ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CRITICAL ACCOUNTING ESTIMATES
We prepare our financial statements in accordance with GAAP. Application of these accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies during the reporting period. We regularly evaluate our estimates, including those related to the calculation of the fair value of derivative instruments, acquisitions, regulatory assets, income taxes, pension and postemployment benefits other than pensions and contingencies related to environmental matters and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. In the normal course of business, estimated amounts are subsequently adjusted to actual results that may differ from estimates.
Regulatory Accounting
NJNG and Adelphia are subject to accounting requirements resulting from the effects of rate regulation. Specifically, NJNG and Adelphia record regulatory assets when it is considered probable that certain operating costs will be recoverable from customers in future periods and record regulatory liabilities when it is probable that future obligations to customers exist.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment and the timing and amount of assets to be recovered by rates. For NJNG, the BPU’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the BPU in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. If the BPU indicates that recovery of all or a portion of a regulatory asset is not probable or does not allow for recovery of and a reasonable return on investments in property, plant and equipment, a charge to income would be made in the period of such determination.
Environmental Costs
At the end of each fiscal year, NJNG, with the assistance of an independent consulting firm, updates the environmental review of its MGP sites, including its potential liability for investigation and remedial action. From this review, NJNG estimates expenditures necessary to remediate and monitor these MGP sites. NJNG’s estimate of these liabilities is developed from then-currently available facts, existing technology and current laws and regulations.
In accordance with accounting standards for contingencies, NJNG’s policy is to record a liability when it is probable that the cost will be incurred and can be reasonably estimated. NJNG will determine a range of liabilities and will record the most likely amount. If no point within the range is more likely than any other, NJNG will accrue the lower end of the range. Since we believe that recovery of these expenditures, as well as related litigation costs, is probable through the regulatory process, we record a regulatory asset corresponding to the related accrued liability. Accordingly, NJNG records an MGP remediation liability and a corresponding regulatory asset on the Consolidated Balance Sheets, which is based on the most likely amount.
The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations and the ultimate ability of other responsible parties to pay, as well as the potential impact of any litigation and any insurance recoveries. Previously incurred remediation costs, net of recoveries from customers and insurance proceeds received, are included in regulatory assets on the Consolidated Balance Sheets.
If there are changes in the regulatory position surrounding these costs, or should actual expenditures vary significantly from estimates in that these costs are disallowed for recovery by the BPU, such costs would be charged to income in the period of such determination. See the Legal Proceedings section in Note 14. Commitments and Contingent Liabilities for more details.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Postemployment Employee Benefits
Our costs of providing postemployment employee benefits are dependent upon numerous factors, including actual plan experience and assumptions of future experience. Postemployment employee benefit costs are affected by actual employee demographics including age, compensation levels and employment periods, the level of contributions made to the plans, changes in long-term interest rates and the return on plan assets. Changes made to the provisions of the plans or healthcare legislation may also impact current and future postemployment employee benefit costs. Postemployment employee benefit costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets, changes in mortality tables, health care cost trends and discount rates used in determining the PBO. In determining the PBO and cost amounts, assumptions can change from period to period and could result in material changes to net postemployment employee benefit periodic costs and the related liability recognized.
The remeasurement of plan assets and obligations for a significant event should occur as of the date of the significant event. We may use a practical expedient to remeasure the plan assets and obligations as of the nearest calendar month-end date. When performing interim remeasurements, we obtain new asset values, roll forward the obligation to reflect population changes and review the appropriateness of all assumptions, regardless of the reason for performing the interim remeasurement.
Our postemployment employee benefit plan assets consist primarily of U.S. equity securities, international equity securities, fixed-income investments and other assets. Fluctuations in actual market returns, as well as changes in interest rates, may result in increased or decreased postemployment employee benefit costs in future periods. Postemployment employee benefit expenses are included in O&M and other income, net on the Consolidated Statements of Operations.
The following is a summary of a sensitivity analysis for each actuarial assumption as of and for the fiscal year ended September 30, 2025:
Pension Plans
Actuarial Assumptions
Increase/
(Decrease)
Estimated
Increase/(Decrease) on PBO
(Thousands)
Estimated
Increase/(Decrease) to Expense
(Thousands)
Discount rate
Discount rate
Rate of return on plan assets
Rate of return on plan assets
Other Postemployment Benefits
Actuarial Assumptions
Increase/
(Decrease)
Estimated
Increase/(Decrease) on PBO
(Thousands)
Estimated
Increase/(Decrease) to Expense
(Thousands)
Discount rate
Discount rate
Rate of return on plan assets
Rate of return on plan assets
Actuarial Assumptions
Increase/
(Decrease)
Estimated
Increase/(Decrease) on PBO
(Thousands)
Estimated
Increase/(Decrease) to Expense
(Thousands)
Health care cost trend rate
Health care cost trend rate
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Impairment of Long-lived Assets
Property, plant and equipment and finite-lived intangible assets are reviewed periodically for impairment when changes in facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable in accordance with the appropriate accounting guidance. Factors that the Company analyzes in determining whether an impairment in its long-lived assets exists include determining if a significant decrease in the market price of a long-lived asset is present; a significant adverse change in the extent to which a long-lived asset is being used in its physical condition; legal proceedings or factors; significant business climate changes; accumulations of costs in significant excess of the amounts expected; a current-period operating or cash flow loss coupled with historical negative cash flows or expected future negative cash flows; and current expectations that more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its estimated useful life. When an impairment indicator is present, the Company determines if the carrying value of the asset is recoverable by comparing it to its expected undiscounted future cash flows. If the carrying value of the asset is greater than the expected undiscounted future cash flows, an impairment charge is recorded in an amount equal to the excess of the carrying value of the asset over its fair value.
Derivative Instruments
We record our derivative instruments held as assets and liabilities at fair value on the Consolidated Balance Sheets. In addition, since we choose not to designate any of our physical and financial natural gas commodity derivatives as accounting hedges, changes in the fair value of ES’s commodity derivatives are recognized in earnings, as they occur, as a component of operating revenues or natural gas purchases on the Consolidated Statements of Operations.
The fair value of derivative instruments is determined by reference to quoted market prices of listed exchange-traded contracts, published price quotations, pipeline tariff information or a combination of those items. ES’s portfolio is valued using the most current and reasonable market information. If the price underlying a physical commodity transaction does not represent a visible and liquid market, ES may utilize additional published pipeline tariff information and/or other services to determine an equivalent market price. As of September 30, 2025, the fair value of its derivative assets and liabilities reported on the Consolidated Balance Sheets that is based on such pricing is considered immaterial.
Should there be a significant change in the underlying market prices or pricing assumptions, ES may experience a significant impact on its financial position, results of operations and cash flows. Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risks for a sensitivity analysis related to the impact to derivative fair values resulting from changes in commodity prices. The valuation methods we use to determine fair values remained consistent for fiscal 2025, 2024 and 2023. We apply a discount to our derivative assets to factor in an adjustment associated with the credit risk of our physical natural gas counterparties and to our derivative liabilities to factor in an adjustment associated with our own credit risk. We determine this amount by using historical default probabilities corresponding to the appropriate S&P issuer ratings. Since the majority of our counterparties are rated investment grade, this results in an immaterial credit risk adjustment.
Gains and losses associated with derivatives utilized by NJNG to manage the price risk inherent in its natural gas purchasing activities are recoverable through its BGSS, subject to BPU approval. Accordingly, the offset to the change in fair value of these derivatives is recorded as either a regulatory asset or liability on the Consolidated Balance Sheets.
The Company hedges certain of its expected production of SRECs through forward and futures contracts. Upon physical delivery of SRECs to the counterparty, the Company recognizes SREC revenue as operating revenue on the Consolidated Statements of Operations.
We have not designated any derivatives as fair value or cash flow hedges as of September 30, 2025 and 2024.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Income Taxes
The determination of our provision for income taxes requires the use of estimates and the interpretation and application of tax laws. Judgment is required in assessing the deductibility and recoverability of certain tax benefits. We use the asset and liability method to determine and record deferred tax assets and liabilities, representing future tax benefits and taxes payable, which result from the differences in basis recorded in GAAP financial statements and amounts recorded in the income tax returns. The deferred tax assets and liabilities are recorded utilizing the statutorily enacted tax rates expected to be in effect at the time the assets are realized and/or the liabilities settled. An offsetting valuation allowance is recorded when it is more likely than not that some or all of the deferred income tax assets won’t be realized. Any significant changes to the estimates and judgments with respect to the interpretations, timing or deductibility could result in a material change to earnings and cash flows.
For state income tax and other taxes, estimates and judgments are required with respect to the apportionment among the various jurisdictions. In addition, we operate within multiple tax jurisdictions and are subject to audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. We maintain a liability for the estimate of potential income tax exposure and, in our opinion, adequate provisions for income taxes have been made for all years reported. Any significant changes to the estimates and judgments with respect to the apportionment factor could result in a material change to earnings and cash flows.
