<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2376465
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 732-938-1480
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
COMMON STOCK - $2.50 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES: [X] NO:
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES: [X] NO:
The aggregate market value of the Registrant's Common Stock held by
non-affiliates was $681,629,449 based on the closing price of $38.31 per share
on December 10, 1998.
The number of shares outstanding of $2.50 par value Common Stock as of December
10, 1998 was 17,870,377.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1998 Annual Report to Stockholders are incorporated
by reference into Part I and Part II of this report.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held January 27, 1999, are incorporated by reference into
Part I and Part III of this report.
<PAGE> 2
TABLE OF CONTENTS
PART I Page
ITEM 1 - Business 1
Business Segments
New Jersey Natural Gas Company
General 2
Throughput 2
Seasonality of Gas Revenues 3
Gas Supply 3
Regulation and Rates 5
Franchises 7
Competition 8
NJR Energy Holdings Corporation 8
NJR Development Corporation 9
Environment 9
Employee Relations 11
Executive Officers of the Registrant 11
ITEM 2 - Properties 12
ITEM 3 - Legal Proceedings 13
ITEM 4 - Submission of Matters to a Vote of Security Holders 15
Information Concerning Forward Looking Statements 15
PART II
ITEM 5 - Market for the Registrant's Common Stock and Related
Stockholder Matters 16
ITEM 6 - Selected Financial Data 16
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
ITEM 8 - Financial Statements and Supplementary Data 16
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 16
PART III
ITEM 10- Directors and Executive Officers of the Registrant 17
ITEM 11- Executive Compensation 17
ITEM 12- Security Ownership of Certain Beneficial Owners
and Management 17
ITEM 13- Certain Relationships and Related Transactions 17
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K 17
Index to Financial Statement Schedules 18
Signatures 20
Independent Auditors' Consent and Report on Schedule 21
Exhibit Index 22
<PAGE> 3
PART I
ITEM 1. BUSINESS
New Jersey Resources Corporation (the Company or NJR) is a New Jersey
corporation formed in 1982 pursuant to a corporate reorganization. The Company
is an exempt energy services holding company providing retail and wholesale
natural gas and related energy services to customers from the Gulf Coast to New
England. Its subsidiaries include:
1) New Jersey Natural Gas Company (NJNG), a natural gas distribution company
that provides regulated energy and appliance services to more than 385,000
residential, commercial and industrial customers in central and northern New
Jersey, and participates in capacity release and off-system sales programs;
2) NJR Energy Holdings Corporation (Energy Holdings), a sub-holding company of
NJR formed in 1995 to better segregate the Company's energy-related operations.
Energy Holdings includes the following wholly-owned subsidiaries:
New Jersey Natural Energy Company (Natural Energy), formed in 1995,
participates in the unregulated retail marketing of natural gas; and
NJR Energy Services Company (Energy Services), formed in 1996, provides
unregulated fuel and capacity management and other wholesale marketing services;
and
NJR Energy Corporation (NJR Energy), an investor in energy-related ventures
through its operating subsidiaries, New Jersey Natural Resources Company (NJNR)
and NJNR Pipeline Company (Pipeline);
3) NJR Development Corporation, a sub-holding company of NJR, which includes the
Company's remaining unregulated operating subsidiary, Commercial Realty &
Resources Corp. (CR&R), a commercial office real estate developer.
The Company is an exempt holding company under Section 3(a)(1) of the Public
Utility Holding Company Act of 1935 (PUHCA).
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BUSINESS SEGMENTS
See Note 11 to the Consolidated Financial Statements - Business Segment Data
in the Company's 1998 Annual Report, for business segment financial information.
NEW JERSEY NATURAL GAS COMPANY
General
NJNG provides natural gas service to more than 385,000 customers. Its service
territory encompasses 1,436 square miles, covering 104 municipalities with an
estimated population of 1.3 million.
NJNG's service territory is primarily suburban, with a wide range of cultural
and recreational activities, highlighted by approximately 100 miles of New
Jersey seacoast. It is in proximity to New York, Philadelphia and the
metropolitan areas of northern New Jersey and is accessible through a network of
major roadways and mass transportation. These factors have contributed to NJNG
adding 11,819, 11,708 and 10,978 new customers in 1998, 1997 and 1996,
respectively. This annual growth rate of 3% is expected to continue with
projected additions of 36,000 new customers over the next three years. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) - Liquidity and Capital Resources-NJNG in the Company's 1998
Annual Report for a discussion of NJNG's projected capital expenditure program
associated with this growth in 1999 and 2000.
In assessing the potential for future growth in its service area, NJNG uses
information derived from county and municipal planning boards which describes
housing developments in various stages of approval. In addition, builders in
NJNG's service area are surveyed to determine their development plans for future
time periods. Finally, NJNG uses information concerning its service territory
and projected population growth rates from a periodic study prepared by outside
consultants. In addition to customer growth through new construction, NJNG's
business strategy includes aggressively pursuing conversions from other fuels,
such as electricity and oil. It is estimated that approximately 40% of NJNG's
projected customer growth will consist of conversions. NJNG will also continue
to pursue off-system sales and non-peak sales, such as natural gas-fueled
electric generating projects.
Throughput
For the fiscal year ended September 30, 1998, operating revenues and
throughput by customer class were as follows:
<TABLE>
<CAPTION>
Operating Revenues Throughput
(Thousands) (Bcf)
<S> <C> <C> <C> <C>
Residential $307,994 53% 35.2 21%
Commercial and other 60,746 11 7.4 5
Firm transportation 19,500 3 6.6 4
-------- --- ----- ---
Total residential and commercial 388,240 67 49.2 30
Interruptible 8,360 2 10.6 6
-------- --- ----- ---
Total system 396,600 69 59.8 36
Off-system 169,903 29 104.9 64
Appliance service revenues 9,468 2 -- --
-------- --- ----- ---
Total $575,971 100% 164.7 100%
======== === ===== ===
</TABLE>
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See MD&A - NJNG Operations in the Company's 1998 Annual Report for a
discussion of gas and transportation sales. Also see NJNG Operating Statistics
in the Company's 1998 Annual Report for information on operating revenues and
throughput for the past six years. During this period, no single customer
represented more than 10% of operating revenues.
Seasonality of Gas Revenues
As a result of the heat-sensitive nature of NJNG's residential customer base,
therm sales are significantly affected by weather conditions. Specifically,
customer demand substantially increases during the winter months when natural
gas is used for heating purposes. See MD&A - Liquidity and Capital Resources -
NJNG in the Company's 1998 Annual Report for a discussion of the effect of
seasonality on cash flow.
The impact of weather on the level and timing of NJNG's revenues and cash
flows has been affected by a weather-normalization clause (WNC), which provides
for a revenue adjustment if the weather varies by more than one-half of 1% from
normal, or 20-year average, weather. The WNC does not fully protect the Company
from factors such as unusually warm weather and declines in customer usage
patterns, which were set at the conclusion of NJNG's last base rate case in
January 1994. The accumulated adjustment from one heating season (i.e.,
October-May) is billed or credited to customers in subsequent periods. See MD&A
- - NJNG Operations in the Company's 1998 Annual Report and Item 1. Business -
State Regulation and Rates for additional information with regard to the WNC.
Gas Supply
A) Firm Natural Gas Supplies
NJNG currently purchases a diverse gas supply portfolio consisting of
long-term (over seven months), winter-term (for the five winter months) and
short-term contracts. In 1998, NJNG purchased gas from 76 suppliers under
contracts ranging from one month to twelve years. NJNG has 5 long-term firm gas
purchase contracts and purchased approximately 12% of its gas in 1998 under one
long-term firm gas purchase contract with Alberta Northeast Gas Limited, which
expires in 2006. NJNG does not purchase more than 10% of its total gas supplies
under any other single long-term firm gas purchase contract. NJNG believes that
its supply strategy should adequately meet its expected firm load over the next
several years.
B) Firm Transportation and Storage Capacity
In order to deliver the above supplies, NJNG maintains agreements for firm
transportation and storage capacity with several interstate pipeline companies.
The pipeline companies that provide firm transportation service to NJNG's city
gate stations in New Jersey, the maximum daily deliverability of that capacity
and the contract expiration dates are as follows:
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<TABLE>
<CAPTION>
Maximum Daily
Pipeline Deliverability (Dths) Expiration Date
- -------- --------------------- ---------------
<S> <C> <C>
Texas Eastern Transmission Corp. 277,949 Various dates after 2000
Iroquois Gas Transmission System, L.P. 40,000 2011
Transcontinental Gas Pipe Line Corp. 22,531 Various dates after 1998
Tennessee Gas Pipeline Co. 10,835 2003
Columbia Gas Transmission Corp. 10,000 2009
Algonquin Gas Transmission Co. 5,000 1999
-------
366,315
=======
</TABLE>
The pipeline companies that provide firm transportation service to NJNG,
which feeds the above pipelines are: Texas Gas Transmission Corporation, CNG
Transmission Corporation, Columbia Gulf Transmission Corporation, Equitrans,
Inc. and Carnegie Interstate Pipeline Company.
In addition, NJNG has storage and related transportation contracts that
provide additional maximum daily deliverability of 216,000 Dths from storage
fields in its Northeast market area. The significant storage suppliers, the
maximum daily deliverability of that storage capacity and the contract
expiration dates are as follows:
<TABLE>
<CAPTION>
Pipeline Maximum Daily Deliverability (Dths) Expiration Date
<S> <C> <C>
Texas Eastern Transmission Corp. 94,557 Various dates after 1998
Transcontinental Gas Pipe Line Corp. 8,384 2005
-------
102,941
=======
</TABLE>
NJNG also has storage contracts with CNG Transmission Corporation (maximum
daily deliverability of 103,661 Dths) and Equitrans, Inc. (maximum daily
deliverability of 9,996 Dths), but utilizes NJNG's existing transportation
contracts to transport that gas from the storage fields to its city gate.
C) Peaking Supply
To meet its increased winter peak day demand, NJNG, in addition to utilizing
the previously mentioned firm storage services, maintains two liquefied natural
gas (LNG) facilities and purchases firm storage services. See Item 2 -
Properties - NJNG for additional information regarding the LNG storage
facilities. NJNG presently has LNG storage deliverability of 140,000 Dths per
day, which represents approximately 22% of its peak day sendout.
D) Future Supplies
NJNG expects to be able to meet the current level of gas requirements of its
existing and projected firm customers for the foreseeable future. Nonetheless,
NJNG's ability to provide supply for its present and projected sales will depend
upon its suppliers' ability to obtain and deliver additional supplies of natural
gas, as well as NJNG's ability to acquire supplies directly from new sources.
Factors beyond the control of NJNG, its suppliers and the independent suppliers
who have obligations to provide gas to certain NJNG customers, may affect NJNG's
ability to deliver such supplies. These factors include other parties control
over the drilling of new wells and the facilities to transport gas to NJNG's
city gate, competition for the acquisition of gas, priority allocations, the
regulatory and pricing policies of federal and state regulatory agencies, as
well as the availability of Canadian reserves for export to the United States.
Proposed energy deregulation legislation discussed immediately below may
increase
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competition among gas utilities and impact the quantities of natural gas
requirements needed for residential services. If NJNG's gas requirements
decrease, NJNG expects to resell any unnecessary supplies that it is required to
purchase under existing agreements with its suppliers.
Energy Deregulation Legislation
Committees of the New Jersey Senate and Assembly have completed a series of
hearings focusing on the "Electric Discount and Energy Restructuring Act." Bills
S-5/A-10 were introduced in October 1998 after nearly a year of stakeholder
meetings conducted by the New Jersey Board of Public Utilities (BPU). The
pending legislation includes various provisions relating to natural gas
utilities. These provisions provide all customer classes with the ability to
choose their natural gas supplier other then their incumbent utility by December
31, 1999. The bills also allow continuation of the utilities role as a gas
supplier at least until December 31, 2002, when the BPU must decide whether to
make the gas supply function competitive. The proposed legislation would allow
natural gas utilities to stay in competitive services (i.e., appliance
services), and customers would be allowed to choose their provider of account
services (i.e., meter reading, billing and collections) by December 31, 2000.
The legislature is currently expected to vote on this matter in early calendar
1999.
Regulation and Rates
A) State
NJNG is subject to the jurisdiction of the BPU with respect to a wide range of
matters, such as rates, the issuance of securities, the adequacy of service, the
manner of keeping its accounts and records, the sufficiency of gas supply,
pipeline safety and the sale or encumbrance of its properties.
Over the last five years, NJNG has been granted two increases in its base
tariff rates, and various increases and decreases in its Levelized Gas
Adjustment clause (LGA). The latter of the base rate increases related to the
recognition of costs for postretirement benefits other than pensions (OPEB).
Through its LGA billing factor, which is reviewed annually, NJNG recovers the
cost of six adjustment clauses. They are: (i) the Gas Cost Recovery (GCR)
factor, which reflects purchased gas costs that are in excess of the level
included in its base rates, (ii) Prior Gas Cost Adjustment Surcharge (PGCA)
factor, which is designed to recover $34.9 million of unrecovered gas costs from
September 1997 and earlier, (iii) Demand Side Management (DSM) factor for
recovery of conservation-related costs, (iv) Remediation Adjustment (RA) factor,
which recovers the costs of remediating former manufactured gas plant sites, (v)
Transportation Education and Implementation (TEI) factor for recovery of
incremental costs incurred in administering a transportation program and (vi)
the WNC factor, which credits or surcharges margins accrued from the past
heating season weather. LGA recoveries do not include an element of profit and,
therefore, have no effect on earnings.
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The following table sets forth information with respect to these rate changes:
<TABLE>
<CAPTION>
($ in 000's) Annualized Annualized
Amount Amount
Date of Filing Type Per Filing Granted Effective Date
- -------------- ---- ---------- ------- --------------
<S> <C> <C> <C> <C>
July 1997 Base Rates-OPEB $1,300 $900 October 1998
April 1993 Base Rates 26,900 7,500 January 1994
September 1998 LGA 0 Pending
July 1997 LGA 0 11,600 October 1998
July 1997 LGA 0 11,100 January 1998
July 1996 LGA 8,000 7,900 December 1996
July 1995 LGA (4,800) (5,200) December 1995
July 1994 LGA 8,800 0 December 1994
July 1993 LGA 4,800 4,800 December 1993
</TABLE>
See Note 7 to the Consolidated Financial Statements - Regulatory Issues in
the Company's 1998 Annual Report for additional information regarding NJNG's
rate proceedings.
In September 1991, the BPU adopted a conservation incentive rule which
requires energy utilities to file a DSM plan. In June 1995, the BPU approved a
Stipulation Agreement approving NJNG's DSM plan. In November 1997, the BPU
extended NJNG's DSM plan to January 1999. In November 1998, NJNG requested the
DSM plan be extended to July 2000.
In November 1992, NJNG filed a petition with the BPU for approval of a Gas
Service Agreement (GSA) executed between NJNG and Freehold Cogeneration
Associates L.P. (Freehold) in September 1992. The GSA provided for NJNG to
supply Freehold with between 21,800 and 26,000 Dths of natural gas per day over
a twenty-year period. Freehold had planned to construct and operate a
cogeneration facility in Freehold, New Jersey, and had executed a power purchase
agreement with Jersey Central Power & Light Company (JCP&L). In November 1993,
the BPU ruled that Freehold and JCP&L should attempt to renegotiate the power
purchase agreement within 30 days of receipt of a written order. In February
1994, the BPU approved the GSA conditioned by a side letter agreement in which
Freehold and NJNG agreed to negotiate in good faith to amend the pricing terms
of the GSA to conform it to changes, if any, in the power purchase agreement if
it is renegotiated. The November 1993 BPU order was overturned in litigation not
involving NJNG as a party. Freehold was successful in this litigation. In April
1996, JCP&L and Freehold reached an agreement in which JCP&L bought out its
rights and obligations under the power purchase agreement for $120 million ("Buy
Out Agreement"). Under the Buy Out Agreement, JCP&L indemnified Freehold against
certain potential claims, including any potential claims NJNG may have
against Freehold for breach of the GSA. NJNG currently is in discussions with
JCP&L and the BPU regarding a possible resolution of NJNG's potential claims.
In January 1998, the BPU approved a 3.5% LGA price increase, which included
updates to NJNG's GCR, PGCA, WNC, RA and DSM clause factors.
In September 1998, the BPU approved a comprehensive agreement which provides
all NJNG customers the option to choose a natural gas supplier as early as
January 1, 1999, modification and extension of the existing margin-sharing
formulas for the off-system and capacity release programs and
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a new margin-sharing incentive related to permanent cost reductions of NJNG's
gas supply portfolio. The BPU also approved an additional 3.5% price increase
designed to recover $34.9 million of deferred gas costs from both sales and
transportation customers. All of these provisions are effective for the period
from October 1, 1998 to December 31, 2001.
In September 1998, NJNG filed with the BPU to extend the current $.1842 per
therm LGA billing factor for a 15-month term rather than for 12 months. By using
the 15-month LGA billing factor, the Company would move to a calendar year basis
for LGA recovery. Further, NJNG proposed a flexible LGA pricing mechanism to
transition toward market-based pricing. The 15-month proposal is currently being
discussed by the parties to the proceeding. NJNG also requested the collection
of $15.8 million of WNC margins accrued but not collected due to the impact of
warmer-than-normal weather during fiscal year 1998 and minimal adjustments to
its RA, DSMAC and Transportation Education and Implementation charge (TEI)
factors.
See Item 3.c Legal Proceedings - BPU Inquiry for information on potential
regulatory proceedings.
B) Federal
NJNG is subject to regulation by the Federal Energy Regulatory Commission
(FERC). Since the mid-1980's, the FERC has issued a series of orders,
regulations and policy statements (e.g., FERC Orders 380, 436, 451, 500, and
528) intended to transform the natural gas industry from a highly regulated
industry to a less regulated, market-oriented industry. The culmination of the
FERC's deregulatory effort was the issuance of Order 636 which established new
rules mandating the unbundling of interstate pipeline sales for resale and
transportation services. The FERC instituted proceedings through which NJNG's
interstate pipeline suppliers have restructured their services in response to
Order 636.
The transition to a more market-oriented interstate pipeline market may offer
long-term benefits. Order 636 has provided NJNG with increased opportunities to
purchase and manage its own, specifically-tailored gas supply portfolio and to
resell its interstate pipeline capacity to other potential customers during
off-peak periods. However, these long-term benefits have been offset by
increases in interstate pipeline demand charges required by Order 636, in
addition to the flow-through of transition costs that pipeline companies have
incurred as a result of the restructuring of their existing gas purchase and
sales arrangements. In the individual pipeline restructuring proceedings
resulting from Order 636, all of NJNG's pipeline suppliers have settled
transition cost recovery issues with their customers. These settlements provide
for partial cost absorption by some of NJNG's pipeline suppliers and the orderly
recovery of remaining costs from pipeline customers, including NJNG.
NJNG continually reviews its gas supply portfolio requirements in the
post-Order 636 environment. Because of its interconnections with multiple
interstate pipelines, NJNG believes that the Order 636 proceedings will not have
a material impact on its ability to obtain adequate gas supplies at market
rates. However, no assurance can be given in this regard.
Franchises
NJNG holds non-exclusive franchises granted by the 104 municipalities it
serves which gives it the right to lay, maintain and operate public utility
property in order to provide natural gas service within
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these municipalities. Of these franchises, 47 are perpetual and the balance
expire between 1999 and 2038.
Competition
Although its franchises are non-exclusive, NJNG is not currently subject to
competition from other natural gas distribution utilities with regard to the
transportation of natural gas in its service territory. Due to significant
distances between NJNG's current large industrial customers and the nearest
interstate natural gas pipelines, as well as the availability of its
transportation tariff, NJNG currently does not believe it has significant
exposure to the risk that its distribution system will be bypassed. Competition
does exist from suppliers of oil, coal, electricity and propane. At the present
time, natural gas enjoys an advantage over alternate fuels as the preferred
choice of fuels in over 95% of new construction due to its efficiency and
reliability. As deregulation of the natural gas industry continues, prices will
be determined by market supply and demand, and while NJNG believes natural gas
will remain competitive with alternate fuels, no assurance can be given in this
regard.
In October 1994, the BPU approved a Stipulation Agreement that provides NJNG's
commercial and industrial customers an expanded menu of transportation and
supplier choices. As a result of the BPU approval, NJNG's sales to its
commercial and industrial customers are subject to competition from other
suppliers of natural gas; however, NJNG continues to provide transportation
service to these customers. Based on its rate design, NJNG's profits would not
be negatively affected by a customer's decision to utilize a sales or a
transportation only service. At September 30, 1998 NJNG had 3,987 commercial and
industrial customers utilizing the transportation service.
In January 1997, the BPU approved a Stipulation Agreement that provides
residential customers the option to choose their gas supplier. In April 1997,
the first 5,000 residential customers switched to a transportation service. In
September 1997, the BPU accelerated the schedule to allow an additional 25,000
residential customers to chose its supplier starting January 2, 1998. A
comprehensive agreement approved by the BPU in September 1998 provides all NJNG
customers the option to choose a natural gas supplier as early as January 1,
1999. On December 16, 1998 the BPU deferred the implementation of full customer
choice until the BPU has resolved certain policy issues related to a fully open
market. The BPU also allowed for the expansion of NJNG's residential supplier
choice pilot to accept an additional 10,000 customers. Based on its current and
projected level of transportation customers, the Company does not expect any
problems with its gas supply portfolio.
See MD&A - NJNG Operations in the Company's 1998 Annual Report for a
discussion of NJNG's financial results.
NJR ENERGY HOLDINGS CORPORATION
Energy Holdings includes the operations of Energy Services, Natural Energy and
NJR Energy.
Natural Energy markets natural gas to retail customers. As of September 30,
1998, Natural Energy marketed natural gas to 7,502 retail customers. An
additional 8,600 residential customers have executed contracts and will begin
service in 1999. The increase is due to participation in residential pilot
programs. Energy Services provides fuel and capacity management services to
wholesale customers including GPU Service, Inc., an electric utility based in
Pennsylvania, Gas Energy, Inc. and Calpine Corporation, independent power
producers operating in New York. Energy Services also
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purchases natural gas for Natural Energy and trades natural gas, under risk
management guidelines, primarily in Northeast markets.
NJR Energy and its subsidiaries were involved in oil and natural gas
development, production, transportation, storage and other energy-related
ventures. In 1996, the Company exited the oil and natural gas production
business and sold the reserves and related assets of NJR Energy and NJNR.
NJR Energy's continuing operations consist primarily of Pipelines' 2.8% equity
investment in the Iroquois Gas Transmission System, L.P., a 375-mile natural gas
pipeline from the Canadian border to Long Island.
See MD&A - Energy Holdings in the Company's 1998 Annual Report for a
discussion of Energy Services, Natural Energy and NJR Energy's consolidated
financial results.
NJR DEVELOPMENT CORPORATION
NJR Development consists solely of CR&R's operations.
As of September 30, 1998, CR&R's completed space totaled 25,000 square feet in
two fully-occupied buildings. In fiscal 1998, CR&R sold a 280,000 square-foot
office building generating proceeds of $15.6 million and an after-tax gain of
$900,000.
Consistent with the Company's previously disclosed strategy to realign its
asset base more closely with its core energy business, CR&R has sold a majority
of its real estate buildings over the past three years.
In conjunction with one of the real estate sales, CR&R granted options to the
buyer to purchase approximately 165 of CR&R's remaining 183 acres of undeveloped
land. CR&R has retained limited rights to sell and develop the acreage that are
subject to the options.
The Company used the sale proceeds from the abovementioned transactions to pay
down outstanding debt incurred to develop the real estate assets. The Company's
future earnings from operations will not be materially affected by these sales
based upon the historical earnings generated by the real estate subsidiary.
See Item 2 - Properties - NJR Development Corporation for additional
information regarding CR&R's remaining real estate assets.
See MD&A - NJR Development Operations in the Company's 1998 Annual Report for
a discussion of CR&R's financial results.
ENVIRONMENT
The Company and its subsidiaries are subject to legislation and regulation by
federal, state and local authorities with respect to environmental matters. The
Company believes that it is in substantial compliance with all applicable
environmental laws and regulations.
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CR&R is the owner of certain undeveloped acreage in the Monmouth Shores
Corporate Park (MSCP), located in Monmouth County, New Jersey. This acreage is
regulated by the provisions of the Freshwater Wetlands Protection Act (the Act),
which restricts building in areas defined as "freshwater wetlands" and their
transition areas.
Based upon an environmental engineer's delineation of the wetland and
transition areas in accordance with the provisions of the Act, CR&R will file
for a Letter of Interpretation from the New Jersey Department of Environmental
Protection (NJDEP) as parcels of land are selected for development. Based upon
the environmental engineer's revised estimated developable yield for MSCP, the
Company does not believe that a reserve against this property was necessary as
of September 30, 1998.
Although the Company cannot estimate with certainty future costs of
environmental compliance, which among other factors are subject to changes in
technology and governmental regulations, the Company does not presently
anticipate any additional significant future expenditures, other than the
activities described in Note 10 to the Consolidated Financial Statements -
Commitments and Contingent Liabilities in the Company's 1998 Annual Report, for
compliance with existing environmental laws and regulations which would have a
material effect upon the capital expenditures, earnings or competitive position
of the Company or its subsidiaries.
See Item 3 - Legal Proceedings - a. Gas Remediation for additional information
regarding environmental activities.
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EMPLOYEE RELATIONS
The Company and its subsidiaries employed 791 and 824 employees at September
30, 1998 and 1997, respectively. NJNG had 466 and 495 union employees at
September 30, 1998 and 1997, respectively. In December 1997, NJNG reached
agreement with the union on a three-year collective bargaining agreement which
provides, among other things, for annual wage increases of 3.25%, 3% and 3%,
effective December 3, 1997 and December 8, 1998 and 1999, respectively.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
First Elected
Office(1) Name Age an Officer
- --------- ---- --- ----------
<S> <C> <C> <C>
Chairman, President and
Chief Executive Officer Laurence M. Downes 41 1/86
Senior Vice President, General
Counsel and Corporate Secretary Oleta J. Harden 49 6/84
Senior Vice President and
Chief Financial Officer Glenn C. Lockwood 37 1/90
Vice President,
Market Development Eva I. Szakal 50 6/97
</TABLE>
(1) All terms of office are one year.
There is no arrangement or understanding between the officers listed above and
any other person pursuant to which they were selected as an officer. The
following is a brief account of their business experience during the past five
years:
Laurence M. Downes
Chairman, President and Chief Executive Officer
Mr. Downes has held the position of Chairman since September 1996. He held the
position of President and Chief Executive officer since July 1995. From January
1990 to July 1995, he held the position of Senior Vice President and Chief
Financial Officer. Additional information concerning Mr. Downes' appears at page
6 in, and is incorporated herein by reference from, the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on January 27,
1999, which was filed with the Securities and Exchange Commission (SEC) pursuant
to Regulation 14A on December 22, 1998.
Oleta J. Harden
Senior Vice President, General Counsel and Corporate Secretary
Mrs. Harden has held her present position since January 1987, except for
the position of General Counsel which she has held since April 1996.
