What changed in this filing

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Item 1A. Risk Factors

2024-11-26 compared with 2023-11-21 · 26 added, 114 removed, 228 unchanged (38% of the section changed)

RISK FACTORS (Continued)

Actions or limitations to address concerns over long-term climate change, both globally and within our utilities' service areas, may affect our operations and financial performance.

Legislative, regulatory and advocacy efforts at the local, state and national levels concerning climate change and other environmental issues could have significant impacts on our operations.

The natural gas utility industry may be affected by proposals to curb greenhouse gas and other air emissions.

Various regulatory and legislative proposals have been made to limit or further restrict byproducts of combustion, including byproducts resulting from the use of natural gas by our customers.

In addition, regionally, a number of regulatory and legislative initiatives have been passed that are designed to limit greenhouse gas emissions and increase the use of renewable sources of energy, such as the ban of natural gas equipment in new construction in New York.

In addition, regulatory and legislative initiatives may restrict customers’ access to natural gas and/or require or limit natural gas infrastructure in buildings.

Other initiatives may seek to promote social interests expressed as energy equity, environmental justice or similar frameworks.

Any such legislation could direct and/or restrict the operation and raise the costs of our energy delivery infrastructure as well as the distribution of natural gas to our customers.

Uncertainties associated with our pipeline of projects could adversely affect our business, results of operations, financial condition and cash flows.

Business development projects involve many risks.

We are currently engaged in business development projects, including projects in various stages of development tied to decarbonization efforts.

Timely completion of our projects is subject to certain risks, including those related to regulatory proceedings regarding permitting and adverse outcomes from legal challenges related to the projects’ authorizations from federal and state regulatory agencies.

We could also experience issues such as:

technological challenges;

ineffective scalability;

failure to achieve expected outcomes;

unsuccessful business models;

startup and construction delays;

construction cost overruns;

disputes with contractors;

the inability to negotiate acceptable agreements such as rights-of-way, easements, construction, gas supply or other material contracts;

changes in customer demand, perception or commitment;

public opposition to projects;

marketing risk and changes in market regulation, behavior or prices;

market volatility or unavailability, including markets for RNG and its associated attributes or other environmental attributes;

the inability to receive expected tax or regulatory treatment;

and operating cost increases.

Additionally, we may be unable to finance our business development projects at acceptable costs or within a scheduled time frame necessary for completing the project.

Any of the foregoing risks, if realized, could result in business development efforts failing to produce expected financial results and the project investment becoming impaired, and such failure or impairment could have an adverse effect on our business, results of operations, financial condition and cash flows.

ES’s earnings and cash flows are dependent upon optimization of its physical assets.

ES ’s earnings and cash flows are based, in part, on its ability to optimize its portfolio of contractually based natural gas storage and pipeline assets.

The optimization strategy involves utilizing its physical assets to take advantage of differences in natural gas prices between geographic locations and/or time periods.

Any change among various pricing points could affect these differentials.

In addition, significant increases in the supply of natural gas in ES’s market areas, including as a result of increased production along the Marcellus Shale, can reduce ES’s ability to take advantage of pricing fluctuations in the future.

Changes in pricing dynamics and supply could have an adverse impact on ES’s optimization activities, earnings and cash flows.

ES incurs fixed demand fees to acquire its contractual rights to transportation and storage assets.

Should commodity prices at various locations or time periods change in such a way that ES is not able to recoup these costs from its customers, the cash flows and earnings at ES, and ultimately the Company, could be adversely impacted.

NJNG and ES rely on storage, transportation assets and suppliers, which they do not own or control, to deliver natural gas.

NJNG and ES depend on natural gas pipelines and other transportation and storage facilities owned and operated by third parties to deliver natural gas to wholesale and retail markets and to provide retail energy services to customers.

Their ability to provide natural gas for their present and projected sales will depend upon their suppliers’ ability to obtain and deliver additional supplies of natural gas, as well as NJNG’s ability to acquire supplies directly from new sources.

