South Jersey Industries — Investor Day (May 2021)
88 slides from South Jersey Industries's investor day presentation, May 6, 2021
Slide 1: 2021 Investor Day May 6, 2021
2021 Investor Day May 6, 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation, including information incorporated by reference, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding
Slide 3: Agenda
AGENDA 1. DELIVERING TOMORROW’S CLEAN ENERGY Mike Renna | President & CEO 2. SUSTAINABILITY Melissa Orsen | Senior Vice President, SJI & President, South Jersey Gas 3. SJI UTILITIES Dave Robbins | Senior Vice President, SJI & President, SJI Utilities 4. NON-UTILITY OPERATIONS Steve Cocchi | Senior V
Slide 4: Delivering Tomorrow's Clean Energy
Delivering Tomorrow’s Clean Energy Mike Renna | President & CEO 4
Slide 5: Our Mission: 21st Century Clean Energy Infrastructure Company
5 Our Mission 21st Century Clean Energy Infrastructure Company ▪ $3B+ infrastructure company supplying safe, reliable and affordable energy and supporting economic growth ▪ U.S. and New Jersey accelerating transition to low carbon and renewable energy future ▪ Launching utility-centered $3.5B, 5-yea
Slide 6: Strategic Plan To Deliver The Clean Energy Of The Future
Strategic Plan To Deliver The Clean Energy Of The Future Positioned For Strong Growth Next Five Years and Beyond 6 ~$3.5B PLANNED CAPEX 2021-2025 ~10% RATE BASE CAGR 2021-2025 5-8% ECONOMIC EPS CAGR 2021-2025 ~30% CFO CAGR 2021-2025 ~3% DIV PER SHARE CAGR 2021-2025
Slide 7: South Jersey Industries at a glance
~$2.5B Market Cap ~700,000 SJIU Customers ~1,100 SJI Employees ~$3.4B Rate Base $163M 2020 Economic Earnings 22 Years of Consecutive Dividend Increases 70-80% Long-Term Regulated Earnings ~50% Emissions Reduction 2006-2019 ~1.5% Annual Customer Growth Rate South Jersey Industries South Jersey Gas El
Slide 8: Complementary Infrastructure Businesses Across The Energy Value Chain
Complementary Infrastructure Businesses Across The Energy Value Chain 8
Slide 9: Disciplined Growth Plan Embracing Infrastructure Modernization and Sustainability
Utility Investments ▪ Drive shareholder value and customer satisfaction through: • expansion and modernization of our utility infrastructure • regulatory innovation that provides safety, reliability, value and service ▪ SJG/ETG are Growth Drivers ▪ ~10% Rate Base CAGR 2021-2025 Disciplined Growth Pl
Slide 10: Regulated Earnings: Utilities Remain Our Core Growth Engine
Regulated Earnings Utilities Remain Our Core Growth Engine in 2021-2025 and Beyond 10 70-80% 20-30% REGULATED NON-REGULATED
Slide 11: Dedicated to A Clean Energy Future for New Jersey and our Region
Dedicated to A Clean Energy Future for New Jersey and our Region ▪ Committed to delivering safe and reliable service, reducing the carbon content of gas, lowering energy costs and improving energy efficiency ▪ Initiating carbon reduction investments across both our utility and nonutility businesses
Slide 12: Decarbonization Goals
Decarbonization Goals Our Pathway To A Clean Energy Future ▪ 70% Reduction in Carbon Emissions and Consumption by 2030 ▪ 100% Reduction in Carbon Emissions and Consumption by 2040 ▪ At least 25% of Annual Capex on Sustainability Investments 12
Slide 13: Experienced Senior Team Focused on Execution
Experienced Senior Team Focused on Execution Mike Renna President & Chief Executive Officer Joined in 1998 ▪ Prior to his leadership role at SJI, Mr. Renna held the titles of president of South Jersey Energy Solutions and South Jersey Energy ▪ Appointed to the South Jersey Energy Solutions executive
Slide 14: Sustainability
Sustainability Melissa Orsen | Senior Vice President & President, South Jersey Gas
Slide 15: Sustainable Business Practices