Occasionally, the federal and state taxing authorities determine that it is necessary to make certain changes to the income tax laws. These changes may include, but are not limited to, changes in the tax rates and/or the treatment of certain items of income or expense. Accounting guidance requires that the Company reflect the effect of changes in tax laws or tax rates at the date of enactment. Additionally, the Company is required to re-measure its deferred tax assets and liabilities as of the date of enactment. For non-regulated entities, the effects of changes in tax laws or tax rates are required to be included in income from continuing operations for the period that includes the enactment date. For regulated entities, if as the result of an action by a regulator it is probable that the future increase or decrease in taxes payable for items such as changes in tax laws or rates will be recovered from or returned to customers through future rates, an asset or liability shall be recognized for that probable increase or decrease in future revenue. Accounting guidance also requires that regulatory liabilities and/or assets be considered a temporary difference for which a related deferred tax asset and/or liability shall be recognized.
Accounting guidance requires that we establish reserves for uncertain tax positions when it is more likely than not that the positions will not be sustained when challenged by taxing authorities. Any changes to the estimates and judgments with respect to the interpretations, timing or deductibility could result in a change to earnings and cash flows. Interest and penalties related to unrecognized tax benefits, if any, are recognized within income tax expense, and accrued interest and penalties are recognized within accrued taxes on the Consolidated Balance Sheets.
To the extent that NJNG invests in property that qualifies for ITCs, the ITC is deferred and amortized to income over the life of the equipment in accordance with regulatory treatment. In general, for our unregulated subsidiaries, we record ITCs on the balance sheet as a contra-asset as a reduction to property, plant and equipment when the property is placed in service. The contra-asset is amortized on the Consolidated Statements of Operations as a reduction to depreciation expense over the useful lives of the related assets.
Changes to the federal statutes related to ITCs that have the effect of reducing or eliminating the credits could have a negative impact on earnings and cash flows.
Recently Issued Accounting Standards
Refer to Note 2. Summary of Significant Accounting Policies in the accompanying Consolidated Financial Statements for discussion of recently issued accounting standards.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
MANAGEMENT’S OVERVIEW
Consolidated
NJR is a diversified energy services holding company providing retail natural gas service in New Jersey and wholesale natural gas and related energy services to customers in the U.S. In addition, we invest in clean energy projects and storage and transportation assets and provide various repair, sales and installation services. A more detailed description of our organizational structure can be found in Item 1. Business .
The following sections include a discussion of results for fiscal 2025 compared to fiscal 2024. The comparative results for fiscal 2024 with fiscal 2023 have been omitted from this Form 10-K but may be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations on Form 10-K of our Annual Report for the fiscal year ended September 30, 2024, filed with the SEC on November 26, 2024.
Reportable Segments
We have four primary reportable segments as presented in the chart below:
In addition to our four reportable segments above, we have nonutility operations that either provide corporate support services or do not meet the criteria to be treated as a separate reportable segment. These operations, which comprise HSO, include appliance repair services, sales and installations at NJRHS and commercial real estate holdings at CR&R.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Operating Results
Net income and assets by reportable segment and other business operations for the fiscal years ended September 30, are as follows:
(Thousands)
Net Income
Assets
Net Income
Assets
Net Income
Assets
NJNG
CEV
HSO
Intercompany (1)
Total
(1) Consists of transactions between subsidiaries that are eliminated in consolidation.
Consolidated net income increased approximately $45.9M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $80.1M increase in earnings at NJNG due primarily to an increase in base rates, effective November 21, 2024; and
• $27.5M increase in earnings at CEV due primarily to the gain on the sale of the residential solar portfolio; partially offset by
• $65.9M decrease in earnings at ES primarily due to the timing of revenue recognition related to the AMAs, along with higher natural gas purchase prices.
The primary drivers of the changes noted above are described in more detail in the individual reportable segment and other business operations discussions.
Consolidated assets increased approximately $597.1M as of September 30, 2025, compared with September 30, 2024, due primarily to the following factors:
• $311.3M increase in utility plant expenditures at NJNG;
• $95.6M increase in nonutility plant and equipment, net at CEV and S&T;
• $63.3M increase in non-current regulatory assets at NJNG;
• $50.2M increase in other non-current assets primarily at CEV; and
• $42.5M increase in notes receivable at CEV.
Non-GAAP Financial Measures
Our management uses net income and NFE, a non-GAAP financial measure, when evaluating our operating results. ES economically hedges its natural gas inventory with financial derivative instruments. NFE is a measure of earnings based on eliminating timing differences surrounding the recognition of certain gains or losses, to effectively match the earnings effects of the economic hedges with the physical sale of natural gas and, therefore, eliminates the impact of volatility to GAAP earnings associated with the derivative instruments. To the extent we utilize forwards, futures or other derivatives to hedge forecasted SREC production, unrealized gains and losses are also eliminated from NFE. NFE also excludes certain transactions associated with equity method investments, including impairment charges, which are non-cash charges, and return of capital in excess of the carrying value of our investment. These are considered unusual in nature and occur infrequently such that they are not indicative of our performance for ongoing operations. Included in the tax effects are current and deferred income tax expense corresponding with the components of NFE.
Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for or a replacement of, the comparable GAAP measure and should be read in conjunction with those GAAP results.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Below is a reconciliation of consolidated net income, the most directly comparable GAAP measure, to NFE for the fiscal years ended September 30:
(Thousands, except per share data)
Net income
Add:
Unrealized (gain) loss on derivative instruments and related transactions
Tax effect
Effects of economic hedging related to natural gas inventory (1)
Tax effect
Gain on equity method investment
Tax effect
Net financial earnings
Basic earnings per share
Add:
Unrealized (gain) loss on derivative instruments and related transactions
Tax effect
Effects of economic hedging related to natural gas inventory (1)
Tax effect
Basic NFE per share
(1) Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.
NFE by reportable segment and other business operations for the fiscal years ended September 30, discussed in more detail within the operating results sections of each reportable segment and other business operations, is summarized as follows:
(Thousands)
NJNG
CEV
HSO
Eliminations (1)
Total
(1) Consists of transactions between subsidiaries that are eliminated in consolidation.
Consolidated NFE increased approximately $38.8M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $80.1M increase in earnings at NJNG, as previously discussed; and
• $27.5M increase in earnings at CEV, as previously discussed; partially offset by
• $76.6M decrease in earnings at ES, as previously discussed.
Natural Gas Distribution
Overview
Natural Gas Distribution is comprised of NJNG, a natural gas utility that provides regulated natural gas service to residential and commercial customers throughout Burlington, Middlesex, Monmouth, Morris, Ocean and Sussex counties in New Jersey and also participates in the off-system sales and capacity release markets. The business is subject to various risks, which may include, but are not limited to, impacts to customer growth and customer usage, customer collections, the timing and costs of capital expenditures and construction of infrastructure projects, operating and financing costs, fluctuations in commodity prices, customer conservation efforts and changes in how customers consume energy. In addition, NJNG may be subject to adverse economic conditions such as inflation and rising natural gas costs, certain regulatory actions, environmental remediation and severe weather conditions. It is often difficult to predict the impact of events or trends associated with these risks.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
NJNG’s business is seasonal by nature, as weather conditions directly influence the volume of natural gas delivered to customers on an annual basis. Specifically, customer demand substantially increases during the winter months when natural gas is used for heating purposes. As a result, NJNG generates most of its natural gas distribution revenues during the first and second fiscal quarters and is subject to variations in earnings and working capital during the fiscal year.
As a regulated company, NJNG is required to recognize the impact of regulatory decisions on its financial statements. See Note 4. Regulation in the accompanying Consolidated Financial Statements for a more detailed discussion of regulatory actions, including filings related to programs and associated expenditures, as well as rate requests related to recovery of capital investments and operating costs.
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.
Base Rate Case
On November 21, 2024, the BPU issued an order adopting a stipulation of settlement approving a $157.0M increase to base rates, effective as of the date of the order. The increase includes an overall rate of return on rate base of 7.08%, return on common equity of 9.6%, a common equity ratio of 54.0% and a composite depreciation rate of 3.21%.
Infrastructure Projects
NJNG has significant annual capital expenditures associated with the management of its natural gas distribution and transmission system, including new utility plant expenditures associated with customer growth and its associated PIM and infrastructure programs. Below is a summary of NJNG’s capital expenditures, including accruals for fiscal 2025 and estimates of expected investments over the next fiscal year:
Estimated capital expenditures are reviewed on a regular basis and may vary based on the ongoing effects of regulatory oversight, environmental regulations, unforeseen events and the ability to access capital.
NJNG implemented BPU-approved infrastructure projects that are designed to enhance the reliability and integrity of NJNG’s natural gas distribution system.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Infrastructure Investment Program
In October 2020, the BPU approved NJNG’s five-year IIP filing for $150.0M of transmission and distribution investments, effective November 1, 2020, which will be recovered through annual filings to adjust base rates. On July 25, 2025, NJNG submitted a filing with the BPU to extend the IIP through June 30, 2026.