Factors beyond the control of NJNG, its suppliers and the independent suppliers that have obligations to provide natural gas to certain NJNG customers may affect NJNG’s ability to deliver such supplies.

These factors include other parties’ control over the drilling of new wells and the facilities to transport natural gas to NJNG’s citygate stations;

development of additional interstate pipeline infrastructure;

availability of supply sources;

third-party pipelines or other midstream facilities interconnected to our gathering or transportation system, such as the TETCO or Transcontinental Pipeline, becoming partially or fully unavailable;

competition for the acquisition of natural gas;

priority allocations;

impact of severe weather disruptions to natural gas supplies;

and the regulatory and pricing policies of federal and state regulatory agencies, as well as the availability of Canadian reserves for export to the U.S.

Energy deregulation legislation may increase competition among natural gas utilities and impact the quantities of natural gas requirements needed for sales service.

ES also relies on a firm supply source to meet its energy management obligations to its customers.

If supply, transportation or storage is disrupted, including for reasons of force majeure, the ability of NJNG and ES to sell and deliver their products and services may be hindered.

As a result, they may be responsible for damages incurred by their customers, such as the additional cost of acquiring alternative supply at then-current

New Jersey Resources Corporation

RISK FACTORS (Continued)

market rates.

Particularly for ES, these conditions could have a material impact on our financial condition, results of operations and cash flows.

Failure to attract and retain an appropriately qualified employee workforce could adversely affect operations.

Our ability to implement our business strategy and serve our customers is dependent upon our continuing ability to attract and retain talented professionals and a technically skilled workforce, and being able to transfer the knowledge and expertise of our workforce to new employees as our aging employees retire.

Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor could adversely affect the ability to manage and operate our business.

NJNG and the Union are in active negotiations to extend the collective bargaining agreement, which is scheduled to expire on December 7, 2023.

The collective bargaining agreement between NJRHS and the Union is scheduled to expire April 2, 2024.

Disputes with the Union over terms and conditions of the agreements could result in instability in our labor relationship and work stoppages that could impair the timely delivery of natural gas and other services from our utility and Home Services business, which could strain relationships with customers and state regulators and cause a loss of revenues that could adversely affect our results of operations.

Our collective bargaining agreements may also increase the cost of employing NJNG and Home Services workforce, affect our ability to continue offering market-based salaries and employee benefits, limit our flexibility in dealing with our workforce and limit our ability to change work rules and practices and implement other efficiency-related improvements to successfully compete in today’s challenging marketplace.

Our success depends upon our ability to attract, effectively transition, motivate and retain key employees and identify and develop talent to succeed senior management.

We depend on senior executive officers and other key personnel to develop, implement and execute on our overall business strategy.

The inability to recruit and retain or effectively transition key personnel or the unexpected loss of key personnel may adversely affect our operations.

We may be unable to obtain governmental approvals, property rights and/or financing for the construction, development and operation of our proposed energy investments and projects in a timely manner or at all.

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If we do not obtain the necessary regulatory approvals or property rights, or if we are unable to enter into contracts with counterparties at reasonable rates or obtain financing, our assets or equity method investments could be impaired.

Such impairment could have a materially adverse effect on our financial condition, results of operations and cash flows.

Such impairment could have a material adverse effect on our financial condition, results of operations and cash flows.

Weather and weather patterns, including normal seasonal and quarterly fluctuations of weather, as well as extreme weather events that, individually or in aggregate, may be associated with climate change, could adversely affect our ability to manage our operational requirements to serve our customers, and ultimately adversely affect our results of operations and liquidity.

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During periods of milder temperatures, demand and volatility in the natural gas market may decrease, which can negatively impact ES’s earnings and cash flows.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Severe weather impacts, including, but not limited to, hurricanes, thunderstorms, high winds, microbursts, fires, tornadoes, blizzards and snow or ice storms, can disrupt energy generation, transmission and distribution.

