10-Q: New Jersey Resources Reports Strong Q1 2025 Earnings, Driven by Clean Energy Ventures Sale and Increased Base Rates

Sentiment:

Quarterly Report 4 February 2025 2:50 PM

📋All filings for New Jersey Resources CORP

New Jersey Resources Corporation (NJR) announced a significant increase in net income for the first quarter of fiscal year 2025, primarily driven by a gain on the sale of its residential solar portfolio and increased base rates at NJNG.

Capital raiseNJNG filed a petition with the BPU seeking authority to issue up to $700M in Medium Term Notes over a three-year period.NJR issued $100M senior notes at a fixed interest rate of 5.55%, maturing on November 7, 2034.

Better than expectedNet income increased significantly due to the gain on the sale of the residential solar portfolio and increased base rates at NJNG.

Summary

New Jersey Resources Corporation (NJR) reported a net income of $131.3 million, or $1.31 per diluted share, for the three months ended December 31, 2024, compared to $89.4 million, or $0.91 per diluted share, for the same period in the previous year.
The increase in net income was primarily driven by a $37.6 million increase at Clean Energy Ventures (CEV) due to a gain on the sale of its residential solar asset portfolio and a $15.5 million increase in earnings at New Jersey Natural Gas (NJNG) due to increased base rates.
Total operating revenues increased to $488.4 million from $467.2 million in the prior year.
NJNG's Utility Gross Margin increased to $181.3 million from $155.8 million, driven by higher base rates.
CEV completed the sale of its 91 MW residential solar portfolio for $132.5 million, recognizing a pre-tax gain of $54.9 million.
NJNG's new SAVEGREEN program, running from January 1, 2025, to June 30, 2027, is projected to increase annual recoveries by approximately $12.3 million.
NJNG's base rate increase of $157.0 million was approved by the BPU, effective November 21, 2024.
ES experienced a decrease in earnings due to lower revenue related to AMAs, decreased sales volumes, and higher natural gas costs.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, driven by strategic asset sales and regulatory approvals. While there are some challenges in the Energy Services segment, the overall tone is optimistic.

Positives

Significant increase in consolidated net income driven by CEV's asset sale and NJNG's increased base rates.
Strong performance in the Clean Energy Ventures segment due to the sale of the residential solar portfolio.
NJNG secured a $157.0 million base rate increase, enhancing its earnings potential.
The new SAVEGREEN program is expected to boost NJNG's annual recoveries.
Addition of new customers at NJNG is expected to contribute to incremental Utility Gross Margin.
NJR issued $100M senior notes at a fixed interest rate of 5.55%, maturing on November 7, 2034.

Negatives

ES experienced a decrease in earnings due to lower revenue related to AMAs, decreased sales volumes, and higher natural gas costs.
Warmer-than-normal weather impacted NJNG's CIP adjustments negatively.
NJNG's BGSS incentive programs decreased due to reduced market volatility.

Risks

Fluctuations in natural gas prices could impact NJNG's customer usage and ES's operations.
Regulatory changes and environmental regulations could affect NJNG's cost recovery.
Wholesale credit risk exists due to potential counterparty defaults.
Cyberattacks and failures of information technology systems pose a risk to operations.
Downturns in financial markets could impact pension and postemployment benefit plans.
Weather and economic conditions, including climate change, could affect operations.
Uncertainties related to litigation, regulatory, administrative, or environmental proceedings could impact financial results.

Future Outlook

NJNG anticipates that FERC will allow it to place the rates into effect during the second half of 2025, subject to refund and the outcome of a hearing to be established by FERC. NJNG expects new customer additions, and those customers who added additional natural gas services to their premises to contribute approximately $2.0M of incremental Utility Gross Margin on an annualized basis. NJNG's total capital expenditures are projected to be between $365M and $415M during fiscal 2025. We estimate solar-related capital expenditures during fiscal 2025 to be between $160M and $265M.

Management Comments

NJNG's operations are managed with the goal of providing safe and reliable service, growing its customer base, diversifying its Utility Gross Margin, promoting clean energy programs and mitigating the risks discussed above.

Industry Context

The announcement reflects a broader trend in the energy sector towards renewable energy investments and the optimization of existing assets. The sale of the residential solar portfolio allows NJR to focus on larger commercial projects, while the increased base rates for NJNG demonstrate the ongoing need for infrastructure investment in natural gas distribution.