In September 2024, the BPU approved NJNG’s annual IIP filing, which requested a rate increase for capital expenditures of approximately $41.2M through June 30, 2024, which resulted in a revenue increase of approximately $4.7M, effective October 1, 2024.
On September 5, 2025, NJNG submitted its annual IIP filing to the BPU requesting a rate increase for capital expenditures of $33.1M through October 31, 2025, which, if approved, would result in a $4.0M revenue increase, with a proposed effective date of January 1, 2026.
Natural Gas Customers
In conducting NJNG’s business, management focuses on factors it believes may have significant influence on its future financial results. NJNG’s policy is to work with all stakeholders, including customers, regulators and policymakers, to achieve favorable results. These factors include the rate of NJNG’s customer growth in its service territory, which can be influenced by political and regulatory policies, the delivered cost of natural gas compared with competing fuels, interest rates and general economic and business conditions.
NJNG’s total customers as of September 30, include the following:
Firm customers
Residential
Commercial, industrial & other
Residential transport
Commercial transport
Total firm customers
Other
Total customers
NJNG expects new customer additions during fiscal 2025, and those customers who added additional natural gas services to their premises, to contribute approximately $9.4M of incremental Utility Gross Margin on an annualized basis.
Energy Efficiency Programs
SAVEGREEN conducts home energy audits and provides various grants, incentives and financing alternatives designed to encourage the installation of high-efficiency heating and cooling equipment and other energy efficiency upgrades. Depending on the specific incentive or approval, NJNG recovers costs associated with the programs over a three- to 10-year period through a tariff rider mechanism. In March 2021, the BPU approved a three-year SAVEGREEN program consisting of approximately $126.1M of direct investment, $109.4M in financing options and $23.4M in O&M. In April 2024, the BPU approved NJNG’s $76.9M extension to this SAVEGREEN program through December 2024.
On October 30, 2024, the BPU approved a new SAVEGREEN program effective from January 1, 2025 to June 30, 2027, consisting of approximately $205.0M of direct investment, $160.5M in financing options and $20.1M in O&M, with expected recoveries of approximately $12.3M through September 30, 2025.
On December 18, 2024, the BPU approved NJNG’s annual SAVEGREEN filing for the recovery of costs, which increased annual recoveries by approximately $3.1M, effective January 1, 2025.
On May 30, 2025, NJNG’s annual SAVEGREEN filing for the recovery of costs was submitted to the BPU, requesting an increase in annual recoveries of approximately $17.3M. This matter is currently pending,
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
The following table summarizes loans, grants, rebates and related investments as of:
(Thousands)
September 30,
September 30,
Loans
Grants, rebates and related investments
Total
Program expenses, eligible for recovery, were approximately $15.7M and $28.6M during the fiscal years ended September 30, 2025 and 2024, respectively. Recovery of SAVEGREEN investments is based upon a weighted average cost of capital that ranges from 6.9% to 7.08%, with a return on equity of 9.6%.
Conservation Incentive Program/BGSS
The CIP facilitates normalizing NJNG’s Utility Gross Margin for variances due not only to weather but also other factors affecting customer usage, such as conservation and energy efficiency. Recovery of Utility Gross Margin for the non-weather variance through the CIP is limited to the amount of certain natural gas supply cost savings achieved and is subject to a variable margin revenue test. Additionally, recovery of the CIP Utility Gross Margin is subject to an annual earnings test. An annual review of the CIP must be filed by June 1, coincident with NJNG’s annual BGSS filing, during which NJNG can request rate changes to the CIP.
NJNG’s total utility firm gross margin includes the following adjustments related to the CIP mechanism:
(Thousands)
Weather (1)
Usage
Total
(1) Compared with the 20-year average, weather was 5.5%, 11.3% and 13.4% warmer-than-normal during fiscal 2025, 2024 and 2023, respectively.
Recovery of Natural Gas Costs
NJNG’s cost of natural gas is passed through to our customers, without markup, by applying NJNG’s authorized BGSS rate to actual therms delivered. There is no Utility Gross Margin associated with BGSS costs; therefore, changes in such costs do not impact NJNG’s earnings. NJNG monitors its actual natural gas costs in comparison to its BGSS rates to manage its cash flows associated with its allowed recovery of natural gas costs, which is facilitated through BPU-approved deferred accounting and the BGSS pricing mechanism. Accordingly, NJNG occasionally adjusts its periodic BGSS rates or can issue credits or refunds, as appropriate, for its residential and small commercial customers when the commodity cost varies from the existing BGSS rate. BGSS rates for its large commercial customers are adjusted monthly based on NYMEX prices.
NJNG’s residential and commercial markets are currently open to competition, and its rates are segregated between BGSS (i.e., natural gas commodity) and delivery (i.e., transportation) components. NJNG earns Utility Gross Margin through the delivery of natural gas to its customers and, therefore, is not negatively affected by customers who use its transportation service and purchase natural gas from another supplier. Under an existing order from the BPU, BGSS can be provided by suppliers other than the state’s natural gas utilities; however, customers who purchase natural gas from another supplier continue to use NJNG for transportation service.
On May 21, 2025, the BPU approved, on a final basis, NJNG’s 2024 annual BGSS/CIP 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. The balancing charge rate includes the cost of balancing natural gas deliveries with customer usage for sales and transportation customers, and balancing charge revenues are credited to BGSS.
On May 30, 2025, the 2025 BGSS/CIP filing was submitted to the BPU requesting an increase of approximately $63.3M to annual revenues related to BGSS, an annual increase of approximately $6.1M related to its balancing charge and a decrease of approximately $25.5M to CIP rates. If approved, the rates are expected to be effective during fiscal 2026.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
On October 31, 2025, NJNG notified the BPU that it intends to self-implement an increase to its BGSS rate, effective December 1, 2025, which will result in an increase of approximately $38.1M in revenues related to BGSS for the December 2025 through September 2026 period.
BGSS Incentive Programs
NJNG is eligible to receive financial incentives for reducing BGSS costs through a series of Utility Gross Margin-sharing programs that include off-system sales, capacity release and storage incentive programs. These programs are designed to encourage better utilization and hedging of NJNG’s natural gas supply and transportation and storage assets. Depending on the program, NJNG shares 80% or 85% of Utility Gross Margin generated by these programs with firm customers. Utility Gross Margin from incentive programs was approximately $18.4M, $17.9M and $20.0M during the fiscal years ended September 30, 2025, 2024 and 2023, respectively.
Hedging
In order to provide relative price stability to its natural gas supply portfolio, NJNG employs a hedging strategy with the goal of having at least 75% of the Company’s projected winter periodic BGSS natural gas sales volumes hedged by each November 1 and at least 25% of the projected periodic BGSS natural gas sales hedged for the following April-through-March period. The hedging goal is typically achieved with gas in storage and the use of financial instruments to hedge storage injections. NJNG may also use various financial instruments including futures, swaps, options and weather-related products to hedge its future delivery obligations.
Commodity Prices
NJNG is affected by the price of natural gas, which can have a significant impact on our cash flows and short-term financing costs, the price of natural gas charged to our customers through the BGSS clause, our ability to collect accounts receivable, which impacts our bad debt expense, and our ability to maintain a competitive advantage over other energy sources. Natural gas commodity prices are shown in the graph below, which illustrates the daily natural gas prices per MMBtu (1) in the Northeast market region, also known as TETCO M-3.
(1) Data sourced from Standard & Poor’s Financial Services, LLC Global Platts.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
The maximum price per MMBtu was $40.02, $20.98 and $32.46 and the minimum price was $1.05, $0.89 and $0.67 for the fiscal years ended September 30, 2025, 2024 and 2023, respectively. A more detailed discussion of the impacts of the price of natural gas on operating revenues, natural gas purchases and cash flows can be found in the Operating Results and Cash Flow sections of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Societal Benefits Charge
NJNG’s qualifying customers are eligible for the USF program, which is administered by the New Jersey Department of Community Affairs, to help make energy bills more affordable.
In March 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.
In June 2024, NJNG submitted its annual USF filing to the BPU requesting an increase to the statewide USF rate. In September 2024, the BPU approved the filing, which resulted in an increase to annual recoveries of approximately $6.8M, effective October 1, 2024.
On April 23, 2025, the BPU approved NJNG’s annual SBC filing of RAC expenditures through June 30, 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, effective May 1, 2025.
On June 27, 2025, NJNG submitted its annual USF filing to the BPU requesting a decrease to the statewide USF rate. On September 25, 2025, the BPU approved the filing, which resulted in a decrease to annual recoveries of approximately $1.0M, effective October 1, 2025.
