NEW JERSEY RESOURCES CORP

The following is a description of certain regulatory proceedings during fiscal 2023 and 2024:

On January 31, 2024, NJNG filed a base rate case with the BPU requesting a natural gas revenue increase of approximately $222.6 M including a recovery of infrastructure investments, a change in the Company’s overall rate of return on rate base to 7.57% and a change in the return on common equity to 10.42%. On May 15, 2024, the filing was updated to reflect actual results through March 31, 2024, which reduced the requested increase to approximately $219.6 M. On August 7, 2024, the filing was updated to reflect actual results through June 30, 2024, which modified the requested increase to approximately $219.9 M. On November 21, 2024, the BPU issued an order adopting a stipulation of settlement approving a $157.0 M increase to base rates, effective November 21, 2024. The increase includes an overall rate of return on rate base of 7.08%, return on common equity of 9.60%, a common equity ratio of 54.0% and a depreciation rate of 3.21%.

BGSS and CIP

BGSS rates are normally revised on an annual basis. In addition, to manage the fluctuations in wholesale natural gas costs, NJNG has the ability to maketwo interim filings during each fiscal year to increase residential and small commercial customer BGSS rates on a self-implementing and provisional basis. NJNG is also permitted to refund or credit back a portion of the commodity costs to customers at any time given five days’ notice when the natural gas commodity costs decrease in comparison to amounts projected or to amounts previously collected from customers. Concurrent with the annual BGSS filing, NJNG files for an annual review of its CIP. NJNG’s annual BGSS and CIP filings are summarized as follows:

•In February 2023, NJNG advised the BPU of a bill credit and a reduction to the BGSS rate for residential and small commercial customers, which reduced recoveries by approximately $29.9 M, effective March 1, 2023, and was approved on a final basis by the BPU on April 12, 2023. Bill credits provided to customers from March 2023 through May 2023 totaled approximately $32.4 M.

•2023 BGSS/CIP filing — On April 30, 2024, the BPU approved on a final basis NJNG’s annual filing, which included a decrease of approximately $38.6 M to the annual revenues credited to BGSS, an annual decrease of approximately $7.4 M related to its balancing charge and an increase of approximately $27.0 M to CIP rates for residential and small business customers, effective October 1, 2023.

•2024 BGSS/CIP filing — On May 31, 2024, NJNG filed its annual petition to modify its BGSS rates for residential and small business customers, the balancing charge and CIP rates. On September 25, 2024, the BPU approved, on a provisional basis, a decrease of approximately $31.0 M to the annual revenues credited to BGSS, an annual increase of approximately $40.3 M related to its balancing charge and a decrease of approximately $0.8 M to CIP rates, effective October 1, 2024.

NJNG is eligible to receive financial incentives for reducing BGSS costs through a series of Utility Gross Margin-sharing programs that include off-system sales, capacity release and storage incentive programs. The Company is permitted to annually propose a process to evaluate and discuss alternative incentive programs, should performance of the existing incentives or market conditions warrant re-evaluation.

Energy Efficiency Programs

SAVEGREEN conducts home energy audits and provides various grants, incentives and financing alternatives, which are designed to encourage the installation of high efficiency heating and cooling equipment and other upgrades to promote energy efficiency to its residential and commercial customers while stimulating state and local economies through the creation of jobs. Depending on the specific initiative or approval, NJNG recovers costs associated with the programs over athree- to 10-year period through a tariff rider mechanism. In March 2021, the BPU approved athree-year SAVEGREEN program that included approximately $126.1 M of direct investment, approximately $109.4 M in financing options and approximately $23.4 M in O&M.

SAVEGREEN investments and costs are filed with the BPU on an annual basis. NJNG’s annual EE filings are summarized as follows:

•2023 EE filing — In June 2023, NJNG submitted its annual EE filing with the BPU for the recovery of SAVEGREEN costs, proposing an increase in annual recoveries of approximately $10.7 M. In September 2023, the BPU approved an increase to the EE rate increasing annual recoveries by approximately $9.0 M based on updated information since the initial filing, effective October 1, 2023.

•On November 9, 2023, NJNG filed a letter petition seeking BPU approval to extend NJNG’s current SAVEGREEN program through December 31, 2024, with an additional $76.9 M in order to meet customer demand for this program, which was approved by the BPU on April 30, 2024.