Sustainable Business Practices SJI’s Mission and Values Reflect Strong Alignment with ESG Goals ✓ Stated goal for 70% reduction in consumption and emissions by 2030 and 100% by 2040 ✓ At least 25% of annual capital spending for sustainability investment ✓ Infrastructure built and monitored to minimi
Slide 16: ESG Initiatives
ESG Initiatives Demonstrated Record of Commitment to ESG Priorities SocialEnvironmental Governance ✓ Replacement of 800+ miles of vintage mains and related facilities ✓ Energy efficiency programs that reduce customer consumption and cost ✓ RNG/Hydrogen initiatives to lower carbon content of gas and
Slide 17: Accomplishments and Recognitions
Accomplishments and Recognitions ✓ Recognition of significant investment in Sustainability and ESG initiatives over past decade -- improving infrastructure safety and reliability, increasing workforce diversity, and supporting a clean energy future ✓ Key sustainability initiatives included accelerat
Slide 18: Future Growth Opportunities
Future Growth Opportunities Focused on Both Utility and Non-Utility Investments 18 HISTORIC TRACK RECORD PRESENT FUTURE OPPORTUNITIES REDUCING ENERGY CONSUMPTION/EMISSIONS Conservation Incentive Program (SJG) Replacement of Aging Infrastructure (SJG) Conservation Incentive Programs (SJG and ETG) Rep
Slide 19: ~60% of Total CapEx for sustainability investments
~60% of Total CapEx over the next five years for sustainability investments Sustainability Investment ~$3.5 Billion CapEx 2021-2025, With ~60% For Sustainability Sustainability investments include RNG, pipeline replacement, energy efficiency, redundancy projects, fuel cell, solar and other clean ene
Slide 20: RNG Legislation Upside to 2021-2025 Plan
RNG Legislation Upside to 2021-2025 Plan From Rate Base Investment and ITCs Proposed legislation seeks to support RNG programs for gas utilities Legislation would help to ensure gas utilities obtain cost recovery for investments in RNG infrastructure and RNG commodity purchases Legislation introduce
Slide 21: Sustainability Key Takeaways
Sustainability | Key Takeaways Key Takeaways + Future Goals ▪ Demonstrated record of commitment to sustainability ▪ Decarbonization goal of 70% reduction in emissions by 2030 and 100% by 2040 ▪ ~60% of total capex 2021-2025 allocated toward sustainability investments ▪ Ongoing commitment beyond 2025
Slide 22: SJI Utilities
SJI Utilities Dave Robbins | Senior Vice President & President, SJI Utilities
Slide 23: SJI Utilities: Largest Stand-Alone Natural Gas Provider in New Jersey
SJI Utilities Largest Stand-Alone Natural Gas Provider in New Jersey ▪ Gas distribution – South Jersey Gas and Elizabethtown Gas ▪ ~10,000 miles of distribution and transmission pipeline ▪ ~700,000 total customers ▪ ~$3.4B combined Rate Base (EOY 2020) ▪ Growing customer base -- new construction and
Slide 24: Top JD Power Customer Satisfaction Scores; Safety Culture
Top JD Power Customer Satisfaction Scores ▪ ETG is #1 in peer group for 6th consecutive year ▪ SJG is #4 in same peer group Cultural Maturity Curves ▪ SJG Improvement Initiative ▪ ETG’s advanced stage journey Benefits of Strong Customer Culture ▪ Enhanced customer growth ▪ Self-service options lower
Slide 25: South Jersey Gas
~407K Total Customers ~$2.3B Rate Base ~10% Rate Base CAGR 2021-2025E 9.6% Authorized ROE 54.0% Equity Component 1.5% Customer Growth 2021-2025E ~1.7B CapEx 2021-2025E ~50% CapEx With Timely Recovery ~60% Sustainability CapEx 2021-2025E South Jersey Gas ▪ Operates and maintains more than 6,600 miles
Slide 26: SJG Customer Growth Strong
SJG Customer Growth Strong 1.5% Projected Growth 2021-2025, Driven By Robust Residential Conversions and New Construction Historic Growth ▪ 1.5% Annualized Growth 2010-2020 ▪ 90%+ of customers residential -- ~65% of utility gross margin ▪ Steady new construction activity, supported by growth in high