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Glenn C. Lockwood
Senior Vice President and Chief Financial Officer
Mr. Lockwood has held the position of Senior Vice President since January
1996. He has held the position of Chief Financial Officer since September 1995.
From January 1994 to September 1995, he held the position of Vice President,
Controller and Chief Accounting Officer. From January 1990 to January 1994, he
held the position of Assistant Vice President, Controller and Chief Accounting
Officer. In December 1997, Mr. Lockwood (along with three other current or
former officers of the Company) entered into a settlement with the SEC in which
he consented without admitting or denying the SEC's findings, to an
administrative order finding that he was a cause of the Company not fully
complying with Section 13(a) of the Securities Exchange Act of 1934 in
connection with the Company's reporting of certain 1992 Company subsidiary
transactions. No fines or monetary penalties were imposed on him nor was his
ability to act as an officer or director of a public company otherwise limited.
Eva I. Szakal
Vice President, Market Development
Ms. Szakal has held her present position since June 1997. From May 1994 to
October 1996 she held various director level positions with Digital Equipment
Corporation in marketing and strategic planning. Ms. Szakal was Vice President,
Strategic Planning for National Liberty Insurance from March 1993 to February
1994, and prior thereto she held various positions with AT&T Corporation from
1975 to February 1992.
ITEM 2. PROPERTIES
NJNG (All properties are in New Jersey)
NJNG owns 11,170 miles of distribution main and services, 325 miles of
transmission main and approximately 385,400 meters. Mains are primarily located
under public roads. Where mains are located under private property, NJNG has
obtained easements from the owners of record.
In addition to mains and services, NJNG owns and operates two LNG storage
plants located in Stafford Township, Ocean County, and Howell Township, Monmouth
County. The two LNG plants have an estimated maximum capacity of 19,200 and
150,000 Dths per day, respectively. These facilities are used for peaking supply
and emergencies.
NJNG owns four service centers located in Rockaway Township, Morris County;
Atlantic Highlands and Wall Township, Monmouth County; and Lakewood, Ocean
County. These service centers house storerooms, garages, gas distribution and
appliance service operations and administrative offices. NJNG leases its
headquarters facilities in Wall Township, customer service offices located in
Asbury Park and Wall Township, Monmouth County and a service center in
Manahawkin, Ocean County. These customer service offices support customer
contact, marketing and other functions. NJNG also owns an equipment storage
facility in Long Branch, Monmouth County.
12
<PAGE> 15
Substantially all of NJNG's properties, not expressly excepted or duly
released, are subject to the lien of an Indenture of Mortgage and Deed of Trust
to Harris Trust and Savings Bank, Chicago, Illinois, dated April 1, 1952, as
amended by twenty-nine supplemental indentures (Indenture), as security for
NJNG's bonded debt, which totaled approximately $238 million at September 30,
1998. In addition, under the terms of its Indenture, NJNG could have issued
approximately $252 million of additional first mortgage bonds as of September
30, 1998. In January 1998, NJNG issued variable rate Series EE and Series FF
Bonds for $9.5 million and $15 million, respectively, due 2028 under its
Indenture. The proceeds were used to redeem the $9.5 million 7.05% Series T and
the $15 million 7.25% Series U Bonds on March 1, 1998. In April 1998, NJNG
entered into a loan agreement whereby the New Jersey Economic Development
Authority loaned NJNG the proceeds from its $18 million Natural Gas Facilities
Revenue Bonds, Series 1998C. Also in April 1998, NJNG drew down $2 million from
the construction fund and issued $2 million of its Series GG Bonds.
Energy Holdings
Pipeline has a 2.8% equity interest in the Iroquois Gas Transmission System,
L.P. which owns and operates the Iroquois pipeline project, a 375-mile pipeline
located from the Canadian border in upstate New York to Long Island.
NJR Development Corporation (All properties are in New Jersey)
At September 30, 1998, CR&R owned 183 acres of undeveloped land and two
fully-occupied buildings. The buildings consisted of 25,000 square feet of
commercial office and mixed-use commercial/industrial space.
See Item 1. Business - NJR Development Corporation for a description of the
sale of CR&R's properties. See Item 1. Environment for a discussion of
regulatory matters concerning one of the business parks.
Capital Expenditure Program
See MD&A - Liquidity and Capital Resources in the Company's 1998 Annual
Report for a discussion of the Company's anticipated 1999 and 2000 capital
expenditures for each business segment.
ITEM 3. LEGAL PROCEEDINGS
a. Gas Remediation
NJNG has identified eleven former manufactured gas plant (MGP) sites, dating
back to the late 1800's and early 1900's, which contain contaminated residues
from the former gas manufacturing operations. Ten of the eleven sites in
question were acquired by NJNG in 1952. All of the gas manufacturing operations
ceased at these sites at least by the mid-1950's and in some cases had been
discontinued many years earlier, and all of the old gas manufacturing facilities
were subsequently dismantled by NJNG or the former owner. NJNG is currently
involved in administrative proceedings with the NJDEP and local government
authorities with respect to the plant sites in question, 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. Since October 1989, NJNG has
entered into Administrative Consent Orders or
13
<PAGE> 16
Memoranda of Agreement with the NJDEP covering all eleven sites. These documents
establish the procedures to be followed by NJNG in developing a final remedial
clean-up plan for each site.
Most of the cost of such studies and investigations is being shared under an
agreement with the former owner and operator of ten of the MGP sites. See Note
10 to the Consolidated Financial Statements - Commitments and Contingent
Liabilities in the Company's 1998 Annual Report for a discussion of the
regulatory treatment of gas remediation costs.
In March 1995, NJNG filed a complaint in New Jersey Superior Court against
various insurance carriers for declaratory judgment and for damages arising from
such defendants' breach of their contractual obligations to defend and/or
indemnify NJNG against liability for claims and losses (including defense costs)
alleged against NJNG relating to environmental contamination at the former MGP
sites and other sites. NJNG is seeking (i) a declaration of the rights, duties
and liabilities of the parties under various primary and excess liability
insurance policies purchased from the defendants by NJNG from 1951 through 1985,
and (ii) compensatory and other damages, including costs and fees arising out of
defendants' obligations under such insurance policies. The complaint was amended
in July 1996 to name Kaiser-Nelson Steel & Salvage Company (Kaiser-Nelson) and
its successors as additional defendants. The Company is seeking (a) a
declaration of the rights, duties and liabilities of the parties under
agreements with respect to claims against the Company that allege property
damage caused by various substances used, handled or generated by NJNG or the
predecessor in title that were removed from several of the MGP sites by
Kaiser-Nelson, and (b) money damages or compensatory relief for the harm caused
by Kaiser-Nelson's aforementioned actions. Discovery is proceeding in this
matter. There can be no assurance as to the outcome of these proceedings.
b. South Brunswick Asphalt, L.P.
NJNG has been named a defendant in a civil action commenced in New Jersey
Superior Court by South Brunswick Asphalt, L.P. (SBA) and its affiliated
companies seeking damages arising from alleged environmental contamination at
three sites owned or occupied by SBA and its affiliated companies. Specifically,
the suit charges that tar emulsion removed from 1979 through 1983 by an
affiliate of SBA (Seal Tite, Inc.) from NJNG's former gas manufacturing plant
sites has been alleged by the NJDEP to constitute a hazardous waste and that the
tar emulsion has contaminated the soil and ground water at the three sites in
question. In February 1991, the NJDEP issued letters classifying the tar
emulsion/sand and gravel mixture at each site as dry industrial waste, a
non-hazardous classification. In April 1996, in a meeting with all parties to
the litigation and the judge assigned to the case, the NJDEP confirmed the
non-hazardous classification, which will allow for conventional disposal. In May
1997, SBA submitted applications to NJDEP for permits to allow SBA to recycle
the tar emulsion/sand and gravel mixture at each site into asphalt, to be used
as a paving material. These applications are currently under review by NJDEP. In
July 1998, SBA filed an amended complaint adding NJDEP to the proceedings to
facilitate the resolution of the applications. The Company does not believe that
the ultimate resolution of these matters will have a material adverse effect on
its consolidated financial condition or results of operations.
c. BPU Inquiry
On August 4, 1998, NJNG was informed by the BPU that the Audit Division staff
had concluded an informal review of certain gas purchases made by NJNG from 1989
to 1995, including purchases relating to the Freehold cogeneration project, and
was recommending that its conclusions be referred to the BPU's counsel for a
determination of whether any of the BPU's statutes or regulations may have
14
<PAGE> 17
been violated. The Company has not been informed of the results of that
referral. The Company and NJNG are currently in discussions with senior staff of
the BPU concerning a possible resolution of the open audits and related BPU
docket items, including those related to the subject matter of the Audit
Division staff's informal review and the proper disposition of any proceeds NJNG
may receive from a settlement with the owners of the Freehold cogeneration
project. Although the Company cannot currently predict the outcome of such
discussions, management does not believe that a resolution of these matters as a
whole would have a material adverse effect on the Company's consolidated
financial condition or results of operations.
d. Various
The Company is party to various other claims, legal actions and complaints
arising in the ordinary course of business. In management's opinion, the
ultimate disposition of these matters will not have a material adverse effect on
its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
Certain of the statements contained in this report (other than the
financial statements and other statements of historical fact), including,
without limitation, statements as to management expectations and belief
presented in Part I under the captions "New Jersey Natural Gas Company -
General; - Gas Supply; - Energy Deregulation Legislation; - Regulation and
Rates; - Competition," "Environment" and "Legal Proceedings", are
forward-looking statements. Forward-looking statements are made based upon
management's expectations and belief concerning future developments and their
potential effect upon the Company. There can be no assurance that future
developments will be in accordance with management's expectations or that the
effect of future developments on the Company will be those anticipated by
management.
The Company wishes to caution readers that the assumptions which form the
basis for forward-looking statements with respect to or that may impact
financial results and capital requirements for fiscal 1999 and thereafter
include many factors that are beyond the Company's ability to control or
estimate precisely, such as estimates of future market conditions and the
behavior of other market participants. Among the factors that could cause actual
results to differ materially from estimates reflected in such forward-looking
statements are weather conditions, economic conditions, and demographic changes
in NJNG's service territory, fluctuations in energy commodity prices, conversion
activity and other marketing efforts, the conservation efforts of NJNG's
customers, the ability to extend certain fuel management contracts, the pace of
deregulation of retail gas markets, competition for the acquisition of gas, the
regulatory and pricing policies of federal and state regulatory agencies, the
availability of Canada's reserves for export to the United States and other
regulatory changes.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with its preparation of management's discussion and analysis of
results of operations and financial condition contained in its quarterly and
annual reports, the Company does not, by including this statement, assume any
obligation to review or revise any particular forward-looking statement
referenced herein in light of future events.
15
<PAGE> 18
PART II
Information for Items 5 through 9 of this report appears below or in the
Company's 1998 Annual Report as indicated on the following table and is
incorporated herein by reference, as follows:
Annual Report
Page
ITEM 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
Market Information - Exchange Inside back cover
- Stock Prices & Dividends 23
Dividend Restrictions 37
Holders of Common Stock - 17,735 Shareowner accounts
ITEM 6. Selected Financial Data 22
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 24-29
ITEM 8 Financial Statements and Supplementary Data 30-42
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure - None
16
<PAGE> 19
PART III
Information for Items 10 through 13 of this report is incorporated herein by
reference to the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on January 27, 1999, which was filed with the SEC
pursuant to Regulation 14A on December 22, 1998.
Proxy Page
----------
ITEM 10. Directors and Executive Officers of the Registrant 3 - 6
ITEM 11. Executive Compensation 7 - 13
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 2
ITEM 13. Certain Relationships and Related Transactions 6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) The following Financial Statements of the Registrant and
Independent Auditors' Report, included in the Company's 1998 Annual Report,
are incorporated by reference in Item 8 above:
Consolidated Balance Sheets as of September 30, 1998 and 1997
Consolidated Statements of Income for the Years Ended September 30, 1998,
1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended September 30,
1998, 1997 and 1996
Consolidated Statements of Capitalization as of September 30, 1998 and 1997
Consolidated Statements of Common Stock Equity for the Years Ended September
30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules - See Index to Financial Statement
Schedules on page 18.
(3) Exhibits - See Exhibit Index on page 22.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1998.
17
<PAGE> 20
NEW JERSEY RESOURCES CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
Schedule II - Valuation and qualifying accounts and
reserves for each of the three years in the period
ended September 30, 1998 19
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
18
<PAGE> 21
Schedule II
NEW JERSEY RESOURCES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED SEPTEMBER 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASSIFICATION BALANCE AT ADDITIONS OTHER BALANCE
BEGINNING CHARGED TO AT END OF
OF YEAR EXPENSE YEAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
($000)
1998:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $1,527 $1,755 $(1,375)(1) $1,907
====== ====== ======= ======
Materials and Supplies $ 502 $ 400 $ (551)(2) $ 351
====== ====== ======= ======
1997:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $878 $3,023 $(2,374) (1) $1,527
==== ====== ======= ======
Materials and Supplies $182 $320 - $ 502
==== ====== ======= ======
1996:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $422 $1,732 $(1,276) (1) $ 878
==== ====== ======= ======
Materials and Supplies $172 - $10 (2) $ 182
==== ====== ======= ======
</TABLE>
Notes: (1) Uncollectible accounts written off, less recoveries.
(2) Obsolete inventory written off, less salvage.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NEW JERSEY RESOURCES CORPORATION
(Registrant)
Date: December 23, 1998 By:/s/Glenn C. Lockwood
--------------------------
Glenn C. Lockwood
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
Dec. 23, 1998 /s/ Laurence M. Downes Dec. 23, 1998 /s/ Lester D. Johnson
----------------------- -----------------------
Laurence M. Downes Lester D. Johnson
Chairman, President and Director
Chief Executive Officer
Dec. 23, 1998 /s/ Glenn C. Lockwood Dec. 23, 1998 /s/ Dorothy K. Light
---------------------- ---------------------
Glenn C. Lockwood Dorothy K. Light
Senior Vice President and Director
Chief Financial Officer
(Principal Accounting
Officer)
Dec. 23, 1998 /s/ Nina Aversano Dec. 23, 1998 /s/ Charles G. Stalon
------------------ ----------------------
Nina Aversano Charles G. Stalon
Director Director
Dec. 23, 1998 /s/ Bruce G. Coe Dec. 23, 1998 /s/ John J. Unkles, Jr.
----------------- ------------------------
Bruce G. Coe John J. Unkles, Jr.
Director Director
Dec. 23, 1998 /s/ Leonard S. Coleman Dec. 23, 1998 /s/ Gary W. Wolf
----------------------- -----------------------
Leonard S. Coleman Gary W. Wolf
Director Director
Dec. 23, 1998 /s/ Joe B. Foster Dec. 23, 1998 /s/ George R. Zoffinger
------------------ -----------------------
Joe B. Foster George R. Zoffinger
Director Director
Dec. 23, 1998 /s/ Hazel S. Gluck
-------------------
Hazel S. Gluck
Director
20
<PAGE> 23
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To The Shareholders and Board of Directors of New Jersey Resources
Corporation:
We consent to the incorporation by reference in Registration Statements No.
33-52409 and 333-59013 on Form S-8 and No. 33-57711 on Form S-3 of New Jersey
Resources Corporation of our report dated October 29, 1998, incorporated by
reference in this Annual Report on Form 10-K of New Jersey Resources Corporation
for the year ended September 30, 1998.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of New Jersey Resources
Corporation, listed in Item 14. This consolidated financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 23, 1998
21
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K Previous Filing
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
<S> <C> <C> <C> <C>
3-1 3 Restated Certificate of Incorporation of the Note (8) 3-1
Company, as amended
3-2 By-laws of the Company, as presently in effect 333-59013 5-1
4-1 4 Specimen Common Stock Certificates 33-21872 4-1
4-2 Indenture of Mortgage and Deed of Trust 2-9569 4(g)
with Harris Trust and Savings Bank, as
Trustee, dated April 1, 1952
4-2A Eighteenth Supplemental Indenture, 33-30034 4-2R
dated as of June 1, 1989
4-2B Nineteenth Supplemental Indenture, Note (3) 4-2S
dated as of March 1, 1991
4-2C Twentieth Supplemental Indenture, Note (4) 4-2T
dated as of December 1, 1992
4-2D Twenty-First Supplemental Indenture, Note (5) 4-2U
dated as of August 1, 1993
4-2E Twenty-Second Supplemental Indenture, Note (5) 4-2V
dated as of October 1, 1993
4-2F Twenty-Third Supplemental Indenture, Note (6) 4-2W
dated as of August 15, 1994
4-2G Twenty-Fourth Supplemental Indenture, Note (6) 4-2X
dated as of October 1, 1994
4-2H Twenty-Fifth Supplemental Indenture, Note (7) 4-2Y
dated as of July 15, 1995
4-2I Twenty-Sixth Supplemental Indenture, Note (7) 4-2Z
dated as of October 1, 1995
4-2J Twenty-Seventh Supplemental Indenture, Note (9) 4-2J
dated as of September 1, 1997
</TABLE>
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K Previous Filing
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- --- --------- -------------------- ------ -------
<S> <C> <C> <C> <C>
4-2K Twenty-Eighth Supplemental Indenture,
dated as of January 1, 1998 (filed herewith)
4-2L Twenty-Ninth Supplemental Indenture,
dated as of April 1, 1998 (filed herewith)
4-3 Term Loan Agreement between New Jersey Note (2) 4-3
Resources Corporation and Union Bank of
Switzerland, dated January 31, 1987
4-5 Amended and Restated Note and Credit The Company's 4-5
Agreement between New Jersey Resources Quarterly Report
Corporation and First Union National Bank, on Form 10-Q for
successor to First Fidelity Bank, dated May 7, 1993 the quarter ended
June 30, 1993
4-5A Dated as of August 29, 1995 Note (8) 4-5A
4-5B Dated as of April 2, 1996 Note (8) 4-5B
4-5C Dated as of September 10, 1996 Note (8) 4-5C
4-5D Dated as of September 26, 1997 Note (9) 4-5D
4-6 Revolving Credit Agreement between New Jersey Note (8) 4-6
Resources Corporation and Societe Generale,
dated August 25, 1996
4-6A Dated as of September 30, 1997 Note (9) 4-6A
4-6B Dated as of September 30, 1998 (filed herewith)
4-7 Revolving Credit and Term Loan Agreement Note (3) 4-7
between New Jersey Resources Corporation
and PNC Bank, successor to Midlantic Bank, N.A.,
dated December 20, 1990
4-7A Dated as of January 31, 1997 Note (9) 4-7A
4-7B Dated as of January 31, 1998 (filed herewith)
4-8 Revolving Credit Agreement between New Jersey Note (8) 4-8
Resources Corporation and Union Bank of
Switzerland, dated August 27, 1996
</TABLE>
23
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K Previous Filing
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- --- --------- -------------------- ------ -------
<S> <C> <C> <C> <C>
4-9 Credit Agreement between New Jersey Resources Note (3) 4-9
Corporation and Morgan Guaranty Trust Company of
New York, successor to J.P. Morgan Delaware,
dated August 1, 1991
4-9A Dated September 1, 1993 Note (9) 4-9A
4-9B Dated January 9, 1995 Note (9) 4-9B
4-9C Dated July 1, 1996 Note (9) 4-9C
4-9D Dated August 30, 1997 Note (9) 4-9D
4-9E Dated September 14, 1998 (filed herewith)
4-10 Shareholder Rights Plan The Company's
Form 8-K filed on
August 2, 1996
10-2 Retirement Plan for Represented Employees, as 2-73181 10(f)
amended October 1, 1984
10-3 Retirement Plan for Non-Represented Employees, 2-73181 10(g)
as amended October 1, 1985
10-4 Supplemental Retirement Plans covering all Note (1) 10-9
Executive Officers as described in the
Registrant's definitive proxy statement
incorporated herein by reference
10-5 Agreements between NJNG and Texas Eastern
Transmission Company Note (8) 10-5
10-5A Dated June 21, 1995 Note (8) 10-5A
10-5B Dated June 21, 1995 Note (8) 10-5B
10-5C Dated November 15, 1995 Note (8) 10-5C
10-6 Officer Incentive Plan effective as of October 1,
1986 Note (8) 10-6
</TABLE>
24
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K Previous Filing
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- --- --------- -------------------- ------ -------
<S> <C> <C> <C> <C>
10-7 Lease Agreement between NJNG as Lessee Note (8) 10-7
and State Street Bank and Trust Company of
Connecticut, National Association as Lessor
for NJNG's Headquarters Building dated
December 21, 1995
10-10 Long-term Incentive Compensation Plan Company's proxy
as amended statement on 14A
for the 1996 Annual
Meeting
10-12 Employment Continuation Agreement of Laurence Note (8) 10-12
M. Downes dated June 5, 1996
10-12A Amendment dated as of December 1, 1997 Note (9) 10-12A
10-12B Revised Schedule of Officer Employee Continuation Note (9) 10-12B
Agreements
10-13 Agreements between NJNG and Alberta Northeast Note (4) 10-13
Gas Limited, dated February 7, 1991
10-14 Agreement between NJNG and Iroquois Gas Note (4) 10-14
Transmission System, L.P., dated February 7, 1991
10-15 Agreements between NJNG and CNG Transmission Note (8) 10-15
Corporation,
10-15A Dated December 1, 1993 Note (8) 10-15A
10-15B Dated December 1, 1993, as amended Note (8) 10-15B
December 21, 1995
13-1 13 1998 Annual Report to Stockholders. Such
Exhibit includes only those portions thereof
which are expressly incorporated by reference
in this Form 10-K (filed herewith)
21-1 21 Subsidiaries of the Registrant (filed herewith)
23-1 23 Independent Auditors' Consent and Report on Schedule (filed herewith)
See page 21
27-1 27 Financial Data Schedule (filed herewith)
</TABLE>
25
<PAGE> 28
Note (1) 1986 Form 10-K File No. 1-8359
Note (2) 1989 Form 10-K File No. 1-8359
Note (3) 1991 Form 10-K File No. 1-8359
Note (4) 1992 Form 10-K File No. 1-8359
Note (5) 1993 Form 10-K File No. 1-8359
Note (6) 1994 Form 10-K File No. 1-8359
Note (7) 1995 Form 10-K File No. 1-8359
Note (8) 1996 Form 10-K File No. 1-8359
Note (9) 1997 Form 10-K File No. 1-8359
26
<PAGE> 1
MORTGAGE
NEW JERSEY NATURAL GAS COMPANY
To
HARRIS TRUST AND SAVINGS BANK,
As Trustee
---------------------------
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE
Dated as of January 1, 1998
---------------------------
Supplemental to Indenture of Mortgage and
Deed of Trust Dated April 1, 1952
Prepared by: William M. Libit
Chapman and Cutler
111 W. Monroe Street
Chicago, Illinois 60603
<PAGE> 2
MORTGAGE
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE, dated as of January 1, 1998,
between NEW JERSEY NATURAL GAS COMPANY, a corporation organized and existing
under the laws of the State of New Jersey (hereinafter called the "Company"),
having its principal office at 1415 Wyckoff Road, Wall, New Jersey, party of the
first part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and
existing under the laws of the State of Illinois and authorized to accept and
execute trusts (hereinafter called the "Trustee"), having its principal office
at 111 West Monroe Street, Chicago, Illinois, as Trustee under the Indenture of
Mortgage and Deed of Trust hereinafter mentioned, party of the second part.