•On December 1, 2023, NJNG filed a petition seeking BPU approval of its 2024 SAVEGREEN program, which would support new energy efficiency, demand response and building decarbonization start-up programs from January 1, 2025 through June 30, 2027. The 2024 SAVEGREEN program includes approximately $245.1 M of direct investment, approximately $217.2 M in financing options and approximately $20.1 M in O&M. On October 30, 2024, the BPU approved a settlement consisting of $205.0 M of direct investment, $160.5 M in financing options and $20.1 M in O&M, which totals $385.6 M.

•2024 EE filing — On May 31, 2024, NJNG submitted its annual EE filing with the BPU for the recovery of SAVEGREEN costs, proposing an increase in annual recoveries of approximately $5.6 M, to be effective January 1, 2025, if approved.

Societal Benefits Charge

The SBC is comprised of three primary riders that allow NJNG to recover costs associated with USF, which is a permanent statewide program for all natural gas and electric utilities for the benefit of income-eligible customers, MGP remediation and the NJCEP. NJNG has submitted the following filings to the BPU, which include a report of program expenditures incurred each program year:

•2023 USF filing—In June 2023, NJNG submitted its annual USF filing to the BPU requesting an increase to the statewide USF rate, which will result in an approximately $0.7 M increase to annual recoveries. The BPU approved this matter in September 2023, effective October 1, 2023.

•2023 SBC filing —In September 2023, NJNG submitted its annual SBC filing to the BPU requesting approval of RAC expenditures through June 2023, which included an increase to the RAC annual recoveries of approximately $2.4 M and an increase to the NJCEP annual recoveries of approximately $5.5 M, effective April 1, 2024. On March 20, 2024, the BPU approved NJNG's annual SBC filing.

•2024 USF filing—On June 28, 2024, NJNG submitted its annual USF filing to the BPU requesting an increase to the statewide USF rate, which resulted in an approximately $6.8 M increase to annual recoveries. On September 25, 2024, the BPU approved this filing, effective October 1, 2024.

•2024 SBC filing —On September 30, 2024, NJNG submitted its annual SBC filing to the BPU requesting approval of RAC expenditures through June 2024, which included an increase to the RAC annual recoveries of approximately $2.4 M and an increase to the NJCEP annual recoveries of approximately $1.6 M, which would be effective April 1, 2025.

Infrastructure Programs

NJNG has significant annual capital expenditures associated with the management of its natural gas distribution and transmission system, including new utility plant for customer growth and its associated PIM and infrastructure programs. NJNG continues to implement BPU-approved infrastructure projects that are designed to enhance the reliability of NJNG’s natural gas distribution system.

Infrastructure Investment Program

In February 2019, NJNG filed a petition with the BPU seeking authority to implement afive-year IIP. The IIP consists oftwo components, transmission and distribution investments and information technology replacement and enhancements. The total investment for the IIP is approximately $507.0 M. Upon approval from the BPU, investments are being recovered through annual filings to adjust base rates. In October 2020, the BPU approved the Company’s transmission and distribution component of the IIP for $150.0 M over five years, effective November 1, 2020. The recovery of information technology replacement and enhancements that was included in the original IIP filing will be included as part of base rate filings as projects are placed in service.

•2023 IIP filing—In March 2023, NJNG submitted its annual IIP filing to the BPU requesting a rate increase for estimated capital expenditures of approximately $31.4 M through June 30, 2023. This filing was updated in July 2023, with actual expenses of approximately $28.2 M through June 30, 2023. The BPU approved this filing in September 2023, which resulted in an approximately $3.2 M revenue increase, effective October 1, 2023.

•2024 IIP filing—On March 28, 2024, NJNG submitted its annual IIP filing to the BPU requesting a rate increase for capital expenditures of approximately $43.5 M through June 30, 2024. The filing was updated July 26, 2024, to reflect actual expenses of approximately $41.2 M through June 30, 2024. The BPU approved this filing on September 25, 2024, which resulted in an approximately $4.7 M revenue increase, effective October 1, 2024.