Severe weather impacts, including, but not limited to, hurricanes, earthquakes, thunderstorms, high winds, microbursts, wildfires, tornadoes, blizzards and snow or ice storms, can disrupt energy generation, transmission and distribution.

Extreme weather conditions, especially those of prolonged duration, create high energy demand on our own and/or other systems and increase the risk that we may be unable to reliably serve customers.

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We may be adversely impacted by natural disasters, pandemic illness, war or terrorist activities and other extreme events to which we may be unable to promptly respond.

Local or national natural disasters, pandemic illness, actual or threatened acts of war or terrorist activities, including the political and economic disruption and uncertainty related to Russia’s military invasion of Ukraine and the Israel-Hamas war, catastrophic failure of the interstate pipeline system and other extreme events are a threat to our assets and operations.

Local or national natural disasters, pandemic illness, actual or threatened acts of war or terrorist activities, including the political and economic disruption and uncertainty related to Russia’s military invasion of Ukraine and conflicts in the Middle East, catastrophic failure of the interstate pipeline system and other extreme events are a threat to our assets and operations.

Companies in our industry that are located in our service territory may face a heightened risk due to exposure to acts of terrorism that could target or impact our natural gas distribution, transmission and storage facilities and disrupt our operations and ability to meet customer requirements.

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Natural disasters, political unrest or actual or threatened terrorist activities may also disrupt capital markets and our ability to raise capital or may impact our suppliers or our customers directly.

New Jersey Resources Corporation

RISK FACTORS (Continued)

A local disaster or pandemic illness could result in part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business.

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Additionally, an attack on, or failure of, information technology systems could result in the unauthorized release of customer, employee or other confidential or sensitive data.

Cyberattacks, ransomware, terrorism, increased use of artificial intelligence technologies or other malicious acts could damage, destroy or disrupt these systems for an extended period of time.

Cyberattacks, ransomware, terrorism or other malicious acts could damage, destroy or disrupt these systems for an extended period of time.

The energy sector, including natural gas utility companies, has become the subject of cyberattacks with increased frequency.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Additionally, the facilities and systems of clients, suppliers and third-party service providers could be vulnerable to the same cyber or terrorism risks as our facilities and systems, and such third-party systems may be interconnected to our systems both physically and technologically.

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Any failure or unexpected or unauthorized use of technology systems could result in the unavailability of such systems, and could result in a loss of operating revenues, an increase in operating expenses and costs to repair or replace damaged assets.

Any of the above could also result in the loss or release of confidential customer and/or employee information or other proprietary data that could adversely affect our reputation and competitiveness, could result in costly litigation and negatively impact our results of operations.

These cyberattacks have become more common and sophisticated and, as such, we could be required to incur costs to strengthen our systems and respond to emerging concerns.

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Failure to keep pace with technological change may limit customer growth and have an adverse effect on our operations.

Advances in technology and changes in laws or regulations are reducing the cost of alternative methods of producing energy.

Advances in technology and changes in laws or regulations are reducing the cost of alternative methods of producing and/or consuming energy.

In addition, customers are increasingly expecting enhanced communications regarding their electric and natural gas services, which, in some cases, may involve additional investments in technology.

New technologies, including, but not limited to, cloud computing and generative artificial intelligence, may require us to make significant expenditures to remain competitive and may result in the obsolescence of certain of our operating assets.

Our future success will depend, in part, on our ability to anticipate and successfully adapt to technological changes and to offer services that meet customer demand.

Failure to adapt to advances in technology and manage the related costs could make us less competitive and negatively impact our financial condition, results of operations and cash flows.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Risks Related to Regulations and Litigation

9 unchanged sentences

Changes in regulations or the imposition of additional regulations could influence our operating environment and may result in substantial costs to us.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Our regulated operations are subject to certain operating risks incidental to handling, storing, transporting and providing customers with natural gas.

