FOLSOM, NJ (February 24, 2022) – SJI (NYSE: SJI) today reported operating results for the fourth quarter and full year periods ended December 31, 2021. Highlights include:
- 2021 GAAP earnings $0.80 per diluted share compared to $1.62 per diluted share in 2020 Economic Earnings* $1.62 per diluted share compared to $1.68 per diluted share in 2020 2020 results included $0.13 per diluted share in non-recurring gains
- Q4 2021 GAAP earnings $0.72 per diluted share compared to $0.69 per diluted share in 2020 Economic Earnings $0.58 per diluted share compared to $0.62 per diluted share in 2020
- 2021 economic earnings increased $15.0 million or 9.2%, despite ongoing challenge of pandemic, driven by increased profitability from core operating entities SJI Utilities and SJI Energy Enterprises
- 2021 highlights include continued strong customer growth and infrastructure modernization, advancement of key regulatory initiatives and clean energy investments, and significant balance sheet improvement
- Dividend increased to indicated annual $1.24 per share, reflecting 23 consecutive years of rising dividends
- Today announced definitive agreement under which the Infrastructure Investments Fund (IIF), an investment vehicle advised by J.P. Morgan Investment Management Inc. will purchase SJI for $36.00 per share in cash, reflecting an enterprise value of approximately $8.1 billion
“I’m pleased to report that 2021 results achieved the higher end of the expectations we outlined at our Investor Day last May, driven by solid growth across our core operating businesses,” said Michael Renna, SJI President and Chief Executive Officer. “As energy markets across the U.S. and New Jersey accelerate the transition toward low carbon and renewable energy, the SJI Board determined that now is the opportune time to join forces with IIF, a trusted partner and long-term investor in utility and renewable energy companies. Together we will be well positioned to execute on our clean energy and decarbonization initiatives in support of the environmental goals of our State and region,” added Renna.
| Twelve Months Ended December 31, 2021 | Twelve Months Ended December 31, 2020 | |||||||||||||||||||||||||
| GAAP | GAAP | Economic | Economic | GAAP | GAAP | Economic | Economic | |||||||||||||||||||
| Earnings | EPS | Earnings | EPS | Earnings | EPS | Earnings | EPS | |||||||||||||||||||
| Utility | $ | 178.4 | $ | 1.62 | $ | 170.5 | $ | 1.55 | $ | 156.1 | $ | 1.61 | $ | 157.3 | $ | 1.62 | ||||||||||
| Non-Utility | $ | (52.7 | ) | $ | (0.49 | ) | $ | 44.3 | $ | 0.40 | $ | 45.9 | $ | 0.47 | $ | 45.9 | $ | 0.47 | ||||||||
| Other | $ | (37.1 | ) | $ | (0.34 | ) | $ | (36.8 | ) | $ | (0.33 | ) | $ | (44.7 | ) | $ | (0.46 | ) | $ | (40.3 | ) | $ | (0.41 | ) | ||
| Total – Continuing Ops | $ | 88.5 | $ | 0.80 | $ | 178.0 | $ | 1.62 | $ | 157.3 | $ | 1.62 | $ | 163.0 | $ | 1.68 | ||||||||||
| Average Diluted Shares | 110.1 | 110.1 | 97.0 | 97.0 | ||||||||||||||||||||||
| *Non-GAAP, see “Explanation and Reconciliation of Non-GAAP Financial Measures.” | ||||||||||||||||||||||||||
| Note: Earnings and average shares outstanding are in millions. Amounts and/or EPS may not add due to rounding. | ||||||||||||||||||||||||||
2021 Results
For the twelve-month period ended December 31, 2021, SJI reported consolidated GAAP earnings of $88.5 million compared to $157.3 million in the prior year period.
SJI uses the non-GAAP measure of economic earnings when discussing results. We believe this presentation provides clarity into the continuing earnings of our business. A full explanation and reconciliation of economic earnings is provided under “Explanation and Reconciliation of Non-GAAP Financial Measures” later in this report and in our 10-K for the year ending December 31, 2021.