5. DERIVATIVE INSTRUMENTS

The Company is subject primarily to commodity price risk due to fluctuations in the market price of natural gas, SRECs and electricity. To manage this risk, the Company enters into a variety of derivative instruments including, but not limited to, futures contracts, physical forward contracts, financial options and swaps to economically hedge the commodity price risk associated with its existing and anticipated commitments to purchase and sell natural gas, SRECs and electricity. In addition, the Company is exposed to foreign currency and interest rate risk and may utilize foreign currency derivatives to hedge Canadian dollar-denominated natural gas purchases and/or sales and interest rate derivatives to reduce exposure to fluctuations in interest rates. All of these types of contracts are accounted for as derivatives, unless the Company elects NPNS, which is done on a contract-by-contract election. Accordingly, all of the financial and certain of the Company’s physical derivative instruments are recorded at fair value on the Consolidated Balance Sheets. For a more detailed discussion of the Company’s fair value measurement policies and level disclosures associated with the Company’s derivative instruments, see Note 6. Fair Value.

ES chooses not to designate its financial commodity and physical forward commodity derivatives as accounting hedges or to elect NPNS. The changes in the fair value of these derivatives are recorded as a component of natural gas purchases or operating revenues, as appropriate for ES, on the Consolidated Statements of Operations as unrealized gains or losses. For ES at settlement, realized gains and losses on all financial derivative instruments are recognized as a component of natural gas purchases, and realized gains and losses on all physical derivatives follow the presentation of the related unrealized gains and losses as a component of either natural gas purchases or operating revenues.

As a result of ES entering into transactions to borrow natural gas, commonly referred to as “park and loans,” an embedded derivative is recognized relating to differences between the fair value of the amount borrowed and the fair value of the amount that will ultimately be repaid, based on changes in the forward price for natural gas prices at the borrowed location over the contract term. This embedded derivative is accounted for as a forward sale in the month in which the repayment of the borrowed natural gas is expected to occur and is considered a derivative transaction that is recorded at fair value on the Consolidated Balance Sheets, with changes in value recognized in current-period earnings.

Expected production of SRECs is hedged through the use of forward and futures contracts. All contracts require the Company to physically deliver SRECs through the transfer of certificates as per contractual settlement schedules. ES recognizes changes in the fair value of these derivatives as a component of operating revenues. Upon settlement of the contract, the related revenue is recognized when the SREC is transferred to the counterparty.

Changes in fair value of NJNG’s financial commodity derivatives are recorded as a component of regulatory assets or liabilities on the Consolidated Balance Sheets. The Company elects NPNS accounting treatment on all physical commodity contracts that NJNG entered into on or before December 31, 2015, and accounts for these contracts on an accrual basis. Accordingly, physical natural gas purchases are recognized in regulatory assets or liabilities on the Consolidated Balance Sheets when the contract settles and the natural gas is delivered. The average cost of natural gas is charged to expense in the current period earnings based on the BGSS factor times the therm sales. NJNG no longer elects NPNS accounting treatment on a portfolio basis. However, since NPNS is a contract-by-contract election, where it makes sense to do so, NJNG can and may elect to treat certain contracts as normal. Because NJNG recovers these amounts through future BGSS rates as increases or decreases to the cost of natural gas in NJNG’s tariff for natural gas service, the changes in fair value of these contracts are deferred as a component of regulatory assets or liabilities on the Consolidated Balance Sheets.

The Company elects NPNS accounting treatment on PPA contracts executed by CEV that meet the definition of a derivative and accounts for the contract on an accrual basis. Accordingly, electricity sales are recognized in revenues throughout the term of the PPA as electricity is delivered. NPNS is a contract-by-contract election and where it makes sense to do so, the Company can and may elect to treat certain contracts as normal.

Fair Value of Derivatives

The following table presents the fair value of the Company’s derivative assets and liabilities recognized on the Consolidated Balance Sheets as of September 30:

Offsetting of Derivatives

The Company transacts under master netting arrangements or equivalent agreements that allow it to offset derivative assets and liabilities with the same counterparty. However, the Company’s policy is to present its derivative assets and liabilities on a gross basis at the contract level unit of account on the Consolidated Balance Sheets.

The following table summarizes the reported gross amounts, the amounts that the Company has the right to offset but elects not to, financial collateral and the net amounts the Company could present on the Consolidated Balance Sheets but elects not to.