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In addition, in July 2019, the State of New Jersey amended the GWRA, which targets 80% reduction in greenhouse gas emissions below 2006 levels economy-wide by 2050.

In January 2020, Governor Murphy released the EMP confirming his commitment to achieve 100% clean energy by 2050, and the GWRA mandate of reducing state greenhouse gas emissions.

In January 2020, New Jersey released the EMP confirming its commitment to achieve 100% clean energy by 2050, and the GWRA mandate of reducing state greenhouse gas emissions.

The EMP addressed New Jersey’s energy system, including electric generation, transportation and buildings, and their associated greenhouse gas emissions and related air pollutants.

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Our goals, to reduce our New Jersey operational emissions by 60% from 2006 levels by 2030 and to achieve net-zero carbon emissions from our New Jersey operations by 2050, may require additional technological, legislative and regulatory developments, the impacts and costs of which may not be fully known at this time.

New Jersey Resources Corporation

RISK FACTORS (Continued)

While the EMP does not place a moratorium or end date on natural gas hook ups, further legislation or rulemaking that de-emphasizes the role of natural gas in providing clean, low-cost energy in the state of New Jersey could put upward pressure on natural gas prices and place customer growth targets at risk.

Higher cost levels could impact the competitive position of natural gas and negatively affect our growth opportunities, cash flows and earnings.

In February 2023, Governor Murphy issued two executive orders that established, or accelerated, previously established 2050 targets for clean-sourced electricity and electric heat pump adoption, with target dates of 2030 or 2035, as applicable.

In February 2023, the Governor of New Jersey issued two executive orders that established, or accelerated, previously established 2050 targets for clean-sourced electricity and electric heat pump adoption, with target dates of 2030 or 2035, as applicable.

An additional executive order opened a proceeding to plan for the future of natural gas utilities in New Jersey.

We are unable to predict the outcomes of these proceedings, but they could have a material impacts on our business, results of operations and cash flows.

We are unable to predict the outcomes of these proceedings, but they could have a material impact on our business, results of operations and cash flows.

Risks related to regulation could affect the rates we are able to charge, various costs and our profitability.

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Additionally, in fiscal 2019, NJR began the process of transitioning away from its enterprise platform, which will no longer receive extended support after 2025.

New Jersey Resources Corporation

RISK FACTORS (Continued)

phase of IT enhancements and upgrades were placed into service in July 2020.

The remaining phases of planned upgrades relate to work order and asset management and customer information systems and experience, which are expected to require significant capital investment through fiscal year 2024.

The first phase of IT enhancements and upgrades were placed into service in July 2020.

The remaining phases of planned upgrades relate to work order and asset management and customer information systems and experience, which are expected to require significant capital investment.

There can be no assurance that NJNG will be able to obtain rate increases and continue its BGSS incentive, CIP, RAC, or SAVEGREEN programs and IT upgrades and enhancements or continue to earn its currently authorized rates of return.

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or the inability to source needed materials, which has occurred and could reoccur, could adversely affect the Company’s results of operations, financial condition and cash flows.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Changes in customer growth may affect earnings and cash flows.

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Our economic hedging activities that are designed to protect against commodity and financial market risks, including the use of derivative contracts in the normal course of our business, may cause fluctuations in reported financial results and financial losses that negatively impact results of operations and our stock price.

We use derivatives, including futures, forwards, options, swaps and foreign exchange contracts, to manage commodity, financial market and foreign currency risks.

We use derivatives, including futures, forwards, options, and swaps, to manage commodity and financial market risks.

The timing of the recognition of gains or losses associated with our economic hedges in accordance with GAAP does not always coincide with the gains or losses on the items being hedged.

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As a result, changes in the underlying assumptions or use of alternative valuation methods could adversely affect the value of the reported fair value of these contracts.

New Jersey Resources Corporation

RISK FACTORS (Continued)

We are exposed to market risk and may incur losses in our wholesale business.