Slide 27: SJG Operational Performance
SJG Operational Performance Solid Improvement Across All Key Categories All Cast Iron/Bare Steel Has Been Replaced 2.78 2.94 2.14 1.31 0.84 2016 2017 2018 2019 2020 Employee Safety Days Away, Restricted or Transferred 0.29 0.17 0.12 0.07 0.03 2016 2017 2018 2019 2020 System Resilience Leaks Per Mile
Slide 28: SJG Regulatory Climate
SJG Regulatory Climate Constructive Partnership With NJBPU Fosters Safety, Reliability and Energy Efficiency With Timely Cost Recovery 28 Authorized Program Objective Authorized Amount Timing ROE Equity Component Average Annual CapEx (M) Accelerated Recovery Conservation Incentive Program (CIP) Prom
Slide 29: SJG Infrastructure Modernization
SJG Infrastructure Modernization 800+ Miles of Vintage Steel and Plastic Pipe To Be Replaced 2021-2026 1,900+ Miles of Vintage Pipeline To Be Replaced Beyond 2026 29 Pipeline Replacement 2021-2026 Pipeline Replacement Beyond 2026
Slide 30: SJG Regulatory Initiatives
SJG Regulatory Initiatives Proposed programs accelerate safety, reliability and redundancy, create jobs, and support our ability to deliver decarbonized gas of the future Proposed $742.5M over five years to replace 825 miles of aging steel main and install excess flow valves ▪ Considerable investmen
Slide 31: SJG Decarbonization Opportunities
SJG Decarbonization Opportunities Exploring Renewable Natural Gas and Green Hydrogen ▪ ASOW pursuing development of offshore wind generation on Atlantic/Ocean County coasts ▪ Partnership exploring utilizing excess electricity from wind projects to create “green hydrogen”-- a renewable energy source
Slide 32: SJG Capital Expenditures
SJG Capital Expenditures ~$1.7B Capital Plan 2021-2025 ~50% of CapEx Expected to Earn Timely Recovery ~$1.7B 32 $403 (24%) $537 (31%) $337 (20%) $320 (19%) $106 (6%) System Growth & Maintenance Infrastructure Modernization New Business Redundancy Clean Energy Note: Timely recovery includes investmen
Slide 33: SJG Rate Base Growth
SJG Rate Base Growth ~10% Rate Base CAGR Projected 2021-2025 Key Assumptions ▪ ~$1.7B Capital Spending Plan ▪ Infrastructure Modernization (IIP) ▪ 1.5% Customer Growth ▪ Clean Energy Investments ▪ LNG Redundancy Project ▪ Base Rate Case Filings every 2-3 years ▪ ROE: 9.6% ▪ No change to depreciation
Slide 34: South Jersey Gas Key Takeaways
South Jersey Gas | Key Takeaways Key Takeaways + Future Goals ▪ Strong projected rate base growth of ~10% drives future earnings ▪ Attractive service territory -- with visibility for continued strong customer growth driven by conversions ▪ Supportive regulatory climate – fully decoupled, timely reco
Slide 35: Elizabethtown Gas
~303K Total Customers ~$1.1B Rate Base ~10% Rate Base CAGR 2021-2025E 9.6% Authorized ROE 51.5% Equity Component 1.5% Customer Growth 2021-2025E ~1.0B CapEx 2021-2025E ~50% CapEx With Timely Recovery ~40% Sustainability CapEx 2021-2025E Elizabethtown Gas ▪ Operates and maintains more than 3,200 mile
Slide 36: #1 J.D. Power Customer Satisfaction Study, 6th Consecutive Year
#1 6th Consecutive Year J.D. Power Customer Satisfaction Study 36
Slide 37: ETG Customer Growth Strong
ETG Customer Growth Strong 1.5% Projected Growth 2021-2025 Balanced Mix of New Construction and Conversions Historic Growth ▪ 1.4% CAGR Since Acquisition, Up from Historic 0.9% ▪ 90%+ of customers residential -- ~65% of utility gross margin ▪ Residential new construction and conversion activity prim
Slide 38: ETG Operational Performance
ETG Operational Performance Improvement Across All Categories Since Mid-2018 Acquisition 1.70 2.90 0.95 1.12 0.49 2016 2017 2018 2019 2020 Employee Safety Days Away, Restricted or Transferred Rate 1.00 1.07 1.34 0.49 0.54 2016 2017 2018 2019 2020 System Resilience Leaks Per Mile 18.3 16.7 14.1 11.3