Comparison to Industry Standards

The sale of CEV's residential solar portfolio for $132.5 million is comparable to other transactions in the renewable energy sector, where companies are divesting assets to streamline operations and focus on core competencies.
The approved base rate increase for NJNG is in line with regulatory trends that allow utilities to recover infrastructure investments and operating costs, ensuring reliable service for customers.
Companies like NextEra Energy and Consolidated Edison are also actively investing in renewable energy projects and optimizing their existing infrastructure, reflecting a similar strategic direction.

Legal Proceedings

NJNG is responsible for the remedial cleanup of certain former MGP sites, dating back to gas operations in the late 1800s and early 1900s, which contain contaminated residues from former gas manufacturing operations.

Related Party Transactions

NJNG and ES enter into various AMAs, the effects of which are eliminated in consolidation.
NJNG entered into two transportation agreements with Adelphia, each for committed capacity of 130,000 Dekatherms per day.
ES had a five-year agreement for 3 Bcf of firm storage capacity with Leaf River, the effects of which were eliminated in consolidation.
NJNG and CEV entered into a 15-year sublease and PPA related to an onsite solar array and the related energy output at the Company's headquarters in Wall, New Jersey, with an expiration date of March 1, 2036, the effects of which are immaterial to the consolidated financial statements.
NJNG entered into 16-year lease agreements, as Lessor, with various NJR subsidiaries, as Lessees, for office space at the Company's headquarters in Wall, New Jersey, each with an expiration date of July 1, 2037, the effects of which are eliminated in consolidation.
NJNG and CEV entered into a 20-year sublease and PPA related to an onsite solar array and the related energy output at the Company's liquefied natural gas plant in Howell, New Jersey, with an expiration date of June 1, 2042, the effects of which are immaterial to the consolidated financial statements.
On January 3, 2025, Adelphia and ES entered into a transportation agreement for committed capacity of 10,000 Dekatherms per day with an expiration date of February 28, 2025.

Stakeholder Impact

Shareholders benefit from increased net income and earnings per share.
Customers of NJNG benefit from reliable service and energy efficiency programs.
Employees are subject to risks related to workforce management and succession planning.
Suppliers and creditors are subject to risks related to commercial and wholesale credit.

Next Steps

Adelphia anticipates that FERC will allow it to place the rates into effect during the second half of 2025, subject to refund and the outcome of a hearing to be established by FERC.
NJNG will continue to seek recovery of MGP-related costs through the RAC.
CEV currently has certain residential solar energy projects that are under contract and in various stages of development that will transfer to the buyer once the assets become operational. The transfer of these projects is expected to take place during fiscal 2025.

