NEW JERSEY RESOURCES CORP

Long-term Debt

NJNG

In September 2023, NJNG entered into a Note Purchase Agreement for $100 M aggregate principal amount of its senior notes consisting of $50 M of 5.56% senior notes due September 28, 2033, which closed on September 28, 2023, and $50 M of 5.85% senior notes due October 30, 2053, which closed on October 30, 2023.

Part I

NJNG received $8.8 M and $8.4 M during the six months ended March 31, 2024 and 2023, respectively, in connection with the sale leaseback of its natural gas meters. NJNG records the sale leaseback as a financing obligation for accounting purposes and has the option to purchase the meters back at fair value upon expiration of the lease.

CEV received proceeds of $24.4 M and $61.8 M during the six months ended March 31, 2024 and 2023, respectively, in connection with the sale leaseback of commercial solar assets. CEV records the sale leaseback as a financing obligation for accounting purposes and continues to operate the solar assets, including related expenses, retains the revenue generated from SRECs, TRECs and energy sales, and has the option to renew the lease or repurchase the assets sold at the end of the lease term.

10. EMPLOYEE BENEFIT PLANS

Pension and Other Postemployment Benefit Plans

In January 2024, the Company announced changes to its postretirement medical benefits plan. Beginning on January 1, 2025, the Company will replace the existing retiree medical coverage for certain eligible employees age 65 and older and their Medicare-eligible dependents with an employer funded Health Reimbursement Arrangement. Medicare-eligible participants may use the Health Reimbursement Arrangement towards the purchase of supplemental insurance coverage and for other qualified medical expenses. The liability associated with postretirement medical benefits was remeasured as of January 1, 2024, and the expense for the remainder of fiscal 2024 will be recorded using updated assumptions and actuarial calculations. The plan amendment will be amortized over approximately 8 years, which is the average remaining service to retirement for all plan participants.

The following summarizes the changes in the funded status of the plan and the related liabilities recognized on the Consolidated Balance Sheets:

(1)Employees hired prior to July 1, 1998, were eligible to elect an additional participant contribution to enhance their benefits. Contributions made during the periods were immaterial.

Part I

The following table summarizes the amounts recognized in regulatory assets and accumulated other comprehensive income (loss):

The amounts in regulatory assets and accumulated other comprehensive income (loss) not yet recognized as components of net periodic benefit cost were as follows:

The components of the net periodic cost for pension benefits, including the Company's Pension Equalization Plan, and OPEB costs (principally health care and life insurance) for employees and covered dependents were as follows:

The Company does not expect to make additional contributions to fund the pension plans during fiscal 2024 based on current actuarial assumptions; however, funding requirements are uncertain and can depend significantly on changes in actuarial assumptions, returns on plan assets and changes in the demographics of eligible employees and covered dependents. In addition, as in the past, the Company may elect to make contributions in excess of the minimum required amount to the plans. There wereno discretionary contributions made during the six months ended March 31, 2024 and 2023.

Part I

Assumptions

The weighted average assumptions used to determine the Company’s obligations are as follows:

(1)Percentages for represented and non-represented plans, respectively.

When measuring its projected benefit obligations, the Company uses an aggregate discount rate at which its obligation could be effectively settled. The Company determines a single weighted average discount rate based on a yield curve comprised of rates of return on a population of high quality debt issuances (AA- or better) whose cash flows (via coupons or maturities) match the timing and amount of its expected future benefit payments. The Company measures its service and interest costs using a disaggregated, or spot rate, approach. The Company applies the duration-specific spot rates from the full yield curve, as of the measurement date, to each year’s future benefit payments, which aligns the timing of the plans’ separate future cash flows to the corresponding spot rates on the yield curve.

11. INCOME TAXES

ASC Topic 740, Income Taxes requires the use of an estimated annual effective tax rate for purposes of determining the income tax provision during interim reporting periods. In calculating its estimated annual effective tax rate, the Company considers forecasted annual pre-tax income and estimated permanent book versus tax differences. Adjustments to the effective tax rate and management's estimates will occur as information and assumptions change.

Changes in tax laws or tax rates are recognized in the financial reporting period that includes the enactment date, the date in which the act is signed into law.

NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with uncertain tax positions. A tax benefit claimed, or expected to be claimed, on a tax return may be recognized only if it is more likely than not that the position will be upheld upon examination by the applicable taxing authority. Interest and penalties related to unrecognized tax benefits, if any, are recognized within income tax expense, and accrued interest and penalties are recognized within other noncurrent liabilities on the Unaudited Condensed Consolidated Balance Sheets.