On September 26, 2025, NJNG submitted its annual SBC filing to the BPU requesting approval of RAC expenditures through June 2025, which included a decrease to the RAC annual recoveries of approximately $0.9M and a decrease to the NJCEP annual recoveries of approximately $5.0M, which, if approved, would be effective April 1, 2026.
Environmental Remediation
NJNG is responsible for the environmental remediation of former MGP sites, which contain contaminated residues from former gas manufacturing operations that ceased operating at these sites by the mid-1950s and, in some cases, had been discontinued many years earlier. Actual MGP remediation costs may vary from management’s estimates due to the developing nature of remediation requirements, regulatory decisions by the NJDEP and related litigation. NJNG reviews these costs periodically, and at least annually, and adjusts its liability and corresponding regulatory asset as necessary to reflect its expected future remediation obligation. Accordingly, NJNG recognized a regulatory asset and an obligation of approximately $167.0M as of September 30, 2025, an increase of approximately $5.3M compared with the prior fiscal period. See Note 14. Commitments and Contingent Liabilities for a more detailed description of MGP expenditures.
Other regulatory filings and a more detailed discussion of the filings in this section can be found in Note 4. Regulation in the accompanying Consolidated Financial Statements.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Operating Results
NJNG’s operating results for the fiscal years ended September 30, are as follows:
(Thousands)
Operating revenues (1)
Operating expenses
Natural gas purchases (2) (3)
Operation and maintenance
Regulatory rider expense (4)
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Interest expense, net of capitalized interest
Income tax provision
Net income
(1) Includes nonutility revenue of approximately $1.1M, $1.4M and $1.3M for fiscal 2025, 2024 and 2023, respectively, for lease agreements with various NJR subsidiaries leasing office space from NJNG at the Company’s headquarters, which are eliminated in consolidation.
(2) Includes the purchased cost of the natural gas, fees paid to pipelines and storage facilities, adjustments as a result of BGSS incentive programs and hedging transactions. These expenses are passed through to customers and are offset by corresponding revenues.
(3) Includes related party transactions of approximately $7.9M for fiscal 2025 and $9.3M for both fiscal 2024 and 2023, a portion of which is eliminated in consolidation.
(4) Consists of expenses associated with state-mandated programs, the RAC and energy efficiency programs, which are calculated on a per-therm basis. These expenses are passed through to customers and are offset by corresponding revenues.
Operating Revenues and Natural Gas Purchases
Operating revenues increased 27.7% and natural gas purchases increased 27.6% during fiscal 2025 compared with fiscal 2024. The factors contributing to the increases (decreases) in operating revenues and natural gas purchases during fiscal 2025 are as follows:
(Thousands)
Operating
revenues
Natural gas
purchases
BGSS incentives
Firm sales
Average BGSS rates
Base rate impact
CIP adjustments
Riders and other (1)
Total increase
(1) Riders and other includes changes in rider rates, including those related to Energy Efficiency, NJCEP and other programs, which is offset in regulatory rider expense.
Non-GAAP Financial Measures
Management uses Utility Gross Margin, a non-GAAP financial measure, when evaluating the operating results of NJNG. NJNG’s Utility Gross Margin is defined as operating revenues less natural gas purchases, sales tax and regulatory rider expenses. This measure differs from gross margin as presented on a GAAP basis, as it excludes certain operations and maintenance expense and depreciation and amortization. Utility Gross Margin may also not be comparable to the definition of gross margin used by others in the natural gas distribution business and other industries. We believe that Utility Gross Margin provides a meaningful basis for evaluating utility operations since natural gas costs, sales tax and regulatory rider expenses are included in operating revenues and passed through to customers and, therefore, have no effect on Utility Gross Margin. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.
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New Jersey Resources Corporation
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Utility Gross Margin
A reconciliation of gross margin, the closest GAAP financial measure to NJNG’s Utility Gross Margin, for the fiscal years ended September 30, is as follows:
(Thousands)
Operating revenues
Less:
Natural gas purchases
Operation and maintenance (1)
Regulatory rider expense
Depreciation and amortization
Gross margin
Add:
Operation and maintenance (1)
Depreciation and amortization
Utility Gross Margin
(1) Excludes SG&A of approximately $110.7M, $111.3M and $111.5M for the fiscal years 2025, 2024 and 2023, respectively.
Utility Gross Margin consists of three components:
• Utility firm gross margin generated from only the delivery component of either a sales tariff or a transportation tariff from residential and commercial customers who receive natural gas service from NJNG;
• BGSS incentive programs, where revenues generated or savings achieved from BPU-approved off-system sales, capacity release or storage incentive programs are shared between customers and NJNG; and
• Utility Gross Margin generated from off-tariff and interruptible customers.
The following provides more information on the components of Utility Gross Margin and associated throughput (Bcf) of natural gas delivered to customers:
($ in thousands)
Margin
Bcf
Margin
Bcf
Margin
Bcf
Utility Gross Margin/Throughput
Residential
Commercial, industrial and other
Firm transportation
Total utility firm gross margin/throughput
BGSS incentive programs
Interruptible/off-tariff agreements
Total Utility Gross Margin/Throughput
Utility Firm Gross Margin
Utility firm gross margin increased approximately $140.1M during fiscal 2025 compared with fiscal 2024, due primarily to an increase in base rates, effective November 21, 2024.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
BGSS Incentive Programs
The factors contributing to the change in Utility Gross Margin generated by BGSS incentive programs are as follows:
(Thousands)
Storage
Off-system sales
Capacity release
Total increase
The increase in BGSS incentive programs was due primarily to increased margins from storage incentives.
Net Income
Net income increased approximately $80.1M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $141.6M increase in Utility Gross Margin, as previously discussed; partially offset by
• $27.9M increase in depreciation expense as a result of additional utility plant being placed into service; and
• $27.7M increase in income tax expense related to higher operating income.
Clean Energy Ventures
Overview
CEV actively pursues opportunities in the renewable energy markets, which includes the development, construction and operation of net-metered and grid-connected commercial solar projects. In addition, CEV enters into various long-term agreements, including PPAs, to supply energy from commercial solar projects.
Capital expenditures related to clean energy projects are subject to change due to a variety of factors that may affect our ability to commence operations at these projects on a timely basis or at all, including logistics associated with the start-up of commercial solar projects, changes to U.S. trade policy and the impact tariffs and other costs and assessments may have on equipment used to construct, generate and deliver clean energy, such as timing of construction schedules, the permitting and regulatory process and any delays related to electric grid interconnection. Other factors include economic trends, changes in law, governmental policies or incentives that support clean energy projects, unforeseen events and the ability to access capital or allocation of capital to other investments or business opportunities. CEV is also subject to various risks, which may include our ability to identify and develop commercial solar asset investments, impacts to our supply chain and our ability to source materials for construction.
The primary contributors toward the value of qualifying clean energy projects are tax incentives, RECs and electricity sales. Changes in the laws and regulations related to the ITC and/or relevant state legislation and regulatory policies affecting the market for solar renewable energy credits could significantly affect future results.
Projects placed into service after August 16, 2022, qualify for a 30% ITC. As a result of the Inflation Reduction Act, there are additional opportunities to increase the ITC amount for certain facilities that are placed in service after December 31, 2022, based upon the type of project and location.
On July 4, 2025, OBBBA was signed into law, which modifies several pre-existing provisions of the Inflation Reduction Act and other laws, including the phase-out of certain clean energy tax credits. In order to be eligible for ITCs, solar facilities must be placed in service by December 31, 2027, unless construction begins before July 4, 2026, and must satisfy the prohibited foreign entity material assistance requirements, unless construction begins before December 31, 2025.
On July 7, 2025, the President of the U.S. issued a federal executive order directing the Secretary of the Treasury to provide revised guidance on determining the beginning of construction for renewable energy projects for purposes of claiming ITCs. On August 15, 2025, the IRS released further guidance to clarify the beginning of construction for renewable energy projects deemed to have started construction on or after September 2, 2025.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
CEV continues to assess the impacts of OBBBA, the foregoing executive order and revised IRS guidance on the determination of the beginning of construction. While there have been no material impacts to the Company’s financial position or results of operations as of September 30, 2025, resulting from the change in law and revised IRS guidance, these changes may impact our ability to identify, develop and source materials to construct future projects in a way that meets the new requirements established for the ITC framework.
CEV placed eleven commercial solar projects in service totaling 93.6 MWs during fiscal 2025, with related expenditures of approximately $249.1M. CEV placed two commercial solar projects in service totaling 5.1 MWs during fiscal 2024, with related expenditures of approximately $18.9M. CEV has approximately 479 MW of commercial solar capacity in service.