Slide 39: ETG Regulatory Climate
ETG Regulatory Climate Constructive Partnership With NJBPU Fosters Safety, Reliability and Energy Efficiency With Timely Cost Recovery 39 Authorized Program Objective Authorized Amount Timing ROE Equity Component Average Annual CapEx (M) Accelerated Recovery Conservation Incentive Program (CIP) Prom
Slide 40: ETG Infrastructure Modernization
ETG Infrastructure Modernization ~300 Miles of Cast Iron Pipeline To Be Replaced 2021-2025, ~600 Miles of Vintage Steel and Plastic Beyond 2025 40 Pipeline Replacement 2021-2025 Pipeline Replacement Beyond 2025
Slide 41: ETG Decarbonization Opportunities
ETG Decarbonization Opportunities Exploring Multiple Projects To Foster Blending of Renewable Natural Gas into ETG System ▪ Evaluating a variety of opportunities for RNG development/production and gas blending into ETG system ▪ Repurposing Landfill Sites in New Jersey ▪ Wastewater Treatment Faciliti
Slide 42: ETG Capital Expenditures
ETG Capital Expenditures ~$1.0B Capital Plan 2021-2025 ~50% of CapEx Expected to Earn Timely Recovery ~$1.0B 42 Note: Timely recovery includes investments in infrastructure modernization and new business $383 (40%) $302 (31%) $210 (22%) $64 (7%) System Growth & Maintenance Infrastructure Modernizati
Slide 43: ETG Rate Base Growth
ETG Rate Base Growth ~10% Rate Base Growth Projected 2021-2025 Key Assumptions ▪ ~$1.0B Capital Spending Plan ▪ Infrastructure Modernization (IIP) ▪ 1.5% Customer Growth ▪ Clean energy projects ▪ Base Rate Case Filings every 2-3 years ▪ ROE: 9.6% ▪ No change to depreciation rates ▪ Modestly improved
Slide 44: Elizabethtown Gas Key Takeaways
Elizabethtown Gas | Key Takeaways Key Takeaways + Future Goals ▪ Strong projected rate base growth of ~10% drives future earnings ▪ Attractive service territory -- visibility for continued strong customer growth driven by mix of new construction and conversions ▪ Supportive regulatory climate – full
Slide 45: Non-Utility Operations
Non-Utility Operations Steve Cocchi | Senior Vice President & CFO
Slide 46: Non-Utility Operations Overview and Strategic Mission
Non-Utility Operations Overview and Strategic Mission ❖ ENERGY MANAGEMENT “Leveraging our deep industry expertise and relationships to provide essential services to utilities, power generators and industrial customers” NON-UTILITY 46 ❖ ENERGY PRODUCTION “Enhancing the value of our infrastructure thr
Slide 47: Midstream: PennEast Pipeline Addresses Critical Supply Need
Midstream PennEast Pipeline Addresses Critical Supply Need 2021-2025 Forecast Only Includes Phase One ▪ 20% equity owner in 1.1 Bcf/d, 120-mile interstate pipeline from Marcellus region of Pennsylvania into New Jersey ▪ Access to low-cost supply benefits customers/local economies ▪ 100% subscribed;
Slide 48: Midstream Key Takeaways
Midstream | Key Takeaways Key Takeaways + Future Goals ▪ PennEast Pipeline addresses critical supply need ▪ Project provides access to low-cost supply and benefits customers and local economies ▪ Forecast only includes Phase One -- constructed entirely within Pennsylvania – with in-service anticipat
Slide 49: Energy Production Well Positioned For Low Carbon Future
Energy Production Well Positioned For Low Carbon and Renewable Energy Future ▪ Key Pillars -- reducing energy consumption and emissions; strategic deployment of renewables; maximizing energy efficiency; and modernizing via technology ▪ SJI well positioned to support investment opportunities that ali
Slide 50: Capital Expenditures ~$750 Million Capital Plan 2021-2025
Capital Expenditures ~$750 Million Capital Plan 2021-2025 ~67% for Decarbonization Investments and ~33% for Traditional Renewables ~$0.75B 50 ~$500 67% ~$250 33% Decarbonization (REV/RNG Farms) Renewables (Fuel Cells/Solar)