Effective Tax Rate

The estimated annual effective tax rates were 21.7% and 22.1%, for the six months ended March 31, 2024 and 2023, respectively.

To the extent there are discrete tax items that are not included in the estimated annual effective tax rate, the actual reported effective tax rate may differ from the estimated annual effective tax rate. During the six months ended March 31, 2024 and 2023, discrete items totaled approximately $(1.2)M and $(0.6)M, respectively, related primarily to excess tax benefits associated with the vesting of share-based awards. NJR’s actual reported effective tax rates were 21.3% and 21.9% during the six months ended March 31, 2024 and 2023, respectively.

Other Tax Items

As of March 31, 2024 and September 30, 2023, the Company has tax credit carryforwards of approximately $179.5 M and $191.2 M, respectively, which each have a life of 20 years. The Company expects to utilize this entire carryforward prior to expiration, which would begin in fiscal 2037.

Part I

As of March 31, 2024 and September 30, 2023, the Company has state income tax net operating losses of approximately $609.1 M and $631.2 M, respectively. These state net operating losses have carry-forward periods dictated by the state in which they were incurred and range from seven to 20 years, with the majority expiring after 2036. The Company expects to utilize this entire carryforward prior to expiration, except for state income tax attributes for which the Company had a valuation allowance of approximately $0.7 M as of both March 31, 2024 and September 30, 2023, for which the Company could not conclude were realizable on a more-likely-than-not basis.

In March 2024, the State of New Jersey commenced an examination of the Company's Corporate Business Tax return for NJR and certain subsidiaries for the fiscal periods ending September 30, 2019 through September 30, 2022.

12. LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. After the criteria are satisfied, the Company accounts for these arrangements as leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases.

The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of certain natural gas meters.

Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. The variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use lease asset and liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns.

Generally, the Company’s solar land lease terms are between 20 and 50 years and may include multiple options to extend the terms for an additional five to 20 years. The Company’s office leases vary in duration, ranging fromtwo to 11 years and may or may not include extension or early purchase options. The Company’s meter lease terms are betweensix and 10 years with purchase options available prior to the end of the term. Equipment leases include general office equipment that also vary in duration, with an average term ofnine years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The Company has elected an accounting policy that exempts leases with an original term of one year or less from the recognition requirements of ASC 842, Leases.

The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not considered material to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. In July 2021, NJNG entered into 16-year lease agreements, as Lessor, with various NJR subsidiaries, as Lessees, for office space at the Company’s headquarters in Wall, New Jersey, the effects of which are eliminated in consolidation.

Part I

The following table presents the Company's lease costs included in the Unaudited Condensed Consolidated Statements of Operations:

(1)Net of capitalized costs.

The following table presents supplemental cash flow information related to leases:

Assets obtained or modified through operating lease liabilities totaled approximately $2.6 M and $0.3 M during the three months ended March 31, 2024 and 2023, respectively, and totaled approximately $4.1 M and $0.4 M during the six months ended March 31, 2024 and 2023, respectively.

Assets obtained or modified through other leases, including those which are finance leases and financing transactions for accounting purposes, totaled $8.4 M during the six months ended March 31, 2023. There wereno assets obtained or modified through finance leases during the three and six months ended March 31, 2024, and the three months ended March 31, 2023.

The following table presents the balance and classifications of the Company's right of use assets and lease liabilities included in the Unaudited Condensed Consolidated Balance Sheets:

Part I

For operating lease assets and liabilities, the weighted average remaining lease term was 28.6 years and 29.2 years for and the weighted average discount rate used in the valuation over the remaining lease term was 3.6% and 3.5% for March 31, 2024 and September 30, 2023, respectively. For finance lease assets and liabilities, the weighted average remaining lease term was 3.4 years and 3.3 years and the weighted average discount rate used in the valuation over the remaining lease term was 3.3% and 2.7% as of March 31, 2024 and September 30, 2023, respectively.

13. COMMITMENTS AND CONTINGENT LIABILITIES

Cash Commitments

NJNG has entered into long-term contracts, expiring at various dates through September 2039, for the supply, transportation and storage of natural gas. These contracts include annual fixed charges of approximately $227.1 M at current contract rates and volumes for the remainder of the fiscal year, which are recoverable through BGSS.

