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New Jersey Resources targets net-zero operations at gas utility

One year after launching a renewable energy-focused strategy, New Jersey Resources Corp. announced a goal of achieving net-zero greenhouse gas emissions from its gas utility operations by 2050.

The Garden State gas distributor said its investments in energy efficiency programs and pipeline upgrades have put subsidiary New Jersey Natural Gas Co. in a strong position to begin flowing low-carbon fuels like renewable natural gas, or RNG, and green hydrogen to customers. The company also plans to run its vehicle fleet on low- or no-carbon fuels to meet the 2050 goal.

Those are the same pathways that NJR identified a year ago, when executives announced they would target a 60% emissions reduction from 2006 levels by 2030. The company has since placed a green hydrogen pilot project into service. Its next step would likely be blending RNG into the gas grid, NJR President and CEO Stephen Westhoven said during a Nov. 18 conference call.

"We've got a few opportunities that are on our system, and we're certainly pursuing it and seeing how we can integrate those," Westhoven said.

In the longer term, Westhoven suggested carbon capture and storage could play a role in the company's decarbonization strategy. Meanwhile, building on NJR's early-phase hydrogen project will depend on several "evolving factors." Those include cooperation with state regulators; the pace of hydrogen market development; and the rollout of renewable energy projects, which will provide the zero-carbon power to produce green hydrogen.

Solar investments advance despite supply chain snarl

NJR is also on pace to place $315 million of commercial solar power projects into service in fiscal years 2021 and 2022. Projects representing more than 80% of the planned capital spending are in-service, under construction, or under contract.

Reflecting global supply chain issues, the remaining $59 million of capex under consideration could be affected by equipment constraints, NJR Senior Vice President and CFO Patrick Migliaccio said. NJR Clean Energy Ventures, or CEV, has taken steps to ensure supplies are available for projects under construction, Westhoven said. The CEO expects the supply chain issues to be resolved within a year or two.

Last year, NJR said a greater portion of its CEV projects would be located beyond New Jersey. Currently, CEV is trending toward siting about 75% of its solar projects within New Jersey through 2022, with a shift toward out-of-state projects anticipated in 2023, Migliaccio said.

Asked whether out-of-state projects would be consistent with 7-7.5% internal rates of return for N.J. solar projects, Migliaccio said IRRs could trend lower for certain out-of-state projects. The CFO noted that CEV cannot leverage the same efficiencies beyond New Jersey, where it has a 10% market share.

Guidance and quarterly results

NJR reaffirmed its guidance for $2.20 to $2.30 per share in 2022 net financial earnings, a non-GAAP financial metric.

The company reported fiscal fourth-quarter net financial earnings of $6.6 million, down from $43.4 million in the year-ago period. EPS of 7 cents was down from 45 cents a year ago and came in below Wall Street's expectations for 11 cents.

For the fiscal year, NJR earned $207.7 million, or $2.16 per share, up from $165.3 million, or $1.74 per share, in 2020. While net financial earnings fell year over year at the gas utility, CEV, and NJR's transmission and storage segment, the company's NJR Energy Services Co. business swung to a sharp profit, driven by a windfall from selling gas held in storage into constrained markets during February's winter storms.