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The success of these transactions will depend on our ability to integrate these transactions within our existing businesses in a timely and seamless manner.

We may experience challenges when combining separate business cultures, information technology systems and employees.

Even if we are able to complete an integration successfully, we may not fully realize all the growth opportunities, cost savings and other synergies that we expect.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Investing through partnerships or joint ventures decreases our ability to manage risk.

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The extent to which our subsidiaries are unable to pay dividends or repay funds to us may adversely affect our ability to pay dividends to holders of our common stock and principal and interest to holders of our debt.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Credit rating downgrades could increase financing costs, limit access to the financial markets and negatively affect NJR and its subsidiaries.

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• fluctuations in interest rates and increased borrowing costs.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Failure by NJR and/or NJNG to comply with debt covenants may impact our financial condition.

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The acceleration of our outstanding debt obligations and our inability to borrow under the existing revolving credit facilities would cause a material adverse change in NJR’s and NJNG’s financial condition.

New Jersey Resources Corporation

RISK FACTORS (Continued)

Our ability to secure short-term financing is subject to conditions in the credit markets.

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Risks Related to Tax and Accounting Matters

A valuation allowance may be required for our deferred tax assets.

Our deferred tax assets are comprised primarily of investment tax credits and state net operating losses.

Any revaluation of our deferred tax assets that may be required in the future could have a material adverse impact on our financial condition and results of operations.

The cost of providing pension and postemployment health care benefits to employees and eligible former employees is subject to changes in pension fund values, interest rates and changing demographics and may have a material adverse effect on our financial results.

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While we believe we comply with all applicable tax laws, rules and regulations in the relevant jurisdictions, tax authorities may elect to audit us and determine that we owe additional taxes, which could result in a significant increase in our liabilities for taxes, interest and penalties in excess of our accrued liabilities.

New tax legislative initiatives may be proposed from time to time, such as proposals for comprehensive tax reform in the United States, which may impact our effective tax rate and which could adversely affect our tax positions or tax liabilities.

On August 16, 2022, the Inflation Reduction Act was signed into law and imposed a 15% minimum tax rate on book earnings for corporations with higher than $1B of annual income, along with a 1% excise tax on corporate stock repurchases while providing tax incentives to promote various clean energy initiatives.

We are currently assessing the potential impact of these legislative changes.

Any future change in tax laws or interpretation of such laws could adversely affect our results of operations, net income, financial condition and cash flows.

New tax legislative initiatives may be proposed from time to time, such as proposals for comprehensive tax reform in the U.S., which may impact our effective tax rate and which could adversely affect our tax positions or tax liabilities.

Any revaluation of our deferred tax attributes that may be required in the future could have a material adverse impact on our financial condition and results of operations.

New Jersey Resources Corporation

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Moreover, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any investor activism.

UNRESOLVED STAFF COMMENTS

Natural Gas Distribution

As of September 30, 2023, NJNG owns approximately 7,334 miles of distribution main, 7,768 miles of service main, 251 miles of transmission main and 595,225 meters.

Mains are primarily located under public roads.

Where mains are located under private property, NJNG has obtained easements from the owners of record.

Additionally, NJNG owns and operates two LNG storage plants in Stafford Township, Ocean County and Howell Township, Monmouth County.

The two LNG plants have an aggregate estimated maximum capacity of approximately 170,000 Dths per day and 1 Bcf of total capacity.

These facilities are used for peaking natural gas supply and for emergencies.

NJNG’s Liquefaction facility is also located on the Howell Township property and allows NJNG to convert natural gas into LNG to fill NJNG’s existing LNG storage tanks.

A Power-to-Gas System is also located at the LNG plant in Howell Township that uses solar power to produce hydrogen and then injects it into the natural gas system.

It consists primarily of an electrolyzer unit, an electrical and instrumentation building and small hydrogen storage tank, along with other supporting systems.

New Jersey Resources Corporation

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors