase, effective October 1,
  2017, to recover NJ RISE and SAFE II capital investments for the
  period ending June 30, 2017.

Basic Gas Supply Service (BGSS) Incentive Programs:

• Contributed $13.7 million in fiscal 2017 to utility gross margin
  compared with $15 million during the same period in fiscal 2016,
  reflecting a decrease in the value of capacity and lower volumes
  associated with the capacity release program.

Energy Efficiency:

• The SAVEGREEN Project®, NJNG’s energy-efficiency program,
  invested $13.1 million during fiscal 2017 in grants and financing
  options designed to help customers with energy-efficiency upgrades for
  their homes and businesses.
• Since inception in 2009, NJNG has invested nearly $150 million and is
  authorized to earn an overall return on its investments, ranging from
  6.69 to 7.76 percent, with a return on equity (ROE) that ranges from
  9.75 to 10.3 percent.

NJR Midstream

Reported fiscal 2017 NFE of $12.9 million compared with $9.4 million
during the same period in fiscal 2016. For the three-month period ended
September 30, 2017, NFE were $2.6 million, compared with $2.5 million
during the same period in fiscal 2016. The improved results were due
primarily to AFUDC associated with the PennEast Pipeline project.

• On October 27, 2017, Adelphia Gateway, LLC, a subsidiary of NJR,
  entered into an agreement with Talen Generation LLC to acquire all of
  the membership interests in Interstate Energy Company LLC, which owns
  and operates an existing 84-mile pipeline in southeastern
  Pennsylvania. The transaction is expected to close following receipt
  of all of the necessary permits and regulatory actions, including
  those from the Federal Energy Regulatory Commission (FERC) and the
  Pennsylvania Public Utility Commission.
• PennEast is awaiting final approval of its Certificate of Public
  Convenience and Necessity from FERC.
• Once the FERC certificate is received, the project will move quickly
  to secure the remaining permits and reassess the project timeline.
  PennEast expects the project to be in service in 2019.

Non-Regulated Business Update:

NJR Clean Energy Ventures

Reported NFE of $24.9 million in fiscal 2017, compared with $28.4
million in fiscal 2016. During the three-month period ended September
30, 2017, NJRCEV reported a net financial loss of $7 million, compared
with NFE of $6.5 million during the same period in fiscal 2016. The
quarterly results were due primarily to lower investment tax credits
(ITCs) driven by NJRCEV's decision to finance two of its commercial
assets through a sale leaseback arrangement, which is described below.
Solar highlights include:

• Five commercial solar projects were placed into service, adding 27.1
  MWs to its growing portfolio of solar assets.
• The Sunlight Advantage® residential solar program added 1,300 new
  customers, compared with 1,123 during the same period in fiscal 2016.
• Solar-related capital expenditures for projects eligible for ITCs
  during fiscal 2017 were $120.3 million, $87.5 million net of sale
  leaseback, compared with $85.6 million during fiscal 2016.
• Completed sale leaseback financing of two commercial solar asset
  projects totaling $32.9 million. Under the sale leaseback financing,
  NJRCEV retains all Solar Renewable Energy Credits (SRECs) and proceeds
  from electricity sales while transferring the tax benefits associated
  with the ITCs and bonus depreciation to the lessor.

NJR Energy Services (NJRES)

Reported NFE of $18.6 million in fiscal 2017 compared with $21.9 million
during the same period in fiscal 2016.

Reported a net financial loss of $1.6 million in the fourth quarter of
fiscal 2017, compared with a net financial loss of $5.7 million during
the same period in fiscal 2016.

• Lower results in fiscal 2017 were due primarily to fewer market
  opportunities related to transportation assets and timing of certain
  transactions related to storage withdrawals, along with
  warmer-than-normal weather during fiscal 2017.

Capital Expenditures and Cash Flows:

NJR is committed to maintaining a strong financial profile while
continuing to invest capital in regulated and non-regulated projects.

• NJR generated operating cash flows of $248 million in fiscal 2017,
  compared with $142.6 million during the same period in fiscal 2016.
  The increase was attributed primarily to higher utility gross margin
  and lower broker margin requirements, as well as a discretionary
  contribution of $30 million to NJR’s pension plan during fiscal 2016
  that did not recur in fiscal 2017.
• Fiscal 2017 capital expenditures were $326.8 million, of which $204.7
  million were related to regulated assets. For the fourth quarter of
  fiscal 2017, capital expenditures were $80.3 million, compared with
  $133.4 million during the same period in fiscal 2016.
• NJR reported aggregate capital expenditures of $410.8 million and
  dividend payments of $88 million for fiscal 2017, of which $248.1
  million was funded from operating cash flows, $32.9 million from sale
  leaseback financing, $206.7 million from other proceeds from debt and
  $11.1 million from equity issuances.

Effective Tax Rate:

NJR’s annual effective tax rate decreased compared with the previous
year. In fiscal 2017, $29.6 million related to tax credits net of
deferred taxes were recognized, compared with $27.3 million, in the same
period last year.

For NFE purposes, the effective tax rate also decreased and NJR
recognized $29.6 million in tax credits net of deferred taxes. Further
detail can be found in Note 13 “Income Taxes” within our 10-K filing.

Webcast Information:

NJR will host a live webcast to discuss its financial results today at
10 a.m. EST. A few minutes prior to the webcast, go to njresources.com
and select “Investor Relations,” then scroll down to the “Events &
Presentations” section and click on the webcast link.