(1)Derivative assets and liabilities are presented on a gross basis on the Consolidated Balance Sheets, as the Company does not elect balance sheet offsetting under ASC 210-20.

(2)Includes transactions with NAESB netting election, transactions held by FCMs with net margining and transactions with ISDA netting.

(3)Financial collateral includes cash balances at FCMs, as well as cash received from or pledged to other counterparties.

(4)Net amounts represent presentation of derivative assets and liabilities if the Company were to elect balance sheet offsetting under ASC 210-20.

ES utilizes financial derivatives to economically hedge the gross margin associated with the purchase of physical natural gas to be used for storage injection and its subsequent sale at a later date. The gains or (losses) on the financial transactions that are economic hedges of the cost of the purchased natural gas are recognized prior to the gains or (losses) on the physical transaction, which are recognized in earnings when the natural gas is delivered. Therefore, mismatches between the timing of the recognition of realized gains or (losses) on the financial derivative instruments and gains or (losses) associated with the actual sale of the natural gas that is being economically hedged, along with fair value changes in derivative instruments, create volatility in the results of ES, although the Company’s intended economic results relating to the entire transaction are unaffected.

The following table presents the effect of derivative instruments recognized on the Consolidated Statements of Operations as of September 30:

NJNG’s derivative contracts are part of the Company’s risk management activities that relate to its natural gas purchases and BGSS incentive programs. At settlement, the resulting gains and/or losses are payable to or recoverable from utility customers and are deferred in regulatory assets or liabilities resulting in no impact to earnings.

The following table reflects the gains and/or (losses) associated with NJNG’s derivative instruments as of September 30:

NJNG and ES had the following outstanding long (short) derivatives as of September 30:

Not included in the above table are 1.2 M and 1.3 M SRECs that were open as of September 30, 2024 and 2023, respectively.

Broker Margin

Futures exchanges have contract-specific margin requirements that require the posting of cash or cash equivalents relating to traded contracts. Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin and variation margin that fluctuates based on the daily marked-to-market relative to maintenance margin requirements. The Company maintains separate broker margin accounts for NJNG and ES.

The balances as of September 30, by reporting segment, are as follows:

Wholesale Credit Risk

NJNG, ES, CEV and S&T are exposed to credit risk as a result of their sales/wholesale marketing activities. As a result of the inherent volatility in the prices of natural gas commodities, derivatives and SRECs, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If a counterparty fails to perform the obligations under its contract, then the Company could sustain a loss.

The Company monitors and manages the credit risk of its wholesale operations through credit policies and procedures that management believes reduce overall credit risk. These policies include a review and evaluation of current and prospective counterparties’ financial statements and/or credit ratings, daily monitoring of counterparties’ credit limits and exposure, daily communication with traders regarding credit status and the use of credit mitigation measures, such as collateral requirements and netting agreements. Examples of collateral include letters of credit and cash received for either prepayment or margin deposit. Collateral may be requested due to the Company’s election not to extend credit or because exposure exceeds defined thresholds. Most of the Company’s wholesale marketing contracts contain standard netting provisions. These contracts include those governed by ISDA and the NAESB. The netting provisions refer to payment netting, whereby receivables and payables with the same counterparty are offset and the resulting net amount is paid to the party to which it is due.

Internally-rated exposure applies to counterparties that are not rated by Fitch or Moody’s. In these cases, the counterparty’s or guarantor’s financial statements are reviewed, and similar methodologies and ratios used by Fitch and/or Moody’s are applied to arrive at a substitute rating. Gross credit exposure is defined as the unrealized fair value of physical and financial derivative commodity contracts, plus any outstanding wholesale receivable for the value of natural gas delivered and/or financial derivative commodity contract that has settled for which payment has not yet been received.

The following is a summary of gross credit exposures grouped by investment and noninvestment grade counterparties, as of September 30, 2024. The amounts presented below have not been reduced by any collateral received or netting and exclude accounts receivable for NJNG retail natural gas sales and services and CEV residential solar installations.