For the purpose of securing storage and pipeline capacity, ES enters into storage and pipeline capacity contracts, which require the payment of certain demand charges by ES to maintain the ability to access such natural gas storage or pipeline capacity, during a fixed time period, which generally ranges fromone to 10 years. Demand charges are established by interstate storage and pipeline operators and are regulated by FERC. These demand charges represent commitments to pay storage providers or pipeline companies for the right to store and/or transport natural gas utilizing their respective assets.

Commitments as of March 31, 2024, for natural gas purchases and future demand fees for the next five fiscal year periods are as follows:

Certain pipeline demand fees totaling approximately $4.0 M per year, for which ES is the responsible party, are being paid for by the counterparty to a capacity release transaction beginning in November 2021, for a period of 10 years.

Part I

Legal Proceedings

Manufactured Gas Plant Remediation

NJNG is responsible for the remedial cleanup of certain former MGP sites, dating back to gas operations in the late 1800s and early 1900s, which contain contaminated residues from former gas manufacturing operations. NJNG is currently involved in administrative proceedings with the NJDEP and is participating in various studies and investigations by outside consultants, to determine the nature and extent of any such contaminated residues and to develop appropriate programs of remedial action, where warranted, under NJDEP regulations.

NJNG periodically, and at least annually, performs an environmental review of former MGP sites located in Atlantic Highlands, Berkeley, Long Branch, Manchester, Toms River, Freehold and Aberdeen, New Jersey, including a review of potential liability for investigation and remedial action. NJNG estimated at the time of the most recent review that total future expenditures at the former MGP sites for which it is responsible, including potential liabilities for natural resource damages that might be brought by the NJDEP for alleged injury to groundwater or other natural resources concerning these sites, will range from approximately $137.3 M to $201.5 M. NJNG’s estimate of these liabilities is based upon known facts, existing technology and enacted laws and regulations in place when the review was completed. Where it is probable that costs will be incurred, and the information is sufficient to establish a range of possible liability, NJNG accrues the most likely amount in the range. If no point within the range is more likely than the other, it is NJNG’s policy to accrue the lower end of the range. Accordingly, as of March 31, 2024, NJNG recorded a MGP remediation liability and a corresponding regulatory asset of approximately $157.8 M on the Unaudited Condensed Consolidated Balance Sheets based on the most likely amount. The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations, the ultimate ability of other responsible parties to pay and insurance recoveries, if any.

NJNG recovers its remediation expenditures, including carrying costs, over rolling seven-year periods pursuant to a RAC approved by the BPU. As of March 31, 2024, $69.2 M of previously incurred remediation costs, net of recoveries from customers and insurance proceeds, are included in regulatory assets on the Unaudited Condensed Consolidated Balance Sheets. NJNG will continue to seek recovery of MGP-related costs through the RAC. If any future regulatory position indicates that the recovery of such costs is not probable, the related non-recoverable costs would be charged to income in the period of such determination.

General

The Company is involved, and from time to time in the future may be involved, in a number of pending and threatened judicial, regulatory and arbitration proceedings relating to matters that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of litigation matters, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, the Company cannot state with confidence what the eventual outcome of the pending litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, the Company establishes accruals for litigation for those matters that present loss contingencies as to which it is both probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The Company also discloses contingent matters for which there is a reasonable possibility of a loss. Based upon currently available information, the Company believes that the results of litigation that are currently pending, taken together, will not have a materially adverse effect on the Company’s financial condition, results of operations or cash flows. The actual results of resolving the pending litigation matters may be substantially higher than the amounts accrued.

The foregoing statements about the Company’s litigation are based upon the Company’s judgments, assumptions and estimates and are necessarily subjective and uncertain. The Company has a number of threatened and pending litigation matters at various stages.

Part I

14. REPORTING SEGMENT AND OTHER OPERATIONS DATA

The Company organizes its businesses based on a combination of factors, including its products and its regulatory environment. As a result, the Company manages its businesses through the following reporting segments and other operations: NJNG consists of regulated energy and off-system, capacity and storage management operations; CEV consists of capital investments in clean energy projects; ES consists of unregulated wholesale and retail energy operations; S&T consists of the Company’s investments in natural gas transportation and storage facilities; the HSO business operations consist of heating, cooling and water appliance sales, installations and services, other investments and general corporate activities.

Information related to the Company's various reporting segments and other operations during the three months ended March 31, 2024 and 2023, are as follows:

(1)Includes sales to Canada for the ES segment, which are immaterial.