For the twelve-month period ended December 31, 2021, economic earnings were $178.0 million compared to $163.0 million in the prior year period.
UTILITY
SJI’s utility entities include the regulated operations of South Jersey Gas (SJG) and Elizabethtown Gas (ETG). 2021 GAAP earnings were $178.4 million compared with $156.1 million in 2020. Economic earnings were $170.5 million compared with $157.3 in 2020.
South Jersey Gas
Performance. 2021 GAAP earnings were $127.6 million compared to $108.1 million in 2020. Economic earnings were $127.6 million compared to $109.3 million. Utility margin increased $38.2 million, reflecting rate relief effective October 1, 2020, customer growth and the roll-in of investments from infrastructure replacement programs. SJI defines utility margin, a non-GAAP measure, as natural gas revenues plus depreciation and amortization expenses, less natural gas costs, regulatory rider expenses and related volumetric and revenue-based energy taxes. Total expenses increased $19.9 million, primarily reflecting higher depreciation and interest expenses.
Customer Growth. SJG added approximately 6,400 new customers over the last 12 months and now serves approximately 411,000 customers. SJG’s 1.6% customer growth rate compares favorably to the peer average and remains driven by gas conversions from alternate fuels such as oil and propane, and new construction.
Infrastructure Modernization. Through infrastructure replacement programs, SJG enhances the safety and reliability of our system while earning our authorized utility return on approved investments in a timely manner. SJG’s Accelerated Infrastructure Replacement Program (AIRP II) authorized investment of $302.5 million from 2016-2021 for infrastructure replacement upgrades. Our investment of approximately $69 million from July 2020 through September 2021 was rolled into rates on January 1, 2022. SJG’s Storm Hardening and Reliability Program (SHARP) authorized investment of $100 million from 2018-2021 for four projects to enhance the safety, redundancy and resiliency of the distribution system along our coastal communities. Our investment of approximately $23 million from July 2020 to June 2021 was rolled into rates on October 1, 2021.
IIP Proposal. SJG has filed a request with the New Jersey Board of Public Utilities (NJBPU) for approval of an Infrastructure Investment Program (IIP) that would accelerate planned capital expenditures to enhance the delivery of safe, reliable, affordable natural gas, create jobs, and support the State’s environmental goals. Under the proposed five-year program, SJG will invest approximately $742.5 million to replace 825 miles of aging steel mains and install excess flow valves on new service lines. These enhancements ensure the continued safety and reliability of SJG’s system. The procedural schedule contemplates a resolution during Q2 2022.
Energy Efficiency. Through energy efficiency programs, SJG advances New Jersey’s clean energy goals in a manner that benefits customers, the environment and the State’s green economy while recovering our investments in a timely manner. SJG’s energy efficiency program, as approved by the NJBPU in April 2021, authorizes investment of $133.2 million from July 1, 2021 to June 30, 2024. Our investment of approximately $40 million from July 2021 to June 2022 commenced recovery in July 2021.
Redundancy. In August 2021, the NJBPU approved SJG’s engineering and route proposal to construct system upgrades in support of a planned 2.0+ Bcf liquefied natural gas (LNG) facility. This project is critically important to ensure service is not interrupted to our customers in the event of a significant outage, either behind our city gate, or on one of the two interstate pipelines that serve the SJG system. Pre-construction engineering and permitting of the project has commenced. We also continue to explore alternatives that will allow for a secondary supply of gas needed to create reliability and resiliency for ~140,000 customers in Atlantic and Cape May counties.
Elizabethtown Gas
Performance. 2021 GAAP earnings were $50.7 million compared with $47.7 million in 2020. Economic earnings were $42.9 million compared with $47.7 million in 2020. Utility margin, as previously defined, increased $1.6 million, reflecting customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $6.4 million, primarily reflecting higher O&M, depreciation and interest expenses.