WHEREAS, the Company has heretofore executed and delivered to the
Trustee its Indenture of Mortgage and Deed of Trust dated April 1, 1952
(hereinafter sometimes called the "Original Indenture") to secure the payment of
the principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding thereunder, and to declare the terms and conditions upon
which Bonds are to be issued thereunder; and
WHEREAS, the Company thereafter executed and delivered to the Trustee
its First Supplemental Indenture dated February 1, 1958, its Second Supplemental
Indenture dated December 1, 1960, its Third Supplemental Indenture dated July 1,
1962, its Fourth Supplemental Indenture dated September 1, 1962, its Fifth
Supplemental Indenture dated December 1, 1963, its Sixth Supplemental Indenture
dated June 1, 1966, its Seventh Supplemental Indenture dated October 1, 1970,
its Eighth Supplemental Indenture dated May 1, 1975, its Ninth Supplemental
Indenture dated February 1, 1977, its Tenth Supplemental Indenture dated as of
September 1, 1980, its Eleventh Supplemental Indenture dated as of September 1,
1983, its Twelfth Supplemental Indenture dated as of August 1, 1984, its
Thirteenth Supplemental Indenture dated as of September 1, 1985, its Fourteenth
Supplemental Indenture dated as of May 1, 1986, its Fifteenth Supplemental
Indenture dated as of March 1, 1987, its Sixteenth Supplemental Indenture dated
as of December 1, 1987, its Seventeenth Supplemental Indenture dated as of June
1, 1988, its Eighteenth Supplemental Indenture dated as of June 1, 1989, its
Nineteenth Supplemental Indenture dated as of March 1, 1991, its Twentieth
Supplemental Indenture dated as of December 1, 1992, its Twenty-First
Supplemental Indenture dated as of August 1, 1993, its Twenty-Second
Supplemental Indenture dated as of October 1, 1993, its Twenty-Third
Supplemental Indenture dated as of August 15, 1994, its Twenty-Fourth
Supplemental Indenture dated as of October 1, 1994, its Twenty-Fifth
Supplemental Indenture dated as of July 15, 1995, its Twenty-Sixth Supplemental
Indenture dated as of October 1, 1995, and its Twenty-Seventh Supplemental
Indenture dated as of September 1, 1997, supplementing and amending the Original
Indenture; and
WHEREAS, Bonds in the aggregate principal amount of Twelve Million Five
Hundred Thousand Dollars ($12,500,000) were issued under and in accordance with
the terms of the Original Indenture, as an initial
<PAGE> 3
series designated "First Mortgage Bonds, 4-1/4% Series A due 1977," herein
sometimes called "1977 Series A Bonds," which 1977 Series A Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First Supplemental Indenture, as a second series designated "First
Mortgage Bonds, 5% Series B due 1983", herein sometimes called "1983 Series B
Bonds", which 1983 Series B Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four
Million Dollars ($4,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First Supplemental
Indenture and the Second Supplemental Indenture, as a third series designated
"First Mortgage Bonds, 5- 1/8% Series C due 1985," herein sometimes called "1985
Series C Bonds," which 1985 Series C Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Five
Million Dollars ($5,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fourth Supplemental Indentures, inclusive, as a fourth series designated "First
Mortgage Bonds, 4-7/8% Series D due 1987," herein sometimes called "1987 Series
D Bonds," which 1987 Series D Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four
Million Five Hundred Thousand Dollars ($4,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Fifth Supplemental Indentures, inclusive, as a fifth
series designated "First Mortgage Bonds, 4-3/4% Series E due 1988," herein
sometimes called "1988 Series E Bonds," which 1988 Series E Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventh Supplemental Indentures, inclusive, as a sixth series designated "First
Mortgage Bonds, 9-1/4% Series F due 1995," herein sometimes called "1995 Series
F Bonds," which 1995 Series F Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Dollars ($10,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Eighth Supplemental Indentures, inclusive as a seventh series designated "First
Mortgage Bonds, 10% Series G due 1987," herein sometimes called "1987 Series G
Bonds," which 1987 Series G Bonds have since been paid and redeemed by the
Company; and
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WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Dollars ($10,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Ninth Supplemental Indentures, inclusive, as an eighth series designated "First
Mortgage Bonds, 9% Series H due 1992," herein sometimes called "1992 Series H
Bonds," which 1992 Series H Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine
Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Tenth Supplemental Indentures, inclusive, as a
ninth series designated "First Mortgage Bonds, 9-1/8% Series J due 2000," herein
sometimes called "2000 Series J Bonds," which 2000 Series J Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Three Hundred Thousand Dollars ($10,300,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Eleventh Supplemental Indentures, inclusive, as a tenth
series designated "First Mortgage Bonds, 10-3/8% Series K due 2013," herein
sometimes called "2013 Series K Bonds," which 2013 Series K Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Five Hundred Thousand Dollars ($10,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twelfth Supplemental Indentures, inclusive, as an
eleventh series designated "First Mortgage Bonds, 10-l/2% Series L due 2014,"
herein sometimes called "2014 Series L Bonds," which 2014 Series L Bonds have
since been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twelve
Million Dollars ($12,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Thirteenth Supplemental Indentures, inclusive, as a twelfth series designated
"First Mortgage Bonds, 10.85% Series M due 2000," herein sometimes called "2000
Series M Bonds," which 2000 Series M Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Dollars ($10,000,000) were issued under and in accordance with the terms
of the Original Indenture as supplemented and amended by the First through the
Fourteenth Supplemental Indentures, inclusive, as a thirteenth series designated
"First Mortgage Bonds, 10% Series N due 2001," herein sometimes called "2001
Series N Bonds," which 2001 Series N Bonds have since been paid and redeemed by
the Company; and
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WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fifteenth Supplemental Indentures, inclusive, as a fourteenth series designated
"First Mortgage Bonds, 8.50% Series P due 2002," herein sometimes called "2002
Series P Bonds," which 2002 Series P Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Sixteenth Supplemental Indentures, inclusive, as a
fifteenth series designated "First Mortgage Bonds, 9% Series Q due 2017," herein
sometimes called "2017 Series Q Bonds," which 2017 Series Q Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of
Twenty-Five Million Dollars ($25,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Seventeenth Supplemental Indentures, inclusive, as a sixteenth
series designated "First Mortgage Bonds, 8.50% Series R due 2018," herein
sometimes called "2018 Series R Bonds," which 2018 Series R Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Eighteenth Supplemental Indentures, inclusive, as a seventeenth series
designated "First Mortgage Bonds, 10.10% Series S due 2009," herein sometimes
called "2009 Series S Bonds," of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine
Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Nineteenth Supplemental Indentures, inclusive,
as an eighteenth series designated "First Mortgage Bonds, 7.05% Series T due
2016," herein sometimes called "2016 Series T Bonds," of which Nine Million Five
Hundred Forty-Five Thousand Dollars ($9,545,000) in principal amount are
outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were authorized, of which Fifteen Million Dollars
($15,000,000) have been issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the
Nineteenth Supplemental Indentures, inclusive, as a nineteenth series designated
"First Mortgage Bonds, 7.25% Series U due
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2021," herein sometimes called "2021 Series U Bonds," of which Fifteen Million
Dollars ($15,000,000) in principal amount are outstanding at the date hereof;
and
WHEREAS, thereafter Bonds in the aggregate principal amount of
Twenty-Five Million Dollars ($25,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twentieth Supplemental Indentures, inclusive, as a twentieth
series designated "First Mortgage Bonds, 7.50% Series V due 2002," herein
sometimes called "2002 Series V Bonds," of which Twenty-Five Million Dollars
($25,000,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Three Hundred Thousand Dollars ($10,300,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twenty-First Supplemental Indentures, inclusive, as a
twenty-first series designated "First Mortgage Bonds, 5-3/8% Series W due 2023,"
herein sometimes called "2023 Series W Bonds," of which Ten Million Three
Hundred Thousand Dollars ($10,300,000) in principal amount are outstanding at
the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirty
Million Dollars ($30,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Second Supplemental Indentures, inclusive, as a twenty-second series
designated "First Mortgage Bonds, 6.27% Series X due 2008," herein sometimes
called "2008 Series X Bonds," of which Thirty Million Dollars ($30,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten
Million Five Hundred Thousand Dollars ($10,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twenty-Third Supplemental Indentures, inclusive, as a
twenty-third series designated "First Mortgage Bonds, 6.25% Series Y due 2024,"
herein sometimes called "2024 Series Y Bonds," of which Ten Million Five Hundred
Thousand Dollars ($10,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of
Twenty-Five Million Dollars ($25,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-Fourth Supplemental Indentures, inclusive, as a
twenty-fourth series designated "First Mortgage Bonds, 8.25% Series Z due 2004,"
herein sometimes called "2004 Series Z Bonds," of which Twenty-Five Million
Dollars ($25,000,000) in principal amount are at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of
Twenty-Five Million Dollars ($25,000,000) were issued under and in
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accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twenty-Fifth Supplemental Indentures, inclusive, as a
twenty-fifth series designated "First Mortgage Bonds, Adjustable Rate Series AA
due 2030," herein sometimes called "2030 Series AA Bonds," of which Twenty-Five
Million Dollars ($25,000,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Sixteen
Million Dollars ($16,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fifth Supplemental Indentures, inclusive, as a twenty-sixth series
designated "First Mortgage Bonds, Adjustable Rate Series BB due 2030," herein
sometimes called "2030 Series BB Bonds," of which Sixteen Million Dollars
($16,000,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Sixth Supplemental Indentures, inclusive, as a twenty-seventh series
designated "First Mortgage Bonds, 6-7/8 Series CC due 2010," herein sometimes
called "2010 Series CC Bonds," of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twenty-Seventh Supplemental Indentures, inclusive, as a
twenty-eighth series designated "First Mortgage Bonds, Adjustable Rate Series DD
due 2027," herein sometimes called "2027 Series DD Bonds," of which Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) in principal amount are
outstanding at the date hereof; and
WHEREAS, the Original Indenture provides that, subject to certain
exceptions not presently relevant, such changes in or additions to the
provisions of the Indenture (the term "Indenture" and other terms used herein
having the meanings assigned thereto in the Original Indenture except as herein
expressly modified) may be made to add to the covenants and agreements of the
Company in the Indenture contained other covenants and agreements thereafter to
be observed by the Company; and to provide for the creation of any series of
Bonds, designating the series to be created and specifying the form and
provisions of the Bonds of such series as in the Indenture provided or
permitted; and
WHEREAS, the Indenture further provides that the Company and the
Trustee may enter into indentures supplemental to the Indenture to convey,
transfer and assign unto the Trustee and to subject to the lien of the Indenture
additional properties acquired by the Company; and
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WHEREAS, the Company has entered into a Loan Agreement dated as of
January 1, 1998 (the "Loan Agreement") with the New Jersey Economic Development
Authority (herein sometimes called the "EDA"), a public body corporate and
politic of the State of New Jersey, pursuant to which (i) the proceeds of the
issuance by the EDA of Nine Million Five Hundred Forty-Five Thousand Dollars
($9,545,000) in aggregate principal amount of its Natural Gas Facilities
Refunding Revenue Bonds, Series 1998A (New Jersey Natural Gas Company Project)
(the "1998A EDA Bonds") are to be loaned to the Company to provide for the
refinancing of certain natural gas and functionally related and subordinate
facilities (consisting of the refunding of $9,545,000 in aggregate principal
amount of the EDA's Natural Gas Facilities Refunding Revenue Bonds, Series 1991A
(New Jersey Natural Gas Company Project)), and (ii) the proceeds of the issuance
by the EDA of Fifteen Million Dollars ($15,000,000) in aggregate principal
amount of its Natural Gas Facilities Refunding Revenue Bonds, Series 1998B (New
Jersey Natural Gas Company Project) (the "1998B EDA Bonds") are to be loaned to
the Company to provide for the refinancing of certain natural gas and
functionally related and subordinate facilities (consisting of the refunding of
$15,000,000 in aggregate principal amount of the EDA's Natural Gas Facilities
Revenue Bonds, Series 1991B (New Jersey Natural Gas Company Project)), which
1998A EDA Bonds and 1998B EDA Bonds (herein collectively referred to as the
"1998 Series EDA Bonds") are being issued pursuant to the EDA Bond Indenture (as
defined below); and
WHEREAS, the Company has duly determined to create a twenty-ninth
series of Bonds, to be known as "First Mortgage Bonds, Adjustable Rate Series EE
due 2028," herein sometimes called "2028 Series EE Bonds," and a thirtieth
series of Bonds to be known as "First Mortgage Bonds, Adjustable Rate Series FF
due 2028," herein sometimes called "2028 Series FF Bonds," each to be issued and
delivered (in conjunction with the assignment by the EDA of certain of its
rights under the Loan Agreement) to First Union National Bank, as trustee (the
"EDA Loan Trustee") pursuant to an indenture of trust dated as of January 1,
1998 (the "EDA Bond Indenture") between the EDA and the EDA Loan Trustee for the
benefit and security of the holders of the 1998 Series EDA Bonds, all as herein
provided, and to add to the covenants and agreements contained in the Indenture
the covenants and agreements hereinafter set forth; and
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Indenture and
pursuant to appropriate resolutions of its Board of Directors (including the
Executive Committee thereof), has duly resolved and determined to make, execute
and deliver to the Trustee a Twenty-Eighth Supplemental Indenture in the form
hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Twenty-Eighth Supplemental Indenture a valid, binding and legal instrument have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized.
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NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That NEW JERSEY NATURAL GAS COMPANY, by way of further assurance and in
consideration of the premises and of the acceptance by the Trustee of the trusts
hereby created and of One Dollar to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, and in order to secure the payment of principal of and any premium
which may be due and payable on and the interest on all Bonds at any time issued
and outstanding under the Indenture according to their tenor and effect, and the
performance and observance by the Company of all the covenants and conditions
herein and therein contained, has granted, bargained, sold, warranted, aliened,
remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, warrant, alien,
remise, release, convey, assign, transfer, mortgage, pledge, set over and
confirm, unto the party of the second part, and to its successors in the trust,
and to it and its assigns forever, and has granted and does hereby grant
thereunto a security interest in, all of the property, real, personal and mixed,
now owned by the Company and situated in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, or wherever situate (except property specifically excepted from the lien
of the Indenture by the terms of the Indenture) and also all of the property,
real, personal and mixed, hereafter acquired by the Company wherever situate
(except property specifically excepted from the lien of the Indenture by the
terms of the Indenture), including both as to property now owned and property
hereafter acquired, without in anywise limiting or impairing the enumeration of
the same, the scope and intent of the foregoing or of any general or specific
description contained in the Indenture, the following:
I. FRANCHISES
All and singular, the franchises, grants, permits, immunities,
privileges and rights of the Company owned and held by it at the date of the
execution hereof or hereafter acquired for the construction, maintenance, and
operation of the gas plants and systems now or hereafter subject to the lien
hereof, as well as all certificates, franchises, grants, permits, immunities,
privileges, and rights of the Company used or useful in the operation of the
property now or hereafter mortgaged hereunder, including all and singular the
franchises, grants, permits, immunities, privileges, and rights of the Company
granted by the governing authorities of any municipalities or other political
subdivisions and all renewals, extensions and modifications of said
certificates, franchises, grants, permits, privileges, and rights or any of
them.
II. GAS DISTRIBUTION SYSTEMS AND RELATED PROPERTY
All gas generating plants, gas storage plants and gas manufacturing
plants of the Company, all the buildings, erections, structures, generating and
purifying apparatus, holders, engines, boilers, benches, retorts, tanks,
instruments, appliances, apparatus, facilities, machinery, fixtures, and all
-8-
<PAGE> 10
other property used or provided for use in the generation, manufacturing and
purifying of gas, together with the land on which the same are situated, and all
other lands and easements, rights-of-way, permits, privileges, and sites forming
a part of such plants or any of them or occupied, enjoyed or used in connection
therewith.
All gas distribution or gas transmission systems of the Company, all
buildings, erections, structures, generating and purifying apparatus, holders,
engines, boilers, benches, retorts, tanks, pipe lines, connections, service
pipes, meters, conduits, tools, instruments, appliances, apparatus, facilities,
machinery, fixtures, and all other property used or provided for use in the
construction, maintenance, repair or operations of such distribution or
transmission systems, together with all the certificates, rights, privileges,
rights-of-way, franchises, licenses, easements, grants, liberties, immunities,
permits of the Company, howsoever conferred or acquired, under, over, or upon
any private property or any public streets or highways within as well as without
the corporate limits of any municipal corporation. Without limiting the
generality of the foregoing, there are expressly included the gas distribution
or gas transmission systems located in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, and in the following municipalities in said State and Counties: Aberdeen
Township (formerly Matawan Township), Allenhurst Borough, City of Asbury Park,
Atlantic Highlands Borough, Avon Borough, Barnegat Light Borough, Barnegat
Township (formerly named Union Township), Bay Head Borough, Beach Haven Borough,
Beachwood Borough, Belmar Borough, Berkeley Township, Boonton Town, Boonton
Township, Bradley Beach Borough, Brick Township, Brielle Borough, Colts Neck
Township, Deal Borough, Denville Township, Dover Town, Dover Township,
Eagleswood Township, East Brunswick Township, Eatontown Borough, Englishtown
Borough, Fair Haven Borough, Farmingdale Borough, Franklin Township in Somerset
County, Freehold Borough, Freehold Township, Hanover Township, Harvey Cedars
Borough, Hazlet Township, Highlands Borough, Holmdel Township, Hopatcong
Borough, Howell Township, Interlaken Borough, Island Heights Borough, Jackson
Township, Jefferson Township, Keansburg Borough, Keyport Borough, Lacey
Township, Lakehurst Borough, Lakewood Township, Lavallette Borough, Lincoln Park
Borough, Little Egg Harbor Township, Little Silver Borough, Loch Arbour Village,
Long Beach Township, Long Branch City, Manalapan Township, Manasquan Borough,
Manchester Township, Mantoloking Borough, Marlboro Township, Matawan Borough,
Middletown Township, Milltown Borough, Mine Hill Township, Monmouth Beach
Borough, Monroe Township, Montville Township, Morris Plains Borough, Mount
Arlington Borough, Mount Olive Township, Mountain Lakes Borough, Neptune City
Borough, Neptune Township, Netcong Borough, New Brunswick City, North Brunswick
Township, Ocean Township in Monmouth County, Ocean Township in Ocean County,
Ocean Gate Borough, Oceanport Borough, Old Bridge Township (formerly named
Madison Township), Parsippany-Troy Hills Township, Pine Beach Borough, Point
Pleasant Borough, Point Pleasant Beach Borough, Randolph Township, Red Bank
Borough, Rockaway Borough, Rockaway Township, Roxbury Township, Rumson
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Borough, Sayreville Borough, Sea Bright Borough, Sea Girt Borough, Seaside
Heights Borough, Seaside Park Borough, Ship Bottom Borough, Shrewsbury Borough,
Shrewsbury Township, South Belmar Borough, South Brunswick Township, South River
Borough, South Toms River Borough, Spring Lake Borough, Spring Lake Heights
Borough, Stafford Township, Surf City Borough, Tinton Falls Borough (formerly
named New Shrewsbury Borough), Tuckerton Borough, Union Beach Borough, Union
Township, Victory Gardens Borough, Wall Township, Washington Township in
Burlington County, Washington Township in Morris County, West Long Branch
Borough, West Milford Township and Wharton Borough.
III. CONTRACTS
All of the Company's right, title and interest in and under all
contracts, licenses or leases for the purchase of gas, either in effect at the
date of execution hereof or hereafter made and any extension or renewal thereof.
TOGETHER WITH ALL AND SINGULAR the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Trust Estate, or any
part thereof, with the reversion or reversions, remainder and remainders, rents,
issues, income and profits thereof, and all the right, title, interest and claim
whatsoever, at law or in equity, which the Company now has or which it may
hereafter acquire in and to the Trust Estate and every part and parcel thereof.
TO HAVE AND TO HOLD the Trust Estate and all and singular the lands,
properties, estates, rights, franchises, privileges and appurtenances hereby
mortgaged, conveyed, pledged or assigned, or intended so to be, together with
all the appurtenances thereto appertaining, unto the Trustee and its successors
and assigns forever;
SUBJECT, HOWEVER, as to property hereby conveyed, to Permitted
Encumbrances;
BUT IN TRUST, NEVERTHELESS, under and subject to the terms and
conditions hereafter set forth, for the equal and proportionate use, benefit,
security and protection of each and every person and corporation who may be or
become the holders of the Bonds and coupons hereby secured, if any, without
preference, priority or distinction as to the lien or otherwise of one Bond or
coupon over or from the others by reason of priority in the issue or negotiation
thereof, or by reason of the date of maturity thereof, or otherwise (except as
any sinking, amortization, improvement, renewal or other analogous fund,
established in accordance with the provisions of the Indenture, may afford
additional security for the Bonds of any particular series and except as
provided in Section 9.02 of the Indenture), and for securing the observance and
performance of all the terms, provisions and conditions of the Indenture.
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THIS INDENTURE FURTHER WITNESSETH, that the Company has agreed and
covenanted, and hereby does agree and covenant, with the Trustee and its
successors and assigns and with the respective holders from time to time of the
Bonds and coupons, or any thereof, as follows:
ARTICLE I.
CERTAIN AMENDMENTS OF INDENTURE
Section 1.1. The Original Indenture, as heretofore amended,
be and it hereby is further amended in the following respects, the section
numbers specified below being the sections of the Indenture in which such
amendments occur:
Section l.01. The following definition be and it hereby is
added immediately after the twenty-seventh sentence of Section 1.01B:
"'TWENTY-EIGHTH SUPPLEMENTAL INDENTURE' shall mean the Supplemental
Indenture dated as of January 1, 1998, supplemental to the Indenture."
Section 1.01. The following definitions be and they hereby are
added immediately after the twenty-ninth sentence of Section 1.01F:
"'2028 SERIES EE BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series EE due 2028, issued hereunder."
"'2028 SERIES FF BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series FF due 2028, issued hereunder."
Section 2.11. The following be and it hereby is added at the
end of Section 2.11:
"No charge except for taxes or governmental charges shall be made
against any holder of any 2028 Series EE Bond or 2028 Series FF Bond
for the exchange, transfer or registration of transfer thereof."
Section 8.08. The period at the end of the first paragraph of
Section 8.08 be and it hereby is deleted and the following words and figures be
and they hereby are added thereto:
", and the 2028 Series EE Bonds and the 2028 Series FF Bonds shall be
redeemed at the redemption price specified in Section 10.74 and Section
10.76, respectively."
ARTICLE II.
2028 SERIES EE BONDS
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Section 2.1. There shall be a twenty-ninth series of Bonds,
known as and entitled "First Mortgage Bonds, Adjustable Rate Series EE due 2028"
or "First Mortgage Bonds, Adjustable Rate Series EE" (herein and in the
Indenture referred to as the "2028 Series EE Bonds"), and the form thereof shall
contain suitable provisions with respect to the matters hereinafter in this
Section specified and shall in other respects be substantially as set forth in
the preambles to the Original Indenture.
The aggregate principal amount of 2028 Series EE Bonds which may be
authenticated and delivered and outstanding under the Indenture is Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000).
The 2028 Series EE Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2028 Series EE Bonds shall bear interest at the minimum rate per
annum necessary to yield interest in amounts sufficient, when taken together
with other amounts available therefor under the EDA Bond Indenture, to pay the
interest from time to time payable on the 1998A EDA Bonds, computed on the same
basis as the 1998A EDA Bonds (interest on overdue principal and premium, if any,
and, to the extent legally enforceable, interest, being at the rate of six
percent (6%) per annum), but in no event shall the interest rate on the 2028
Series EE Bonds exceed ten percent (10%) per annum; and the 2028 Series EE Bonds
shall mature on January 1, 2028, subject to prior redemption as described
herein. The amount of "annual interest charges" on the 2028 Series EE Bonds,
within the meaning of any provision of the Indenture requiring a determination
of said amount as a condition to the issuance of any Bonds thereunder
(including, without limitation, the 2028 Series EE Bonds), shall mean the amount
calculated by applying to the 2028 Series EE Bonds the interest rate of ten
percent (10%) per annum; provided, however, that if the rate of interest on the
1998A EDA Bonds shall have become fixed and determined at a per annum rate lower
than ten percent (10%) for a period not less than the remaining maturity of said
1998A EDA Bonds (whether said 1998A EDA Bonds shall mature at their stated
maturity, by earlier redemption or otherwise), then said lower rate shall be
used to determine the amount of the "annual interest charges" on the 2028 Series
EE Bonds.
The 2028 Series EE Bonds shall be in the form of registered Bonds
without coupons of denominations of Five Thousand Dollars ($5,000) and any
integral multiple thereof which may be authorized by the Company, the issue of a
registered Bond without coupons in any such denomination to be conclusive
evidence of such authorization. The 2028 Series EE Bonds shall be dated as
provided in Section 2.05 of the Indenture. All 2028 Series EE Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2028 Series EE Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1998A EDA Bonds; provided, that the obligation of the Company to
make payments with respect to the principal of, premium, if any, and interest on
the 2028 Series EE Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that at
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<PAGE> 14
the time any such payment shall be due, the then due principal of, premium, if
any, and interest on any of the 1998A EDA Bonds shall have been fully or
partially paid from payments made by the Company under the Loan Agreement or
from other moneys expressly available therefor in the principal and interest
account for the 1998A EDA Bonds under the EDA Bond Indenture or, as far as
principal is concerned, reduced by the principal amount of any of the 1998A EDA
Bonds deemed paid pursuant to Article X of the EDA Bond Indenture. The principal
of and the premium, if any, and interest on the 2028 Series EE Bonds shall be
payable at the principal office of the Trustee, in the City of Chicago,
Illinois, or, at the option of the Company, at the "Principal Office" (as that
term is defined in the EDA Bond Indenture) of the EDA Loan Trustee, in any coin
or currency of the United States of America which at the time of payment shall
be legal tender for the payment of public and private debts.
Notwithstanding any other provision of the Indenture or of the 2028
Series EE Bonds, payments of the principal of and the premium, if any, and
interest on any 2028 Series EE Bond may be made directly to the registered
holder thereof without presentation or surrender thereof or the making of any
notation thereon if there shall be filed with the Trustee a Certificate of the
Company to the effect that such registered holder (or the person for whom such
registered holder is a nominee) and the Company have entered into a written
agreement that payment shall be so made; provided, however, that before such
registered holder transfers or otherwise disposes of any 2028 Series EE Bond,
such registered holder will, at its election, either endorse thereon (or on a
paper annexed thereto) the principal amount thereof redeemed and the last date
to which interest has been paid thereon or make such Bond available to the
Company at the principal office of the Trustee for the purpose of making such
endorsement thereon. The 2028 Series EE Bonds shall be subject to redemption at
the option of the Company or otherwise, in the manner provided in the applicable
provisions of Article Ten of the Indenture, as amended by Article IV of this
Supplemental Indenture.
The 2028 Series EE Bonds shall be excluded from the benefits of, and
shall not be subject to redemption through the operation of, a Mandatory Sinking
Fund pursuant to Section 11.02 of the Indenture and shall also be excluded from
the benefits of the covenants of Section 9.08 and Section 11.01 of the
Indenture.
Notwithstanding the provisions of Section 10.04 or any other provision
of the Indenture, the selection of 2028 Series EE Bonds to be redeemed shall, in
case fewer than all of the outstanding 2028 Series EE Bonds are to be redeemed,
be made by the Trustee pro rata (to the nearest multiple of Five Thousand
Dollars ($5,000)) among the registered holders of the 2028 Series EE Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2028 Series EE Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2028 Series EE
Bonds).
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<PAGE> 15
The definitive 2028 Series EE Bonds may be issued in the form of
engraved Bonds or Bonds printed or lithographed on steel engraved borders or
Bonds in typed form on normal bond paper. Subject to the foregoing provisions of
this Section and the provisions of Section 2.11 of the Indenture, all definitive
2028 Series EE Bonds shall be fully exchangeable for other Bonds of the same
series, of like aggregate principal amounts, and, upon surrender to the Trustee
at its principal office, shall be exchangeable for other Bonds of the same
series of a different authorized denomination or denominations, as requested by
the holder surrendering the same. The Company will execute, and the Trustee
shall authenticate and deliver, registered Bonds without coupons, whenever the
same shall be required for any such exchange.
Section 2.2. 2028 Series EE Bonds in the aggregate principal
amount of Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) may
forthwith upon the execution and delivery of this Supplemental Indenture, or
from time to time thereafter, be executed by the Company and delivered to the
Trustee, and shall thereupon be authenticated and delivered by the Trustee upon
compliance by the Company with the provisions of Articles Four, Five or Six of
the Indenture, without awaiting the filing or recording of this Supplemental
Indenture. No additional 2028 Series EE Bonds shall be issued under Article
Four, Five or Six without the consent in writing of the holders of all the
outstanding 2028 Series EE Bonds.
ARTICLE III.
2028 SERIES FF BONDS
Section 3.1. There shall be a thirtieth series of Bonds, known
as and entitled "First Mortgage Bonds, Adjustable Rate Series FF due 2028" or
"First Mortgage Bonds, Adjustable Rate Series FF" (herein and in the Indenture
referred to as the "2028 Series FF Bonds"), and the form thereof shall contain
suitable provisions with respect to the matters hereinafter in this Section
specified and shall in other respects be substantially as set forth in the
preambles to the Original Indenture.
The aggregate principal amount of 2028 Series FF Bonds which may be
authenticated and delivered and outstanding under the Indenture is Fifteen
Million Dollars ($15,000,000).
The 2028 Series FF Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2028 Series FF Bonds shall bear interest at the minimum rate per
annum necessary to yield interest in amounts sufficient, when taken together
with other amounts available therefor under the EDA Bond Indenture, to pay the
interest from time to time payable on the 1998B EDA Bonds, computed on the same
basis as the 1998B EDA Bonds (interest on overdue principal and premium, if any,
and, to the extent legally enforceable, interest, being at the rate of six
percent (6%) per annum), but in
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<PAGE> 16
no event shall the interest rate on the 2028 Series FF Bonds exceed ten percent
(10%) per annum; and the 2028 Series FF Bonds shall mature on January 1, 2028,
subject to prior redemption as described herein. The amount of "annual interest
charges" on the 2028 Series FF Bonds, within the meaning of any provision of the
Indenture requiring a determination of said amount as a condition to the
issuance of any Bonds thereunder (including, without limitation, the 2028 Series
FF Bonds), shall mean the amount calculated by applying to the 2028 Series FF
Bonds the interest rate of ten percent (10%) per annum; provided, however, that
if the rate of interest on the 1998B EDA Bonds shall have become fixed and
determined at a per annum rate lower than ten percent (10%) for a period not
less than the remaining maturity of said 1998B EDA Bonds (whether said 1998B EDA
Bonds shall mature at their stated maturity, by earlier redemption or
otherwise), then said lower rate shall be used to determine the amount of the
"annual interest charges" on the 2028 Series FF Bonds.