Forward-Looking Statements:

This release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, Section 21E of
the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. NJR cautions readers that the
assumptions forming the basis for forward-looking statements include
many factors that are beyond NJR’s ability to control or estimate
precisely, such as estimates of future market conditions and the
behavior of other market participants. Words such as “anticipates,”
“estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,”
“believes,” “should” and similar expressions may identify
forward-looking statements and such forward-looking statements are made
based upon management’s current expectations, assumptions and beliefs as
of this date concerning future developments and their potential effect
upon NJR. There can be no assurance that future developments will be in
accordance with management’s expectations, assumptions and beliefs or
that the effect of future developments on NJR will be those anticipated
by management. Forward-looking statements in this release include, but
are not limited to, certain statements regarding NJR’s NFE guidance for
fiscal 2018, forecasted contribution of business segments to fiscal 2018
NFE, future NJNG customer growth, future NJR capital expenditures and
infrastructure investments, NJRCEV’s ITC-eligible projects and demand
for residential solar, SREC prices and electricity sales, future base
rate cases, earnings and dividend growth, the ability to close and
successfully implement the Adelphia Gateway acquisition, as well as the
SRL and PennEast Pipeline projects.

The factors that could cause actual results to differ materially from
NJR’s expectations include, but are not limited to, risks associated
with our investments in clean energy projects, including the
availability of regulatory and tax incentives, the availability of
viable projects, our eligibility for ITCs and PTCs, the future market
for SRECs and electricity prices, and operational risks related to
projects in service; the ability to obtain governmental and regulatory
approvals, land-use rights, electric grid connection (in the case of
clean energy projects) and/or financing for the construction,
development and operation of our unregulated energy investments and
NJNG’s infrastructure projects in a timely manner; risks associated with
acquisitions and the related integration of acquired assets with our
current operations; volatility of natural gas and other commodity prices
and their impact on NJNG customer usage, NJNG’s BGSS incentive programs,
our Energy Services segment operations and on our risk management
efforts; the level and rate at which NJNG’s costs and expenses are
incurred and the extent to which they are approved for recovery from
customers through the regulatory process, including through future base
rate case filings; the impact of a disallowance of recovery of
environmental-related expenditures and other regulatory changes; the
performance of our subsidiaries; operating risks incidental to handling,
storing, transporting and providing customers with natural gas; access
to adequate supplies of natural gas and dependence on third-party
storage and transportation facilities for natural gas supply; the
regulatory and pricing policies of federal and state regulatory
agencies; timing of qualifying for ITCs and PTCs due to delays or
failures to complete planned solar and wind energy projects and the
resulting effect on our effective tax rate and earnings; the results of
legal or administrative proceedings with respect to claims, rates,
environmental issues, gas cost prudence reviews and other matters; risks
related to cyberattack or failure of information technology systems;
changes in rating agency requirements and/or credit ratings and their
effect on availability and cost of capital to our company; the ability
to comply with current and future regulatory requirements; the impact of
volatility in the equity and credit markets on our access to capital;
the impact to the asset values and resulting higher costs and funding
obligations of our pension and postemployment benefit plans as a result
of potential downturns in the financial markets, lower discount rates,
revised actuarial assumptions or impacts associated with the Patient
Protection and Affordable Care Act; commercial and wholesale credit
risks, including the availability of creditworthy customers and
counterparties, and liquidity in the wholesale energy trading market;
accounting effects and other risks associated with hedging activities
and use of derivatives contracts; the ability to optimize our physical
assets; any potential need to record a valuation allowance for our
deferred tax assets; changes to tax laws and regulations; weather and
economic conditions; the ability to comply with debt covenants;
demographic changes in NJR’s service territory and their effect on NJR’s
customer growth; the impact of natural disasters, terrorist activities
and other extreme events on our operations and customers; the costs of
compliance with present and future environmental laws, including
potential climate change-related legislation; environmental-related and
other uncertainties related to litigation or administrative proceedings;
risks related to our employee workforce; and risks associated with the
management of our joint ventures and partnerships, and investment in a
master limited partnership. The aforementioned factors are detailed in
the “Risk Factors” sections of our Form 10-K that we filed with the
Securities and Exchange Commission (SEC) on November 21, 2017, which is
available on the SEC’s website at sec.gov. Information included in this
release 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.

Non-GAAP Financial Information:

This release includes the non-GAAP financial measures NFE (losses),
financial margin and utility gross margin. A reconciliation of these
non-GAAP financial measures to the most directly comparable financial
measures calculated and reported in accordance with GAAP can be found
below. As an indicator of NJR’s operating performance, these measures
should not be considered an alternative to, or more meaningful than, net
income or operating revenues as determined in accordance with GAAP. This
information has been provided pursuant to the requirements of SEC
Regulation G.

NFE (losses) and financial margin 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, net of
applicable tax adjustments as described below. Volatility associated
with the change in value of these financial instruments and physical
commodity contracts is reported on 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.

NJNG’s utility gross margin represents the results of revenues less
natural gas costs, sales, expenses and other taxes and regulatory rider
expenses, which are key components of NJR’s operations that move in
relation to each other. Natural gas costs, sales, expenses and other
taxes and regulatory rider expenses are passed through to customers and,
therefore, have no effect on gross margin. Management uses these
non-GAAP financial measures as supplemental measures to other GAAP
results to provide a more complete understanding of NJR’s performance.

Contacts

New Jersey Resources
Media:
Michael Kinney, 732-938-1031
[email protected]
or
Investors:
Dennis
Puma, 732-938-1229
[email protected]

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