Conversely, certain of NJNG’s and ES’s derivative instruments are linked to agreements containing provisions that would require cash collateral payments from the Company if certain events occur. These provisions vary based upon the terms in individual counterparty agreements and can result in cash payments if NJNG’s credit rating were to fall below its current level. Specifically, most, but not all, of these additional payments will be triggered if NJNG’s debt is downgraded by the major credit agencies, regardless of investment grade status. In addition, some of these agreements include threshold amounts that would result in additional collateral payments if the values of derivative liabilities were to exceed the maximum values provided for in relevant counterparty agreements. Other provisions include payment features that are not specifically linked to ratings, but are based on certain financial metrics.

Collateral amounts associated with any of these conditions are determined based on a sliding scale and are contingent upon the degree to which the Company’s credit rating and/or financial metrics deteriorate, and the extent to which liability amounts exceed applicable threshold limits. Derivative instruments with credit-risk-related contingent features that were in a liability position for which collateral is required were immaterial as of both September 30, 2024 and 2023. These amounts differ from the respective net derivative liabilities reflected on the Consolidated Balance Sheets because the agreements also include clauses, commonly known as “Rights of Offset,” that would permit the Company to offset its derivative assets against its derivative liabilities for determining additional collateral to be posted, as previously discussed.

6. FAIR VALUE

Fair Value of Assets and Liabilities

The fair value of cash and cash equivalents, accounts receivable, current loans receivable, accounts payable, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. Noncurrent loans receivable are recorded based on what the Company expects to receive, which approximates fair value, in other noncurrent assets on the Consolidated Balance Sheets. The Company regularly evaluates the credit quality and collection profile of its customers to approximate fair value.

As of September 30, the estimated fair value of long-term debt, including current maturities, excluding natural gas meter sale leasebacks, debt issuance costs and solar asset sale leasebacks, is as follows(1):

(1)See Note 9. Debt for a reconciliation to long-term and short-term debt.

The Company enters into sale leaseback transactions for certain commercial solar assets and natural gas meters. These transactions are recorded within long-term debt on the Consolidated Balance Sheets. The carrying value of solar sale leasebacks was approximately $283.0 M and $278.4 M and the estimated fair value was approximately $290.4 M and $268.1 M as of September 30, 2024 and 2023, respectively. The carrying value of the natural gas meter sale leasebacks was approximately $31.6 M and $31.4 M and the estimated fair value of certain natural gas meter sale leasebacks amounted to approximately $26.7 M and $20.9 M as of September 30, 2024 and 2023, respectively.

The Company utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate, for the maturity of the specific debt instrument and the Company’s credit rating. As of September 30, 2024 and 2023, the Company discloses its debt within Level 2 of the fair value hierarchy.

Fair Value Hierarchy

The Company applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, investments in equity securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs-to-valuation techniques used to measure fair value based on the source of the data used to develop the price inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and includes the following:

Financial derivative portfolios of NJNG and ES consist mainly of futures, options and swaps. The Company primarily uses the market approach, and its policy is to use actively quoted market prices when available. The principal market for its derivative transactions is the natural gas wholesale market; therefore, the primary sources for its price inputs are CME, NYMEX and ICE. ES uses Platts and Natural Gas Exchange for Canadian delivery points. However, ES also engages in transactions that result in transporting natural gas to delivery points for which there is no actively quoted market price. In most instances, the transportation cost to the final delivery location is not significant to the overall valuation. If required, ES’s policy is to use the best information available to determine fair value based on internal pricing models, which would include estimates extrapolated from broker quotes or other pricing services.

The Company also has other financial assets that include listed equities, mutual funds and money market funds for which there are active exchange quotes available. When the Company determines fair values, measurements are adjusted, as needed, for credit risk associated with its counterparties, as well as its own credit risk. The Company determines these adjustments by using historical default probabilities that correspond to the applicable S&P issuer ratings, while also taking into consideration collateral and netting arrangements that serve to mitigate risk.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

7. INVESTMENTS IN EQUITY INVESTEES

Steckman Ridge

The Company holds a 50% equity method investment in Steckman Ridge, a jointly owned and controlled natural gas storage facility located in Bedford County, Pennsylvania. The Company’s investment in Steckman Ridge was $101.7 M and $104.1 M as of September 30, 2024 and 2023, respectively, which includes loans with a total outstanding principal balance of $70.4 M for both September 30, 2024 and 2023. On October 1, 2023, the Company entered into an Amended and Restated Loan Agreement with Steckman Ridge to extend the existing loan agreement and moved from London Interbank Offered Rate to Secured Overnight Financing Rate. These loans accrue interest at a variable rate that resets quarterly and are now due October 1, 2027.

