FOR IMMEDIATE RELEASE
Telephone: 609-561-9000
Investor Relations Contact: Marissa Travaline x4227 e-mail:
mtravaline@sjindustries.com
Media Contact: Dan Lockwood x4108 e-mail:
dlockwood@sjindustries.com
May 8, 2015
SJI Announces
First Quarter Results;
Offers 2015 Economic EPS Guidance
Folsom, NJ - South Jersey
Industries today announced first quarter 2015 results that
demonstrated solid operating performance from all areas of our
business. Those results included 13 percent year over year growth
in net income from our utility, as well as strong contributions to
Economic Earnings from both our wholesale commodity business and
from solar project development.
GAAP income and Economic Earnings for the full
year and first quarter of 2015 are presented below, as compared
with the same period in 2014. You will note that these numbers are
presented on a split-adjusted basis, accounting for the stock split
that is reflected with today's market open, which increased shares
outstanding for the period to approximately 68.4 million.
|
2015 |
2014 |
GAAP income from continuing operations -
Q1 |
$53.9 million |
$48.2 million |
GAAP EPS per diluted share - Q1 |
$0.79 |
$0.74 |
Economic Earnings - Q1 |
$58.9 million |
$66.2 million
|
Economic EPS per diluted share -
Q1 |
$0.86 |
$1.01 |
SJI uses the non-GAAP measure of Economic Earnings
when discussing results. A reconciliation of SJI's GAAP earnings to
Economic Earnings for the first quarter of 2015 appears at the
close of this news release. Economic Earnings eliminates all
unrealized gains and losses on commodity derivative transactions
and on the ineffective portion of interest rate derivative
transactions. It also adjusts for realized gains and losses
attributed to hedges on inventory transactions and for the impact
of transactions or contractual arrangements where the true economic
impact will be realized in a future period. A full explanation of
this non-GAAP measure is also outlined at the close of this
release.
"Our first quarter results reflect strong
performance and steady growth in our utility, as well as in our key
wholesale and retail commodity marketing business lines," said SJI
President and CEO Michael J. Renna. "Coupled with solid results
from our operating CHP assets and the benefits of recent solar
project additions, this performance will help SJI to grow Economic
EPS by between 2 and 8 percent in 2015."
Guidance reflects the continued uncertainty
surrounding the company's investment in the energy facility
constructed to serve the former Revel resort in Atlantic City,
NJ.
"As we look at both the opportunities and
challenges that 2015 presents for SJI, we are committed to moving
forward with a focus on our most promising opportunities, where we
are well positioned to achieve exceptional growth and to drive the
organization toward our goal of realizing 75 to 80 percent of
Economic Earnings from our utility and regulated returns," Renna
added.
PROJECTED CONTRIBUTIONS TO
EARNINGS
Looking at 2015 and beyond, we expect regulated contributions from
our utility to continue to outweigh non-regulated contributions to
net income, and to remain the key driver of performance over the
longer term. We also anticipate that the PennEast interstate
pipeline project could contribute at least 10 percent of net income
in 2018 and beyond, with the balance of earnings rounded out by
continuing strong performance in our commodity businesses and
reliable contributions from our energy production portfolio.
South Jersey Energy Group is off to a strong start
in 2015. Although lacking the significant benefit that
weather-based optimization provided in 2014, our wholesale and
retail commodity businesses remain well positioned to deliver
strong baseline earnings in the coming year. This performance will
be driven by fuel management services that will be provided to four
large gas-fired merchant generating facilities by year end, and the
value derived from our portfolio of transportation assets. Within
South Jersey Energy Services, we expect positive performance from
the operating assets in our energy production portfolio and
investment tax credits derived from solar project development to
benefit earnings. While there is some near term uncertainty around
the future of the ACR facility at the site of the former Revel
casino, we remain committed to maximizing the value of our energy
production assets for our shareholders over the long term.
Following is a more detailed discussion of first
quarter performance in 2015, and expectations from each area of the
business.
REGULATED BUSINESS
PERFORMANCE
SOUTH JERSEY GAS:
First quarter utility net income increased by 13 percent,
contributing $42.6 million in 2015, as compared with $37.7 million
in 2014. There is no difference between SJG's GAAP net income and
Economic Earnings.
Benefits from the rate case settled in 2014
provided the most significant contribution in the utility, with
infrastructure investment and customer growth remaining
consistently strong year over year.
Regulatory Update:
The rate case settled in October 2014 positively impacted year to
date results primarily through the significant increase in rate
base that the utility earns upon. Rate base increased with
our 2014 case from $821.9 million to $1.2 billion as a result of
investments made by SJG in the four years leading up to the
case.
Infrastructure investment remains a core component
of our regulated growth, with investments totaling $12.0 million
for the first quarter from our Accelerated Infrastructure
Replacement Program, or AIRP, and our Storm Hardening and
Reliability Program, or SHARP. In the first quarter of 2015,
accelerated infrastructure investments provided an incremental net
income contribution $1.7 million higher than in the first quarter
of 2014. For the full year, these investments are expected to
contribute a total of roughly $5.8 million to earnings, as compared
with $3.3 million in 2014.
Customer Growth:
In the first quarter, the utility added over 2,100 customers. Of
these additions, 1,400 are from conversions, underscoring the
competitive cost of heating with natural gas versus alternatives
like oil or propane, which can cost customers two to three times
more per year. New construction customers added for the quarter
remained fairly consistent year over year. As we have noted in
prior communications, with the current strength of our conversion
market, a sustained improvement in new construction activity offers
upside potential to our earnings projections around customer
growth. The annualized value of our year over year customer growth
is approximately $1.7 million.
Compressed Natural
Gas:
Expanding public access to compressed natural gas infrastructure
remains a priority for South Jersey Gas, and progress continues
around our joint project with Wawa to add CNG at up to three of
their existing fueling stations. With the approval process already
underway for siting the first Wawa station, we are also in
discussions with an additional station owner in southern New Jersey
to pilot CNG infrastructure at one or more of their existing
service stations. Further, South Jersey Gas is currently seeking
suitable locations to add three of our own stations in 2015, which
would serve CNG vehicles within our fleet, as well as provide
public access.
Beyond 2015:
We remain committed to reinforcing the reliability of our system
and providing an alternative to coal fired generation at the BL
England generating facility. While our efforts to develop a
pipeline to serve that facility have been delayed, this remains a
priority for South Jersey Gas.
Additionally, we are on schedule to begin
construction of a natural gas liquefier at our McKee City facility
in mid to late summer. We expect this facility to add to earnings
in 2015 and 2016 with contributions from AFUDC before the
investment is rolled in to a base rate case that could be filed as
early as 2016.
SJI MIDSTREAM:
The first quarter of 2015 brought further advancement of the
PennEast project, in which SJI is a 20 percent equity owner of a
proposed $1 billion, interstate pipeline. Scoping meetings designed
to engage the public have concluded, and insights from those
meetings are being incorporated to help keep the project moving on
schedule. Also within the quarter, a study of natural gas pricing
was released which highlighted the potential cost savings to
customers served off of the PennEast pipeline. Had the pipeline
been in service during the winter of 2014, energy costs to
customers in the region could have been reduced by as much as $890
million. With a demonstrated need for the pipeline - local
utilities (or their affiliates) are committed as foundation
shippers, representing 80 percent of capacity under 15-year
agreements - we remain optimistic about the projected timeline for
approval and construction.
UNREGULATED BUSINESS
PERFORMANCE
SJ ENERGY GROUP:
The performance from our commodity marketing activities in the
first quarter of 2014 was driven to record levels by unprecedented
spikes in natural gas prices during periods of unusually cold
weather experienced that winter. While temperatures in the
northeast were well below normal during the first quarter of 2015,
gas prices were significantly less volatile than in the prior year
period. Consequently, a very strong first quarter 2015 Economic
Earnings contribution of $7.8 million from this business had a very
difficult comparison to the $18.2 million contribution from the
prior year. Importantly, as we progress through the year, we expect
to see significantly improved earnings from this business line
during the second and third quarters as compared with the same
periods in 2014, based upon the value of our current transportation
asset portfolio.
Beyond 2015:
With seven fuel supply management contracts currently executed, we
expect this business line to become an increasingly stronger
contributor to Economic Earnings over the next three years. We've
estimated the total contribution to Economic Earnings from our
existing contracts to be approximately $8 million to $10 million by
2018, when all of the facilities these contracts serve are expected
to be operational. Additionally, as legacy contracts expire, we
expect the drag on earnings from these to diminish going forward.
We remain confident in the ability of this business line to provide
meaningful contributions to Economic Earnings in the near term, and
to continue growing considerably through the end of the decade.
SJ ENERGY SERVICES:
For the first quarter of 2015, South Jersey Energy Services
reflected Economic Earnings of $8.6 million, as compared with $10.3
million in the prior year period. Performance from our operating
combined heat and power projects remained a strong contributor to
Economic Earnings for the quarter, as did solar development. The
main variance, year over year, resulted from costs associated with
our ACR facility at the former Revel property. While we are
currently serving the former Revel hotel and casino property on a
very limited, short-term basis, and are subsequently not gaining a
bottom line benefit at present, discussions continue around
potentially serving the property in the future, particularly as
media outlets recently reported the possibility of it being sold
again.
CHP/Thermal - Our CHP and
thermal project business reflected Economic Earnings of $2.0
million in the first quarter of 2015, as compared with a
contribution of $3.3 million in 2014. This year over year decline
was driven by two things. The first was the absence of any
significant asset optimization opportunities from extreme weather
and price volatility like that which we experienced in the first
quarter of 2014. The second was the loss of revenue associated with
our assets at the ACR facility. However our CHP portfolio still
delivered solid results from operating performance as compared with
the first quarter of 2014, despite the loss of these two benefits.
As we move forward, our development of these types of projects will
remain highly selective and we expect that this technology will
remain an important part of our energy production portfolio.
Renewable - Within our
renewable energy project business, solar development remains a
positive contributor for SJI, adding $7.9 million for the first
quarter of 2015, as compared with $7.8 million in the first quarter
of 2014. These results reflect $10.2 million of ITC from solar
development for the quarter, as compared to $10.5 million of ITC
for the same period last year.
Despite generating over 20,000 solar renewable
energy credits for the quarter, production fell short of historical
levels due to unfavorable weather conditions this winter, as snow
and cloud cover persisted for extended periods of time for our New
Jersey and Massachusetts based arrays. Overall operating
performance from our solar portfolio is still up $0.4 million, year
over year, and we expect to see continued improvements in 2015.
Landfill project operating performance continues
to lag expectations, with a loss of $1.4 million in the first
quarter of 2015, as compared with $0.9 million in the first quarter
of 2014. The first quarter saw several key initiatives implemented
that we expect to help boost performance at our two most
problematic sites and improve the long term value we anticipate
from these particular projects.
Beyond 2015:
Going forward, we expect the reliability and historical cost
benefits associated with CHP and thermal energy production
facilities to provide a compelling basis for the continued
development of these types of projects.
Within our renewable portfolio, we will continue
to consider new solar investment that is supported by declining
development costs and improving operating performance, as well as
by increasing SREC values. Our target for solar development in 2015
is based on a current project queue of 35MW to 45MW. The
contribution in 2015 from ITC should continue to be equal to or
slightly below the 2014 level.
SJI BALANCE SHEET UPDATE
Our equity-to-capitalization ratio at the end of
the quarter was 43 percent, as compared to 45 percent at the end of
the first quarter in 2014. Deferred costs associated with last
winter's higher natural gas costs combined with infrastructure and
project investments to drive higher debt levels.
Looking forward, SJI intends to use its Dividend
Reinvestment Plan to issue equity in support of capital investments
in 2015, with an equity issuance projected to be below the 2014
total of $80 million. The company also has approximately $300
million of deferred tax benefits related to our investments that we
expect to realize between now and 2021, the benefits of which will
help support the balance sheet.