Customer Growth. ETG added approximately 4,000 new customers over the last 12 months and now serves approximately 305,000 customers. ETG’s 1.3% customer growth rate has increased from its historic 0.9% rate, driven by increases in gas conversions from alternate fuels such as oil and propane, and new construction.
Infrastructure Modernization. ETG’s Infrastructure Investment Plan (IIP) authorizes investment of $300 million from 2019-2024 for important infrastructure upgrades including the replacement of up to 250 miles of cast iron and bare steel mains. Our investment of approximately $64 million from July 2020 to June 2021 was rolled into rates on October 1, 2021.
Energy Efficiency. ETG’s energy efficiency program, as approved by the NJBPU in April 2021, authorizes investment of $74.0 million from July 1, 2021 to June 30, 2024. Our investment of approximately $21 million from July 2021 to June 2022 commenced recovery in July 2021.
Base Rate Case. In December 2021, ETG filed a petition with the NJBPU requesting an increase of $76.6 million to its base rates. An update to this petition was filed in February 2022 updating the requested base rate revenue increase to $72.9 million. The request is based on a proposed after tax return on invested capital of 7.63%, with a capital structure that includes a common equity component of 54.89% and a return on common equity of 10.75%. The request is predominantly driven by the significant capital investments that ETG has made since its last base rate proceeding that was resolved in 2019. Since that time, ETG has invested approximately $215 million of capital investments that are not currently reflected in rates, with an additional $175 million of capital investment anticipated to be invested by September 30, 2022. These capital investments have been and will continue to be made to ensure the safety, reliability and resiliency of ETG’s distribution system, allow ETG to continue to provide safe, reliable and best in class customer service, and facilitate the environmental goals of NJ and SJI’s commitment to ensuring that it is part of New Jersey’s clean energy future. A resolution of the case is expected later this year.
NON-UTILITY
SJI’s non-utility entities include Energy Management, Energy Production and Midstream. 2021 GAAP earnings were $(52.7) million compared to $45.9 million in 2020. Economic earnings were $44.3 million compared with $45.9 million in 2020.
Energy Management
Performance. Energy Management includes Wholesale Services (Fuel Management/Marketing) and Retail Services (Account Services/Energy Consulting). 2021 GAAP earnings were $40.1 million compared to $26.9 million in 2020. Economic earnings were $36.9 million compared with $26.0 million in 2020.
- Wholesale Services 2021 GAAP earnings were $37.3 million compared with $25.6 million in 2020. Economic earnings were $33.5 million compared with $25.1 million in 2020, primarily reflecting improved asset optimization opportunities. For comparative purposes, note that 2020 results included a one-time $2.9 million after-tax refund from a third-party supplier.
- Retail Services 2021 GAAP earnings were $2.8 million compared with $1.2 million in 2020. Economic earnings were $3.5 million compared with $0.9 million in 2020, reflecting improved contributions from consulting activities, meter reading and appliance service contract fees.
Energy Production
Performance. Energy Production includes renewable (fuel cell/solar) and decarbonization (REV/RNG development) investments. 2021 GAAP earnings were ($7.1) million compared with $14.9 million in 2020. Economic earnings were $5.8 million compared with $15.7 million in 2020.
- Renewables 2021 GAAP earnings were ($7.5) million compared to $14.9 million in 2020, reflecting an other-than-temporary impairment charge taken on the Company’s equity investment in Energenic. Economic earnings were $5.4 million compared to $15.7 million in 2020, primarily reflecting income associated with past fuel cell and solar investments and the timing of recognition of investment tax credits (ITC) from current investments. SJI invested $46.4 million net in renewable projects in 2021, recognizing approximately $3.9 million in ITC. Development of our 5.0 MW fuel cell project in Bronx, New York continues to advance and is expected to become operational in Q2 2022.
- Decarbonization 2021 GAAP/economic earnings were $0.4 million, reflecting contributions from SJI’s 35% equity interest in REV partially offset by new business investment. RNG development activities at eight dairy farms is proceeding on track, with in-service anticipated later this year.
Midstream
Performance. Midstream includes SJI’s 20% equity interest in the PennEast Pipeline. 2021 GAAP earnings were $(85.8) million compared with $4.2 million in 2020, reflecting an impairment charge of $87.4 million recorded during the quarterly period ended June 30, 2021. Economic earnings were $1.6 million compared to $4.2 million, reflecting allowance for funds used during construction (AFUDC) related to the project. As previously communicated, following extensive evaluation and discussion, the PennEast partners determined that further development of the project is no longer supported.
OTHER
Performance. Other includes interest on debt, including debt associated with past acquisitions. 2021 GAAP earnings were $(37.1) million compared to $(44.7) million in 2020. Economic earnings were $(36.8) million compared to $(40.3) million in 2020, reflecting lower outstanding debt partially offset by higher interest and bank fees.
Fourth Quarter 2021 Results
| Three Months Ended December 31, 2021 | Three Months Ended December 31, 2020 | |||||||||||||||||||||||||
| GAAP | GAAP | Economic | Economic | GAAP | GAAP | Economic | Economic | |||||||||||||||||||
| Earnings | EPS | Earnings | EPS | Earnings | EPS | Earnings | EPS | |||||||||||||||||||
| Utility | $ | 62.8 | $ | 0.55 | $ | 62.8 | $ | 0.55 | $ | 63.8 | $ | 0.63 | $ | 63.8 | $ | 0.63 | ||||||||||
| Non-Utility | $ | 28.4 | $ | 0.25 | $ | 12.1 | $ | 0.11 | $ | 18.7 | $ | 0.19 | $ | 12.9 | $ | 0.13 | ||||||||||
| Other | $ | (9.1 | ) | $ | (0.08 | ) | $ | (9.0 | ) | $ | (0.08 | ) | $ | (13.4 | ) | $ | (0.13 | ) | $ | (13.8 | ) | $ | (0.14 | ) | ||
| Total – Continuing Ops | $ | 82.2 | $ | 0.72 | $ | 66.0 | $ | 0.58 | $ | 69.1 | $ | 0.69 | $ | 63.0 | $ | 0.62 | ||||||||||
| Average Diluted Shares | 113.6 | 113.6 | 100.8 | 100.8 | ||||||||||||||||||||||
| *Non-GAAP, see “Explanation and Reconciliation of Non-GAAP Financial Measures.” | ||||||||||||||||||||||||||
| Note: Earnings and average shares outstanding are in millions. Amounts and/or EPS may not add due to rounding. | ||||||||||||||||||||||||||
For the three month period ended December 31, 2021, SJI reported consolidated GAAP earnings of $82.2 million compared to $69.1 million in the prior year period.
Economic earnings were $66.0 million compared to $63.0 million in the prior year period.
UTILITY
Fourth quarter 2021 GAAP/economic earnings were $62.8 million compared with $63.8 million in 2020.
- SJG. Fourth Quarter GAAP/economic earnings were $45.4 million compared with $43.4 million in 2020. Utility margin increased $4.5 million, primarily reflecting customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $2.5 million, primarily reflecting higher depreciation and interest expenses.
- ETG. Fourth Quarter GAAP/economic earnings were $17.4 million compared with $20.4 million in 2020. Utility margin decreased $2.6 million, primarily reflecting timing associated with customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $0.4 million, primarily reflecting higher depreciation and interest expenses.
NON-UTILITY
Fourth quarter 2021 GAAP earnings were $28.4 million compared with $18.7 million in 2020. Economic earnings were $12.1 million compared with $12.9 million in 2020.
- Energy Management. Fourth quarter 2021 GAAP earnings were $40.5 million compared with $13.2 million in 2020. Economic earnings were $11.5 million compared with $7.2 million in 2020.
- Wholesale Services GAAP earnings were $39.7 million compared with $12.9 million in 2020. Economic earnings were $10.2 million compared with $6.8 million in 2020, primarily reflecting improved asset optimization opportunities.
- Retail Services GAAP earnings were $0.7 million compared with $0.2 million in 2020. Economic earnings were $1.4 million compared with $0.3 million in 2020, primarily reflecting improved contributions from consulting activities.