Slide 51: Renewables ~$250 Million Capital Plan 2021-2025
Renewables ~$250 Million Capital Plan 2021-2025 Modest Average Annual Investment of ~$50M Over Five Years in Support of State and Region Clean Energy Goals Fuel Cells Investment strategy aimed at reducing emissions and strengthening grid reliability ▪ SJI formed Catamaran Renewables in 2020 -- a joi
Slide 52: Decarbonization ~$500 Million Capital Plan 2021-2025
Decarbonization ~$500 Million Capital Plan 2021-2025 Targeted Investment in RNG Entity and RNG Project Development Acquired minority interest in REV LNG, LLC in 2020, along with rights to develop anaerobic digesters at a portfolio of dairy farms to produce RNG ▪ REV is a leading renewable energy pro
Slide 53: SJI Renewable Energy Ventures
SJI Renewable Energy Ventures Equity Investment, Combined with RNG Project Development, Positions SJI as a Leader in Both RNG and ESG ▪ Initial equity investment in REV for 35% minority interest in 2020 ▪ 100% ownership of REV forecasted by 2025 upon REV attaining defined financial milestones ▪ Core
Slide 54: RNG Project Development Lifecycle
SJI Renewable Energy Ventures RNG Project Development Lifecycle 54 Site Analysis – Manure and RNG Diligence Finalize Manure and Lease Documents with Farm Permitting and Design Finalize RNG Offtake Contracts Final Investment Decision / Notice to proceed with Construction EPC Evaluation and Award Cons
Slide 55: Energy Production Earnings
Energy Production Earnings ~20% Economic Earnings CAGR Projected 2021-2025 10-15% of 2021 Consolidated Economic Earnings Key Assumptions ▪ ~$750M Capital Plan ▪ ~$500M – REV/RNG Farms ▪ ~$250M – Fuel Cells/Solar ▪ ~$55M total ITCs 2021-2025 ▪ Fuel Cell unlevered 11% IRR ▪ REV exceeds 10-12% Hurdle R
Slide 56: Energy Production Key Takeaways
Energy Production | Key Takeaways Key Takeaways + Future Goals ▪ SJI well positioned to support accelerating trend toward clean energy and decarbonization ▪ ~$750M investment plan focused on decarbonization and renewables drives ~20% economic earnings CAGR 2021-2025 ▪ REV equity investment, combined
Slide 57: Energy Management Well Positioned For Steady Earnings Growth
Energy Management Well Positioned For Steady Earnings Growth, Leveraging Expertise Of Essential Services For Customers ▪ Key Pillars -- wholesale services to utilities, power generators and industrial customers and retail energy consulting and meter reading services ▪ Wholesale services portfolio ha
Slide 58: Wholesale Services
Wholesale Services Fuel Management & Reshaped Marketing Book Support Steady Earnings Contributions ▪ Stable cash flows driven by gas supply to new and existing merchant generation facilities on multi-year contracts ▪ Services offered are firm supply of fuel to the plant along with daily and intra-da
Slide 59: Retail Services
Retail Services Account Services and Energy Consulting Expansion Support Modest Earnings Growth ▪ Meter Reading and Appliance Service Contracts ▪ Meter Reading: SJI and JV partner (Atlantic City Electric) read utility customer meters on a monthly basis for a fee ▪ Appliance Service Contracts: SJI re
Slide 60: Energy Management Earnings
Energy Management Earnings ~10% Economic Earnings CAGR Projected 2021-2025 10-15% of 2021 Consolidated Economic Earnings Key Assumptions ▪ Wholesale Services ▪ 2 new Fuel Management contracts 2021-2025 ▪ Retail Services ▪ ~$30M CapEx for Energy Consulting acquisitions 2021-2025 60 2021E 2022E 2023E
Slide 61: Energy Management Key Takeaways
Energy Management | Key Takeaways Key Takeaways + Future Goals ▪ Well positioned for ~10% economic earnings CAGR 2021-2025 ▪ Steady cash flows expected from wholesale and retail services ▪ Wholesale services portfolio has been reshaped in recent years -- de-risking the business and minimizing future