NJNG and ES have entered into storage and park and loan agreements with Steckman Ridge. See Note 16. Related Party Transactions for more information on these intercompany transactions.

8. EARNINGS PER SHARE

The following table presents the calculation of the Company’s basic and diluted earnings per share for the fiscal years ended September 30:

(1)Incremental shares consist primarily of unvested stock awards and performance units, which are calculated using the treasury stock method.

9. DEBT

NJNG and NJR finance working capital requirements and capital expenditures through various short-term debt and long-term financing arrangements, including a commercial paper program and committed unsecured credit facilities.

Long-term Debt

The following table presents the long-term debt of the Company as of September 30:

Annual long-term debt redemption requirements, excluding meter financing obligations, debt issuance costs and solar asset financing obligations, as of September 30, are as follows:

NJR

On November 7, 2024, NJR entered into a Note Purchase Agreement under which NJR issued $100 M senior notes at a fixed interest rate of 5.55%, maturing in 2034.

NJNG

First Mortgage Bonds

NJNG and Trustee entered into the Mortgage Indenture, dated September 1, 2014, which secures all the outstanding FMBs issued by NJNG. The Mortgage Indenture provides a direct first mortgage lien upon substantially all the operating properties and franchises of NJNG (other than excepted property, such as cash on hand, choses-in-action, securities, rent, natural gas meters and certain materials, supplies, appliances and vehicles), subject only to certain permitted encumbrances. The Mortgage Indenture contains provisions subjecting after-acquired property (other than excepted property and subject to pre-existing liens, if any, at the time of acquisition) to the lien thereof.

NJNG’s Mortgage Indenture does not restrict NJNG’s ability to pay dividends. New Jersey Administrative Code 14:4-4.7 states that a public utility cannot issue dividends without regulatory approval if its equity-to-total-capitalization ratio falls below 30%. As of September 30, 2024, NJNG’s equity-to-total-capitalization ratio is 53.4% and NJNG has the capacity to issue up to $1.4 B of FMB under the terms of the Mortgage Indenture.

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.

On June 26, 2024, NJNG entered into a Note Purchase Agreement for $200 M aggregate principal amount of its senior notes consisting of $125 M of 5.82% senior notes due June 26, 2054, which closed on June 26, 2024, and $75 M of 5.49% senior notes due September 30, 2034, which closed on September 30, 2024.

The senior notes are secured by an equal principal amount of NJNG’s FMBs issued under NJNG’s Mortgage Indenture.

Sale Leasebacks

NJNG received approximately $8.8 M and $8.4 M during fiscal 2024 and 2023, respectively, in connection with the sale leaseback of its natural gas meters, with terms ranging fromsix to 10 years. NJNG records the sale leaseback as a financing obligation for accounting purposes that is paid over the term of the arrangement and has the option to purchase the meters back at fair value upon expiration of the lease.

Contractual commitments for meter sale leaseback arrangements, which represent the most likely outcome of cash payments, as of the fiscal years ended September 30, are as follows:

CEV enters into transactions to sell the commercial solar assets concurrent with agreements to lease the assets back over a period offive toseven years. These transactions are treated as financing obligations for accounting purposes and are typically secured by the renewable energy facility asset and its future cash flows from RECs and energy sales. ITCs and other tax benefits associated with these solar projects are transferred to the buyer, if applicable; however, the lease payments are structured so that CEV is compensated for the transfer of the related tax incentives. CEV continues to operate the solar assets, including related expenses, and retain the revenue generated from RECs and energy sales, and has the option to repurchase the assets sold or renew the lease at the end of the lease term. CEV received proceeds of approximately $64.7 M and $167.8 M during fiscal 2024 and 2023, respectively, in connection with the sale leaseback of commercial solar assets. The proceeds received were recognized as a financing obligation on the Consolidated Balance Sheets.

Contractual commitments for the solar sale leaseback arrangements, which represent the most likely outcome of cash payments, as of the fiscal years ended September 30, are as follows: