New Jersey Resources Corporation — Q1 FY2023 10-Q
Reporting period: Three months ended December 31, 2022; balance-sheet comparisons are to September 30, 2022. NJR is a diversified energy company spanning regulated natural gas distribution, clean energy, energy services, and storage and transportation. The quarter is seasonally significant for gas demand; interim results are not necessarily indicative of full-year performance.
Financial results
| Metric | Q1 FY2023 | Prior-year quarter | Change |
|---|---|---|---|
| Operating revenue | $723.6 million | $675.8 million | +7.1% |
| Operating income | $172.8 million | $156.9 million | +10.1% |
| Net income | $115.9 million | $111.3 million | +4.1% |
| Diluted EPS | $1.19 | $1.16 | +2.6% |
| Net financial earnings (NFE), non-GAAP | $110.3 million | $65.8 million | +67.7% |
Revenue growth reflected higher utility revenue, while nonutility revenue declined. Utility revenue rose to $357.4 million from $274.4 million; nonutility revenue was $366.2 million versus $401.4 million. Reported results include derivative-related timing volatility: management’s non-GAAP NFE measure adjusts for specified unrealized derivative effects and inventory hedging timing.
- Natural Gas Distribution: Net income was $54.7 million, up from $51.1 million. Utility Gross Margin, a non-GAAP measure, increased to $154.7 million from $133.5 million, supported by base-rate increases, higher incentive-program margin, and customer growth.
- Energy Services: Net income was $64.6 million, slightly below $65.7 million; NFE increased to $52.5 million from $17.6 million, primarily reflecting higher Financial Margin amid greater natural-gas price volatility.
- Storage and Transportation: Net income rose to $6.2 million from $3.0 million, including contribution from Adelphia Gateway’s southern section, which became fully operational in September 2022.
- Clean Energy Ventures: Net loss narrowed to $3.6 million from $6.8 million as revenue increased and operating and maintenance expense declined.
Cash flow and investment: Operating cash flow was negative $88.9 million, compared with negative $37.4 million, mainly due to higher working-capital needs. Investing cash outflow was $145.6 million, versus $164.1 million; capital expenditures were approximately $145.9 million. Financing cash inflow was $235.9 million. Cash and cash equivalents were $2.4 million at quarter-end ($2.9 million including restricted cash).
Debt and liquidity: Long-term debt was $2.69 billion; short-term debt was $464.5 million and current maturities of long-term debt were $80.1 million. NJR reported $427.7 million available under its credit facility and NJNG reported $137.5 million available under its facility. NJR’s $150 million term loan was due February 7, 2023. Management said it expected available borrowing capacity, equity proceeds, and operating cash flow to cover needs for at least 12 months and reported covenant compliance at December 31, 2022.
Material changes and management commentary
- Total assets increased to $6.61 billion from $6.26 billion, driven mainly by utility and solar investment and higher receivables.
- Interest expense increased to $29.5 million from $19.5 million, reflecting higher borrowing and interest costs.
- Customer accounts at NJNG reached 572,500, up from 566,561 a year earlier. Management expects approximately 1.6% annual customer growth.
- Management estimated fiscal 2023 capital spending of $352–$378 million for NJNG and $100–$200 million for solar projects. It also estimated fiscal 2023 spending of $12–$16 million for Adelphia Gateway and $8–$12 million for Leaf River. These estimates may change.
- No consolidated fiscal 2023 earnings guidance is stated in the provided filing text.
Risks, contingencies, and unusual items
- Natural-gas and renewable-credit price changes, derivative valuation and settlement timing, weather, working-capital swings, counterparty credit, and access to capital can affect results and liquidity. Energy Services’ earnings are particularly exposed to market volatility and hedge timing.
- NJNG recorded approximately $125.7 million for manufactured-gas-plant remediation, with estimated total future costs of $110.8–$167.1 million. Recovery is pursued through BPU-approved mechanisms; actual costs and regulatory recovery remain uncertain.
- NJNG had approximately $3.9 million of deferred pandemic-related costs at December 31, 2022. It advised the BPU it would stop deferring such costs after that date and seek recovery in its next base-rate proceeding.
- The company identified regulatory approvals, clean-energy project execution and incentives, inflation, natural-gas supply and pricing, litigation, environmental obligations, credit ratings, and financing access among forward-looking risks. It reported no material change in risk factors from its 2022 Form 10-K.
- The Inflation Reduction Act’s expanded clean-energy tax credits may create opportunities, but the company said future impacts could not yet be reasonably estimated. It stated the corporate alternative minimum tax did not apply based on current income thresholds.
Important facts for investors to verify
- Whether the $150 million NJR term loan due February 7, 2023 was refinanced or repaid, and the resulting borrowing costs and available liquidity.
- Progress and regulatory treatment of NJNG’s next base-rate proceeding, including recovery of deferred pandemic costs and infrastructure investment.
- Updates to MGP remediation cost estimates, regulatory recovery, and the Aberdeen site investigation.
- Whether Energy Services’ reported and non-GAAP earnings remain supported by realized economic margins as derivative positions settle.
- Execution, financing, and expected returns for the planned fiscal 2023 utility, solar, and storage and transportation capital programs.