The 2028 Series FF Bonds shall be in the form of registered Bonds
without coupons of denominations of Five Thousand Dollars ($5,000) and any
integral multiple thereof which may be authorized by the Company, the issue of a
registered Bond without coupons in any such denomination to be conclusive
evidence of such authorization. The 2028 Series FF Bonds shall be dated as
provided in Section 2.05 of the Indenture. All 2028 Series FF Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2028 Series FF Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1998B EDA Bonds; provided, that the obligation of the Company to
make payments with respect to the principal of, premium, if any, and interest on
the 2028 Series FF Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that at the time any such payment shall
be due, the then due principal of, premium, if any, and interest on any of the
1998B EDA Bonds shall have been fully or partially paid from payments made by
the Company under the Loan Agreement or from other moneys expressly available
therefor in the principal and interest account for the 1998B EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any of the 1998B EDA Bonds deemed paid pursuant to Article X
of the EDA Bond Indenture. The principal of and the premium, if any, and
interest on the 2028 Series FF Bonds shall be payable at the principal office of
the Trustee, in the City of Chicago, Illinois, or, at the option of the Company,
at the "Principal Office" (as that term is defined in the EDA Bond Indenture) of
the EDA Loan Trustee, in any coin or currency of the United States of America
which at the time of payment shall be legal tender for the payment of public and
private debts.
Notwithstanding any other provision of the Indenture or of the 2028
Series FF Bonds, payments of the principal of and the premium, if any, and
interest on any 2028 Series FF Bond may be made directly to the registered
holder thereof without presentation or surrender thereof or the making of any
notation thereon if there shall be filed with the Trustee a Certificate of the
Company to the effect that such registered holder (or the person for whom such
registered holder is a nominee) and the Company have entered
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<PAGE> 17
into a written agreement that payment shall be so made; provided, however, that
before such registered holder transfers or otherwise disposes of any 2028 Series
FF Bond, such registered holder will, at its election, either endorse thereon
(or on a paper annexed thereto) the principal amount thereof redeemed and the
last date to which interest has been paid thereon or make such Bond available to
the Company at the principal office of the Trustee for the purpose of making
such endorsement thereon.
The 2028 Series FF Bonds shall be subject to redemption at the option
of the Company or otherwise, in the manner provided in the applicable provisions
of Article Ten of the Indenture, as amended by Article V of this Supplemental
Indenture.
The 2028 Series FF Bonds shall be excluded from the benefits of, and
shall not be subject to redemption through the operation of, a Mandatory Sinking
Fund pursuant to Section 11.02 of the Indenture and shall also be excluded from
the benefits of the covenants of Section 9.08 and Section 11.01 of the
Indenture.
Notwithstanding the provisions of Section 10.04 or any other provision
of the Indenture, the selection of 2028 Series FF Bonds to be redeemed shall, in
case fewer than all of the outstanding 2028 Series FF Bonds are to be redeemed,
be made by the Trustee pro rata (to the nearest multiple of Five Thousand
Dollars ($5,000)) among the registered holders of the 2028 Series FF Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2028 Series FF Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2028 Series FF
Bonds).
The definitive 2028 Series FF Bonds may be issued in the form of
engraved Bonds or Bonds printed or lithographed on steel engraved borders or
Bonds in typed form on normal bond paper. Subject to the foregoing provisions of
this Section and the provisions of Section 2.11 of the Indenture, all definitive
2028 Series FF Bonds shall be fully exchangeable for other Bonds of the same
series, of like aggregate principal amounts, and, upon surrender to the Trustee
at its principal office, shall be exchangeable for other Bonds of the same
series of a different authorized denomination or denominations, as requested by
the holder surrendering the same. The Company will execute, and the Trustee
shall authenticate and deliver, registered Bonds without coupons, whenever the
same shall be required for any such exchange.
Section 3.2. 2028 Series FF Bonds in the aggregate principal
amount of Fifteen Million Dollars ($15,000,000) may forthwith upon the execution
and delivery of this Supplemental Indenture, or from time to time thereafter, be
executed by the Company and delivered to the Trustee, and shall thereupon be
authenticated and delivered by the Trustee upon compliance by the Company with
the provisions of Articles Four, Five or Six of the Indenture, without awaiting
the filing or recording of this Supplemental Indenture. No additional 2028
Series FF Bonds shall be
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<PAGE> 18
issued under Article Four, Five or Six without the consent in writing of the
holders of all the outstanding 2028 Series FF Bonds.
ARTICLE IV
REDEMPTION OF THE 2028 SERIES EE BONDS
Section 4.1. The following Section 10.73 and Section 10.74 be
and they hereby are added to Article Ten of the Indenture:
"Section 10.73. The 2028 Series EE Bonds shall be subject to
mandatory redemption as follows: payments of principal of and premium on the
2028 Series EE Bonds shall be made to the EDA Loan Trustee to redeem 2028 Series
EE Bonds in such amounts as shall be necessary, in accordance with the
provisions of the Loan Agreement, to provide funds under the Loan Agreement to
(a) make, when due, payment at maturity (including, without limitation, maturity
upon acceleration of the 1998A EDA Bonds) and (b) make, when due, any prepayment
required by the Loan Agreement in connection with any mandatory or optional
redemption of 1998A EDA Bonds; provided, however, that the obligation of the
Company to make any redemption payments under this Section shall be fully or
partially, as the case may be, satisfied and discharged to the extent that at
any time such payment shall be due, the then due payment at maturity or
redemption payment on any of the 1998A EDA Bonds shall have been fully or
partially made from payments made by the Company under the Loan Agreement or
from other moneys expressly available therefor in a redemption account or
subaccount for the 1998A EDA Bonds under the EDA Bond Indenture or, as far as
principal is concerned, reduced by the principal amount of any 1998A EDA Bonds
deemed paid pursuant to Article X of the EDA Bond Indenture. Terms used and not
defined in this Section shall have the respective meanings given to them in the
Twenty-Eighth Supplemental Indenture dated as of January 1, 1998."
"Section 10.74. In the case of the redemption of 2028 Series
EE Bonds out of moneys deposited with the Trustee pursuant to Section 8.08, such
2028 Series EE Bonds shall, upon compliance with provisions of Section 10.04,
and subject to the provisions of Section 2.1 of the Twenty-Eighth Supplemental
Indenture, be redeemable at the principal amounts thereof, together with
interest accrued thereon to the date fixed for redemption, without premium."
ARTICLE V
REDEMPTION OF THE 2028 SERIES FF BONDS
Section 5.1. The following Section 10.75 and Section 10.76 be
and they hereby are added to Article Ten of the Indenture:
"Section 10.75. The 2028 Series FF Bonds shall be subject to
mandatory redemption as follows: payments of principal of and premium on the
2028 Series FF Bonds shall be made to the EDA Loan Trustee to redeem
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<PAGE> 19
2028 Series FF Bonds in such amounts as shall be necessary, in accordance with
the provisions of the Loan Agreement, to provide funds under the Loan Agreement
to (a) make, when due, payment at maturity (including, without limitation,
maturity upon acceleration of the 1998B EDA Bonds) and (b) make, when due, any
prepayment required by the Loan Agreement in connection with any mandatory or
optional redemption of 1998B EDA Bonds; provided, however, that the obligation
of the Company to make any redemption payments under this Section shall be fully
or partially, as the case may be, satisfied and discharged to the extent that at
any time such payment shall be due, the then due payment at maturity or
redemption payment on any of the 1998B EDA Bonds shall have been fully or
partially made from payments made by the Company under the Loan Agreement or
from other moneys expressly available therefor in a redemption account or
subaccount for the 1998B EDA Bonds under the EDA Bond Indenture or, as far as
principal is concerned, reduced by the principal amount of any 1998B EDA Bonds
deemed paid pursuant to Article X of the EDA Bond Indenture. Terms used and not
defined in this Section shall have the respective meanings given to them in the
Twenty-Eighth Supplemental Indenture dated as of January 1, 1998."
"Section 10.76. In the case of the redemption of 2028 Series
FF Bonds out of moneys deposited with the Trustee pursuant to Section 8.08, such
2028 Series FF Bonds shall, upon compliance with provisions of Section 10.04,
and subject to the provisions of Section 3.1 of the Twenty-Eighth Supplemental
Indenture, be redeemable at the principal amounts thereof, together with
interest accrued thereon to the date fixed for redemption, without premium."
ARTICLE VI
MISCELLANEOUS
Section 6.1. The Company is lawfully seized and possessed of
all the real estate, franchises and other property described or referred to in
the Indenture (except properties released from the lien of the Indenture
pursuant to the provisions thereof) as presently mortgaged, subject to the
exceptions stated therein, such real estate, franchises and other property are
free and clear of any lien prior to the lien of the Indenture except as set
forth in the Granting Clauses of the Indenture and the Company has good right
and lawful authority to mortgage the same as provided in and by the Indenture.
Section 6.2. The Trustee assumes no duties, responsibilities
or liabilities by reason of this Supplemental Indenture other than as set forth
in the Indenture, and this Supplemental Indenture is executed and accepted by
the Trustee subject to all the terms and conditions of its acceptance of the
trust under the Indenture, as fully as if said terms and conditions were herein
set forth at length.
Section 6.3. The terms used in this Supplemental Indenture
shall have the meanings assigned thereto in the Indenture. Reference by number
in this Supplemental Indenture to Articles or Sections shall be construed as
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<PAGE> 20
referring to Articles or Sections contained in the Indenture, unless otherwise
stated.
Section 6.4. As amended and modified by this Supplemental
Indenture, the Indenture is in all respects ratified and confirmed and the
Indenture and this Supplemental Indenture shall be read, taken and construed as
one and the same instrument.
Section 6.5. Neither the approval by the Board of Public
Utilities of the State of New Jersey of the execution and delivery of this
Supplemental Indenture nor the approval by said Board of the issue of any Bonds
under the Indenture shall in any way be construed as the approval by said Board
of any other act, matter or thing which requires approval of said Board under
the laws of the State of New Jersey; nor shall approval by said Board of the
issue of any Bonds under the Indenture bind said Board or any other public body
or authority of the State of New Jersey having jurisdiction in the premises in
any future application for the issue of Bonds under the Indenture or otherwise.
Section 6.6. This Supplemental Indenture may be executed in
any number of counterparts and all said counterparts executed and delivered each
as an original shall constitute but one and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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<PAGE> 21
NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT HAS READ THIS
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY FILLED-IN TRUE
COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS TWENTY-EIGHTH SUPPLEMENTAL
INDENTURE ON THE DATE CONTAINED IN ITS ACKNOWLEDGMENT HEREOF.
IN WITNESS WHEREOF, NEW JERSEY NATURAL GAS COMPANY, party of the first
part, has caused these presents to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and HARRIS TRUST AND
SAVINGS BANK, party of the second part, in evidence of its acceptance of the
trust hereby created, has caused these presents to be signed in its corporate
name by one of its Vice Presidents and its corporate seal to be hereunto affixed
and attested by its Secretary or one of its Assistant Secretaries.
NEW JERSEY NATURAL GAS COMPANY
By ____________________________________
Name: Timothy C. Hearne
Title: Senior Vice President,
Financial and Administrative Services
(Corporate Seal)
ATTEST:
______________________________________________
Oleta J. Harden
Secretary
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<PAGE> 22
Signed, sealed and delivered by NEW JERSEY NATURAL GAS COMPANY in the presence
of:
_______________________________
Name:
_______________________________
Name:
HARRIS TRUST AND SAVINGS BANK, as Trustee
By _______________________________
Name: J. Bartolini
Title: Vice President
[Corporate Seal]
ATTEST:
_______________________________
Name: M. Onischak
Title: Assistant Secretary
Signed, sealed and delivered by HARRIS
TRUST AND SAVINGS BANK in the presence of:
_______________________________
Name:
_______________________________
Name:
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<PAGE> 23
STATE OF NEW JERSEY )
) SS:
COUNTY OF MONMOUTH )
BE IT REMEMBERED that on this _____ day of January 1998, before me, the
subscriber, an Attorney-at-Law of the State of New Jersey, and I hereby certify
that I am such an Attorney-at-Law as witness my hand, personally appeared Oleta
J. Harden to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is the Secretary of NEW
JERSEY NATURAL GAS COMPANY, the grantor or mortgagor in the foregoing
Supplemental Indenture named; that she well knows the seal of said corporation;
that the seal affixed to said Supplemental Indenture is the corporate seal of
said corporation, and that it was so affixed in pursuance of resolutions of the
Board of Directors (including the Executive Committee of said Board) of said
corporation; that Timothy C. Hearne is a Senior Vice President, Financial and
Administrative Services of said corporation; that she saw said Timothy C.
Hearne, as such Senior Vice President, Financial and Administrative Services,
affix said seal thereto, sign and deliver said Supplemental Indenture, and heard
him declare that he signed, sealed and delivered the same as the voluntary act
and deed of said corporation, in pursuance of said resolutions, and that this
deponent signed her name thereto, at the same time, as attesting witness.
_______________________________
Oleta J. Harden
Secretary
Subscribed and sworn to before me, an Attorney-at-Law of the State of New
Jersey, at Wall, New Jersey, the day and year aforesaid.
_______________________________
Name:
Attorney-at-Law of the
State of New Jersey
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<PAGE> 24
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
BE IT REMEMBERED that on this ____ day of January 1998, before me, the
subscriber, a Notary Public of the State of Illinois, personally appeared M.
Onischak to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is an Assistant Secretary
of HARRIS TRUST AND SAVINGS BANK, the grantee or mortgagee and trustee in the
foregoing Supplemental Indenture named; that she well knows the seal of said
corporation; that the seal affixed to said Supplemental Indenture is the
corporate seal of said corporation, and that it was so affixed in pursuance of a
resolution of the Board of Directors of said corporation; that J. Bartolini is a
Vice President of said corporation; that she saw said J. Bartolini as such Vice
President affix said seal thereto, sign and deliver said Supplemental Indenture,
and heard said J. Bartolini declare that she signed, sealed and delivered the
same as the voluntary act and deed of said corporation, in pursuance of said
resolution, and that this deponent signed her name thereto, at the same time, as
attesting witness.
_______________________________
Name: M. Onischak
Title: Assistant Secretary
Subscribed and sworn to before me a Notary Public of the State of Illinois at
Chicago, the day and year aforesaid.
_______________________________
Notary Public of the State of Illinois
[SEAL]
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<PAGE> 1
================================================================================
MORTGAGE
NEW JERSEY NATURAL GAS COMPANY
To
HARRIS TRUST AND SAVINGS BANK,
As Trustee
---------------------------
TWENTY-NINTH SUPPLEMENTAL INDENTURE
Dated as of April 1, 1998
---------------------------
Supplemental to Indenture of Mortgage and
Deed of Trust Dated April 1, 1952
================================================================================
Prepared by: William M. Libit
Chapman and Cutler
111 W. Monroe Street
Chicago, Illinois 60603
<PAGE> 2
MORTGAGE
TWENTY-NINTH SUPPLEMENTAL INDENTURE, dated as of April 1, 1998, between
NEW JERSEY NATURAL GAS COMPANY, a corporation organized and existing under the
laws of the State of New Jersey (hereinafter called the "Company"), having its
principal office at 1415 Wyckoff Road, Wall, New Jersey, party of the first
part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing
under the laws of the State of Illinois and authorized to accept and execute
trusts (hereinafter called the "Trustee"), having its principal office at 111
West Monroe Street, Chicago, Illinois, as Trustee under the Indenture of
Mortgage and Deed of Trust hereinafter mentioned, party of the second part.
WHEREAS, the Company has heretofore executed and delivered to the Trustee
its Indenture of Mortgage and Deed of Trust dated April 1, 1952 (hereinafter
sometimes called the "Original Indenture") to secure the payment of the
principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding thereunder, and to declare the terms and conditions upon
which Bonds are to be issued thereunder; and
WHEREAS, the Company thereafter executed and delivered to the Trustee its
First Supplemental Indenture dated February 1, 1958, its Second Supplemental
Indenture dated December 1, 1960, its Third Supplemental Indenture dated July 1,
1962, its Fourth Supplemental Indenture dated September 1, 1962, its Fifth
Supplemental Indenture dated December 1, 1963, its Sixth Supplemental Indenture
dated June 1, 1966, its Seventh Supplemental Indenture dated October 1, 1970,
its Eighth Supplemental Indenture dated May 1, 1975, its Ninth Supplemental
Indenture dated February 1, 1977, its Tenth Supplemental Indenture dated as of
September 1, 1980, its Eleventh Supplemental Indenture dated as of September 1,
1983, its Twelfth Supplemental Indenture dated as of August 1, 1984, its
Thirteenth Supplemental Indenture dated as of September 1, 1985, its Fourteenth
Supplemental Indenture dated as of May 1, 1986, its Fifteenth Supplemental
Indenture dated as of March 1, 1987, its Sixteenth Supplemental Indenture dated
as of December 1, 1987, its Seventeenth Supplemental Indenture dated as of June
1, 1988, its Eighteenth Supplemental Indenture dated as of June 1, 1989, its
Nineteenth Supplemental Indenture dated as of March 1, 1991, its Twentieth
Supplemental Indenture dated as of December 1, 1992, its Twenty-First
Supplemental Indenture dated as of August 1, 1993, its Twenty-Second
Supplemental Indenture dated as of October 1, 1993, its Twenty-Third
Supplemental Indenture dated as of August 15, 1994, its Twenty-Fourth
Supplemental Indenture dated as of October 1, 1994, its Twenty-Fifth
Supplemental Indenture dated as of July 15, 1995, its Twenty-Sixth Supplemental
Indenture dated as of October 1, 1995, and its Twenty-Seventh Supplemental
Indenture dated as of September 1, 1997, supplementing and amending the Original
Indenture; and
WHEREAS, Bonds in the aggregate principal amount of Twelve Million Five
Hundred Thousand Dollars ($12,500,000) were issued under and in accordance with
the terms of the Original Indenture, as an initial
<PAGE> 3
series designated "First Mortgage Bonds, 4-1/4% Series A due 1977," herein
sometimes called "1977 Series A Bonds," which 1977 Series A Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Two Million
Two Hundred Fifty Thousand Dollars ($2,250,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First Supplemental Indenture, as a second series designated "First
Mortgage Bonds, 5% Series B due 1983", herein sometimes called "1983 Series B
Bonds", which 1983 Series B Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four
Million Dollars ($4,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First Supplemental
Indenture and the Second Supplemental Indenture, as a third series designated
"First Mortgage Bonds, 5-1/8% Series C due 1985," herein sometimes called "1985
Series C Bonds," which 1985 Series C Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Five
Million Dollars ($5,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fourth Supplemental Indentures, inclusive, as a fourth series designated "First
Mortgage Bonds, 4-7/8% Series D due 1987," herein sometimes called "1987 Series
D Bonds," which 1987 Series D Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four
Million Five Hundred Thousand Dollars ($4,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Fifth Supplemental Indentures, inclusive, as a fifth
series designated "First Mortgage Bonds, 4-3/4% Series E due 1988," herein
sometimes called "1988 Series E Bonds," which 1988 Series E Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventh Supplemental Indentures, inclusive, as a sixth series designated "First
Mortgage Bonds, 9-1/4% Series F due 1995," herein sometimes called "1995 Series
F Bonds," which 1995 Series F Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Eighth
Supplemental Indentures, inclusive as a seventh series designated "First
Mortgage Bonds, 10% Series G due 1987," herein sometimes called "1987 Series G
Bonds," which 1987 Series G Bonds have since been paid and redeemed by the
Company; and
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WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Ninth
Supplemental Indentures, inclusive, as an eighth series designated "First
Mortgage Bonds, 9% Series H due 1992," herein sometimes called "1992 Series H
Bonds," which 1992 Series H Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine
Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Tenth Supplemental Indentures, inclusive, as a
ninth series designated "First Mortgage Bonds, 9-1/8% Series J due 2000," herein
sometimes called "2000 Series J Bonds," which 2000 Series J Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Eleventh Supplemental Indentures, inclusive, as a tenth series
designated "First Mortgage Bonds, 10-3/8% Series K due 2013," herein sometimes
called "2013 Series K Bonds," which 2013 Series K Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twelfth Supplemental Indentures, inclusive, as an eleventh
series designated "First Mortgage Bonds, 10-l/2% Series L due 2014," herein
sometimes called "2014 Series L Bonds," which 2014 Series L Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twelve
Million Dollars ($12,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Thirteenth Supplemental Indentures, inclusive, as a twelfth series designated
"First Mortgage Bonds, 10.85% Series M due 2000," herein sometimes called "2000
Series M Bonds," which 2000 Series M Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture as supplemented and amended by the First through the
Fourteenth Supplemental Indentures, inclusive, as a thirteenth series designated
"First Mortgage Bonds, 10% Series N due 2001," herein sometimes called "2001
Series N Bonds," which 2001 Series N Bonds have since been paid and redeemed by
the Company; and
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WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fifteenth Supplemental Indentures, inclusive, as a fourteenth series designated
"First Mortgage Bonds, 8.50% Series P due 2002," herein sometimes called "2002
Series P Bonds," which 2002 Series P Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Sixteenth Supplemental Indentures, inclusive, as a
fifteenth series designated "First Mortgage Bonds, 9% Series Q due 2017," herein
sometimes called "2017 Series Q Bonds," which 2017 Series Q Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventeenth Supplemental Indentures, inclusive, as a sixteenth series designated
"First Mortgage Bonds, 8.50% Series R due 2018," herein sometimes called "2018
Series R Bonds," which 2018 Series R Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Eighteenth Supplemental Indentures, inclusive, as a seventeenth series
designated "First Mortgage Bonds, 10.10% Series S due 2009," herein sometimes
called "2009 Series S Bonds," of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine
Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Nineteenth Supplemental Indentures, inclusive,
as an eighteenth series designated "First Mortgage Bonds, 7.05% Series T due
2016," herein sometimes called "2016 Series T Bonds," which 2016 Series T Bonds
have since been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were authorized, of which Fifteen Million Dollars
($15,000,000) have been issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the
Nineteenth Supplemental Indentures, inclusive, as a nineteenth series designated
"First Mortgage Bonds, 7.25% Series U due
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2021," herein sometimes called "2021 Series U Bonds," which 2021 Series U Bonds
have since been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twentieth Supplemental Indentures, inclusive, as a twentieth series designated
"First Mortgage Bonds, 7.50% Series V due 2002," herein sometimes called "2002
Series V Bonds," of which Twenty-Five Million Dollars ($25,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-First Supplemental Indentures, inclusive, as a
twenty-first series designated "First Mortgage Bonds, 5-3/8% Series W due 2023,"
herein sometimes called "2023 Series W Bonds," of which Ten Million Three
Hundred Thousand Dollars ($10,300,000) in principal amount are outstanding at
the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirty
Million Dollars ($30,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Second Supplemental Indentures, inclusive, as a twenty-second series
designated "First Mortgage Bonds, 6.27% Series X due 2008," herein sometimes
called "2008 Series X Bonds," of which Thirty Million Dollars ($30,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-Third Supplemental Indentures, inclusive, as a
twenty-third series designated "First Mortgage Bonds, 6.25% Series Y due 2024,"
herein sometimes called "2024 Series Y Bonds," of which Ten Million Five Hundred
Thousand Dollars ($10,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fourth Supplemental Indentures, inclusive, as a twenty-fourth series
designated "First Mortgage Bonds, 8.25% Series Z due 2004," herein sometimes
called "2004 Series Z Bonds," of which Twenty-Five Million Dollars ($25,000,000)
in principal amount are at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and
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amended by the First through the Twenty-Fifth Supplemental Indentures,
inclusive, as a twenty-fifth series designated "First Mortgage Bonds, Adjustable
Rate Series AA due 2030," herein sometimes called "2030 Series AA Bonds," of
which Twenty-Five Million Dollars ($25,000,000) in principal amount are
outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Sixteen
Million Dollars ($16,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fifth Supplemental Indentures, inclusive, as a twenty-sixth series
designated "First Mortgage Bonds, Adjustable Rate Series BB due 2030," herein
sometimes called "2030 Series BB Bonds," of which Sixteen Million Dollars
($16,000,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Sixth Supplemental Indentures, inclusive, as a twenty-seventh series
designated "First Mortgage Bonds, 6-7/8 Series CC due 2010," herein sometimes
called "2010 Series CC Bonds," of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Twenty-Seventh Supplemental Indentures, inclusive, as a
twenty-eighth series designated "First Mortgage Bonds, Adjustable Rate Series DD
due 2027," herein sometimes called "2027 Series DD Bonds," of which Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) in principal amount are
outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine
Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Eighth Supplemental Indentures,
inclusive, as a twenty-ninth series designated "First Mortgage Bonds, Adjustable
Rate Series EE due 2028," herein sometimes called "2028 Series EE Bonds," of
which Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Eighth Supplemental Indentures, inclusive, as a thirtieth series
designated "First Mortgage Bonds, Adjustable Rate Series FF due 2028," herein
sometimes called "2028 Series FF Bonds," of which
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Fifteen Million Dollars ($15,000,000) in principal amount are outstanding at the
date hereof; and
WHEREAS, the Original Indenture provides that, subject to certain
exceptions not presently relevant, such changes in or additions to the
provisions of the Indenture (the term "Indenture" and other terms used herein
having the meanings assigned thereto in the Original Indenture except as herein
expressly modified) may be made to add to the covenants and agreements of the
Company in the Indenture contained other covenants and agreements thereafter to
be observed by the Company; and to provide for the creation of any series of
Bonds, designating the series to be created and specifying the form and
provisions of the Bonds of such series as in the Indenture provided or
permitted; and
WHEREAS, the Indenture further provides that the Company and the Trustee
may enter into indentures supplemental to the Indenture to convey, transfer and
assign unto the Trustee and to subject to the lien of the Indenture additional
properties acquired by the Company; and
WHEREAS, the Company has entered into a Loan Agreement dated as of April
1, 1998 (the "Loan Agreement") with the New Jersey Economic Development
Authority (herein sometimes called the "EDA"), a public body corporate and
politic of the State of New Jersey, pursuant to which the proceeds of the
issuance by the EDA of Eighteen Million Dollars ($18,000,000) in aggregate
principal amount of its Natural Gas Facilities Revenue Bonds, Series 1998C (New
Jersey Natural Gas Company Project) (the "1998C EDA Bonds") are to be loaned
from time to time to the Company to finance a portion of the cost of the
construction of natural gas pipelines and auxiliary equipment throughout the
franchise portion of Morris County, New Jersey, which 1998C EDA Bonds are being
issued pursuant to the EDA Bond Indenture (as defined below); and
WHEREAS, the Company has duly determined to create a thirty-first series
of Bonds, to be known as "First Mortgage Bonds, Adjustable Rate Series GG due
2033," herein sometimes called "2032 Series GG Bonds," to be issued and
delivered (in conjunction with the assignment by the EDA of certain of its
rights under the Loan Agreement) to First Union National Bank, as trustee (the
"EDA Loan Trustee") pursuant to an indenture of trust dated as of April 1, 1998
(the "EDA Bond Indenture") between the EDA and the EDA Loan Trustee for the
benefit and security of the holders of the 1998C EDA Bonds, all as herein
provided, and to add to the covenants and agreements contained in the Indenture
the covenants and agreements hereinafter set forth; and
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Indenture and
pursuant to appropriate resolutions of its Board of Directors (including the
Executive Committee thereof), has duly resolved and determined to make, execute
and deliver to the Trustee a Twenty-Ninth Supplemental Indenture in the form
hereof for the purposes herein provided; and
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WHEREAS, all conditions and requirements necessary to make this
Twenty-Ninth Supplemental Indenture a valid, binding and legal instrument have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That NEW JERSEY NATURAL GAS COMPANY, by way of further assurance and in
consideration of the premises and of the acceptance by the Trustee of the trusts
hereby created and of One Dollar to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, and in order to secure the payment of principal of and any premium
which may be due and payable on and the interest on all Bonds at any time issued
and outstanding under the Indenture according to their tenor and effect, and the
performance and observance by the Company of all the covenants and conditions
herein and therein contained, has granted, bargained, sold, warranted, aliened,
remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, warrant, alien,
remise, release, convey, assign, transfer, mortgage, pledge, set over and
confirm, unto the party of the second part, and to its successors in the trust,
and to it and its assigns forever, and has granted and does hereby grant
thereunto a security interest in, all of the property, real, personal and mixed,
now owned by the Company and situated in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, or wherever situate (except property specifically excepted from the lien
of the Indenture by the terms of the Indenture) and also all of the property,
real, personal and mixed, hereafter acquired by the Company wherever situate
(except property specifically excepted from the lien of the Indenture by the
terms of the Indenture), including both as to property now owned and property
hereafter acquired, without in anywise limiting or impairing the enumeration of
the same, the scope and intent of the foregoing or of any general or specific
description contained in the Indenture, the following:
I. FRANCHISES
All and singular, the franchises, grants, permits, immunities, privileges
and rights of the Company owned and held by it at the date of the execution
hereof or hereafter acquired for the construction, maintenance, and operation of
the gas plants and systems now or hereafter subject to the lien hereof, as well
as all certificates, franchises, grants, permits, immunities, privileges, and
rights of the Company used or useful in the operation of the property now or
hereafter mortgaged hereunder, including all and singular the franchises,
grants, permits, immunities, privileges, and rights of the Company granted by
the governing authorities of any municipalities or other political subdivisions
and all renewals, extensions and modifications of said certificates, franchises,
grants, permits, privileges, and rights or any of them.