CEV may enter into transactions to sell certain of its commercial solar assets concurrent with agreements to lease the assets back over a period of five to seven years. The Company will continue to operate the solar assets and is responsible for related expenses and entitled to retain the revenue generated from RECs and energy sales. ITCs and other tax attributes associated with these solar projects transfer to the buyer if applicable; however, the lease payments are structured so that CEV is compensated for the transfer of the related tax incentives. Accordingly, for solar projects financed under sale leasebacks for which the assets were sold during the first five years of in-service life, CEV recognizes the equivalent value of the ITC in other income on the Consolidated Statements of Operations over the respective five-year ITC recapture periods, starting with the second year of the lease. During fiscal 2025, 2024 and 2023, CEV received proceeds of $251.2M, $64.7M and $167.8M, respectively, in connection with the sale leaseback of commercial solar assets.
CEV operated a residential solar portfolio, which provided qualifying homeowners with the opportunity to have a solar system installed at their home in exchange for monthly lease payments and with no installation or maintenance expenses. On November 25, 2024, CEV completed the sale of its residential solar portfolio, and related assets and liabilities, to a third party for a purchase price of $132.5M. See Note 17. Dispositions for more details.
For solar installations placed in-service in New Jersey prior to April 30, 2020, each MWh of electricity produced creates an SREC that represents the renewable energy attribute of the solar-electricity generated that can be sold to third parties, predominantly load-serving entities that are required to comply with the solar requirements under New Jersey’s renewable portfolio standard.
Following the close of the SREC market in New Jersey, the BPU established the TREC as the successor program to the SREC program. TRECs provide a fixed compensation base multiplied by an assigned project factor in order to determine their value. The project factor is determined by the type and location of the project, as defined. All TRECs generated are required to be purchased monthly by a TREC program administrator as appointed by the BPU.
In July 2021, the BPU established a new successor solar incentive program. This ADI Program provides administratively set incentives for net metered projects of 5 MW or less. RECs generated through the production of electricity under this program are known as SREC IIs.
In December 2022, the BPU established the CSI program, which provides incentives to larger solar facilities. It is open to qualifying grid supply solar facilities, non-residential net metered solar installations with a capacity greater than 5 MW and eligible grid supply solar facilities installed in combination with energy storage. Pricing is determined based on a competitive bid solicitation process.
REC activity for the fiscal years ended September 30, consisted of the following:
Inventory balance as of October 1,
RECs
Inventory balance as of September 30,
Average
Generated
Delivered
Sale Price
SRECs
TRECs (2)
SREC IIs (2)
SRECs
TRECs (2)
SREC IIs (2)
(1) Includes SRECs purchased in relation to the sale of the residential solar portfolio.
(2) TREC and SREC II inventory balances are due primarily to the timing of generation and when RECs are delivered to the state administrator.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
CEV hedges its expected SREC production through the use of forward sales contracts. The following table reflects the hedged percentage of our projected inventory of SRECs related to CEV’s in-service solar assets at September 30, 2025:
Energy Year (1)
Percent of SRECs Hedged
(1) Energy years are compliance periods for New Jersey’s renewable portfolio standard that run from June 1 to May 31.
There are no direct costs associated with the production of RECs by our solar assets. All related costs are included as a component of O&M on the Consolidated Statements of Operations, including such expenses as facility maintenance and broker fees.
Operating Results
CEV’s financial results for the fiscal years ended September 30, are summarized as follows:
(Thousands)
Operating revenues
Operating expenses
Operation and maintenance
Depreciation and amortization
Gain on sale of assets
Total operating expenses
Operating income
Other income, net
Interest expense, net of capitalized interest
Income tax provision (benefit)
Net income
Net income increased approximately $27.5M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $56.2M gain on the sale of the residential solar portfolio; partially offset by
• $18.1M decrease in operating revenues due primarily to the timing of SREC sales and the absence of revenue related to the sale of the residential solar portfolio;
• $12.1M increase in O&M due primarily to SREC transfers resulting from the sale of the residential solar portfolio; and
• $6.8M increase in income tax expense related to higher operating income.
Energy Services
Overview
ES markets and sells natural gas to wholesale and retail customers and manages natural gas transportation and storage assets throughout major market areas across North America. ES maintains a strategic portfolio of natural gas transportation and storage contracts that it utilizes in conjunction with its market expertise to provide service and value to its customers. Availability of these transportation and storage contracts allows ES to generate market opportunities by capturing price differentials over specific time horizons and between geographic market locations.
ES also provides management of transportation and storage assets for natural gas producers and regulated utilities. These management transactions typically involve the release of producer/utility-owned storage and/or transportation capacity in combination with an obligation to purchase and/or deliver physical natural gas. In addition to the contractual purchase and/or sale of physical natural gas, ES generates or pays fee-based margin in exchange for its active management and may provide the producer and/or utility with additional margin based on actual results.
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New Jersey Resources Corporation
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
In conjunction with the active management of these contracts, ES generates earnings by identifying market opportunities and simultaneously entering into natural gas purchase/sale, storage or transportation contracts and financial derivative contracts. In cases where storage is utilized to fulfill these contracts, these forecast sales and/or purchases are economically hedged through the use of financial derivative contracts. The financial derivative contracts consist primarily of exchange-traded futures, options and swap contracts, and are frequently used to lock in anticipated transactional cash flows and to help manage volatility in natural gas market prices. Generally, when its transportation and storage contracts are exposed to periods of increased market volatility, ES is able to implement strategies that allow it to capture margin by improving the respective time or geographic spreads on a forward basis.
ES accounts for its physical commodity contracts and its financial derivative instruments at fair value on the Consolidated Balance Sheets. Changes in the fair value of physical commodity contracts and financial derivative instruments are included in earnings as a component of operating revenues or natural gas purchases on the Consolidated Statements of Operations. Volatility in reported net income at ES can occur over periods of time due to changes in the fair value of derivatives, as well as timing differences related to certain transactions. Unrealized gains and losses can fluctuate as a result of changes in the price of natural gas and SRECs from the original transaction price. Volatility in earnings can also occur as a result of timing differences between the settlement of financial derivatives and the sale of the underlying physical commodity. For example, when a financial instrument settles and the physical natural gas is injected into inventory, the realized gains and losses associated with the financial instrument are recognized in earnings. However, the gains and losses associated with the physical natural gas are not recognized in earnings until the natural gas inventory is withdrawn from storage and sold, at which time ES realizes the entire margin on the transaction.
During December 2020, ES entered into a series of AMAs with an investment grade public utility to release pipeline capacity associated with certain natural gas transportation contracts. The utility provides certain asset management services, and ES may deliver natural gas to the utility in exchange for aggregate net proceeds of approximately $500M, payable through November 1, 2030. The AMAs include a series of initial and permanent releases, which commenced in November 2021. NJR received a total of approximately $260M in cash from fiscal 2022 through fiscal 2024 and will receive approximately $34M per year from fiscal 2025 through fiscal 2031 under the agreements. During fiscal 2025, 2024 and 2023, ES recognized approximately $19.7M, $137.2M and $48.5M, respectively, of operating revenue related to the AMAs on the Consolidated Statements of Operations. Amounts received in excess of revenue, totaling approximately $36.8M and $22.3M as of September 30, 2025 and 2024, respectively, are included in deferred revenue on the Consolidated Balance Sheets.
Operating Results
ES’s financial results for the fiscal years ended September 30, are summarized as follows:
(Thousands)
Operating revenues (1)
Operating expenses
Natural gas purchases (including demand charges (2)(3) )
Operation and maintenance
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Interest expense, net of capitalized interest
Income tax provision
Net income
(1) Includes related party transactions of approximately $(4.9)M and $10.2M for fiscal 2024 and 2023, respectively, which are eliminated in consolidation. There were no related party transactions for fiscal 2025.
(2) Costs associated with pipeline and storage capacity are expensed over the term of the related contracts, which generally varies from less than one year to 10 years.
(3) Includes related party transactions of approximately $1.2M for both fiscal 2025 and 2024, and $0.9M for fiscal 2023, a portion of which is eliminated in consolidation.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
ES’s portfolio of financial derivative instruments for the fiscal years ended September 30, is composed of:
(in Bcf)
Net short futures and swaps contracts
During fiscal 2025, 2024 and 2023 the net short position resulted in unrealized gains of approximately $7.3M, $3.1M and $16.2M, respectively.
Operating revenues decreased approximately $31.9M during fiscal 2025, compared with fiscal 2024, due primarily to lower revenue from the AMAs, as previously discussed, partially offset by an increase in non-fee based revenue related to higher natural gas prices. Natural gas purchases increased approximately $66.5M during fiscal 2025, compared with fiscal 2024, due primarily to the higher natural gas prices.
Future results at ES are contingent upon natural gas market price volatility driven by variations in both the supply and demand balances caused by weather and other factors. As a result, variations in weather patterns in the key market areas served may affect earnings during the fiscal year. Changes in market fundamentals, such as an increase in supply and decrease in demand due to warmer temperatures and reduced volatility, can negatively impact ES’s earnings. See Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations - Natural Gas Distribution for TETCO M-3 Daily Prices, which illustrates the daily natural gas prices in the Northeast market region.