Key Dates

Date	Description
September 1, 2014	Date of the Amended and Restated Indenture of Mortgage, Deed of Trust and Security Agreement between NJNG and U.S. Bank National Association
April 2020	NJNG entered into a five-year agreement for 3 Bcf of firm storage capacity with Steckman Ridge, which expires on March 31, 2025.
April 30, 2020	The SREC program officially closed to new qualified solar projects in New Jersey.
October 2020	The BPU approved NJNGs five-year IIP filing for $150.0M of transmission and distribution investments, effective November 1, 2020.
July 2021	The BPU established a new successor solar incentive program, or SREC IIs.
November 2021	Commencement of AMAs with an investment grade public utility to release pipeline capacity associated with certain natural gas transportation contracts.
August 2022	The federal ITC was restored to 30% through the end of 2032.
March 1, 2023	NJNGs February 2023 filing for a reduction to the BGSS rate, which reduced annual recoveries by approximately $29.9M, effective March 1, 2023.
October 1, 2023	The BPU approved NJNG's annual IIP filing, which requested a rate increase for capital expenditures of $28.2M through June 30, 2023, which resulted in a $3.2M revenue increase, effective October 1, 2023.
November 1, 2023	Start date of NJNG's 15-year transportation agreement with Adelphia in Zone North, with an expiration date of October 31, 2038.
January 1, 2024	The Company announced changes to its postretirement medical benefits plan.
January 31, 2024	NJNG filed a base rate case with the BPU requesting a natural gas revenue increase of approximately $222.6M.
March 20, 2024	The BPU approved NJNG's annual SBC filing of RAC expenditures through June 30, 2023, which included an increase to the RAC annual recoveries of approximately $2.4M and an increase to the NJCEP annual recoveries of approximately $5.5M, effective April 1, 2024.
March 28, 2024	NJNG submitted its annual IIP filing to the BPU requesting a rate increase for capital expenditures of $43.5M through June 30, 2024.
April 1, 2024	Effective date of NJNG's annual SBC filing of RAC expenditures through June 30, 2023, which included an increase to the RAC annual recoveries of approximately $2.4M and an increase to the NJCEP annual recoveries of approximately $5.5M.
April 30, 2024	The BPU approved, on a final basis, NJNG's June 2023 annual filing, which included a decrease of approximately $38.6M to the annual revenues credited to BGSS, an annual decrease of approximately $7.4M related to its balancing charge and an increase of approximately $27.0M to CIP rates for residential and small business customers, effective October 1, 2023.
May 2024	NJNGs May 2024 annual filing, which included a decrease of approximately $31.0M to the annual revenues credited to BGSS, an annual increase of approximately $40.3M related to its balancing charge and a decrease of approximately $0.8M to CIP rates, effective October 1, 2024.
June 1, 2024	Annual review of the CIP must be filed by June 1, coincident with NJNGs annual BGSS filing, during which NJNG can request rate changes to the CIP.
June 28, 2024	NJNG submitted its annual USF filing to the BPU requesting an increase to the statewide USF rate.
July 26, 2024	The filing was updated July 26, 2024, to reflect actual expenses of $41.2M.
August 7, 2029	Maturity date of NJRs Second Amended and Restated Credit Agreement, governing a $575M NJR Credit Facility, with an option to extend the maturity date up to two times for an additional period of one year each.
August 8, 2027	Expiration date of NJNG's first transportation agreement with Adelphia for five years in Zone South.
September 25, 2024	The BPU approved NJNG's annual IIP filing, which resulted in a $4.7M revenue increase, effective October 1, 2024.
September 25, 2024	The BPU approved, on a provisional basis, NJNGs May 2024 annual filing, which included a decrease of approximately $31.0M to the annual revenues credited to BGSS, an annual increase of approximately $40.3M related to its balancing charge and a decrease of approximately $0.8M to CIP rates, effective October 1, 2024.
September 30, 2024	Adelphia filed a Section 4 rate case with the FERC seeking approval to revise its transportation cost-of-service rates.
September 30, 2024	NJNG submitted its annual SBC filing to the BPU requesting approval of RAC expenditures through June 2024, which included an increase to the RAC annual recoveries of approximately $2.4M and an increase to the NJCEP annual recoveries of approximately $1.6M, which would be effective April 1, 2025.
October 1, 2024	The BPU approved the filing, which resulted in a $6.8M increase to annual recoveries, effective October 1, 2024.
October 1, 2027	Loans accrue interest at a variable rate that resets quarterly and are due October 1, 2027.
October 30, 2024	The BPU approved a settlement of the new SAVEGREEN program running from January 1, 2025 to June 30, 2027, and consisting of $205.0M of direct investment, $160.5M in financing options and $20.1M in O&M, which totals $385.6M.
November 7, 2024	NJR entered into a Note Purchase Agreement under which NJR issued $100M senior notes at a fixed interest rate of 5.55%, maturing on November 7, 2034.
November 21, 2024	The BPU issued an order adopting a stipulation of settlement approving a $157.0M increase to base rates, effective November 21, 2024.
November 25, 2024	CEV completed the sale of its residential solar asset portfolio to a third party for a total purchase price of $132.5M.
December 17, 2024	NJNG filed a petition with the BPU seeking authority to issue up to $700M in Medium Term Notes over a three-year period.
December 18, 2024	The BPU approved NJNG's annual EE filing for the recovery of SAVEGREEN costs, which will increase annual recoveries by approximately $3.1M, effective January 1, 2025.
December 19, 2024	Roberto Bel, our Senior Vice President and Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement, which is intended to satisfy the affirmative defense of Rule 10b5-1(c).
January 3, 2025	Adelphia and ES entered into a transportation agreement for committed capacity of 10,000 Dekatherms per day with an expiration date of February 28, 2025.
January 8, 2025	This audit was completed by the State of New Jersey and no other action is necessary.
March 20, 2025	The Rule 10b5-1 trading arrangement provides for sales of up to 3,519 shares of our common stock beginning on March 20, 2025 until August 10, 2025, or once all of the shares have been sold.
August 10, 2025	The Rule 10b5-1 trading arrangement provides for sales of up to 3,519 shares of our common stock beginning on March 20, 2025 until August 10, 2025, or once all of the shares have been sold.

Keywords

Net Income, Utility Gross Margin, Clean Energy Ventures, New Jersey Natural Gas, Base Rates, SAVEGREEN, Solar Portfolio Sale, Energy Services, Natural Gas, Regulation

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