II. GAS DISTRIBUTION SYSTEMS AND RELATED PROPERTY
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All gas generating plants, gas storage plants and gas manufacturing plants
of the Company, all the buildings, erections, structures, generating and
purifying apparatus, holders, engines, boilers, benches, retorts, tanks,
instruments, appliances, apparatus, facilities, machinery, fixtures, and all
other property used or provided for use in the generation, manufacturing and
purifying of gas, together with the land on which the same are situated, and all
other lands and easements, rights-of-way, permits, privileges, and sites forming
a part of such plants or any of them or occupied, enjoyed or used in connection
therewith.
All gas distribution or gas transmission systems of the Company, all
buildings, erections, structures, generating and purifying apparatus, holders,
engines, boilers, benches, retorts, tanks, pipe lines, connections, service
pipes, meters, conduits, tools, instruments, appliances, apparatus, facilities,
machinery, fixtures, and all other property used or provided for use in the
construction, maintenance, repair or operations of such distribution or
transmission systems, together with all the certificates, rights, privileges,
rights-of-way, franchises, licenses, easements, grants, liberties, immunities,
permits of the Company, howsoever conferred or acquired, under, over, or upon
any private property or any public streets or highways within as well as without
the corporate limits of any municipal corporation. Without limiting the
generality of the foregoing, there are expressly included the gas distribution
or gas transmission systems located in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, and in the following municipalities in said State and Counties: Aberdeen
Township (formerly Matawan Township), Allenhurst Borough, City of Asbury Park,
Atlantic Highlands Borough, Avon Borough, Barnegat Light Borough, Barnegat
Township (formerly named Union Township), Bay Head Borough, Beach Haven Borough,
Beachwood Borough, Belmar Borough, Berkeley Township, Boonton Town, Boonton
Township, Bradley Beach Borough, Brick Township, Brielle Borough, Colts Neck
Township, Deal Borough, Denville Township, Dover Town, Dover Township,
Eagleswood Township, East Brunswick Township, Eatontown Borough, Englishtown
Borough, Fair Haven Borough, Farmingdale Borough, Franklin Township in Somerset
County, Freehold Borough, Freehold Township, Hanover Township, Harvey Cedars
Borough, Hazlet Township, Highlands Borough, Holmdel Township, Hopatcong
Borough, Howell Township, Interlaken Borough, Island Heights Borough, Jackson
Township, Jefferson Township, Keansburg Borough, Keyport Borough, Lacey
Township, Lakehurst Borough, Lakewood Township, Lavallette Borough, Lincoln Park
Borough, Little Egg Harbor Township, Little Silver Borough, Loch Arbour Village,
Long Beach Township, Long Branch City, Manalapan Township, Manasquan Borough,
Manchester Township, Mantoloking Borough, Marlboro Township, Matawan Borough,
Middletown Township, Milltown Borough, Mine Hill Township, Monmouth Beach
Borough, Monroe Township, Montville Township, Morris Plains Borough, Mount
Arlington Borough, Mount Olive Township, Mountain Lakes Borough, Neptune City
Borough, Neptune Township, Netcong Borough, New Brunswick City, North Brunswick
Township, Ocean Township in Monmouth County, Ocean Township in Ocean County,
Ocean Gate Borough, Oceanport Borough, Old
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Bridge Township (formerly named Madison Township), Parsippany-Troy Hills
Township, Pine Beach Borough, Point Pleasant Borough, Point Pleasant Beach
Borough, Randolph Township, Red Bank Borough, Rockaway Borough, Rockaway
Township, Roxbury Township, Rumson Borough, Sayreville Borough, Sea Bright
Borough, Sea Girt Borough, Seaside Heights Borough, Seaside Park Borough, Ship
Bottom Borough, Shrewsbury Borough, Shrewsbury Township, South Belmar Borough,
South Brunswick Township, South River Borough, South Toms River Borough, Spring
Lake Borough, Spring Lake Heights Borough, Stafford Township, Surf City Borough,
Tinton Falls Borough (formerly named New Shrewsbury Borough), Tuckerton Borough,
Union Beach Borough, Union Township, Victory Gardens Borough, Wall Township,
Washington Township in Burlington County, Washington Township in Morris County,
West Long Branch Borough, West Milford Township and Wharton Borough.
III. CONTRACTS
All of the Company's right, title and interest in and under all contracts,
licenses or leases for the purchase of gas, either in effect at the date of
execution hereof or hereafter made and any extension or renewal thereof.
TOGETHER WITH ALL AND SINGULAR the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Trust Estate, or any
part thereof, with the reversion or reversions, remainder and remainders, rents,
issues, income and profits thereof, and all the right, title, interest and claim
whatsoever, at law or in equity, which the Company now has or which it may
hereafter acquire in and to the Trust Estate and every part and parcel thereof.
TO HAVE AND TO HOLD the Trust Estate and all and singular the lands,
properties, estates, rights, franchises, privileges and appurtenances hereby
mortgaged, conveyed, pledged or assigned, or intended so to be, together with
all the appurtenances thereto appertaining, unto the Trustee and its successors
and assigns forever;
SUBJECT, HOWEVER, as to property hereby conveyed, to Permitted
Encumbrances;
BUT IN TRUST, NEVERTHELESS, under and subject to the terms and conditions
hereafter set forth, for the equal and proportionate use, benefit, security and
protection of each and every person and corporation who may be or become the
holders of the Bonds and coupons hereby secured, if any, without preference,
priority or distinction as to the lien or otherwise of one Bond or coupon over
or from the others by reason of priority in the issue or negotiation thereof, or
by reason of the date of maturity thereof, or otherwise (except as any sinking,
amortization, improvement, renewal or other analogous fund, established in
accordance with the provisions of the Indenture, may afford additional security
for the Bonds of any particular series and except as provided in Section 9.02 of
the Indenture), and for securing
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the observance and performance of all the terms, provisions and conditions of
the Indenture.
THIS INDENTURE FURTHER WITNESSETH, that the Company has agreed and
covenanted, and hereby does agree and covenant, with the Trustee and its
successors and assigns and with the respective holders from time to time of the
Bonds and coupons, or any thereof, as follows:
ARTICLE I.
CERTAIN AMENDMENTS OF INDENTURE
Section 1.1. The Original Indenture, as heretofore amended, be and it
hereby is further amended in the following respects, the section numbers
specified below being the sections of the Indenture in which such amendments
occur:
Section l.01. The following definition be and it hereby is added
immediately after the twenty-eighth sentence of Section 1.01B:
"'TWENTY-NINTH SUPPLEMENTAL INDENTURE' shall mean the Supplemental
Indenture dated as of April 1, 1998, supplemental to the Indenture."
Section 1.01. The following definition be and it hereby is added
immediately after the thirtieth sentence of Section 1.01F:
"'2033 SERIES GG BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series GG due 2033, issued hereunder."
Section 2.11. The following be and it hereby is added at the end of
Section 2.11:
"No charge except for taxes or governmental charges shall be made against
any holder of any 2033 Series GG Bond for the exchange, transfer or
registration of transfer thereof."
Section 8.08. The period at the end of the first paragraph of Section
8.08 be and it hereby is deleted and the following words and figures be and they
hereby are added thereto:
", and the 2033 Series GG Bonds shall be redeemed at the redemption price
specified in Section 10.74 and Section 10.77."
ARTICLE II.
2033 SERIES GG BONDS
Section 2.1. There shall be a thirty-first series of Bonds, known as
and entitled "First Mortgage Bonds, Adjustable Rate Series GG due 2033"
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or "First Mortgage Bonds, Adjustable Rate Series GG" (herein and in the
Indenture referred to as the "2033 Series GG Bonds"), and the form thereof shall
contain suitable provisions with respect to the matters hereinafter in this
Section specified and shall in other respects be substantially as set forth in
the preambles to the Original Indenture.
The aggregate principal amount of 2033 Series GG Bonds which may be
authenticated and delivered and outstanding under the Indenture is Eighteen
Million Dollars ($18,000,000).
The 2033 Series GG Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2033 Series GG Bonds shall bear interest at the minimum rate per annum
necessary to yield interest in amounts sufficient, when taken together with
other amounts available therefor under the EDA Bond Indenture, to pay the
interest from time to time payable on the 1998C EDA Bonds, computed on the same
basis as the 1998C EDA Bonds (interest on overdue principal and premium, if any,
and, to the extent legally enforceable, interest, being at the rate of six
percent (6%) per annum), but in no event shall the interest rate on the 2033
Series GG Bonds exceed ten percent (10%) per annum; and the 2033 Series GG Bonds
shall mature on April 1, 2033, subject to prior redemption as described herein.
The amount of "annual interest charges" on the 2033 Series GG Bonds, within the
meaning of any provision of the Indenture requiring a determination of said
amount as a condition to the issuance of any Bonds thereunder (including,
without limitation, the 2033 Series GG Bonds), shall mean the amount calculated
by applying to the 2033 Series GG Bonds the interest rate of ten percent (10%)
per annum; provided, however, that if the rate of interest on the 1998C EDA
Bonds shall have become fixed and determined at a per annum rate lower than ten
percent (10%) for a period not less than the remaining maturity of said 1998C
EDA Bonds (whether said 1998C EDA Bonds shall mature at their stated maturity,
by earlier redemption or otherwise), then said lower rate shall be used to
determine the amount of the "annual interest charges" on the 2033 Series GG
Bonds.
The 2033 Series GG Bonds shall be in the form of registered Bonds without
coupons of denominations of Five Thousand Dollars ($5,000) and any integral
multiple thereof which may be authorized by the Company, the issue of a
registered Bond without coupons in any such denomination to be conclusive
evidence of such authorization. The 2033 Series GG Bonds shall be dated as
provided in Section 2.05 of the Indenture. All 2033 Series GG Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2033 Series GG Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1998C EDA Bonds; provided, that the obligation of the Company to
make payments with respect to the principal of, premium, if any, and interest on
the 2033 Series GG Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that at the time any such payment shall
be due, the
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then due principal of, premium, if any, and interest on any of the 1998C EDA
Bonds shall have been fully or partially paid from payments made by the Company
under the Loan Agreement or from other moneys expressly available therefor in
the principal and interest account for the 1998C EDA Bonds under the EDA Bond
Indenture or, as far as principal is concerned, reduced by the principal amount
of any of the 1998C EDA Bonds deemed paid pursuant to Article X of the EDA Bond
Indenture. The principal of and the premium, if any, and interest on the 2033
Series GG Bonds shall be payable at the principal office of the Trustee, in the
City of Chicago, Illinois, or, at the option of the Company, at the "Principal
Office" (as that term is defined in the EDA Bond Indenture) of the EDA Loan
Trustee, in any coin or currency of the United States of America which at the
time of payment shall be legal tender for the payment of public and private
debts.
Notwithstanding any other provision of the Indenture or of the 2033 Series
GG Bonds, payments of the principal of and the premium, if any, and interest on
any 2033 Series GG Bond may be made directly to the registered holder thereof
without presentation or surrender thereof or the making of any notation thereon
if there shall be filed with the Trustee a Certificate of the Company to the
effect that such registered holder (or the person for whom such registered
holder is a nominee) and the Company have entered into a written agreement that
payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2033 Series GG Bond, such registered
holder will, at its election, either endorse thereon (or on a paper annexed
thereto) the principal amount thereof redeemed and the last date to which
interest has been paid thereon or make such Bond available to the Company at the
principal office of the Trustee for the purpose of making such endorsement
thereon.
The 2033 Series GG Bonds shall be subject to redemption at the option of
the Company or otherwise, in the manner provided in the applicable provisions of
Article Ten of the Indenture, as amended by Article IV of this Supplemental
Indenture.
The 2033 Series GG Bonds shall be excluded from the benefits of, and shall
not be subject to redemption through the operation of, a Mandatory Sinking Fund
pursuant to Section 11.02 of the Indenture and shall also be excluded from the
benefits of the covenants of Section 9.08 and Section 11.01 of the Indenture.
Notwithstanding the provisions of Section 10.04 or any other provision of
the Indenture, the selection of 2033 Series GG Bonds to be redeemed shall, in
case fewer than all of the outstanding 2033 Series GG Bonds are to be redeemed,
be made by the Trustee pro rata (to the nearest multiple of Five Thousand
Dollars ($5,000)) among the registered holders of the 2033 Series GG Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2033 Series GG Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2033 Series GG
Bonds).
-13-
<PAGE> 15
The definitive 2033 Series GG Bonds may be issued in the form of engraved
Bonds or Bonds printed or lithographed on steel engraved borders or Bonds in
typed form on normal bond paper. Subject to the foregoing provisions of this
Section and the provisions of Section 2.11 of the Indenture, all definitive 2033
Series GG Bonds shall be fully exchangeable for other Bonds of the same series,
of like aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same. The Company will execute, and the Trustee shall
authenticate and deliver, registered Bonds without coupons, whenever the same
shall be required for any such exchange.
Section 2.2. 2033 Series GG Bonds in the aggregate principal amount
of Eighteen Million Dollars ($18,000,000) may forthwith upon the execution and
delivery of this Supplemental Indenture, or from time to time thereafter, be
executed by the Company and delivered to the Trustee, and shall thereupon be
authenticated and delivered by the Trustee upon compliance by the Company with
the provisions of Articles Four, Five or Six of the Indenture, without awaiting
the filing or recording of this Supplemental Indenture. No additional 2033
Series GG Bonds shall be issued under Article Four, Five or Six without the
consent in writing of the holders of all the outstanding 2033 Series GG Bonds.
ARTICLE III
REDEMPTION OF THE 2033 SERIES GG BONDS
Section 3.1. The following Section 10.77 and Section 10.78 be and
they hereby are added to Article Ten of the Indenture:
"Section 10.77. The 2033 Series GG Bonds shall be subject to mandatory
redemption as follows: payments of principal of and premium on the 2033 Series
GG Bonds shall be made to the EDA Loan Trustee to redeem 2033 Series GG Bonds in
such amounts as shall be necessary, in accordance with the provisions of the
Loan Agreement, to provide funds under the Loan Agreement to (a) make, when due,
payment at maturity (including, without limitation, maturity upon acceleration
of the 1998C EDA Bonds) and (b) make, when due, any prepayment required by the
Loan Agreement in connection with any mandatory or optional redemption of 1998C
EDA Bonds; provided, however, that the obligation of the Company to make any
redemption payments under this Section shall be fully or partially, as the case
may be, satisfied and discharged to the extent that at any time such payment
shall be due, the then due payment at maturity or redemption payment on any of
the 1998C EDA Bonds shall have been fully or partially made from payments made
by the Company under the Loan Agreement or from other moneys expressly available
therefor in a redemption account or subaccount for the 1998C EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 1998C EDA Bonds deemed paid pursuant to Article X of the
EDA Bond Indenture. Terms used and not defined in this
-14-
<PAGE> 16
Section shall have the respective meanings given to them in the Twenty-Ninth
Supplemental Indenture dated as of April 1, 1998."
"Section 10.78. In the case of the redemption of 2033 Series GG Bonds
out of moneys deposited with the Trustee pursuant to Section 8.08, such 2033
Series GG Bonds shall, upon compliance with provisions of Section 10.04, and
subject to the provisions of Section 2.1 of the Twenty-Ninth Supplemental
Indenture, be redeemable at the principal amounts thereof, together with
interest accrued thereon to the date fixed for redemption, without premium."
ARTICLE IV
MISCELLANEOUS
Section 4.1. The Company is lawfully seized and possessed of all the
real estate, franchises and other property described or referred to in the
Indenture (except properties released from the lien of the Indenture pursuant to
the provisions thereof) as presently mortgaged, subject to the exceptions stated
therein, such real estate, franchises and other property are free and clear of
any lien prior to the lien of the Indenture except as set forth in the Granting
Clauses of the Indenture and the Company has good right and lawful authority to
mortgage the same as provided in and by the Indenture.
Section 4.2. The Trustee assumes no duties, responsibilities or
liabilities by reason of this Supplemental Indenture other than as set forth in
the Indenture, and this Supplemental Indenture is executed and accepted by the
Trustee subject to all the terms and conditions of its acceptance of the trust
under the Indenture, as fully as if said terms and conditions were herein set
forth at length.
Section 4.3. The terms used in this Supplemental Indenture shall have
the meanings assigned thereto in the Indenture. Reference by number in this
Supplemental Indenture to Articles or Sections shall be construed as referring
to Articles or Sections contained in the Indenture, unless otherwise stated.
Section 4.4. As amended and modified by this Supplemental Indenture,
the Indenture is in all respects ratified and confirmed and the Indenture and
this Supplemental Indenture shall be read, taken and construed as one and the
same instrument.
Section 4.5. Neither the approval by the Board of Public Utilities of
the State of New Jersey of the execution and delivery of this Supplemental
Indenture nor the approval by said Board of the issue of any Bonds under the
Indenture shall in any way be construed as the approval by said Board of any
other act, matter or thing which requires approval of said Board under the laws
of the State of New Jersey; nor shall approval by said Board of the issue of any
Bonds under the Indenture bind said Board or any other public body or authority
of the State of New Jersey having jurisdiction in the premises in any future
application for the issue of Bonds under the Indenture or otherwise.
-15-
<PAGE> 17
Section 4.6. This Supplemental Indenture may be executed in any
number of counterparts and all said counterparts executed and delivered each as
an original shall constitute but one and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
-16-
<PAGE> 18
NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT HAS READ THIS
TWENTY-NINTH SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY FILLED-IN TRUE
COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS TWENTY-NINTH SUPPLEMENTAL
INDENTURE ON THE DATE CONTAINED IN ITS ACKNOWLEDGMENT HEREOF.
IN WITNESS WHEREOF, NEW JERSEY NATURAL GAS COMPANY, party of the first
part, has caused these presents to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and HARRIS TRUST AND
SAVINGS BANK, party of the second part, in evidence of its acceptance of the
trust hereby created, has caused these presents to be signed in its corporate
name by one of its Vice Presidents and its corporate seal to be hereunto affixed
and attested by its Secretary or one of its Assistant Secretaries.
NEW JERSEY NATURAL GAS COMPANY
By
Name: Timothy C. Hearne
Title: Senior Vice
President, Financial and Administrative Services
(Corporate Seal)
ATTEST:
- ------------------------------------
Oleta J. Harden
Secretary
-17-
<PAGE> 19
Signed, sealed and delivered by NEW JERSEY NATURAL GAS COMPANY in the presence
of:
- ------------------------------------
Name:
- ------------------------------------
Name:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By
Name: J. Bartolini
Title: Vice President
[Corporate Seal]
ATTEST:
- ------------------------------------
Name: M. Onischak
Title: Assistant Secretary
Signed, sealed and delivered by HARRIS
TRUST AND SAVINGS BANK in the
presence of:
- ------------------------------------
Name:
- ------------------------------------
Name:
-18-
<PAGE> 20
STATE OF NEW JERSEY )
) SS:
COUNTY OF MONMOUTH )
BE IT REMEMBERED that on this _____ day of April 1998, before me, the
subscriber, an Attorney-at-Law of the State of New Jersey, and I hereby certify
that I am such an Attorney-at-Law as witness my hand, personally appeared Oleta
J. Harden to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is the Secretary of NEW
JERSEY NATURAL GAS COMPANY, the grantor or mortgagor in the foregoing
Supplemental Indenture named; that she well knows the seal of said corporation;
that the seal affixed to said Supplemental Indenture is the corporate seal of
said corporation, and that it was so affixed in pursuance of resolutions of the
Board of Directors (including the Executive Committee of said Board) of said
corporation; that Timothy C. Hearne is a Senior Vice President, Financial and
Administrative Services of said corporation; that she saw said Timothy C.
Hearne, as such Senior Vice President, Financial and Administrative Services,
affix said seal thereto, sign and deliver said Supplemental Indenture, and heard
him declare that he signed, sealed and delivered the same as the voluntary act
and deed of said corporation, in pursuance of said resolutions, and that this
deponent signed her name thereto, at the same time, as attesting witness.
--------------------------------
Oleta J. Harden
Secretary
Subscribed and sworn to before me,
an Attorney-at-Law of the State of
New Jersey, at Wall, New Jersey,
the day and year aforesaid.
- ------------------------------------
Name:
Attorney-at-Law of the
State of New Jersey
-19-
<PAGE> 21
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
BE IT REMEMBERED that on this ____ day of April 1998, before me, the
subscriber, a Notary Public of the State of Illinois, personally appeared M.
Onischak to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is an Assistant Secretary
of HARRIS TRUST AND SAVINGS BANK, the grantee or mortgagee and trustee in the
foregoing Supplemental Indenture named; that she well knows the seal of said
corporation; that the seal affixed to said Supplemental Indenture is the
corporate seal of said corporation, and that it was so affixed in pursuance of a
resolution of the Board of Directors of said corporation; that J. Bartolini is a
Vice President of said corporation; that she saw said J. Bartolini as such Vice
President affix said seal thereto, sign and deliver said Supplemental Indenture,
and heard said J. Bartolini declare that she signed, sealed and delivered the
same as the voluntary act and deed of said corporation, in pursuance of said
resolution, and that this deponent signed her name thereto, at the same time, as
attesting witness.
---------------------------------
Name: M. Onischak
Title: Assistant Secretary
Subscribed and sworn to before
me a Notary Public of the State
of Illinois at Chicago, the day
and year aforesaid.
- ------------------------------------
Notary Public of the State of Illinois
[SEAL]
-20-
<PAGE> 1
EXHIBIT 4-6B
SECOND AMENDMENT TO LETTER AGREEMENT
SECOND AMENDMENT dated as of September 30, 1998 (this "Amendment") to
Letter Agreement dated as of August 25, 1996 ( the "Agreement") by and between
NEW JERSEY RESOURCES CORPORATION (the "Borrower") and SOCIETE GENERALE, NEW YORK
BRANCH (the "Bank"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to such terms in the Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement, the Bank has provided the Borrower
with a revolving credit facility in the amount of U.S. $10,000,000; and
WHEREAS, the Borrower and the Bank wish to amend the Agreement as
herein provided;
NOW, THEREFORE, the parties hereto agree as follows:
I. Amendment to the Agreement
On the Amendment Effective Date (as hereinafter defined), the Agreement
shall be amended by deleting the definition of the term "Termination Date" in
Section 1.1 thereof and inserting the following in lieu thereof:
" "Termination Date" means September 30, 1999 or the earlier date of
termination in whole of the Commitment pursuant to Section 3.2."
II. Effectiveness
This Amendment shall become effective on the date (the "Amendment
Effective Date") when (i) this Amendment shall have been signed by the parties
hereto and (ii) the Borrower shall have delivered to the Bank (a) a new
Promissory Note (the "New Note") in the form of Exhibit A attached hereto, duly
executed on its behalf, (b) an opinion of the General Counsel of the Borrower,
in form and substance satisfactory to the Bank, confirming the authority for the
Borrower to execute and deliver this Amendment and the New Note and to obtain
Advances from the Bank to the Termination Date, as amended by this Amendment and
(c) a certificate from the Secretary or Assistant Secretary of the Borrower as
to the incumbency of the persons who are authorized to execute and deliver this
Amendment and the New Note on its behalf and to request Advances pursuant to the
Agreement.
<PAGE> 2
III. Representations and Warranties
In order to induce the Bank to amend the Agreement as provided for in this
Amendment, the Borrower confirms, reaffirms and restates its representations and
warranties set forth in the Agreement.
IV. Reference to and Effect on the Agreement
4.1 Upon the effectiveness of this Amendment, (i) each reference in the
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import shall mean and be a reference to the Agreement as amended hereby and (ii)
each reference in the Agreement to "the Note" shall be deemed to be a reference
to the New Note.
4.2 Except as specifically amended above, all of the terms of the
Agreement shall remain unchanged and in full force and effect.
4.3 The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of the
Agreement.
V. Governing Law
This Amendment and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
NEW JERSEY RESOURCES CORPORATION
By:______________________
Name:
Title:
SOCIETE GENERALE,
NEW YORK BRANCH
By:_______________________
Name:
Title:
2
<PAGE> 3
EXHIBIT A
PROMISSORY NOTE
New York, New York
$10,000,000 September __ , 1996
FOR VALUE RECEIVED, the undersigned, NEW JERSEY RESOURCES CORPORATION (the
"Borrower"), unconditionally promises to pay to the order of SOCIETE GENERALE,
NEW YORK BRANCH (the "Bank") at the Bank's office located at 1221 Avenue of the
Americas, New York, New York 10020, in immediately available funds, on the dates
and in the manner set forth in the Agreement (as defined below), the principal
sum of Ten Million Dollars (U.S. $10,000,000) or the unpaid principal amount of
all Advances made by the Bank to the Borrower made pursuant to this promissory
note and the Agreement, whichever is less.
The Borrower further promises to pay interest (computed for the actual
number of days elapsed on the basis of a year of 360 days) in like money and
funds on the daily outstanding balance of each Advance for the period commencing
on the date of such Advance until the Advance is repaid in full, at such rate
and in the manner set forth in the Agreement.
All payments of principal of an interest on this promissory note shall be
made by the Borrower not later than 12:00 noon (New York time) on the date when
due to the Bank at its office located on the date hereof at 1221 Avenue of the
Americas, New York New York 10020 in lawful money of the United States of
America, in immediately available funds without setoff, deduction or
counterclaim and free and clear of any present of future taxes, levies, imposts,
duties, fees, assessments or other charges. If any day on which a payment is due
hereunder is not a business day, which for purposes of this promissory note
shall mean a day other than Saturday or Sunday or other than a day on which
commercial banks in New York City are authorized or required to close, then such
payment shall be due on the following business day and such additional time
shall be included in the calculation of interest.