CONFERENCE CALL / WEBCAST
DETAILS
To participate in the conference call at 11:00 AM
ET on Friday, May 8, 2015, please pre-register by going to the
South Jersey Industries website, http://www.sjindustries.com,
clicking on Investors, and then scrolling down to "Webcasts and
Presentations" for the pre-registration link. This will allow you
to generate an event reminder as well as a PIN to expedite your
inclusion into the conference call when dialing in. On the day of
the call, dial 1-888-680-0865 approximately 15 minutes ahead of the
scheduled call time; enter the participant pass code 35317280 and
the PIN you received during pre-registration. International callers
may dial 1-617-213-4853; enter the participant pass code 35317280
and the PIN you received during pre-registration.
To listen to the live webcast simply visit the
South Jersey Industries website at
http://www.sjindustries.com , and scroll down to the "Webcasts and
Presentations" section where you will find the link to participate.
SJI encourages shareholders, media, and members of the financial
community to listen to the webcast.
FORWARD LOOKING STATEMENT
Certain statements contained in
this news release may qualify as "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements
other than statements of historical fact included in this release
should be considered forward-looking statements made in good faith
and are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of
1995. Words such as "anticipate", "believe", "expect", "estimate",
"forecast", "goal", "intend", "objective", "plan", "project",
"seek", "strategy" and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in the
statements. These risks and uncertainties include, but are not
limited to, the following: general economic conditions on an
international, national, state and local level; weather conditions
in our marketing areas; changes in commodity costs; changes in the
availability of natural gas; "non-routine" or "extraordinary"
disruptions in our distribution system; regulatory, legislative and
court decisions; competition; the availability and cost of capital;
costs and effects of legal proceedings and environmental
liabilities; the failure of customers, suppliers or business
partners to fulfill their contractual obligations; and changes in
business strategies.
A discussion of these and other
risks and uncertainties may be found in the Company's Annual Report
on Form 10-K for the year ended December 31, 2014 and in other
filings made by us with the Securities and Exchange Commission
(SEC). These cautionary statements should not be construed by you
to be exhaustive and they are made only as of the date of this news
release, or in any document incorporated by reference, at the date
of such document. While South Jersey Industries, Inc. (SJI or the
Company) believes these forward-looking statements to be
reasonable, there can be no assurance that they will approximate
actual experience or that the expectations derived from them will
be realized. Further, SJI undertakes no obligation to update or
revise any of its forward-looking statements, whether as a result
of new information, future events or otherwise.
ABOUT SOUTH JERSEY
INDUSTRIES
South Jersey Industries (NYSE: SJI), an energy
services holding company based in Folsom, NJ, operates its business
through two primary subsidiaries. South Jersey Gas, one of the
nation's fastest growing natural gas utilities, delivers clean,
efficient natural gas and promotes energy efficiency to
approximately 365,000 customers in southern New Jersey. SJI's
non-regulated businesses, under South Jersey Energy Solutions,
promote efficiency, clean technology and renewable energy by
developing, owning and operating on-site energy production
facilities - including Combined Heat and Power, Solar, and District
Heating and Cooling projects; acquiring and marketing natural gas
and electricity for retail customers; providing wholesale commodity
marketing and risk management services; and offering HVAC and other
energy-efficiency related services. For more information about SJI
and its subsidiaries, visit http://www.sjindustries.com.
EXPLANATION AND RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
This news release includes the non-generally
accepted accounting principles ("non-GAAP") financial measures of
Economic Earnings and Economic Earnings per share when evaluating
the results of operations for its nonutility operations. These
non-GAAP financial measures should not be considered as an
alternative to GAAP measures, such as net income, operating income,
earnings per share from continuing operations or any other GAAP
measure of liquidity or financial performance.
We define Economic Earnings as: Income from continuing operations,
(1) less the change in unrealized gains and plus the change in
unrealized losses, as applicable and in each case after tax, on all
derivative transactions, and (2) less realized gains and plus
realized losses, as applicable and in each case after tax, on all
commodity derivative transactions attributed to expected purchases
of gas in storage to match the recognition of these gains and
losses with the recognition of the related cost of the gas in
storage in the period of withdrawal, and (3) less the impact of
transactions or contractual arrangements where the true economic
impact will be realized in a future period.