- Energy Production. Fourth quarter 2021 GAAP earnings were $(11.7) million compared with $4.6 million in 2020. Economic earnings were $0.9 million compared with $4.8 million in 2020.
- Renewables GAAP earnings were ($11.2) million compared with $4.6 million in 2020, reflecting an other-than-temporary impairment charge taken on the Company’s equity investment in Energenic. Economic earnings were $1.4 million compared with $4.8 million in 2020, reflecting income associated with past fuel cell and solar investments and the timing of recognition of ITC’s from current investments.
- Decarbonization GAAP/economic earnings were $(0.5) million, reflecting contributions from SJI’s 35% equity interest in REV offset by initial operating costs and new business investments.
- Midstream. Fourth quarter 2021 GAAP/economic earnings were $(0.3) million compared with $0.9 million in 2020, reflecting the absence of AFUDC related to the project.
OTHER
Fourth quarter 2021 GAAP earnings were $(9.1) million compared with $(13.4) million in 2020. Economic earnings were $(9.0) million compared with $(13.8) million in 2020, reflecting lower outstanding debt partially offset by higher interest and bank fees.
Capital Expenditures and Cash Flow
For the twelve months ended December 31, 2021:
- Net cash provided by operating activities was $273.1 million compared with $311.6 million in the prior year period, primarily reflecting rate relief at SJG, improved wholesale marketing results and customer growth offset by increased utility remediation costs and a third-party gas supplier refund in 2020.
- Net cash used in investing activities was $645.5 million compared with $507.8 million in the prior year period, primarily reflecting $532.0 million in capital expenditures and $58.4 million in REV, fuel cell and solar investments.
- Net cash provided by financing activities was $360.0 million compared with $209.6 million in the prior year period, primarily reflecting debt and equity issuances partially offset by debt repayment and refinancing.
Balance Sheet
- Equity-to-total capitalization was 35.8% at December 31, 2021 compared with 32.2% at December 31, 2020, largely reflecting equity financing and repayment of debt.
- Assuming conversion of mandatory convertible equity units and equity credit from rating agencies for long-duration debt, SJI’s adjusted equity-to-total capitalization, a non-GAAP measure, was 43.6% at December 31, 2021 compared with 39.6% at December 31, 2020.
- At December 31, 2021, SJI had total credit facilities of $1.0 billion, with $653.3 million of available liquidity.
Acquisition
In a separate press release issued today, SJI announced that it has entered into a definitive agreement to be acquired by the Infrastructure Investments Fund, an investment vehicle advised by J.P. Morgan Investment Management Inc. (IIF). The per share purchase price of $36.00 represents a 46.3% premium to SJI’s 30-day volume weighted average price (VWAP) as of February 23, 2022, the last trading day prior to the announcement of the agreement. The transaction was unanimously approved by SJI’s Board of Directors and is expected to close in the fourth quarter of 2022, subject to the approval of SJI’s shareholders, the receipt of regulatory approvals, including by the New Jersey Board of Public Utilities, and other customary closing conditions. Dividends payable to SJI shareholders are expected to continue in the ordinary course until the closing, subject to approval by SJI’s Board of Directors. Upon completion of the transaction, SJI’s shares will no longer trade on the New York Stock Exchange, and SJI will become a private company.
About SJI
SJI (NYSE: SJI), an energy infrastructure holding company based in Folsom, NJ, delivers energy services to customers through two primary subsidiaries: SJI Utilities (SJIU) and SJI Energy Enterprises (SJIEE). SJIU houses the company’s regulated natural gas utility operations, delivering safe, reliable and affordable natural gas to more than 700,000 residential, commercial and industrial customers across New Jersey via its South Jersey Gas and Elizabethtown Gas subsidiaries. SJIEE houses the company’s non-utility operations primarily focused on clean energy development and decarbonization via renewable energy production and energy management activities. Visit sjindustries.com for more information about SJI and its subsidiaries.