The Borrower agrees to pay costs of collection (including reasonable legal
fees and disbursements of counsel) if default is made in the payment of the
principal of or interest on this promissory note.
This promissory note is the grid note referred to in the Credit Agreement
dated as of August 25, 1996, as amended by the First Amendment thereto dated as
3
<PAGE> 4
of September __, 1997 and the Second Amendment thereto dated as of September 30,
1998 (said Credit Agreement, as so amended, and as it may hereafter be amended,
supplemented or otherwise modified from time to time, the "Agreement"), between
the Borrower and the Bank, which provides for the prepayment of this note on
certain events, the acceleration of its maturity and other terms and conditions
relating to this note, all of which are herein incorporated by reference.
The Borrower hereby irrevocably submits to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in New York City in
any action or proceeding arising out of or relating to this promissory note, and
hereby consents that personal jurisdiction over the Borrower may be obtained by
mailing a summons to the Borrower by registered mail or certified mail, return
receipt requested, within or without such court's jurisdiction, or by personal
service, provided a reasonable time for appearance is allowed. The Borrower
hereby waives all objections as to venue, inconvenient forum and the like. The
Borrower hereby waives trial by jury in any legal proceeding arising out of or
relating to this promissory note.
Presentment, demand, protest and notices of any kind with respect to this
promissory note are hereby expressly waived by the Borrower.
The promissory note shall be governed by and construed in accordance with
the laws of the State of New York.
NEW JERSEY RESOURCES CORPORATION
By: SPECIMEN ONLY - DO NOT SIGN
-------------------------------------
Name:
Title:
4
<PAGE> 1
EXHIBIT 4-7B
NEW JERSEY RESOURCES CORPORATION
AMENDMENT TO CREDIT AGREEMENT
This Amendment dated as of January 31, 1998 (this "Amendment"), is entered into
between New Jersey Resources Corporation (the "Borrower") and PNC Bank, National
Association, (the "Bank").
RECITALS
A. The Borrower and the Bank are parities to a certain Revolving Credit
Agreement and Term Loan Agreement, dated as of December 20, 1990, which has
heretofore amended (as amended, the "Loan Agreement").
B. The Loan Agreement provides for certain loans to the Borrower and, as
evidence of the loans, the Borrower has delivered its Revolving Credit
Promissory Note, dated December 20, 1990 (the "Note") to the Bank, in the
original principal amount of $20,000,000.00.
C. The Borrower and the Bank wish to amend the Loan Agreement and the Note as
set forth in this Amendment.
D. Now, therefore, in consideration of the premises and the mutual agreements
contained herein, the parties agree to amend the Loan Agreement and the
Note on the following terms and conditions.
1. DEFINED TERMS. Unless otherwise defined in this Amendment, terms defined in
the Loan Agreement shall be used herein with their defined meanings.
2. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is amended by:
(a) Section 1.1 Definition and Interpretation, "Termination Date" is
deemed amended to substitute as the relevant date "January 31, 2000"
(b) Bank hereby waives the sixty (60) days' notice requirement of Section
3.4 (Extension of Termination Date).
3. NOTE. The Borrower and the Bank hereby agree that the Note is deemed
amended to incorporate the amendments to the Loan Agreement as to amount
and term of the Note, without the necessity of replacing said Note and that
each reference to the "note" in the Loan Agreement and any document
referred to therein shall refer to the Note as deemed amended hereby.
<PAGE> 2
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into
this Amendment, the Borrower hereby represents and warrants to the Bank as
follows:
(a) The representations and warranties contained in Section 8 of the Loan
Agreement are true and correct on and as of the date of this Agreement
and, upon the Effective Date hereof and after giving effect hereto, no
Event of Default or unmatured Event of Default will be in existence or
will occur as a result of giving effect hereto.
(b) The execution, delivery and performance of this Amendment will not
violate any provision of any law or regulation, or of any writ or
decree of any court or governmental instrumentality, or of the
Undersigned's articles of incorporation or by-laws.
(c) The Borrower has the power to execute, deliver and perform this
Amendment and has taken all necessary corporate action to authorize
the execution, and performance of this Amendment and the performance
of the Loan Agreement and the note as amended hereby.
(d) The execution, delivery and performance of this Amendment does not
require the consent of any other party or the consent, license,
approval or authorization of, or registration or declaration with, any
governmental body, authority, bureau or agency and this amendment and
the Loan Agreement and the Note as amended by the Amendment.
constitute valid obligations of the Borrower, legally binding, upon it
and enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditor's rights.
5. CONDITIONS PRECEDENT. This Amendment shall become effective (the "Effective
Date") upon the satisfaction of the following conditions precedents:
(a) This Amendment shall have been duly executed and delivered by the
Borrower and the Bank.
(b) All proceedings required to be taken by the Borrower in connection
with the transactions contemplated by this Amendment shall be
satisfactory in form and substance to the Bank and its counsel, and
the Bank shall have received such counterpart originals or certified
or other copies of such documents as the Bank may reasonably request.
6. GENERAL.
(a) As herein amended or modified, the Loan Agreement shall remain in full
force and effect and are hereby ratified, approved and confirmed in
all respects.
<PAGE> 3
(b) After the date hereof, all references in the Loan Agreement, any
collateral document and the Note to the "Loan Agreement," "Agreement"
or "Note" shall refer to the Loan Agreement and the Note as herein
amended or modified.
(c) This Amendment shall be binding upon the Borrower, the Bank and their
respective successors and assigns and shall inure to the benefit of
the Borrower and the Bank.
(d) This Amendment may be executed in any number of counterparts. This
Amendment shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: Edward M. Tessalone
Title: Vice President
NEW JERSEY RESOURCES CORPORATION
By: Glenn C. Lockwood
<PAGE> 1
EXHIBIT 4-9E
FIFTH AMENDMENT AGREEMENT
FIFTH AMENDMENT AGREEMENT dated as of September 14, 1998 between NEW JERSEY
RESOURCES CORPORATION (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK (the "Bank").
W I T N E S S E T H:
WHEREAS, Company and Bank are parties to that certain Credit Agreement
dated as of August 1, 1991, as amended by a First Amendment Agreement dated as
of September 1, 1993, a Second Amendment Agreement dated as of January 9, 1995,
a Third Amendment Agreement dated as of July 1, 1996 and a Fourth Amendment
Agreement dated as of August 30, 1997 (as so amended, the "Agreement"); and
WHEREAS, Company and Bank wish to further amend the Agreement in certain
respects:
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Except as otherwise specified herein, capitalized terms
used herein and defined in the Agreement shall have the respective meanings
ascribed thereto in the Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Agreement
shall from and after the effective date hereof refer to the Agreement as amended
hereby.
2. Amendment. The definition in Section 1.1 of "Termination Date" is hereby
amended by deleting the date "October 1, 1998" and inserting the date "October
1, 1999" in its place.
3. Representations. Company hereby represents and warrants to Bank that:
(A) the representations and warranties set forth in Section 5 of the
Agreement are true and correct in all respects as if made on the date
hereof and as if each reference therein to the Agreement were a
reference to the Agreement as amended by this Fourth Amendment
Agreement;
(B) no Event of Default specified in Section 7 of the Agreement has
occurred and is continuing; and
(C) the making and performance by the Company of this Fourth Amendment
Agreement have been duly authorized by all necessary corporate action.
4. Miscellaneous.
(A) Except as expressly amended hereby, the Agreement shall remain
unmodified and in full force and effect.
<PAGE> 2
(B) The provisions of Section 2 of this Fourth Amendment Agreement are
hereby incorporated into and made a part of the Agreement as if fully
set forth therein.
(C) This Fifth Amendment Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Fifth
Amendment Agreement by signing any such counterpart.
(D) This Fifth Amendment Agreement shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NEW JERSEY RESOURCES CORPORATION MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By ________________________ By ________________________
Title: Title:
<PAGE> 3
CERTIFICATE OF INCUMBENCY
NEW JERSEY RESOURCES CORPORATION
I, Oleta J. Harden, Secretary, do hereby certify that the persons listed
below have been duly elected to the offices set forth opposite his or her name
and have held such offices at all times since January 1, 1997 through and
including the date hereof, and the signature appearing opposite his or her name
is his or her genuine signature:
Name Title Signature
Laurence M. Downes Chairman, President and Chief
Executive Officer
Glenn C. Lockwood Senior Vice-President and
Chief Financial Officer
Oleta J. Harden Senior Vice-President and
Secretary
Dated: September 8, 1997
<PAGE> 1
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statistics 22
Operating Statistics and Stock History 23
Management's Discussion and Analysis of Financial 24
Condition and Results of Operations
Independent Auditors' Report 30
Consolidated Statements of Income 31
Consolidated Statements of Common Stock Equity 31
Consolidated Statements of Cash Flows 32
Consolidated Balance Sheets 33
Consolidated Statements of Capitalization 34
Notes to Consolidated Financial Statements 35
</TABLE>
[New Jersey Resources LOGO]
21
<PAGE> 2
[New Jersey Resources Corporation LOGO]
CONSOLIDATED FINANCIAL STATISTICS
(Thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal years ended September 30, 1998 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
Operating Revenues $ 710,342 $ 696,544 $ 554,753 $ 460,179 $ 501,961 $ 451,168
------------------------------------------------------------------------------------
Operating Expenses
Gas purchases 483,715 465,552 327,991 251,086 286,352 251,856
Operation and maintenance 77,990 79,408 75,729 64,819 69,080 62,025
Depreciation and amortization 27,835 25,797 23,229 23,022 21,236 21,237
Energy and other taxes 36,758 43,240 49,357 45,900 53,670 52,615
Federal income taxes 18,945 20,764 18,671 15,967 16,569 13,726
State income taxes 4,477 321 176 117 74 97
------------------------------------------------------------------------------------
Total operating expenses 649,720 635,082 495,153 400,911 446,981 401,556
====================================================================================
Operating Income 60,622 61,462 59,600 59,268 54,980 49,612
Other income, net 2,353 566 68 362 30 713
Interest charges, net 19,633 20,513 21,001 24,082 21,619 20,130
------------------------------------------------------------------------------------
Income before Preferred Stock Dividends 43,342 41,515 38,667 35,548 33,391 30,195
Preferred stock dividends 1,585 1,591 1,599 1,629 1,662 2,022
------------------------------------------------------------------------------------
Income from Continuing Operations 41,757 39,924 37,068 33,919 31,729 28,173
Loss from discontinued operations, net -- -- -- (9,134) 545 (1,011)
Cumulative effect of change in accounting -- -- -- -- 721 --
------------------------------------------------------------------------------------
Net Income $ 41,757 $ 39,924 $ 37,068 $ 24,785 $ 32,995 $ 27,162
====================================================================================
Capitalization
Common stock equity $ 290,804 $ 278,436 $ 273,921 $ 258,919 $ 250,163 $ 230,313
Redeemable preferred stock 20,640 20,760 20,880 21,004 22,070 22,340
Long-term debt 326,741 291,407 303,363 352,227 323,590 310,996
------------------------------------------------------------------------------------
Total Capitalization $ 638,185 $ 590,603 $ 598,164 $ 632,150 $ 595,823 $ 563,649
====================================================================================
Property, Plant and Equipment
Utility plant $ 895,321 $ 855,375 $ 811,484 $ 736,434 $ 691,757 $ 637,580
Accumulated depreciation (237,150) (216,302) (196,354) (182,080) (168,299) (155,618)
Real estate properties 24,490 22,897 45,010 49,509 104,309 102,369
Accumulated depreciation (2,664) (2,610) (4,942) (7,728) (12,602) (10,660)
Oil and gas properties -- -- -- -- 63,224 64,576
Accumulated amortization -- -- -- -- (38,012) (32,597)
------------------------------------------------------------------------------------
Property, Plant and Equipment, Net $ 679,997 $ 659,360 $ 655,198 $ 596,135 $ 640,377 $ 605,650
====================================================================================
Capital Expenditures
Utility plant $ 42,847 $ 46,193 $ 48,216 $ 47,286 $ 54,506 $ 53,420
Real estate properties 1,609 840 7,862 5,214 2,619 2,869
Equity investments and other 9,500 1,430 2,937 5,259 462 296
Oil and gas properties -- -- -- 1,250 1,517 9,216
------------------------------------------------------------------------------------
Total Capital Expenditures $ 53,956 $ 48,463 $ 59,015 $ 59,009 $ 59,104 $ 65,801
====================================================================================
Total Assets $ 943,018 $ 879,061 $ 855,187 $ 826,364 $ 797,347 $ 738,662
====================================================================================
COMMON STOCK DATA
Earnings per share from continuing
operations - Basic $ 2.35 $ 2.22 $ 2.06 $ 1.93 $ 1.86 $ 1.70
Earnings per share from continuing
operations - Diluted $ 2.33 $ 2.21 $ 2.05 $ 1.93 $ 1.85 $ 1.69
Earnings per share - Basic $ 2.35 $ 2.22 $ 2.06 $ 1.41 $ 1.93 $ 1.64
Earnings per share - Diluted $ 2.33 $ 2.21 $ 2.05 $ 1.41 $ 1.93 $ 1.63
Dividends declared per share $ 1.64 $ 1.60 $ 1.55 $ 1.52 $ 1.52 $ 1.52
Payout ratio* 70% 72% 75% 79% 82% 90%
Market price at year end $ 35.63 $ 32.38 $ 28.00 $ 25.88 $ 21.13 $ 29.13
Dividend yield at year end 4.6% 4.9% 5.6% 5.9% 7.2% 5.2%
Price-earnings ratio 15 15 14 18 11 18
Book value per share $ 16.33 $ 15.57 $ 15.15 $ 14.55 $ 14.46 $ 13.69
Market to book ratio at year end 2.2 2.1 1.8 1.8 1.5 2.1
Shares outstanding at year end 17,811 17,880 18,084 17,793 17,303 16,820
Average shares outstanding - Basic 17,798 18,001 18,030 17,605 17,096 16,607
Average shares outstanding - Diluted 17,894 18,052 18,052 17,607 17,107 16,623
Return on average equity* 14.2% 13.9% 13.4% 12.8% 12.7% 12.2%
====================================================================================
</TABLE>
*Continuing operations
22
<PAGE> 3
[NJ Natural Gas LOGO]
OPERATING STATISTICS
<TABLE>
<CAPTION>
Fiscal years ended September 30, 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands)
Residential $307,994 $317,500 $311,081 $282,015 $308,196 $284,638
Commercial and other 60,746 70,315 76,649 76,483 87,958 81,285
Firm transportation 19,500 15,586 13,316 4,864 255 --
-------------------------------------------------------------------------
Total residential and commercial 388,240 403,401 401,046 363,362 396,409 365,923
Interruptible 8,360 7,996 7,438 10,869 15,645 21,115
-------------------------------------------------------------------------
Total system 396,600 411,397 408,484 374,231 412,054 387,038
Off-system 169,903 141,481 65,904 52,431 68,267 49,549
Appliance service revenues 9,468 8,712 6,241 5,586 4,886 4,516
-------------------------------------------------------------------------
Total Operating Revenues $575,971 $561,590 $480,629 $432,248 $485,207 $441,103
=========================================================================
Throughput (Bcf)
Residential 35.2 37.0 40.1 33.9 38.5 36.3
Commercial and other 7.4 8.7 10.3 10.3 11.9 11.1
Firm transportation 6.6 5.5 4.5 1.6 .1 --
-------------------------------------------------------------------------
Total residential and commercial 49.2 51.2 54.9 45.8 50.5 47.4
Interruptible 10.6 9.7 9.8 12.4 8.2 7.6
-------------------------------------------------------------------------
Total system 59.8 60.9 64.7 58.2 58.7 55.0
Off-system and capacity release 104.9 83.2 61.6 62.6 46.7 20.8
-------------------------------------------------------------------------
Total Throughput 164.7 144.1 126.3 120.8 105.4 75.8
=========================================================================
Customers at Year End
Residential 346,605 343,520 338,906 329,237 318,003 309,215
Commercial and other 22,088 22,650 21,897 22,199 21,938 21,112
Firm transportation 16,495 7,647 2,002 880 27 --
-------------------------------------------------------------------------
Total residential and commercial 385,188 373,817 362,805 352,316 339,968 330,327
Interruptible 49 45 40 38 37 36
Off-system and capacity release 43 53 29 23 17 4
-------------------------------------------------------------------------
Total Customers at Year End 385,280 373,915 362,874 352,377 340,022 330,367
=========================================================================
Interest Coverage Ratio 4.16 3.90 3.96 3.45 3.63 3.50
-------------------------------------------------------------------------
Average Therm Use per Customer
Residential 1,016 1,061 1,184 1,031 1,211 1,175
Commercial 3,344 3,979 4,682 4,636 5,287 5,013
Degree Days 4,354 4,787 5,715 4,877 5,064 5,048
Weather as a Percent of Normal 89% 97% 115% 98% 102% 103%
Maximum Day Sendout (Bcf) .4 .5 .5 .5 .5 .4
Number of Employees 755 789 827 827 814 796
=========================================================================
</TABLE>
[New Jersey Resources LOGO]
TWO YEAR STOCK HISTORY
The range of high and low sales prices as reported in The Wall Street Journal
and dividends paid per share were as follows:
<TABLE>
<CAPTION>
1998 1997 Dividends Paid
------------------------------------------------------------------------
Fiscal Quarter HIGH LOW High Low 1998 1997
<S> <C> <C> <C> <C> <C> <C>
FIRST $41 1/2 $31 15/16 $29 7/8 $26 3/4 $.40 $.39
SECOND $39 3/16 $34 3/4 $30 1/2 $28 1/8 $.41 $.40
THIRD $40 1/16 $34 3/16 $33 5/8 $28 1/4 $.41 $.40
FOURTH $37 3/16 $32 7/8 $33 7/8 $31 $.41 $.40
</TABLE>
23
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS New Jersey Resources Corporation
RESULTS OF OPERATIONS
CONSOLIDATED
Net income increased 5% to $41.8 million in 1998, compared with $39.9 million in
1997 and $37.1 million in 1996. The increase each year was primarily
attributable to continued profitable customer growth in New Jersey Natural Gas
Company (NJNG), the principal subsidiary of New Jersey Resources
Corporation (the Company).
Basic earnings per share increased 6% to $2.35 in 1998, compared with $2.22 in
1997 and $2.06 in 1996. Diluted earnings per share were $2.33, $2.21 and $2.05
in 1998, 1997 and 1996, respectively.
Dividends declared per share increased 2.5% to $1.64 in 1998, compared with
$1.60 in 1997 and $1.55 in 1996.
NJNG OPERATIONS
NJNG is a natural gas distribution company that provides regulated energy and
appliance services to more than 385,000 residential and commercial customers in
central and northern New Jersey, and participates in the off-system sales and
capacity release markets.
NJNG's financial results are summarized as follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Gross margin
Residential and
commercial $152,781 $151,311 $147,078
Firm transportation 18,288 14,676 12,573
Off-system and
capacity release 4,888 5,393 4,574
Interruptible 645 940 610
--------------------------------------
Total gross margin $176,602 $172,320 $164,835
Appliance service revenues $ 9,468 $ 8,712 $ 6,241
Operating income before
federal income taxes $ 75,566 $ 76,431 $ 71,976
Net income $ 39,105 $ 37,529 $ 35,606
======================================
</TABLE>
GROSS MARGIN
Effective January 1, 1998, gross margin is defined as gas revenues less gas
costs, sales tax and a transitional energy facilities assessment (TEFA). Gross
margin provides a more meaningful basis for evaluating utility operations, since
gas costs, sales tax and TEFA are passed through to customers and, therefore,
have no effect on earnings. Gas costs are charged to operating expenses on the
basis of therm sales at the rates included in NJNG's tariff. The Levelized Gas
Adjustment (LGA) clause allows NJNG to recover gas costs that exceed the level
reflected in its base rates. Sales tax is calculated at 6% of revenue and
excludes sales to other utilities, off-system sales and federal accounts. TEFA
is calculated on a per therm basis and excludes sales to other utilities and
off-system sales. Prior to January 1, 1998, gross margin was defined as gas
revenues less gas costs and gross receipts and franchise taxes (GRFT), which
were replaced by the sales tax, state income tax and TEFA.
State income taxes are included in operating expenses. The revised tax structure
will allow NJNG to be more competitive with other energy providers, and has not
adversely impacted NJNG's net income. (See Note 1: Summary of Significant
Accounting Policies).
The comparison of gross margin between periods will be impacted by the state tax
change described above.
RESIDENTIAL AND COMMERCIAL
Residential and commercial (i.e., firm) gross margin is subject to a
Weather-Normalization Clause (WNC), which provides for a revenue adjustment if
the weather varies by more than one-half of 1% from normal, or 20-year average,
weather. The WNC does not fully protect NJNG from factors such as unusually warm
weather and declines in customer usage patterns, which were set at the
conclusion of NJNG's last base rate case in January 1994. The accumulated
adjustment from one heating season (i.e., October-May) is billed or credited to
customers in subsequent periods. This mechanism reduces the variability of both
customer bills and NJNG's earnings due to weather fluctuations.
NJNG added 11,819 and 11,708 new customers, and converted the heating systems of
another 865 and 1,048 existing customers in 1998 and 1997, respectively. The
growth in 1998 represents an annual increase of approximately 1.9 Billion cubic
feet (Bcf), or 4.5%, in sales to firm customers.
Gross margin from sales to firm customers increased $1.5 million, or 1%, in
1998, and $4.2 million, or 3%, in 1997 due to customer growth, the impact of the
WNC and state tax law changes.
Sales to firm customers were 42.6 Bcf in 1998, compared with 45.7 Bcf in 1997
and 50.4 Bcf in 1996. The decreases in sales were due to 9% and 15% warmer
weather and the impact of customers switching to firm transportation service,
which more than offset customer growth in 1998 and 1997, respectively.
The weather in 1998 was 11% warmer than normal, which, in accordance with the
WNC, resulted in $12.2 million of gross margin being accrued for future recovery
from customers. In 1997, warmer-than-normal weather resulted in $3.3 million of
gross margin being accrued and recovered from customers in 1998. In 1996,
colder-than-normal weather resulted in $11.9 million of gross margin being
deferred and credited to customers in 1997.
In both 1999 and 2000, NJNG's goal is to add 11,800 to 12,000 new customers, and
convert an additional 950 existing customers each year to natural gas heat.
Achieving these goals would represent a customer growth rate of more than 3% and
result in a sales increase of approximately 1.9 Bcf per year, assuming normal
weather and average use, and increase gross margin under present rates by
approximately $5.5 million per year.
24
<PAGE> 5
New Jersey Resources Corporation
These growth goals are based upon management's review of county and municipal
planning board activity, builder surveys and studies of population growth rates
in NJNG's service territory. However, future sales will be affected by the
weather, economic conditions in NJNG's service territory, conversion activity,
the impact of changing from a regulated to a competitive environment, and other
marketing efforts, as has been the case in prior years.
A comprehensive agreement approved by the New Jersey Board of Public Utilities
(BPU) in September 1998 provides all NJNG customers the option to choose a
natural gas supplier as early as January 1, 1999, which makes NJNG the first New
Jersey energy supplier to make such an offer. In addition, the BPU approved the
extension of existing margin-sharing programs as well as a new incentive
program (see "Off-System and Capacity Release" below). As part of the agreement,
the BPU also set forth a recovery schedule designed to collect $34.9 million of
deferred gas costs over three years.
NJNG's goal is to continue to grow without increasing its base rates in order to
remain competitive as the utility industry transitions to a more market-based
environment.
FIRM TRANSPORTATION
Gross margin from firm transportation customers increased 25% to $18.3 million
in 1998 as more customers chose this service. NJNG transported 6.6 Bcf for its
firm customers in 1998, compared with 5.5 Bcf in 1997 and 4.5 Bcf in 1996.
At September 30, 1998 and 1997, NJNG provided firm transportation service to
16,495 and 7,647 customers, respectively. Transportation customers are expected
to grow as customers select other suppliers. An additional 5,500 customers have
executed contracts and will begin transportation service in 1999.
NJNG's total gross margin is not negatively impacted by customers who utilize
its firm transportation service and purchase their gas from another supplier, as
NJNG's tariffs are designed such that no profit is earned on the commodity
portion of sales to firm customers, and all customers who do purchase gas from
another supplier continue to utilize NJNG for transportation.
OFF-SYSTEM AND CAPACITY RELEASE
In order to reduce the overall cost of its gas supply commitments, NJNG has
entered into contracts to sell gas to customers outside its franchise territory
when the gas is not needed for system requirements. These sales enable NJNG to
spread its fixed demand costs, which are charged by pipelines to access their
supplies year round, over a larger and more diverse customer base. NJNG also
participates in the capacity release market on the interstate pipeline network
when the capacity is not needed for its own system requirements. Through
September 30, 1998, NJNG retained 20% of the gross margin from these sales, with
the balance credited to firm sales customers through the LGA clause. Effective
October 1, 1998 through December 31, 2001, NJNG will retain 15% of the gross
margin from these sales.
Also effective October 1, 1998, is a new incentive mechanism designed to reduce
the fixed cost of NJNG's gas supply portfolio. Any savings achieved through the
permanent reduction or replacement of capacity or other services will be shared
between customers and shareowners. Under this program, NJNG retains 40% of the
savings for the first 12 months following any transaction and retains 15% for
the remaining period through December 31, 2001, with the balances credited to
firm sales customers through the LGA clause.
NJNG's off-system sales totaled 62.2 Bcf and generated $2.6 million of gross
margin in 1998, compared with 44.7 Bcf and $3 million of gross margin in 1997
and 23.8 Bcf and $1.6 million of gross margin in 1996. The gross margin
generated by the capacity release program was $2.3 million in 1998, compared
with $2.4 million in 1997 and $3 million in 1996. The margin decreases in both
programs in 1998 were due primarily to warmer weather, which increased the
availability of supply and capacity and resulted in lower margins per therm.
INTERRUPTIBLE
NJNG serves 49 customers through interruptible sales and/or transportation
tariffs. Sales made under the interruptible sales tariff are priced on
market-sensitive oil and gas parity rates. Although therms sold and transported
to interruptible customers represented 6% of total throughput in 1998 and 7% in
1997, they accounted for less than 1% of the total gross margin in each year due
to the margin-sharing formulas that govern these sales. Under these formulas,
NJNG retains 10% of the gross margin from interruptible sales and 5% of the
gross margin from transportation sales, with the balance credited to firm sales
customers through the LGA clause. Interruptible sales were 2 Bcf in 1998,
compared with 1.5 Bcf in 1997 and 1.4 Bcf in 1996. In addition, NJNG transported
8.6 Bcf, 8.2 Bcf and 8.4 Bcf in 1998, 1997 and 1996, respectively, for its
interruptible customers.
APPLIANCE SERVICE REVENUES
Revenues from appliance service contracts and service calls increased 10% in
1998 due to the addition of 9,400 service contracts. Revenues increased 40% in
1997 due to an overall 30% increase in rates charged for such services effective
April 1996. Costs related to this service work are primarily included
in operation and maintenance expenses.