Economic Earnings is a significant performance
metric used by our management to indicate the amount and timing of
income from continuing operations that we expect to earn after
taking into account the impact of derivative instruments on the
related transactions, and transactions or contractual arrangements
where the true economic impact will be realized in a future period.
Specifically, we believe that this financial measure indicates to
investors the profitability of the entire derivative related
transaction and not just the portion that is subject to
mark-to-market valuation under GAAP. Considering only the change in
market value on the derivative side of the transaction can produce
a false sense as to the ultimate profitability of the total
transaction as no change in value is reflected for the
non-derivative portion of the transaction.
The following table presents a reconciliation of
our GAAP income from continuing operations and earnings per share
from continuing operations, to Economic Earnings and Economic
Earnings per Share:
|
Three Months Ended
March 31 |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
Income/(Loss) from Continuing
Operations |
$ |
53,853 |
$ |
48,211 |
(Minus)/Plus: |
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
4,310 |
|
17,658 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
30 |
|
322 |
Net Loss from Affiliated Companies (A) |
|
742 |
|
--- |
Other (B) |
|
(25) |
|
(25) |
Economic Earnings |
$ |
58,910 |
$ |
66,166 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from Continuing
Operations |
$ |
0.79 |
$ |
0.74 |
(Minus)/Plus: |
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
0.06 |
|
0.27 |
Net Loss from Affiliated Companies (A) |
|
0.01 |
|
--- |
Economic Earnings Per Share |
$ |
0.86 |
$ |
1.01 |
The following table presents reconciliations of
GAAP income from continuing operations to Economic Earnings for our
non-utility businesses for the three months period ended March 31,
2015:
|
Three Months Ended
March 31 |
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
South Jersey Energy Group Income/(Loss) from
Continuing Operations |
$ |
3,626 |
$ |
456 |
(Minus)/Plus |
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
4,122 |
|
17,467 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
30 |
|
322 |
South Jersey Energy Group Economic
Earnings |
$ |
7,778 |
$ |
18,245 |
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Services Income/(Loss)
from Continuing Operations |
$ |
7,661 |
$ |
10,114 |
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
188 |
|
191 |
Net Loss from Affiliated Companies (A) |
|
742 |
|
--- |
Other (B) |
|
(25) |
|
(25) |
South Jersey Energy Services Economic
Earnings |
$ |
8,566 |
$ |
10,280 |
|
|
|
|
|
|
|
|
|
|
CHP/Thermal Income/(Loss) from Continuing
Operations |
$ |
1,044 |
|
3,136 |
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
188 |
|
191 |
Net Loss from Affiliated Companies (A) |
|
742 |
|
--- |
CHP/Thermal Economic Earnings |
$ |
1,974 |
|
3,327 |
|
|
|
|
|
|
|
|
|
|
Solar Income/(Loss) from Continuing
Operations |
$ |
7,956 |
|
7,797 |
Other (B) |
|
(25) |
|
(25) |
Solar Economic Earnings |
$ |
7,931 |
|
7,772 |
|
|
|
|
|
|
|
|
|
|
(A) Resulting from a reserve for uncollectible
accounts recorded by an Energenic subsidiary that owns and operates
a central energy center and energy distribution system for a hotel,
casino and entertainment complex in Atlantic City, New Jersey. This
charge is being excluded from Economic Earnings until the total
economic impact of the proceedings are realized. Energenic
management expects the proceedings to be concluded during 2015.
(B) Represents additional depreciation expense
within Economic Earnings on a solar generating facility. During
2012 an impairment charge was recorded within Income from
Continuing Operations on a solar generating facility which reduced
its depreciable basis and recurring depreciation expense. This
impairment charge was excluded from Economic Earnings and therefore
the related reduction in depreciation expense is being added
back.
SJI Q1 2015 Earnings
Statement
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: South Jersey Industries via Globenewswire
HUG#1920181
South Jersey Industries (NYSE:SJI)
Historical Stock Chart
From Mar 2024 to Apr 2024
South Jersey Industries (NYSE:SJI)
Historical Stock Chart
From Apr 2023 to Apr 2024