(2)The amortization of acquired wholesale energy contracts is excluded above and is included in natural gas purchases - nonutility on the Unaudited Condensed Consolidated Statements of Operations.

(3)Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.

Part I

Information related to the Company's various reporting segments and other operations during the six months ended March 31, 2024 and 2023, are as follows:

(1)Includes sales to Canada for the ES segment, which are immaterial.

(2)The amortization of acquired wholesale energy contracts is excluded above and is included in natural gas purchases - nonutility on the Unaudited Condensed Consolidated Statements of Operations.

(3)Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.

The Company's assets for the various reporting segments and business operations are detailed below:

(1)Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.

Part I

The Chief Executive Officer, who uses NFE as a measure of profit or loss in measuring the results of the Company's reporting segments and other business operations, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:

The Company uses derivative instruments as economic hedges of purchases and sales of physical natural gas inventory. For GAAP purposes, these derivatives are recorded at fair value and related changes in fair value are included in reported earnings. Revenues and cost of natural gas related to physical natural gas flow are recognized when the natural gas is delivered to customers. Consequently, there is a mismatch in the timing of earnings recognition between the economic hedges and physical natural gas flows. Timing differences occur in two ways:

•unrealized gains and losses on derivatives are recognized in reported earnings in periods prior to physical natural gas inventory flows; and

•unrealized gains and losses of prior periods are reclassified as realized gains and losses when derivatives are settled in the same period as physical natural gas inventory movements occur.

NFE is a measure of the earnings based on eliminating these timing differences, to effectively match the earnings effects of the economic hedges with the physical sale of natural gas, SRECs and foreign currency contracts. Consequently, to reconcile between net income and NFE, current period unrealized gains and losses on the derivatives are excluded from NFE as a reconciling item. Realized derivative gains and losses are also included in current period net income. However, NFE includes only realized gains and losses related to natural gas sold out of inventory, effectively matching the full earnings effects of the derivatives with realized margins on physical natural gas flows. Included in the tax effects are current and deferred income tax expense corresponding with the components of NFE. The Company also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

15. RELATED PARTY TRANSACTIONS

Effective April 2020, NJNG entered into a 5-year agreement for 3 Bcf of firm storage capacity with Steckman Ridge, which expires on March 31, 2025. Under the terms of the agreement, NJNG incurs demand fees, at market rates, of approximately $9.3 M annually, a portion of which is eliminated in consolidation. These fees are recoverable through NJNG’s BGSS mechanism and are included as a component of regulatory assets.

Part I

ES may periodically enter into storage or park and loan agreements with its affiliated FERC-jurisdictional natural gas storage facility, Steckman Ridge. As of March 31, 2024, ES entered into transactions with Steckman Ridge for varying terms, all of which expire by March 31, 2027.

Demand fees, net of eliminations, associated with Steckman Ridge were as follows:

The following table summarizes demand fees payable to Steckman Ridge as of:

NJNG and ES enter into various AMAs, the effects of which are eliminated in consolidation. Under the terms of these agreements, NJNG releases certain transportation and storage contracts to ES. NJNG and ES hadone AMA, which expired on March 31, 2024, and was not renewed.

NJNG entered intotwo transportation agreements with Adelphia, each for committed capacity of 130,000 Dekatherms per day. The first is for 5 years in Zone South with an expiration date of August 8, 2027, and the second is for 15 years in Zone North, which began on November 1, 2023, with an expiration date of October 31, 2038.

ES had a 5-year agreement for 3 Bcf of firm storage capacity with Leaf River, that expired on March 31, 2024, the effects of which are eliminated in consolidation, and was not renewed.

NJNG and CEV entered into a 15-year sublease and PPA related to an onsite solar array and the related energy output at the Company’s headquarters in Wall, New Jersey, with an expiration date of March 1, 2036, the effects of which are immaterial to the consolidated financial statements.

NJNG entered into 16-year lease agreements, as Lessor, with various NJR subsidiaries, as Lessees, for office space at the Company’s headquarters in Wall, New Jersey, with an expiration date of July 1, 2037, the effects of which are eliminated in consolidation.

NJNG and CEV entered into a 20-year sublease and PPA related to an onsite solar array and the related energy output at the Company’s liquefied natural gas plant in Howell, New Jersey, with an expiration date of June 1, 2042, the effects of which are immaterial to the consolidated financial statements.

The intercompany profits for certain transactions between NJNG and ES and NJNG and Adelphia are not eliminated in accordance with ASC 980, Regulated Operations.