OPERATING INCOME BEFORE FEDERAL INCOME TAXES
Operating income before federal income taxes decreased 1% in 1998 and increased
6% in 1997. The 1998 results were adversely affected by reduced sales because of
warmer winter weather and a higher level of depreciation expense on utility
plant, which includes the capitalized costs of a new customer information and
billing system (CIS) placed in service in 1997, which were partially offset by
customer growth and increased appliance service revenues and lower operation and
maintenance expenses. Operation and maintenance expenses declined by 1% due to
lower fringe benefit costs and other cost control efforts. The 1997 increase was
primarily due to higher gross margin and appliance service revenues, which more
than offset higher operating expenses.
25
<PAGE> 6
New Jersey Resources Corporation
NET INCOME
Net income increased 4% to $39.1 million in 1998 and 5% to $37.5 million in
1997. The 1998 increase was due to lower interest expense and lower federal
income taxes, which more than offset lower operating income before taxes. The
1997 increase was the result of increased operating income, which more than
offset higher interest costs and income taxes.
ENERGY HOLDINGS OPERATIONS
NJR Energy Holdings Corporation's (Energy Holdings) consolidated financial
results, which include NJR Energy Services Company (Energy Services), and New
Jersey Natural Energy Company (Natural Energy), the Company's unregulated fuel
and capacity management and marketing subsidiaries, and the continuing
operations of NJR Energy Corporation (NJR Energy), which includes an equity
investment in the Iroquois Gas Transmission System, L.P. (Iroquois), are
summarized as follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Revenues $151,118 $144,343 $81,076
Gross margin $ 5,122 $ 6,930 $ 5,974
Operating income before
federal income taxes $ 3,346 $ 4,932 $ 5,668
Net income $ 1,740 $ 2,551 $ 2,884
-------------------------------------
</TABLE>
Energy Holdings' energy deliveries and gas under management increased to 82.9
Bcf in 1998, compared with 67.3 Bcf in 1997 and 28.7 Bcf in 1996. Retail sales
were 6.7 Bcf in 1998, compared with 9.1 Bcf in 1997 and 8.9 Bcf in 1996. Natural
Energy had 7,502 and 6,949 retail customers at September 30, 1998 and 1997,
respectively. An additional 8,600 customers have executed contracts and will
begin service in 1999. The increase is due to participation in residential pilot
programs.
The decline in Energy Holdings' gross margin, operating income and net income in
1998 was primarily due to the impact of warmer weather, changes in state tax
laws and increased competition. Operating income before federal income taxes and
net income decreased in 1997, primarily due to lower retail marketing results,
which more than offset increased wholesale marketing results.
NJR Energy's results include interest expense related to debt remaining after
the discontinuance of the oil and natural gas production business in 1994. The
Company plans to further reduce such debt from cash flow generated by its equity
investment in Iroquois.
Future results are subject to Energy Holdings' ability to grow its retail
customer base with more marketing services, expand its fuel management
agreements and increase its wholesale marketing activity.
NJR DEVELOPMENT OPERATIONS
NJR Development Corporation's financial results, which consist solely of
Commercial Realty & Resources Corp.'s (CR&R) operations, are summarized as
follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Revenues $ 758 $ 3,193 $ 4,272
Other income (loss), net $1,494 $ 397 $ (439)
Net income (loss) $ 487 $ (320) $(1,494)
------------------------------------
</TABLE>
In 1998, CR&R sold a 280,000 square-foot office building for $15.6 million.
Included in Other income, net is an after-tax gain of $900,000 related to this
transaction.
In 1996, CR&R entered into a sale-leaseback transaction, which generated a
pre-tax gain of $17.8 million, which is included in Deferred revenue and is
being amortized to Other income, net over 25 years in accordance with generally
accepted accounting principles. The primary tenant of the facility, NJNG, is
leasing the building under a long-term master lease agreement and continues to
occupy a majority of the space in the building.
The net loss in 1997 was due primarily to interest expense related to debt
remaining after the sale of certain real estate assets in 1996.
THE YEAR 2000 ISSUE
The Company's overall goal is to be Year 2000 ready. "Year 2000 ready" means
that critical systems, devices, applications or business relationships have been
evaluated and are expected to be suitable for continued use into and beyond the
Year 2000, or contingency plans are in place.
The Company began addressing the Year 2000 issue in 1994 by assessing its
enterprise computer systems, such as general ledger, payroll, inventory control,
accounts receivable and CIS. The majority of these systems have been replaced
and have been running the Company's day-to-day computing environment since 1995.
The vendor of the software systems notified the Company that the new CIS,
installed in August 1997, is Year 2000 compliant and the balance of the systems
will be compliant with a scheduled system upgrade that will take place the first
half of 1999.
In 1997, a Year 2000 Project was established to provide leadership and direction
to the Year 2000 efforts throughout the Company and its subsidiaries. The
project scope was also expanded to include "embedded" systems (such as chart
recorders, data loggers and calibration equipment), end-user computing hardware
and software, plant and corporate facilities, gas control hardware and software,
meter reading equipment and remittance processing equipment, and business
relationships with key suppliers and customers. Additionally, the Year 2000
Project includes intelligent devices used in field operations.
26
<PAGE> 7
New Jersey Resources Corporation
The Company is using a multi-step approach in conducting its Year 2000 Project.
These steps are: inventory, assessment, remediation, testing, and contingency
planning. The first step, an inventory of all systems and devices with potential
Year 2000 problems, was completed in May 1998. The next step, also completed in
May 1998, was to conduct an initial assessment of the inventory to determine the
state of its Year 2000 readiness. As part of the assessment phase, remediation
strategies are being identified and remediation cost estimates are being
developed. The Company will utilize both internal and external resources to
remediate and test for Year 2000 readiness. The testing and contingency phases
are scheduled to end in August 1999. The Company has initiated formal
communications with the suppliers with which it has active contracts to
determine the extent to which the Company is vulnerable to those third parties'
failure to remediate their own Year 2000 issues. Key vendors have been mailed
surveys regarding their Year 2000 compliance, however not all responses have
been received. The Company will continue to pursue its key vendors to obtain
their Year 2000 readiness.
COSTS
The capitalized costs through September 30, 1998 of updating its enterprise
computer systems, including the CIS described above, was $18 million. The
Company expects to incur $6.4 million in 1999 for projects which will also
address Year 2000 readiness, of which $6.1 million is for new software and
hardware which the Company expects to capitalize. The costs of the projects and
the date on which the Company plans to complete the Year 2000 modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third parties' Year 2000 readiness and other factors.
RISK ASSESSMENT
At this time, the Company believes its most reasonably likely worst case
scenario is a temporary disruption of service to its gas customers, including
the disruptions caused by key vendors on which the Company relies for its gas
deliveries. In particular, the Company believes that most of the gas movement
components can be manually controlled. The Company has been informed that our
major gas supplier will have staff standing by at the time of transition. The
Company is assessing the risk of these scenarios and is formulating contingency
plans, currently scheduled to be completed during the second quarter of 1999, to
mitigate the potential impact.
CONTINGENCY PLANS
Contingency plans will be prepared so that the Company's critical business
processes can be expected to continue to function on January 1, 2000 and beyond.
The Company's contingency plans will be structured to address both remediation
of systems and their components and overall business operating risk. The work on
the contingency plan is focusing primarily on high priority items that affect
customer safety, continuation of service and revenue. These plans are intended
to mitigate both internal risks as well as potential risks in the supply chain
of the Company's suppliers and customers.
The Company's Year 2000 project is designed to provide corrective action with
respect to Year 2000 risks. If the plan is not successfully carried out in a
timely manner, or if unforeseen events occur, Year 2000 problems could have a
material adverse impact on the Company. Management does not expect such problems
to have such an effect on its financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
CONSOLIDATED
The Company obtains its common equity requirements, if any, through issuances of
its common stock, including the proceeds from its Automatic Dividend
Reinvestment Plan (DRP). In 1996, the DRP was amended to allow for the purchase
of shares on the open market. The Company can switch funding options once in any
three-month period. In September 1996, the Company implemented a one-million
share repurchase program, and through September 30, 1998, has repurchased
522,670 shares.
The Company provides the debt requirements for its unregulated companies, while
NJNG satisfies its debt needs by issuing short-term and long-term debt based
upon its own financial profile. In order to meet the working capital and
external debt financing requirements of the unregulated companies, as well as
its own working capital needs, the Company maintains committed credit facilities
totaling $135 million with a number of banks.
It is the Company's objective to maintain a consolidated capital structure that
reflects the different characteristics of each business segment and provides
adequate financial flexibility for accessing capital markets as required. Based
upon its existing mix of investments, it is the Company's goal to achieve a
common equity ratio of approximately 50%.
At September 30, the Company's consolidated capital structure was as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------
<S> <C> <C>
Common stock equity 46% 47%
Preferred stock 3 4
Long-term debt 51 49
----------------------
Total 100% 100%
----------------------
</TABLE>
NJNG
The seasonal nature of NJNG's operations creates large short-term cash
requirements, primarily to finance gas purchases and customer accounts
receivable. NJNG obtains working capital for these requirements, as well as for
the temporary financing of construction expenditures, sinking fund needs and
energy tax payments through the issuance of commercial paper and short-term bank
loans. To support the issuance of commercial paper, NJNG maintains committed
credit facilities totaling $90 million with a number of commercial banks.
27
<PAGE> 8
New Jersey Resources Corporation
CAPITAL REQUIREMENTS
NJNG's capital requirements for 1996 through 1998 and projected amounts through
2000 are as follows:
<TABLE>
<CAPTION>
Maturities and Redemption
Construction redemption of of preferred
(Thousands) expenditures long-term debt stock Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 $48,216 $ 7,364 $ 124 $55,704
1997 $46,193 $ 8,182 $ 120 $54,495
---------------------------------------------------------------
1998 $42,847 $38,192 $ 120 $81,159
---------------------------------------------------------------
1999 $54,000 $20,000 $20,120 $94,120
2000 $50,000 -- $ 120 $50,120
---------------------------------------------------------------
</TABLE>
The level of construction expenditures results primarily from the need for
services, mains and meters to support NJNG's continued customer growth and
general system maintenance. Optional redemption activity included $38 million,
$7 million and $6 million of First Mortgage Bonds in 1998, 1997 and 1996,
respectively. In September 1998, NJNG received approval from the BPU to
establish a $60 million medium-term note program. On October 26, 1998, NJNG
redeemed its $20 million 7.72% Redeemable Preferred Stock. NJNG currently plans
to redeem its $20 million 10.1% Series S Bonds in 1999, subject to market and
other conditions.
FINANCING
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Cash flow $75,665 $68,781 $66,955
External financing
Common stock $ 6,552 -- $ 5,037
Long-term debt $40,045 $ 6,500 $26,000
---------------------------------------
</TABLE>
Cash flow, defined as net income adjusted for depreciation, amortization of
deferred charges and the change in deferred income taxes, represents the cash
generated from operations available for capital expenditures, dividends, working
capital and other requirements. Cash flow increased in 1998 and 1997 due
primarily to higher earnings and deferred tax benefits.
NJNG's external financing requirements are expected to be $50 million in 1999
and none in 2000. It is currently anticipated that they will be met through
additional issuances of short-term and long-term debt. The timing and mix of
these issuances will be geared toward maintaining a common equity ratio of
approximately 50%, which is consistent with maintaining its current short-term
and long-term credit ratings.
ENERGY HOLDINGS
Energy Holdings' capital requirements and financing activity for 1996 through
1998 were as follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Capital expenditures and
equity investments $ 2,000 $ 1,430 $ 2,937
Cash flow $ 2,028 $ 2,694 $ 1,445
Asset sales -- $ 9,087 $ 19,414
External financing
Common stock -- -- $ 600
Long-term debt $19,306 $(9,765) $(22,222)
--------------------------------------
</TABLE>
NJR Energy invested $2 million in 1998 for an equity interest in Capstone
Turbine Corporation, a developer of energy efficient gas-fired microturbine
units which produce electricity. Energy Holdings' cash flow in 1998 declined due
to lower earnings.
NJR Energy sold its interest in Market Hub Partners, L.P. for $9.1 million in
1997. Proceeds from the sale were used to reduce debt.
Energy Holdings does not currently expect any significant capital expenditures
or external financing requirements in 1999.
NJR DEVELOPMENT
CR&R's capital requirements and financing activity for 1996 through 1998 were as
follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Capital expenditures $ 1,609 $ 840 $ 7,862
Cash flow $ 1,376 $ (14) $(11,490)
Asset sales $ 15,600 $ 7,031 $ 77,855
External financing
Long-term debt $(11,580) $(2,596) $(58,379)
----------------------------------------
</TABLE>
Proceeds from asset sales have been used by the Company to reduce debt, while
the changes in cash flow in each year reflect the tax payments related to the
asset sales.
CR&R currently has 183 acres of undeveloped land and two, fully-occupied
buildings totaling 25,000 square-feet.
Capital expenditures were $1.6 million in 1998 in connection with the
construction of a 21,000 square-foot, build-to-suit office building, which is
supported by a ten-year lease.
CR&R's future capital expenditures will be limited to the fit-up of existing
tenant space and additional investments to preserve the value of its real estate
holdings.
28
<PAGE> 9
New Jersey Resources Corporation
FINANCIAL RISK MANAGEMENT
COMMODITY MARKET RISKS
The regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations in the price of
natural gas. To hedge against such fluctuations, the Company and its
subsidiaries have entered into futures contracts, options agreements and
over-the-counter swap agreements. The Company's natural gas businesses are
conducted through three of its operating subsidiaries. First, NJNG is a
regulated utility whose recovery of gas costs is protected by the LGA, but to
further hedge against price fluctuations, utilizes futures and options through
its financial risk management program. Second, Energy Services has entered into
fixed-price sales contracts with wholesale customers for an aggregate of
approximately .7 Bcf of natural gas at prices ranging from $2.16 to $2.56 per
Mmbtu. Energy Services has also hedged its commitments to purchase natural gas
for the retail customers of Natural Energy and hedged purchases and sales of
storage gas. Finally, NJR Energy has entered into a long-term, fixed-price
contract to sell approximately 30.9 Bcf of natural gas to a gas marketing
company at prices ranging from $2.43 to $4.41 per Mmbtu.
Natural gas is a nationally traded commodity, and its prices are effectively
determined by the New York Mercantile Exchange (NYMEX) and over-the-counter
markets. The prices on the NYMEX and over-the-counter markets generally reflect
the national balance of natural gas supply and demand, but are also influenced
significantly from time to time by other events.
NJNG entered into futures contracts to buy and sell 8.1 Bcf of natural gas
through October 1999 at prices ranging from $1.995 to $2.72 per Mmbtu, and as of
September 30, 1998, NJNG had a deferred unrealized gain of approximately
$239,000 from these contracts.
As of September 30, 1998, Energy Services had entered into futures contracts to
buy 5.3 Bcf of natural gas through July 2000, at prices ranging from $1.885 to
$2.79 per Mmbtu, and had a deferred unrealized gain of $613,000 from these
futures contracts. Energy Services also entered into natural gas swap agreements
in order to hedge its risks on 5.1 Bcf of natural gas. As of September 30, 1998,
Energy Services had a deferred unrealized loss of approximately $162,000 from
these swap agreements.
NJR Energy has hedged both its price and physical delivery risks associated with
its long-term, fixed-price sales contract with a gas marketing company (the "Gas
Sale Contract"). To hedge its price risk, NJR Energy entered into two swap
agreements. Under the terms of these two swap agreements, NJR Energy will pay to
the counterparties the identical fixed price it receives from the gas marketing
company in exchange for the payment by the counterparties of an index price plus
a spread per Mmbtu for the total volumes under the Gas Sale Contract. The swap
agreements were effective as of November 1995. In order to hedge its physical
delivery risk, NJR Energy entered into a purchase contract with a second gas
marketing company for the identical volumes it is obligated to sell under the
Gas Sale Contract. NJR Energy has agreed to pay this second gas marketing
company the identical floating price it receives under the swap agreements
mentioned above.
To manage these instruments, the Company has well-defined risk management
policies and procedures, which include volumetric limits and monetary
guidelines.
All of the futures contracts, options and swap agreements described above are
held for hedging, rather than trading purposes. As of September 30, 1998, the
Company does not have any options outstanding. With respect to futures contracts
and swap agreements, the Company has performed a sensitivity analysis to
estimate its exposure to market risk arising from natural gas price fluctuations
using the net futures positions and the net swaps positions. Futures contracts
and swap agreements are substantially all settled at the NYMEX settlement date
and the related natural gas quantity is purchased or sold in the physical market
and, therefore, their notional values, which represent the absolute sum of all
outstanding natural gas futures contracts or swap agreements, as the case may
be, are not accurate measurements of risk to the Company from those futures
contracts or swap agreements. With respect to natural gas futures contracts as
of September 30, 1998, in the event of a hypothetical 10 percent change in
natural gas prices, the value of the Company's contracts would change by
approximately $1.2 million. With respect to natural gas swap agreements as of
September 30, 1998, in the event of a hypothetical 10 percent change in natural
gas prices, the value of such agreements would change by approximately $690,000
(in addition to the deferred unrealized loss of approximately $162,000 discussed
above). However, any such additional changes in value under the futures
contracts and the swap agreements would be substantially offset by a
corresponding change on the related underlying contracts that are being hedged.
INTEREST RATE RISK
NJNG has total variable rate debt of $97 million, of which $56 million has been
hedged by the purchase of a 6.5% interest rate cap through the year 2003.
According to the Company's sensitivity analysis, NJNG's annual interest rate
exposure on the $56 million, based on the difference between current average
rates and the 6.5% interest rate cap, is limited to $1.1 million, net of tax. If
interest rates were to change by 100 basis points on the remaining $41 million
of variable rate debt, NJNG's interest expense, net of tax, would change by
$242,000. The Company also has variable rate debt of $59.3 million, of which $15
million is hedged through an interest rate swap agreement which fixes interest
at 9.5%. According to the Company's sensitivity analysis, if interest rates were
to change by 100 basis points on the remaining $44.3 million, interest expense,
net of tax, would change by $261,000. Subsequent to the expiration of the
interest rate swap agreement in June 1999, a 100 basis point change would result
in an additional $89,000 annual change in interest expense, net of tax.
EFFECTS OF INFLATION
Although inflation rates have been low to moderate in recent years, any change
in price levels has an effect on operating results due to the capital intensive
and regulated nature of the Company's principal subsidiary. The Company attempts
to minimize the effects of inflation through cost control, productivity
improvements and regulatory actions where appropriate.
NEW ACCOUNTING STANDARDS
See Note 1 to the Consolidated Financial Statements for a discussion of new
accounting standards.
29
<PAGE> 10
New Jersey Resources Corporation
INFORMATION CONCERNING
FORWARD LOOKING STATEMENTS
Certain statements contained in this report (other than the financial statements
and other statements of historical fact), including statements as to management
expectations and beliefs presented in the Chairman's Letter, statements made in
Management's Discussion and Analysis under the captions "NJNG Operations - Gross
Margin; - Residential and Commercial; - Firm Transportation; - "Energy Holdings
Operations", "The Year 2000 Issue"; "Liquidity and Capital Resources" and
statements made in the Notes to Consolidated Financial Statements under the
captions "Summary of Significant Accounting Policies - New Accounting
Standards," "Financial Instruments and Risk Management", and "Commitments and
Contingent Liabilities", are forward-looking statements. Forward-looking
statements are made based upon management's expectations and belief concerning
future developments and their potential effect upon the Company. There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management.
The Company wishes to caution readers that the assumptions which form the basis
for forward-looking statements with respect to or that may impact financial
results and capital requirements for fiscal 1999 and thereafter include many
factors that are beyond the Company's ability to control or estimate precisely,
such as estimates of future market conditions and the behavior of other market
participants. Among the factors that could cause actual results to differ
materially from estimates reflected in such forward-looking statements are
weather conditions, economic conditions, and demographic changes in NJNG's
service territory, fluctuations in energy commodity prices, conversion activity
and other marketing efforts, the conservation efforts of NJNG's customers, the
ability to extend certain fuel management contracts, unknown Year 2000 related
problems, the pace of deregulation of retail gas markets, competition for the
acquisition of gas, the regulatory and pricing policies of federal and state
regulatory agencies, legislative changes due to legislation in the New Jersey
Senate and the Assembly, the availability of Canada's reserves for export to the
United States and other regulatory changes.
The Company does not, by including this statement, assume any obligation to
review or revise any particular forward-looking statement referenced herein in
light of future events.
[Deloitte & Touche LLP LOGO]
INDEPENDENT AUDITORS' REPORT
To the Shareowners and Board of Directors of New Jersey Resources Corporation:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of New Jersey Resources Corporation and its
subsidiaries (the Company) as of September 30, 1998 and 1997 and the related
consolidated statements of income, common stock equity and cash flows for each
of the three years in the period ended September 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at September 30, 1998
and 1997 and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1998 in conformity with
generally accepted accounting principles.
We have also previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets and consolidated statements of
capitalization as of September 30, 1996, 1995, 1994, and 1993, and the related
consolidated statements of income, common stock equity and cash flows for the
years ended September 30, 1995, 1994 and 1993 (none of which are presented
herein) and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information set forth in the Selected Financial
Data for each of the six years in the period ended September 30, 1998 for the
Company, presented on page 22, is fairly stated in all material respects, in
relation to the consolidated financial statements from which it has been
derived.
[Deloitte & Touche LLP]
Parsippany, New Jersey
October 29, 1998
30
<PAGE> 11
New Jersey Resources Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal years ended September 30, 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $710,342 $696,544 $554,753
--------------------------------
Operating Expenses
Gas purchases 483,715 465,552 327,991
Operation and maintenance 77,990 79,408 75,729
Depreciation and amortization 27,835 25,797 23,229
Energy and other taxes 36,758 43,240 49,357
Federal income taxes 18,945 20,764 18,671
State income taxes 4,477 321 176
--------------------------------
Total operating expenses 649,720 635,082 495,153
--------------------------------
Operating Income 60,622 61,462 59,600
--------------------------------
Other Income, Net 2,353 566 68
--------------------------------
Interest Charges, Net
Long-term debt 16,760 18,626 20,123
Short-term debt and other 2,873 1,887 878
--------------------------------
Total interest charges, net 19,633 20,513 21,001
--------------------------------
Income before Preferred Stock Dividends 43,342 41,515 38,667
Preferred stock dividends 1,585 1,591 1,599
--------------------------------
Net Income $ 41,757 $ 39,924 $ 37,068
--------------------------------
Earnings per Share - Basic $ 2.35 $ 2.22 $ 2.06
Earnings per Share - Diluted $ 2.33 $ 2.21 $ 2.05
--------------------------------
Dividends per Common Share $ 1.64 $ 1.60 $ 1.55
--------------------------------
Average Shares Outstanding - Basic 17,798 18,001 18,030
Average Shares Outstanding - Diluted 17,894 18,052 18,052
--------------------------------
</TABLE>
CONSOLIDATED
STATEMENTS OF COMMON STOCK EQUITY New Jersey Resources Corporation
<TABLE>
<CAPTION>
(Thousands) Number of Common Premium on Treasury Stock Retained
Shares Stock Common Stock and Other Earnings
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 17,793 $44,481 $203,499 $ (49) $ 10,988
Net income 37,068
Common stock issued under stock plans 325 814 6,017
Cash dividends declared (27,969)
Treasury stock and other (34) (928)
-------------------------------------------------------------------------
Balance at September 30, 1996 18,084 45,295 209,516 (977) 20,087
Net income 39,924
Common stock issued under stock plans 36 90 869
Cash dividends declared (28,807)
Treasury stock and other (240) (7,561)
-------------------------------------------------------------------------
Balance at September 30, 1997 17,880 45,385 210,385 (8,538) 31,204
Net income 41,757
Common stock issued under stock plans 180 449 7,645
Cash dividends declared (29,219)
Treasury stock and other (249) (8,264)
-------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1998 17,811 $45,834 $218,030 $(16,802) $ 43,742
=========================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOWS New Jersey Resources Corporation
(Thousands)
<TABLE>
<CAPTION>
Fiscal years ended September 30, 1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 41,757 $ 39,924 $ 37,068
Adjustments to reconcile net income to cash flows
Depreciation and amortization 27,835 25,797 23,229
Amortization of deferred charges 2,716 1,118 3,385
Deferred income taxes 6,989 4,720 (7,211)
Changes in working capital (48,967) 5,485 3,232
Other, net (9,270) (9,868) (1,924)
----------------------------------
Net cash flows from operating activities 21,060 67,176 57,779
----------------------------------
Cash Flows from (used in) Financing Activities
Proceeds from long-term debt 75,345 -- 20,000
Proceeds from common stock 6,579 313 6,868
Payments of long-term debt (38,192) (13,182) (81,564)
Payments of preferred stock (120) (120) (124)
Purchases of treasury stock (9,240) (7,410) --
Payments of common stock dividends (29,076) (28,711) (27,663)
Net change in short-term debt 12,700 13,000 (1,400)
----------------------------------
Net cash flows from (used in) financing activities 17,996 (36,110) (83,883)
----------------------------------
Cash Flows (used in) from Investing Activities
Expenditures for
Utility plant (42,847) (46,193) (48,216)
Real estate properties (1,609) (840) (7,862)
Equity investments and other (9,500) (1,430) (2,937)
Cost of removal (3,691) (4,062) (3,757)
Proceeds from sale of assets 15,600 16,118 98,619
----------------------------------
Net cash flows (used in) from investing activities (42,047) (36,407) 35,847
----------------------------------
Net change in cash and temporary investments (2,991) (5,341) 9,743
Cash and temporary investments at beginning of the year 5,467 10,808 1,065
----------------------------------
Cash and temporary investments at end of the year $ 2,476 $ 5,467 $ 10,808
==================================
Changes in Components of Working Capital
Construction fund $(16,000) $ 6,500 $ 6,000
Receivables (810) (14,465) (4,805)
Inventories (17,046) 7,179 (11,630)
Deferred gas costs (3,730) (13,938) (3,380)
Purchased gas (10,418) 24,241 2,402
Accrued and prepaid taxes, net 4,854 10,728 (734)
Customers' credit balances and deposits 126 (10,319) 7,805
Other, net (5,943) (4,441) 7,574
----------------------------------
Total $(48,967) $ 5,485 $ 3,232
==================================
Supplemental Disclosures of Cash Flows Information
Cash paid during the year for
Interest (net of amounts capitalized) $ 18,287 $ 18,297 $ 18,198
Income taxes $ 10,660 $ 5,991 $ 24,781
Non-cash investing and financing activities
Capital lease -- -- $ 31,850
----------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE> 13
CONSOLIDATED BALANCE SHEETS New Jersey Resources Corporation
(Thousands)
<TABLE>
<CAPTION>
September 30, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Property, Plant and Equipment
Utility plant, at cost $ 895,321 $ 855,375
Real estate properties, at cost 24,490 22,897
-----------------------
919,811 878,272
Accumulated depreciation and amortization (239,814) (218,912)
-----------------------
Property, plant and equipment, net 679,997 659,360
-----------------------
Current Assets
Cash and temporary investments 2,476 5,467
Construction fund 16,000 --
Customer accounts receivable 48,805 45,900
Unbilled revenues 3,795 3,998
Allowance for doubtful accounts (1,907) (1,527)
Gas in storage, at average cost 52,797 34,152
Materials and supplies, at average cost 3,846 5,445
Prepaid state taxes 11,752 12,089
Deferred gas costs 16,589 15,070
Assets held for sale, net -- 13,386
Other 7,324 6,377
-----------------------
Total current assets 161,477 140,357
-----------------------
Deferred Charges and Other
Equity investments 9,196 7,086
Regulatory assets 40,297 38,635
Long-term deferred gas costs 21,833 19,622
Other 30,218 14,001
-----------------------
Total deferred charges and other 101,544 79,344
-----------------------
Total Assets $ 943,018 $ 879,061
=======================
Capitalization and Liabilities
Capitalization
Common stock equity $ 290,804 $ 278,436
Redeemable preferred stock 20,640 20,760
Long-term debt 326,741 291,407
-----------------------
Total capitalization 638,185 590,603
-----------------------
Current Liabilities
Current maturities of long-term debt 1,957 138
Short-term debt 60,700 48,000
Purchased gas 47,461 57,879
Accounts payable and other 29,706 28,632
Dividends payable 7,304 7,161
Accrued taxes 7,029 5,781
Customers' credit balances and deposits 13,652 13,526
-----------------------
Total current liabilities 167,809 161,117
-----------------------
Deferred Credits
Deferred income taxes 73,759 63,501
Deferred investment tax credits 10,628 10,934
Deferred revenue 19,375 20,551
Other 33,262 32,355
-----------------------
Total deferred credits 137,024 127,341
-----------------------
Commitments and Contingent Liabilities (Note 10)
Total Capitalization and Liabilities $ 943,018 $ 879,061
=======================
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE> 14
CONSOLIDATED STATEMENTS OF CAPITALIZATION New Jersey Resources Corporation
(Thousands)
<TABLE>
<CAPTION>
September 30, 1998 1997
<S> <C> <C>
Common Stock Equity
Common stock, $2.50 par value, authorized 50,000,000 shares;
issued shares 1998-18,333,655; 1997-18,153,545 $ 45,834 $ 45,385
Premium on common stock 218,030 210,385
Treasury stock at cost and other; 1998 - 522,670 shares; 1997 - 273,900 shares (16,802) (8,538)
Retained earnings 43,742 31,204
---------------------------
Total common stock equity 290,804 278,436
---------------------------
Redeemable Preferred Stock
New Jersey Natural Gas Company
$100 par value, cumulative; authorized shares
1998 - 516,400; 1997 - 517,600; outstanding shares
5.65% series - 1998 - 6,400; 1997 - 7,600 640 760
7.72% series - 1998 and 1997 - 200,000 20,000 20,000
---------------------------
Total redeemable preferred stock 20,640 20,760
---------------------------
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt
New Jersey Natural Gas Company
First mortgage bonds Maturity date
<S> <C> <C> <C> <C>
9% Series Q December 1, 2017 -- 13,500
10.10% Series S June 1, 2009 18,200 20,000
7.05% Series T March 1, 2016 -- 9,545
7.25% Series U March 1, 2021 -- 15,000
7.50% Series V December 1, 2002 25,000 25,000
5.38% Series W August 1, 2023 10,300 10,300
6.27% Series X November 1, 2008 30,000 30,000
6.25% Series Y August 1, 2024 10,500 10,500
8.25% Series Z October 1, 2004 25,000 25,000
Variable Series AA August 1, 2030 25,000 25,000
Variable Series BB August 1, 2030 16,000 16,000
6.88% Series CC October 1, 2010 20,000 20,000
Variable Series DD September 1, 2027 13,500 --
Variable Series EE January 1, 2028 9,545 --
Variable Series FF January 1, 2028 15,000 --
Variable Series GG April 1, 2033 18,000 --
Capital lease obligation 31,396 31,562
---------------------------
Total 267,441 251,407
---------------------------
New Jersey Resources Corporation
Revolving credit agreements, at floating rates October 1, 1999 - January 1, 2000 59,300 40,000
---------------------------
Total long-term debt 326,741 291,407
---------------------------
Total Capitalization $ 638,185 $ 590,603
---------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE> 15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS New Jersey Resources Corporation
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE BUSINESS
New Jersey Resources Corporation (the Company) is an energy services holding
company providing retail and wholesale natural gas and related energy services
to customers from the Gulf Coast to New England. Its principal subsidiary, New
Jersey Natural Gas Company (NJNG), provides regulated natural gas and appliance
services in central and northern New Jersey and participates in the off-system
sales and capacity release markets. Other operating subsidiaries include New
Jersey Natural Energy Company (Natural Energy) and NJR Energy Services Company
(Energy Services), the Company's unregulated marketing and fuel and capacity
management subsidiaries, NJR Energy Corporation (NJR Energy), an investor in
energy-related ventures, and Commercial Realty and Resources Corp. (CR&R), a
commercial real estate developer.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have been
eliminated.