Net income decreased approximately $65.9M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $66.5M increase in natural gas purchases, as previously discussed; and
• $31.9M decrease in operating revenues, as previously discussed; partially offset by
• $21.0M decrease in income tax expense related to lower operating income; and
• $8.9M decrease in O&M due primarily to lower employee-related expenses.
Non-GAAP Financial Measures
Management uses Financial Margin and NFE, non-GAAP financial measures, when evaluating the operating results of ES. Financial Margin and NFE are based upon removing timing differences associated with certain derivative instruments. Management views these measures as representative of the overall expected economic result and uses these measures to compare ES’s results against established benchmarks and earnings targets, as these measures eliminate the impact of volatility on GAAP earnings as a result of timing differences associated with the settlement of derivative instruments. To the extent that there are unanticipated impacts from changes in the market value related to the effectiveness of economic hedges, ES’s actual non-GAAP results can differ from the results anticipated at the outset of the transaction. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.
When ES reconciles the most directly comparable GAAP measure to both Financial Margin and NFE, the current period unrealized gains and losses on derivatives are excluded as a reconciling item. Financial Margin and NFE also exclude the effects of economic hedging of the value of our natural gas in storage and, therefore, only include realized gains and losses related to natural gas withdrawn from storage, effectively matching the full earnings effects of the derivatives with realized margins on the related physical natural gas flows. To the extent we utilize forwards, futures or other derivatives to hedge natural gas transactions and forecasted SREC production, the resulting unrealized gains and losses are also eliminated from NFE. Financial Margin differs from gross margin as defined on a GAAP basis, as it excludes certain operations and maintenance expense and depreciation and amortization as well as the effects of derivatives, as discussed above.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Financial Margin
A reconciliation of gross margin, the closest GAAP financial measure, to ES’s Financial Margin is as follows:
(Thousands)
Operating revenues (1)
Less:
Natural gas purchases
Operation and maintenance (2)
Depreciation and amortization
Gross margin
Add:
Operation and maintenance (2)
Depreciation and amortization
Unrealized (gain) loss on derivative instruments and related transactions
Effects of economic hedging related to natural gas inventory (3)
Financial Margin
(1) Includes unrealized (gains) losses related to intercompany transactions between NJNG and ES that have been eliminated in consolidation of approximately $(4.9)M and $7.8M for fiscal 2024 and 2023, respectively. There were no unrealized (gains) losses related to intercompany transactions between NJNG and ES for fiscal 2025.
(2) Excludes SG&A of approximately $1.1M, $1.8M and $(0.8)M for fiscal 2025, 2024 and 2023, respectively.
(3) Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.
Financial Margin decreased approximately $112.6M during fiscal 2025, compared with fiscal 2024, due primarily to lower operating revenue related to the AMAs, as previously discussed.
Net Financial Earnings
A reconciliation of ES’s net income, the most directly comparable GAAP financial measure to NFE, is as follows for the fiscal years ended September 30:
(Thousands)
Net income
Add:
Unrealized (gain) loss on derivative instruments and related transactions
Tax effect (1)
Effects of economic hedging related to natural gas inventory
Tax effect
Net financial earnings
(1) Includes taxes related to intercompany transactions between NJNG and ES that have been eliminated in consolidation of approximately $1.2M and $(2.4)M for fiscal 2024 and 2023, respectively. There were no unrealized (gains) losses related to intercompany transactions between NJNG and ES for fiscal 2025.
NFE decreased approximately $76.6M during fiscal 2025, compared with fiscal 2024, due primarily to lower Financial Margin, as previously discussed.
Future results are subject to the ability of ES to expand its wholesale sales and service activities and are contingent upon many other factors, including an adequate number of appropriate and credit-qualified counterparties in an active and liquid natural marketplace; volatility in the natural gas market due to weather or other fundamental market factors impacting supply and/or demand; transportation, storage and/or other market arbitrage opportunities; sufficient liquidity in the overall energy trading market; and continued access to liquidity in the capital markets.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Storage and Transportation
Overview
S&T invests in natural gas assets, such as natural gas transportation and storage facilities. We believe that acquiring, owning and developing these storage and transportation assets, which operate under a tariff structure that has either cost- or market-based rates, can provide us organic growth opportunities. S&T is subject to various risks, including the construction, development and operation of our transportation and storage assets, as well as our ability to obtain necessary governmental, environmental and regulatory approvals, property rights and financing at reasonable costs for the construction, operation and maintenance of our assets.
S&T is comprised of Leaf River, a 32.2M Dth salt dome natural gas storage facility that operates under market-based rates, and Adelphia, a FERC-regulated interstate pipeline in southeastern Pennsylvania that operates under cost-of-service rates but can enter into negotiated rates with counterparties.
On September 30, 2024, Adelphia filed a Section 4 rate case with the FERC seeking approval to revise its transportation cost-of-service rates to reflect investments made in its pipeline system. On June 26, 2025, Adelphia reached a settlement in principle with customers participating in the rate case. On August 25, 2025, Adelphia and the rate case participants filed an offer of settlement with the FERC, which was approved on November 4, 2025, the results of which are considered immaterial to the Company’s Consolidated Financial Statements.
S&T has a 50% ownership interest in Steckman Ridge, a storage facility located in western Pennsylvania that operates under market-based rates. As of September 30, 2025, our investment in Steckman Ridge totaled $101.2M.
Operating Results
The financial results of S&T for the fiscal years ended September 30, are summarized as follows:
(Thousands)
Operating revenues (1)
Operating expenses
Natural gas purchases
Operation and maintenance
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Interest expense, net of capitalized interest
Income tax provision
Equity in earnings of affiliates
Net income
(1) Includes related party transactions of approximately $0.1M, $1.4M and $4.2M for the fiscal years ended September 30, 2025, 2024 and 2023, respectively, which are eliminated in consolidation.
Net income increased approximately $6.3M during fiscal 2025, compared with fiscal 2024, due primarily to the following factors:
• $10.2M increase in operating revenues due to higher hub services and firm storage revenue at Leaf River; partially offset by
• $3.8M increase in O&M due to increased employee-related expenses and consulting fees.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Non-GAAP Financial Measures
Management uses Adjusted EBITDA and NFE, non-GAAP financial measures, when evaluating the operating results of S&T. Adjusted EBITDA is net income before interest, income taxes, depreciation and amortization, corporate overhead and other income, net. Certain transactions associated with equity method investments and their impact, including the return of capital in excess of the carrying value of our previously impaired investment, are excluded from NFE. The details of such adjustments can be found in the tables below. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.
Adjusted EBITDA
A reconciliation of S&T's net income, the most directly comparable GAAP financial measure to Adjusted EBITDA, for the fiscal years ended September 30, is as follows:
(Thousands)
Net income
Add:
Interest expense, net of capitalized interest
Income tax provision
Depreciation and amortization
Corporate overhead
Less:
Other income, net (1)
Adjusted EBITDA
(1) Consists primarily of interest income.
Adjusted EBITDA increased approximately $7.5M during fiscal 2025, compared with fiscal 2024, due primarily to higher operating revenue, as previously discussed.
Net Financial Earnings
A reconciliation of S&T's net income, the most directly comparable GAAP financial measure to NFE for the fiscal years ended September 30, is as follows:
(Thousands)
Net income
Add:
Gain on equity method investment
Tax effect
Net financial earnings
NFE increased approximately $6.3M during fiscal 2025, compared with fiscal 2024, due primarily to higher net income, as previously discussed.
Home Services and Other
The financial results of HSO consist primarily of the operating results of NJRHS. NJRHS provides service, sales and installation of appliances to service contract customers and has been focused on growing its installation business and expanding its service contract customer base. HSO also includes organizational expenses incurred at NJR. Net (loss) income was $(0.4) and $0.1 for the fiscal years ended September 30, 2025 and 2024, respectively.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Liquidity and Capital Resources
Our objective is to maintain an efficient consolidated capital structure that reflects the different characteristics of each reportable segment and other business operations and provides adequate financial flexibility for accessing capital markets as required. Our consolidated capital structure as of September 30, was as follows:
Common stock equity
Long-term debt
Short-term debt
Total
Common Stock Equity
We satisfy our external common equity requirements, if any, through issuances of our common stock, including the proceeds from stock issuances under our DRP. The DRP allows us, at our option, to use treasury shares or newly issued shares to raise capital. NJR raised approximately $14.9M and $14.7M of equity through the DRP during fiscal 2025 and 2024, respectively. We also raised approximately $19.9M and $59.7M of equity by issuing approximately 418,000 and 1,380,000 shares through the waiver discount feature of the DRP during fiscal 2025 and 2024, respectively.
In 1996, the Board of Directors authorized us to implement a share repurchase program, which was expanded seven times since the inception of the program, authorizing a total of 19.5M shares of common stock for repurchase. Since inception, we repurchased a total of approximately 17.8M of those shares and may repurchase an additional 1.7M shares under the approved program. There were no shares repurchased during fiscal 2025 and 2024.