Slide 62: Financial Review
Financial Review Steve Cocchi | Senior Vice President & CFO
Slide 63: Financial Goals & Priorities
Financial Goals & Priorities Future Goals + Priorities ▪ $3.5B capital plan 2021-2025 – with ~80% allocated toward utilities and ~60% for safety and reliability investment ▪ Key focus on funding capital plan, balance sheet strength, credit metric improvement and maintaining ample liquidity ▪ Project
Slide 64: Capital Allocation
Capital Allocation Disciplined Approach Balances Financial Strength With Strong Growth 64 Capital Allocation Priority 2021-2025 Plan Allocate capital first at utility operating companies to ensure system safety and reliability ~60% of 5-year capital plan dedicated to safety and reliability investmen
Slide 65: Capital Expenditures ~$3.5 Billion Capital Plan 2021-2025
Capital Expenditures ~$3.5 Billion Capital Plan 2021-2025 ~80% for Utilities (SJG/ETG) ~60% for Safety & Reliability ~60% for Sustainability 65 ~ $2,100 60% ~ $1,400 40% Sustainability Traditional ~ $2,000 57% ~ $500 14% ~ $1,000 29% Safety & Reliability New Business Clean Energy ~$2,700 78% ~$800 2
Slide 66: Projected Rate Base Growth
Projected Rate Base Growth ~$2.7B Capital Plan 2021-2025 Drives ~10% Rate Base CAGR ~50% of CapEx Expected to Earn Timely Recovery $2.4 $2.6 $2.8 $3.2 $3.5 $1.3 $1.4 $1.5 $1.7 $1.8 $3.7 $4.0 $4.4 $4.8 $5.4 2 0 2 1 E 2 0 2 2 E 2 0 2 3 E 2 0 2 4 E 2 0 2 5 E B IL LI O N S SJG Projected Rate Base ETG Pr
Slide 67: Rate Base Growth Key Assumptions
Rate Base Growth ~10% Rate Base Growth Projected 2021-2025 Key Assumptions ▪ ~$2.7B Capital Spending Plan (SJG/ETG) ▪ Infrastructure Modernization (IIP) ▪ Redundancy Project ▪ Clean Energy Initiatives ▪ 1.5% Customer Growth ▪ Base Rate Case Filings • SJG – every 2-3 years • ETG - every 2-3 years ▪ R
Slide 68: First Quarter 2021 Economic Earnings Consolidated Earnings Bridge
First Quarter 2021 Economic Earnings Consolidated Earnings Bridge – Q1 2020 to Q1 2021 68 • UTILITY: SJG $11.9M; ETG $1.2M; ELK $(0.4)M • NON-UTILITY: Energy Management $8.1M; Energy Production $1.8M; Midstream $(0.2) • OTHER: Interest on Debt $(0.4)M
Slide 69: 2021 Economic Earnings Guidance
2021 Economic Earnings Guidance Midpoint Guidance By Segment – 2020 to 2021 69 • NON-RECURRING ITEMS: 2020 results included ~$13M in nonrecurring gains — adjustments for certain tax benefits (~$7M), adjustments to SJG's rate design (~$3M) and pipeline supplier refunds (~$3M) • UTILITY: SJG rate reli
Slide 70: Projected Economic EPS
Projected Economic EPS Attractive 2021-2025 and Long-Term Economic EPS CAGR 5-8% 5-8% LONG-TERM ANNUAL GROWTH 70 $1.55 - $1.65 $2.00 - $2.10 2021E 2022E 2023E 2024E 2025E
Slide 71: Segment Contributions
Segment Contributions Utility Operations Continue to Generate Majority of Economic EPS in 2021-2025 Plan 5-8% LONG-TERM ANNUAL GROWTH 71 Note: Excludes interest on debt, including debt associated with past acquisitions $1.55 - $1.65 $2.00 - $2.10 2021E 2022E 2023E 2024E 2025E Utility Non-Utility
Slide 72: Dividends
Dividends Committed to Maintaining and Growing Dividend, Increasingly Supported By Strong Cash Flow Growth ~3% CAGR 2021-2025 $1.02 $1.06 $1.10 $1.13 $1.16 $1.19 2015 2016 2017 2018 2019 2020 Dividends Paid Per Share ~30% CAGR 2021-2025 72 $205-$215 $600-$650 2021E 2022E 2023E 2024E 2025E Cash Flow
Slide 73: Dividend Payout
Dividend Payout Payout Ratio Improves During Plan Period, With Enhanced Quality As Lower Percentage of CFO Target Payout: 55-65% of Economic EPS Dividend-to-CFO Decrease to ~30% 73 75-78% 65-68% 2021E 2022E 2023E 2024E 2025E Dividend As % of Economic EPS 63-66% 31-34% 2021E 2022E 2023E 2024E 2025E D
Slide 74: Balance Sheet
Balance Sheet Recent Financing Strengthened Balance Sheet and Credit Ratings and Significantly Funds Near Term Capital Plan Needs Recent Financing Activity Investment Grade Credit Ratings Common Stock Offerings ▪ In March, offered and sold 11.7M shares ▪ ~1.9M shares issued during Q1 ▪ ~9.8M forward
Slide 75: Liquidity and Debt Maturities
Liquidity and Debt Maturities Ample Liquidity Available at SJI and Utilities No Significant Debt Maturities Next Five Years Long-Term Debt Maturities As of March 31, 2021, Millions Liquidity As of March 31, 2021, Millions 75 - 100 200 300 400 500 600 SJI SJG ETG Note: Excludes $335 million mandatory
Slide 76: Sources and Uses of Funds
Sources and Uses of Funds Sizable Portion of Funding Need Met By Internally Generated Cash Flow, No Large Block Equity Need Anticipated Near Term Capital Sources ~4.5B Capital Uses ~4.5B 76 CASH FLOW FROM INVESTING 80% DIVIDENDS 20% CASH FLOW FROM OPERATIONS 40-50% DEBT FINANCING 35-40% EQUITY FINAN
Slide 77: Financial Strength
Financial Strength Forecast Supports 40-45% Equity Capitalization and FFO-to-Debt 12-13% by 2025 Equity-to-Total Cap FFO-to-Debt 77 Note: Non-GAAP includes equity credit from rating agencies for long duration debt ($100M) and Mandatory Convertible Units ($335M) 11-12% 12-13% 2021E 2022E 2023E 2024E
Slide 78: Well Positioned For Solid Growth Over The Next Five Years And Beyond
Well Positioned For Solid Growth Over The Next Five Years And Beyond 78 ~$3.5B PLANNED CAPEX 2021-2025 ~10% RATE BASE CAGR 2021-2025 5-8% ECONOMIC EPS CAGR 2021-2025 ~30% CFO CAGR 2021-2025 ~3% DIV PER SHARE CAGR 2021-2025
Slide 79: Closing Remarks
Closing Remarks Mike Renna | President & CEO
Slide 80: Strong Growth Through 2025 and Beyond
Strong Growth Through 2025 and Beyond, Driving Significant Shareholder Value 80 SECTOR FUNDAMENTALS STRATEGIC PLAN FINANCIAL TARGETS $3B+ existing infrastructure are valuable assets, performing essential role supplying reliable energy to homes and businesses and supporting economic growth Utilities
Slide 81: Q&A
9SJI Q&A
Slide 82: Appendix
9SJI Appendix
Slide 83: COVID Update
COVID Update Business Operations Continue To Function Effectively During Pandemic 83 • COST RECOVERY: NJBPU has authorized deferral of incremental costs and bad debt for future recovery • PENDING PROCEEDINGS: NJBPU continues to hold regular commission agenda meetings • SERVICE: Operations and delive
Slide 84: ESG Oversight and Reporting
ESG Board Committee ESG Management Committee ESG Task Force Annual ESG Report Ongoing ESG Report Updates Oversight Reporting Report published for 11 consecutive years Updated format includes additional metrics and content Dynamic report updated in real time Expanded overview of initiatives to reduce
Slide 85: First Quarter 2021 Economic Earnings
First Quarter 2021 Economic Earnings Strong Performance To Begin 2021 85 GAAP GAAP Economic Economic GAAP GAAP Economic Economic Earnings EPS Earnings EPS Earnings EPS Earnings EPS UTILITY South Jersey Gas $83.6 $0.82 $83.6 $0.82 $70.5 $0.76 $71.7 $0.78 Elizabethtown Gas $38.0 $0.37 $38.0 $0.37 $36.
Slide 86: First Quarter 2021 Economic Earnings: Utility Earnings Bridge
First Quarter 2021 Economic Earnings Utility Earnings Bridge – Q1 2020 to Q1 2021 86 • MARGIN: SJG rate relief, customer growth and infrastructure modernization investment • OTHER INCOME: Investment performance from pension/other postretirement benefit plans • OPERATION EXPENSES: O&M, bad debt, regu
Slide 87: First Quarter 2021 Economic Earnings: Non-Utility Earnings Bridge
First Quarter 2021 Economic Earnings Non-Utility Earnings Bridge – Q1 2020 to Q1 2021 87 • WHOLESALE SERVICES: Improved asset optimization opportunities, and fuel supply management contracts • RETAIL SERVICES: Meter reading/appliance services contracts and energy consulting fees • RENEWABLES: Fuel C
Slide 88: 9SJI
9SJI