Debt
NJR and its unregulated subsidiaries generally rely on cash flows generated from operating activities and the utilization of committed credit facilities to provide liquidity to meet working capital and short-term debt financing requirements. NJNG also relies on the issuance of commercial paper for short-term funding. NJR and NJNG, as borrowers, periodically access the capital markets to fund long-life assets through the issuance of long-term debt securities.
We believe that our existing borrowing availability, equity proceeds and cash flows from operations will be sufficient to satisfy our working capital, capital expenditures and dividend requirements for at least the next 12 months. NJR, NJNG, CEV, S&T and ES currently anticipate that each of their financing requirements for the next 12 months will be met primarily through the issuance of short- and long-term debt, and meter or solar asset sale leasebacks.
We believe that as of September 30, 2025, NJR and NJNG were, and currently are, in compliance with all existing debt covenants, both financial and non-financial.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Short-Term Debt
We use our short-term borrowings primarily to finance ES’s short-term liquidity needs, share repurchases and, on an initial basis, CEV’s investments. ES’s use of high-volume storage facilities and anticipated pipeline park and loan arrangements, combined with related economic hedging activities in the volatile wholesale natural gas market, create significant short-term cash requirements.
As of September 30, 2025, NJR had a revolving credit facility totaling $575M, with approximately $401.0M available under the facility.
NJNG satisfies its debt needs by issuing short-term and long-term debt based on its financial profile. The seasonal nature of NJNG’s operations creates large short-term cash requirements, primarily to finance natural gas purchases and customer accounts receivable. NJNG obtains working capital for these requirements and for the temporary financing of construction and MGP remediation expenditures and energy tax payments, based on its financial profile, through the issuance of commercial paper supported by the NJNG Credit Facility or through short-term bank loans under the NJNG Credit Facility.
NJNG’s commercial paper is sold through several commercial banks under an issuing and paying agency agreement and is supported by the $250M NJNG Credit Facility. As of September 30, 2025, there was approximately $206.3M available under the NJNG Credit Facility, including amounts allocated to the backstop under the commercial paper program, as applicable, and the issuance of letters of credit.
Short-term borrowings for the twelve months ended September 30, 2025, were as follows:
(Thousands)
NJR
Notes Payable to banks:
Balance at end of period
Weighted average interest rate at end of period
Average balance for the period
Weighted average interest rate for average balance
Month end maximum for the period
NJNG
Commercial Paper and Notes Payable to banks:
Balance at end of period
Weighted average interest rate at end of period
Average balance for the period
Weighted average interest rate for average balance
Month end maximum for the period
Due to the seasonal nature of natural gas prices and demand, and because inventory levels are built up during its natural gas injection season (April through October), NJR and NJNG’s short-term borrowings tend to peak in the November through January time frame.
NJR
During fiscal 2024, NJR entered into a second amendment to NJR’s Second Amended and Restated Credit Agreement, governing a $575M NJR Credit Facility maturing on August 7, 2029, with an option to extend the maturity date up to two times for an additional period of one year each. The NJR Credit Facility includes an accordion feature, which allows NJR, in the absence of a default or event of default, to increase from time to time, with the existing or new lenders, the revolving credit commitments under the NJR Credit Facility in increments of at least $50M with the total revolving credit commitments not exceeding $750M. The NJR Credit Facility also permits the borrowing of revolving loans and swingline loans, as well as a $75M sublimit for the issuance of letters of credit. Certain of NJR’s unregulated subsidiaries have guaranteed all of NJR’s obligations under the NJR Credit Facility. The credit facility is used primarily to finance its share repurchases, to satisfy ES’s short-term liquidity needs and to finance, on an initial basis, unregulated investments.
As of September 30, 2025, NJR had 24 letters of credit outstanding totaling approximately $21.4M, which reduced the amount available under the NJR Credit Facility by the same amount. NJR does not anticipate that these letters of credit will be drawn upon by the counterparties.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Based on its average borrowings during fiscal 2025, NJR’s average interest rate was 5.65%, resulting in interest expense of approximately $12.4M. Based on average borrowings of $215.0M during the period, a 100 basis point change in the underlying average interest rate would have caused a change in interest expense of approximately $2.2M during fiscal 2025.
Neither NJNG nor its assets are obligated or pledged to support the NJR Credit Facility.
NJNG
During fiscal 2024, NJNG entered into a second amendment to NJNG’s Second Amended and Restated Credit Agreement governing a $250M NJNG Credit Facility, maturing on August 7, 2029, with an option to extend the maturity date up to two times for an additional period of one year each. The NJNG Credit Facility includes an accordion feature, which would allow NJNG, in the absence of a default or event of default, to increase from time to time, with the existing or new lenders, the revolving credit commitments under the NJNG Credit Facility in increments of at least $50M with total revolving credit commitments not exceeding $350M. The NJNG Credit Facility also permits the borrowing of revolving loans and swingline loans, as well as a $30M sublimit for the issuance of letters of credit.
As of September 30, 2025, NJNG had two letters of credit outstanding for $0.7M, which reduced the amount available under the NJNG Credit Facility by the same amount. NJNG does not anticipate that these letters of credit will be drawn upon by the counterparties.
Based on its average borrowings during fiscal 2025, NJNG’s average interest rate was 4.63%, resulting in interest expense of $3.2M. Based on average borrowings of $67.9M during the period, a 100 basis point change in the underlying average interest rate would have caused a change in interest expense of approximately $0.8M during fiscal 2025.
Short-Term Debt Covenants
Borrowings under the NJR Credit Facility and NJNG Credit Facility are conditioned upon compliance with a maximum leverage ratio (consolidated total indebtedness to consolidated total capitalization as defined in the applicable agreements) of not more than .70 to 1.00 for NJR and .65 to 1.00 for NJNG. These revolving credit facilities contain customary representations and warranties for transactions of this type. They also contain customary events of default and certain covenants that will limit NJR’s or NJNG’s ability, beyond agreed-upon thresholds, to, among other things:
• incur additional debt;
• incur liens and encumbrances;
• make dispositions of assets;
• enter into transactions with affiliates; and
• merge, consolidate, transfer, sell or lease all or substantially all of the borrowers’ or guarantors’ assets.
These covenants are subject to a number of exceptions and qualifications set forth in the applicable agreements.
Default Provisions
The agreements governing our long-term and short-term debt obligations include provisions that, if not complied with, could require early payment or similar actions. Default events include, but are not limited to, the following:
• defaults for non-payment;
• defaults for breach of representations and warranties;
• defaults for insolvency;
• defaults for non-performance of covenants;
• cross-defaults to other debt obligations of the borrower; and
• guarantor defaults.
The occurrence of an event of default under these agreements could result in all loans and other obligations of the borrower becoming immediately due and payable and the termination of the credit facilities or term loan.
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New Jersey Resources Corporation
Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Long-Term Debt
NJR
As of September 30, 2025, NJR’s long-term debt consisted of approximately $1.1B in fixed-rate unsecured debt issuances, with maturities ranging from 2026 to 2034.
On 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 in 2034.
Neither NJNG nor its assets are obligated or pledged to support NJR’s long-term debt.
NJNG
As of September 30, 2025, NJNG’s long-term debt consisted of approximately $1.8B in fixed-rate debt issuances secured by the Mortgage Indenture, with maturities ranging from 2028 to 2061, and approximately $33.5M in sale leasebacks of natural gas meters with various maturities ranging from 2025 to 2031.
On April 15, 2025, NJNG’s 10-year 2.82% $50M senior notes matured.
On August 21, 2025, NJNG entered into a Note Purchase Agreement for $200M aggregate principal amount of its senior notes consisting of $100M of 5.16% senior notes due August 21, 2035, and $100M of 5.85% senior notes due August 21, 2055.
Senior notes are secured by an equal principal amount of NJNG’s FMBs issued under NJNG’s Mortgage Indenture.
NJR is not obligated directly nor contingently with respect to NJNG’s fixed-rate debt issuances.
Long-Term Debt Covenants and Default Provisions
The NJR and NJNG long-term debt instruments contain customary representations and warranties for transactions of their type. They also contain customary events of default and certain covenants that will limit NJR or NJNG’s ability beyond agreed-upon thresholds to, among other things:
• incur additional debt (including a covenant that limits the amount of consolidated total debt of the borrower at the end of a fiscal quarter to 70% for NJR and 65% for NJNG of the consolidated total capitalization of the borrower, as those terms are defined in the applicable agreements, and a covenant limiting priority debt to 20% of the borrower’s consolidated total capitalization, as those terms are defined in the applicable agreements);
• incur liens and encumbrances;
• make loans and investments;
• make dispositions of assets;
• make dividends or restricted payments;
• enter into transactions with affiliates; and
• merge, consolidate, transfer, sell or lease substantially all of the borrower’s assets.
The aforementioned covenants are subject to a number of exceptions and qualifications set forth in the applicable note purchase agreements.
In addition, the FMBs issued by NJNG under the Mortgage Indenture are subject to certain default provisions. Events of Default, as defined in the Mortgage Indenture, consist mainly of:
• failure for 30 days to pay interest when due;
• failure to pay principal or premium when due and payable;
• failure to make sinking fund payments when due;
• failure to comply with any other covenants of the Mortgage Indenture after 30 days’ written notice from the Trustee;
• failure to pay or provide for judgments in excess of $30M in aggregate amount within 60 days of the entry thereof; or
• certain events that are or could be the basis of a bankruptcy, reorganization, insolvency or receivership proceeding.
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New Jersey Resources Corporation
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Upon the occurrence and continuance of such an Event of Default, the Mortgage Indenture, subject to any provisions of law applicable thereto, provides that the Trustee may take possession and conduct the business of NJNG, may sell the trust estate or proceed to foreclose the lien of the Mortgage Indenture. The interest rate on defaulted principal and interest, to the extent permitted by law, on the FMBs issued under the Mortgage Indenture is the rate stated in the applicable supplement or, if no such rate is stated, 6% per annum.
Sale Leaseback
NJNG received approximately $11.7M, $8.8M and $8.4M in fiscal 2025, 2024 and 2023, respectively, in connection with the sale leaseback of its natural gas meters. NJNG utilizes sale leaseback arrangements as a financing mechanism to fund certain of its capital expenditures related to natural gas meters, whereby the physical asset is sold concurrent with an agreement to lease the asset back. These agreements include options to repurchase the assets sold or renew the lease at the end of the term. As NJNG retains control of the natural gas meters, these arrangements do not qualify as a sale. NJNG uses the financing method to account for the transactions. NJNG continues to evaluate this sale leaseback program based on current market conditions. Natural gas meters are excluded from the lien on NJNG property under the Mortgage Indenture.
CEV enters into transactions to sell the commercial solar assets concurrent with agreements to lease the assets back over a period of five to seven years. The Company has concluded that these arrangements do not qualify as a sale for accounting purposes, as the Company retains control of the underlying assets, and are therefore treated as financing obligations, which are typically secured by the renewable energy facility asset and its future cash flows from RECs and energy sales. ITCs and other tax benefits associated with these solar projects are transferred to the buyer, if applicable; however, the lease payments are structured so that CEV is compensated for the transfer of the related tax incentives. CEV continues to operate the solar assets, including related expenses, and retain the revenue generated from RECs and energy sales, and has the option to renew the lease or repurchase the assets sold at the end of the lease term. During fiscal 2025, 2024 and 2023, CEV received proceeds of approximately $251.2M, $64.7M and $167.8M, respectively, in connection with the sale leaseback of commercial solar projects. The proceeds received were recognized as a financing obligation on the Consolidated Balance Sheets.
Contractual Obligations and Capital Expenditures
As of September 30, 2025, the Company had 26 outstanding letters of credit totaling approximately $22.1M, as previously mentioned, and there were NJR guarantees covering approximately $138.8M of natural gas purchases and ES demand fee commitments, not yet reflected in accounts payable on the Consolidated Balance Sheets.
Estimated capital expenditures are reviewed on a regular basis and may vary based on the ongoing effects of regulatory constraints, environmental regulations, unforeseen events and the ability to access capital.
NJNG’s total capital expenditures spent or accrued during fiscal 2025 were approximately $450.1M. During fiscal 2026 capital expenditures are projected to be between $430M and $480M. NJNG expects to fund its obligations with a combination of cash flows from operations, cash on hand, issuance of commercial paper, available capacity under its revolving credit facility and the issuance of long-term debt. As of September 30, 2025, NJNG’s future MGP expenditures are estimated to be approximately $167.0M. For a more detailed description of MGP expenditures, see Note 14. Commitments and Contingent Liabilities in the accompanying Consolidated Financial Statements.
During fiscal 2025, total capital expenditures spent or accrued related to the purchase and installation of solar equipment were approximately $271.4M. CEV’s expenditures include clean energy projects that support our goal to promote renewable energy. Accordingly, CEV enters into agreements to install solar equipment for commercial projects. We estimate solar-related capital expenditures during fiscal 2026 to be between $210M and $290M.
Capital expenditures related to clean energy projects are subject to change due to a variety of factors that may affect our ability to commence operations at these projects on a timely basis or at all, including sourcing projects that meet our investment criteria; logistics associated with the start-up of commercial solar projects, such as timing of construction schedules, the permitting and regulatory process, any delays related to electric grid interconnection, economic trends or unforeseen events; and the ability to access capital or allocation of capital to other investments or business opportunities.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
During fiscal 2025, S&T had capital expenditures spent or accrued for Adelphia totaling approximately $11.1M, and capital expenditures spent or accrued for Leaf River totaling approximately $19.4M. During fiscal 2026, we expect expenditures related to Adelphia to be between $5M and $10M and expenditures related to Leaf River to be between $40M and $50M.
ES does not currently anticipate any significant capital expenditures during fiscal 2026 and 2027.
In December 2020, ES entered into a series of AMAs with an investment grade public utility to release pipeline capacity associated with certain natural gas transportation contracts. The utility provides certain asset management services, and ES may deliver natural gas to the utility in exchange for aggregate net proceeds of approximately $500M, payable through November 1, 2030. The AMAs include a series of initial and permanent releases which commenced in November 2021. NJR received a total of approximately $260M in cash from fiscal 2022 through fiscal 2024 and will receive $34M per year from fiscal 2025 through fiscal 2031 under the agreements. During fiscal 2025, 2024 and 2023, ES recognized approximately $19.7M, $137.2M and $48.5M, respectively, of operating revenue related to the AMAs on the Consolidated Statements of Operations. Amounts received in excess of revenue, totaling approximately $36.8M and $22.3M as of September 30, 2025 and 2024, respectively, are included in deferred revenue on the Consolidated Balance Sheets.
Cash Flows
Operating Activities
Cash flows from operating activities during fiscal 2025 totaled approximately $466.3M compared with approximately $427.4M during fiscal 2024. Operating cash flows are primarily affected by variations in working capital, which can be impacted by several factors, including:
• seasonality of our business;
• fluctuations in wholesale natural gas prices and other energy prices, including changes in derivative asset and liability values;
• timing of storage injections and withdrawals;
• deferral and recovery of natural gas costs;
• changes in contractual assets utilized to optimize margins related to natural gas transactions;
• broker margin requirements;
• impact of unusual weather patterns on our wholesale business;
• timing of the collections of receivables and payments of current liabilities;
• volumes of natural gas purchased and sold; and
• timing of SREC deliveries.
The increase of approximately $38.9M in cash flows from operating activities during fiscal 2025, compared with fiscal 2024, was due primarily to higher base rates along with the changes in the mix of working capital components.
Investing Activities
Cash flows used in investing activities decreased approximately $0.8M during fiscal 2025, compared with fiscal 2024, due primarily to proceeds from the sale of the CEV’s residential solar portfolio, partially offset by increased utility plant and solar asset expenditures.
Financing Activities
Financing cash flows generally are seasonal in nature and are impacted by the volatility in pricing in the natural gas and other energy markets. NJNG’s inventory levels are built up during its natural gas injection season (April through October) and reduced during withdrawal season (November through March) in response to the supply requirements of its customers. Changes in financing cash flows can also be impacted by natural gas management and marketing activities at ES and clean energy investments at CEV.
Cash flows from financing activities decreased approximately $39.8M during fiscal 2025, compared with fiscal 2024, due primarily to increased payments of short and long-term debt, along with lower proceeds from the waiver discount feature of the DRP, partially offset by higher proceeds from solar sale leasebacks and long-term debt.
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New Jersey Resources Corporation
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Credit Ratings
The table below summarizes NJNG’s credit ratings as of September 30, 2025, issued by two rating entities, Moody’s and Fitch:
Moody’s
Fitch
Corporate Rating
Commercial Paper
Senior Secured
Ratings Outlook
Stable
Stable
The Moody’s ratings and outlook were reaffirmed on June 27, 2025. The Fitch ratings and outlook were reaffirmed on April 4, 2025. NJNG’s Moody’s and Fitch ratings are investment-grade ratings. NJR is not rated by Moody’s or Fitch.
Although NJNG is not party to any lending agreements that would accelerate the maturity date of any obligation caused by a failure to maintain any specific credit rating, if such ratings are downgraded below investment grade, borrowing costs could increase, as would the costs of maintaining certain contractual relationships, and future financing and our access to capital markets would be reduced. Even if ratings are downgraded without falling below investment grade, NJR and NJNG could face increased borrowing costs under their credit facilities. A rating set forth above is not a recommendation to buy, sell or hold NJR’s or NJNG’s securities and may be subject to revision or withdrawal at any time. Each rating set forth above should be evaluated independently of any other rating.
The timing and mix of any external financings will target a common equity ratio that is consistent with maintaining NJNG’s current short-term and long-term credit ratings.