REGULATORY ACCOUNTING
NJNG maintains its accounts in accordance with the Uniform System of Accounts as
prescribed by the New Jersey Board of Public Utilities (BPU). As a result of the
ratemaking process, the accounting principles applied by NJNG differ in certain
respects from those applied by unregulated businesses.
UTILITY PLANT AND DEPRECIATION
Depreciation is computed on a straight-line basis for financial statement
purposes, using rates based on the estimated average lives of the various
classes of depreciable property. The composite rate of depreciation was 3.36% of
average depreciable property in 1998, 3.25% in 1997 and 3.12% in 1996. When
depreciable properties are retired, the original cost thereof, plus cost of
removal less salvage, is charged to accumulated depreciation.
UTILITY REVENUES
Customers are billed through monthly cycle billings on the basis of actual or
estimated usage. Revenues are based upon service rendered.
GAS PURCHASES
NJNG's tariff includes a Levelized Gas Adjustment (LGA) clause, which is
normally revised on an annual basis. Under this clause, NJNG projects its cost
of gas, net of supplier refunds and credits from non-firm sales and
transportation activities, over the subsequent 12 months and recovers the
excess, if any, of such projected costs over those included in its base rates
through levelized charges to customers. Any under- or over-recoveries are
deferred and reflected in the LGA clause in subsequent years.
STATE OF NEW JERSEY TAX REFORM
In January 1998, the utility gross receipts tax formula was replaced with a
state sales tax, a state income tax and a transitional energy facilities
assessment (TEFA). The TEFA will be gradually phased out between 1999 and 2002.
The new law requires that all energy providers in the state be subject to the
sales and state income taxes. Previously, non-utility providers of energy were
not subject to the gross receipts and franchise tax.
INCOME TAXES
Deferred income taxes are calculated in conformance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" (SFAS 109)
(See Note 6: Income Taxes).
Investment tax credits have been deferred and are being amortized as a reduction
to the tax provision over the average lives of the related property.
CAPITALIZED INTEREST
The Company's capitalized interest totaled $714,000 in 1998, $1.3 million in
1997 and $1.4 million in 1996.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Gains and losses related to qualifying hedges of firm commitments or anticipated
transactions are deferred and recognized in income or as adjustments of carrying
amounts when the hedged transaction occurs (See Note 9: Financial Instruments
and Risk Management).
REGULATORY ASSETS
Regulatory Assets at September 30, 1998 and 1997 consist of the following items:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
-------------------
<S> <C> <C>
Remediation costs (Note 10) $35,243 $35,316
Postretirement costs (Note 8) 4,885 3,615
Other 169 (296)
-------------------
Total $40,297 $38,635
-------------------
</TABLE>
Included in Other Deferred Credits are the following items:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
-------------------
<S> <C> <C>
Remediation costs (Note 10) $27,500 $27,500
Postretirement costs (Note 8) 4,617 3,524
-------------------
Total $32,117 $31,024
-------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, all temporary investments with maturities
of three months or less are considered cash equivalents.
35
<PAGE> 16
New Jersey Resources Corporation
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Boards (FASB) issued SFAS No.
130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosure About Segments
of an Enterprise and Related Information." In February 1998, the FASB also
issued SFAS No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits." These statements must be adopted by fiscal 1999. It is
management's opinion that these statements will not have a material effect on
either its financial condition or results of operations. In June 1998, the FASB
issued SFAS No. 133 "Accounting for Derivative Investments and Hedging
Activities," which must be adopted by the quarter ended December 31, 1999. The
Company is currently evaluating the effects of SFAS No. 133 on its financial
condition and results of operations, which will vary based on the Company's use
of derivative instruments at the time of adoption.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
reporting.
USE OF ESTIMATES
The consolidated financial statements of the Company include estimates and
assumptions of certain assets, liabilities, revenues and expenses and the
disclosure of certain contingent assets and liabilities. Actual future results
may differ from such estimates.
2. COMMON STOCK
At September 30, 1998, there were 1,238,585 shares reserved for issuance under
the Company's Automatic Dividend Reinvestment, Employee Stock Ownership and
Retirement Savings Plans.
A total of 750,000 shares are reserved for issuance to employees under the
Long-Term Incentive Compensation Plan (the Plan) at the discretion of the Board
of Directors. At September 30, 1998, there were 352,967 shares remaining for
issuance or grant under the Plan. The Company issued 22,461 shares in 1997 with
a related annual expense of approximately $224,000, which vest over a three-year
period and are subject to the Company achieving certain performance targets.
All options granted under the Plan have been non-qualified stock options. They
give a right to purchase the Company's common stock at prices no less than the
closing price on the date of grant. Generally no option can be exercised before
one year or more than 10 years from the date of each grant.
A total of 175,000 shares are reserved for issuance to outside directors under
the Restricted Stock and Stock Option Program for Outside Directors (the
Program). Under the Program, each director received an award of 200 shares of
restricted stock which vests over four years. Each director is also granted
5,000 options upon joining the Board. A Supplemental Stock Option Program
(Supplemental Program) was approved by the Board of Directors, effective October
1, 1998. The Supplemental Program provides that each director receives an annual
grant of 1,500 options. All other terms of the Program remain the same. In 1998,
200 shares were issued and none were forfeited. At September 30, 1998, there
were 60,750 shares remaining for issuance or grant under the Program, including
the Supplemental Program. All options granted under the Program allow for
purchase of common stock at prices equal to the closing price on the date of
grant, and no option can be exercised before one year or more than 10 years from
the date of each grant.
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123). As permitted by SFAS 123, the Company will continue to apply
Accounting Principles Board Opinion No. 25 and its related interpretations in
accounting for its stock-based plans and provide the pro forma disclosures
required by SFAS 123. No compensation expense has been recognized for its
stock-based plans except for performance-based awards. If compensation expense
had been determined based on the fair value of stock options at the date of
grant consistent with the methodology of SFAS 123, the Company's net income
would have been reduced by approximately $171,000 ($.01 EPS - Basic and Diluted)
in 1998, $249,000 ($.02 EPS - Basic, $.01 EPS - Diluted) in 1997, and $47,000
($.01 EPS - Basic and no impact to Diluted) in 1996.
The following table summarizes the stock option activity for the past three
years:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price Range Price
<S> <C> <C> <C>
---------------------------------------
Outstanding at
September 30, 1995 210,067 $19.01 - $26.00 $23.08
Granted 148,750 27.75 - 29.00 27.86
Exercised (54,027) 19.01 - 26.00 21.67
Forfeited (33,994) 22.25 - 27.75 24.31
---------------------------------------
Outstanding at
September 30, 1996 270,796 22.25 - 29.00 25.83
Granted 119,420 29.25 - 33.75 31.60
Exercised (13,522) 22.25 - 23.13 23.06
Forfeited (9,339) 27.75 - 32.00 28.45
---------------------------------------
Outstanding at
September 30, 1997 367,355 22.25 - 33.75 27.74
Granted 36,431 22.25 - 37.50 35.42
Exercised (12,019) 22.25 - 32.00 26.15
Forfeited (11,366) 22.88 - 34.44 28.54
---------------------------------------
OUTSTANDING AT
SEPTEMBER 30, 1998 380,401 $22.25 - $37.50 $28.51
=======================================
EXERCISABLE AT
SEPTEMBER 30, 1998 197,293 $22.25 - $29.00 $27.42
=======================================
</TABLE>
The weighted average remaining option contractual life is 6.2 years.
The weighted average fair value of the options granted in 1998 is estimated at
$5.26 per option on the date of grant using the Black-Scholes option pricing
model, with the following assumptions: dividend yield of 4.6%, volatility of
30.95% and expected life of 7.6 years.
36
<PAGE> 17
New Jersey Resources Corporation
The Company has adopted SFAS No. 128 "Earnings Per Share" which establishes
standards for computing and presenting basic and diluted earnings per share
(EPS). SFAS 128 requires that all prior data presented be restated. The
incremental shares, which relate to stock options and restricted stock, using
the treasury stock method, that were required for inclusion in the denominator
for the diluted EPS calculation were 96,205 and 50,540 for 1998 and 1997,
respectively. The numerator for both the basic and diluted calculations was net
income. The impact was a two-cent and one-cent dilutive effect for 1998 and
1997, respectively.
In September 1996, the Board of Directors authorized the repurchase of up to one
million of the Company's common shares. As of September 30, 1998, the Company
has repurchased 522,670 shares of its common stock at a cost of $16.7 million.
3. REDEEMABLE PREFERRED STOCK
The $20 million 7.72% series was redeemed in October 1998 at a price of $101.72
per share.
Preferred stockholders are entitled to one vote per share on all NJNG matters
and have priority as to dividends. NJNG's certificate of incorporation prohibits
the distribution of common stock dividends unless NJNG is in compliance with all
its provisions. In addition, whenever preferred dividends are in arrears in an
amount equal to four quarterly dividends, preferred stockholders may elect a
number of directors necessary to constitute one less than a majority of NJNG's
Board of Directors, until such dividends are paid in full.
In July 1996, the Board of Directors adopted a shareholder rights plan that
provides for the distribution of one right for each share of common stock
outstanding on or after August 15, 1996. Each right entitles its holder to
purchase 1/1000 of one share of the Series A Stock (as defined below), at an
exercise price of $55.
The rights plan provides that after a person or group acquires 10% or more of
the Company's common stock, each of the rights, except for those held by the 10%
holder, which become void once the holder reaches the 10% threshold, becomes the
right to acquire shares of the Company's common stock having a market value
equal to twice the exercise price. If a person or group acquires at least 10%,
but less than 50%, the Board of Directors may exchange each right for one share
of the Company's common stock. The rights may be redeemed for $.01 per right at
any time prior to the first public announcement or communication to the Company
that a person or group has crossed the 10% threshold.
The Company has 400,000 shares of authorized and unissued $100 par value
preferred stock. The Company has created and reserved for issuance 50,000 shares
of Series A Junior Participating Cumulative Preferred Stock (Series A Stock) in
connection with the adoption of the shareholder rights plan.
4. LONG-TERM DEBT, DIVIDENDS AND RETAINED EARNINGS RESTRICTIONS
Annual redemption requirements for the next five years are as follows: 1999, $2
million; 2000, $61.3 million; 2001, $2.3 million; 2002, $27.3 million and 2003,
$2.4 million.
NJNG's mortgage secures its First Mortgage Bonds and represents a lien on
substantially all its property, including gas supply contracts. Certain
indentures supplemental to the mortgage include restrictions as to cash
dividends and other distributions on NJNG's common stock, which restrictions
apply so long as certain series of First Mortgage Bonds are outstanding. Under
the most restrictive provision, approximately $54.1 million of NJNG's retained
earnings was available for such purposes at September 30, 1998.
NJNG has entered into loan agreements with the New Jersey Economic Development
Authority (the Authority) in which the Authority issues bonds to the public. To
secure its loans from the Authority, NJNG issues First Mortgage Bonds with
interest rates and maturity dates identical to the Authority's Bonds.
In April 1998, NJNG entered into a loan agreement whereby the Authority loaned
NJNG the proceeds from its $18 million Natural Gas Facilities Revenue Bonds,
Series 1998C (the EDA Bonds). The rates of interest on the EDA Bonds are
variable, currently set at a weekly mode, and may be changed by NJNG to daily,
weekly, flexible or long-term interest rate modes, not to exceed 10% per annum.
The EDA Bonds mature on April 1, 2033. The proceeds from the EDA Bonds were
deposited into a project construction fund. NJNG may obtain such funds in
reimbursement of its qualified expenditures relating to the project upon
delivering an equivalent amount of its Adjustable Rate Series GG First Mortgage
Bonds (Series GG Bonds) to the indenture trustee. In April 1998, NJNG drew down
$2 million from the construction fund and issued $2 million of its Series GG
Bonds.
In January 1998, NJNG issued variable rate Series EE and Series FF Bonds for
$9.5 million and $15 million, respectively. The proceeds were used to redeem the
$9.5 million 7.05% Series T and the $15 million 7.25% Series U Bonds on March 1,
1998.
In October 1997, NJNG issued variable rate Series DD Bonds for $13.5 million and
utilized the proceeds to redeem its $13.5 million 9% Series Q Bonds in December
1997.
NJNG has total variable rate debt of $97 million, of which $56 million has been
hedged by the purchase of a 6.5% interest rate cap through the year 2003.
In December 1995, the BPU approved NJNG's petition to enter into a master-lease
agreement for its headquarters building for a 25.5 year term with two five-year
renewal options. The present value of the agreement's minimum lease payments is
reflected as both a capital lease and a capital lease obligation, which are
37
<PAGE> 18
New Jersey Resources Corporation
included in Utility Plant and Long-Term Debt, respectively, in the Consolidated
Balance Sheets. In accordance with its ratemaking treatment, NJNG records rent
expense as if the lease was an operating lease. Minimum annual lease payments
are $2.3 million in 1999, $2.4 million in 2000, and $2.6 million in 2001 through
2003, with $58.1 million over the remaining term of the lease. Approximately 21%
of the building, representing approximately $100,000 of minimum annual lease
payments through 1999, is presently subleased to other tenants.
The Company has six committed revolving credit agreements totaling $135 million,
which provide for bank loans at negotiable rates at or below the prime rate. At
September 30, 1998, a total of $59.3 million was outstanding under these
agreements, all of which matures in 2000.
The Company has one interest rate swap agreement, having a notional amount of
$15 million, to eliminate the impact of changes in interest rates on a portion
of its floating rate long-term debt. The agreement effectively fixes the
Company's interest rate on $15 million of its floating rate revolving credit
facilities at 9.5% through June 1999. In the event of nonperformance by the
counterparty, the Company's interest cost on $15 million of long-term debt would
revert to a floating rate. However, the Company does not anticipate
nonperformance by the counterparty.
The Company's remaining long-term debt outstanding under revolving credit
agreements at September 30, 1998 and 1997 totaled $44.3 million and $25 million,
with weighted average interest rates of 6.1% and 5.9%, respectively.
5. SHORT-TERM DEBT AND CREDIT FACILITIES
Committed credit facilities of NJNG support the issuance of commercial paper and
provide for bank loans at negotiable rates at or below the prime rate. These
credit facilities total $90 million and require commitment fees on the unused
amounts. A comparison of pertinent data follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Bank credit facilities $90,000 $75,000 $65,000
Maximum amount outstanding $99,000 $78,500 $44,100
Average daily amount outstanding
Notes payable to banks $ 6,100 $ 5,800 $ 4,900
Commercial paper $50,900 $40,500 $13,100
Weighted average interest rate
Notes payable to banks 5.81% 5.65% 5.73%
Commercial paper 5.67% 5.53% 5.70%
Amount outstanding at year end
Commercial paper $60,700 $48,000 $35,000
Interest rate at year end
Commercial paper 5.53% 5.59% 5.43%
-----------------------------------
</TABLE>
6. INCOME TAXES
The Company's federal income tax returns have been examined by the Internal
Revenue Service (IRS) through 1993 and all significant matters have been
settled. The IRS has substantially completed its examination of the 1995 and
1994 tax returns and the Company does not anticipate any significant issues.
Income tax expense differs from the amount computed by applying the statutory
federal income tax rate of 35% to pre-tax income for the following reasons:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Statutory income tax expense $ 23,811 $ 22,020 $ 20,119
Increase (reduction)
resulting from State income taxes 3,060 248 71
Depreciation and
cost of removal (1,201) (639) (854)
Investment tax credits (335) (346) (348)
Other (647) 116 (172)
----------------------------------------
Provision for income taxes $ 24,688 $ 21,399 $ 18,816
----------------------------------------
</TABLE>
The provision for income taxes is composed of the following:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Current
Federal $ 11,097 $ 3,314 $ 26,643
State 4,209 381 109
Deferred
Federal 9,218 18,050 (7,588)
State 499 -- --
Investment tax credits (335) (346) (348)
------------------------------------
Total provision $ 24,688 $ 21,399 $ 18,816
------------------------------------
Charged to: Operating expenses $ 23,422 $ 21,085 $ 18,847
Other income, net 1,266 314 (31)
------------------------------------
Total provision $ 24,688 $ 21,399 $ 18,816
------------------------------------
</TABLE>
38
<PAGE> 19
New Jersey Resources Corporation
The tax effects of significant temporary differences comprising the Company's
net deferred income tax liability at September 30, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
------------------------
<S> <C> <C>
Current
Deferred gas costs $ 5,560 $ 6,238
Weather-normalization clause 3,078 1,024
Other (3,180) (1,634)
------------------------
Current deferred tax liability, net $ 5,458 $ 5,628
------------------------
Non-current
Property-related items $ 83,849 $ 79,150
Gain on sale of real estate (11,978) (12,220)
Customer contributions (3,849) (3,778)
Capitalized overhead and interest (4,465) (2,873)
Deferred gas costs 7,736 6,771
Unamortized investment tax credits (4,315) (3,948)
Remediation costs and other 6,781 399
------------------------
Non-current deferred tax liability, net $ 73,759 $ 63,501
------------------------
</TABLE>
7. REGULATORY ISSUES
NJNG's Weather-Normalization Clause (WNC) provides for a revenue adjustment if
the weather varies by more than one-half of 1% from the 20-year average, or
normal, weather. The accumulated adjustment from one heating season (i.e.,
October - May) is billed or credited to customers in subsequent years.
In January 1998, the BPU approved a 3.5% LGA price increase, which included
updates to NJNG's Gas Cost Recovery, WNC, Remediation Rider (RA) and Demand Side
Management Adjustment clause factors.
In September 1998, the BPU approved a comprehensive agreement which provides all
NJNG customers the option to choose a natural gas supplier as early as January
1, 1999, modification and extension of the existing margin-sharing formulas for
the off-system and capacity release programs and a new margin-sharing incentive
related to permanent cost reductions of NJNG's gas supply portfolio. The BPU
also approved an additional 3.5% price increase designed to recover $34.9
million of deferred gas costs from both sales and transportation customers. All
of these provisions are effective for the period from October 1, 1998 to
December 31, 2001.
8. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has two trusteed, noncontributory defined benefit retirement plans
covering all regular, full-time employees with more than one year of service.
Plan benefits are based on years of service and average compensation during the
last five years of employment. The Company makes annual contributions to the
plans consistent with the funding requirements of federal law and regulations.
The components of the net pension cost are as follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 1,467 $ 1,927 $ 1,748
Interest cost on projected
benefit obligation 3,791 3,573 3,147
Return on plan assets 1,717 (4,186) (3,617)
Net amortization and deferral (6,580) (152) (152)
-----------------------------------
Net cost $ 395 $ 1,162 $ 1,126
-----------------------------------
</TABLE>
Plan assets consist primarily of corporate equities and obligations, U.S.
Government obligations and cash equivalents. A reconciliation of the funded
status of the plans to the amounts recognized in the Consolidated Balance Sheets
is presented below:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
-----------------------
<S> <C> <C>
Plan assets at fair value $ 55,666 $ 59,172
-----------------------
Actuarial present value of plan benefits
Vested benefits (47,863) (36,070)
Non-vested benefits (2,566) (2,251)
Impact of estimated future
compensation changes (12,296) (12,626)
-----------------------
Projected plan benefits (62,725) (50,947)
-----------------------
Plan assets (less than) in excess of
projected plan benefits (7,059) 8,225
-----------------------
Unrecognized net assets at beginning
of the year (1,750) (2,057)
Unrecognized prior service costs 836 1,644
Unrecognized net loss (gain) 5,229 (10,773)
-----------------------
Net pension liability recognized in the
Consolidated Balance Sheets $ (2,744) $ (2,961)
-----------------------
</TABLE>
The assumptions used in determining the actuarial present value of the projected
benefit obligation are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------
<S> <C> <C>
Discount rate 6.25% 7.75%
Compensation increase 3.00% 4.50%
Long-term rate of return on plan assets 9.50% 9.50%
-------------------
</TABLE>
OTHER POSTRETIREMENT BENEFITS
Effective October 1, 1993, the Company adopted SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires an
accrual method of accounting for postretirement benefits, similar to that in
effect for pension plans. Previously, certain health care and life insurance
benefits were charged to expense when paid. Under the accrual method, the cost
of providing postretirement benefits will be recognized over the employee's
service period. The Company's transition obligation associated with SFAS 106 was
$8.6 million, which is being amortized over 20 years, and its annual expense has
39
<PAGE> 20
New Jersey Resources Corporation
increased from approximately $400,000 to $2.2 million, of which over 95% relates
to NJNG.
Effective October 1, 1998, the BPU approved the recovery of an additional
$945,000 of annual OPEB costs as well as recovery of $4.9 million of deferred
costs over the next 15 years, which is included in Regulatory Assets in the
Consolidated Balance Sheets.
A reconciliation of the accumulated postretirement benefit obligation (APBO) to
the amounts recognized in the Consolidated Balance Sheets is presented below:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
-----------------------
<S> <C> <C>
Retirees $ (6,515) $ (3,211)
Fully eligible participants (3,798) (3,109)
Other active participants (9,090) (8,046)
-----------------------
Total APBO (19,403) (14,366)
Plan assets 1,930 1,645
Unrecognized net loss 4,903 1,214
Unrecognized transition obligation 6,450 6,880
Unrecognized prior service costs 1,472 1,351
-----------------------
Net liability recognized in the Consolidated
Balance Sheets $ (4,648) $ (3,276)
-----------------------
</TABLE>
The components of the net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
(Thousands) 1998 1997
-----------------------
<S> <C> <C>
Service cost $ 607 $ 539
Interest cost 1,204 1,009
Amortization of transition obligation 430 430
Deferral of current expense (1,374) (1,209)
-----------------------
Total annual net expense $ 867 $ 769
-----------------------
</TABLE>
The assumed health care cost trend rate used in measuring the APBO as of
September 30, 1998 was 10%, declining by 1% each year until attaining an
ultimate level of 5.5% in 2003, and then remaining constant thereafter for
participants under age 65. For participants age 65 and older the trend rate was
8% in 1998, declining to 5.5% in 2003, and then remaining constant thereafter. A
1% increase in the trend rates would increase the APBO as of September 30, 1998,
by $3.1 million and would increase the annual service and interest costs by
$369,000. The assumed discount rate used in determining the APBO was 6.25% and
7.75% at September 30, 1998 and 1997, respectively.
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Energy Services and Natural Energy enter into fixed-price contracts to sell
natural gas. In order to hedge these contracts, as of September 30, 1998, Energy
Services entered into futures contracts to buy 5.26 Bcf of natural gas through
July 2000 at prices ranging from $1.885 to $2.79 per MMbtu and had a deferred
unrealized gain of $613,000 related to these contracts. Energy Services also
entered into natural gas swap agreements in order to hedge its risk for 5.1 Bcf
of natural gas and as of September 30, 1998 had a deferred unrealized loss of
approximately $162,000 related to these agreements.
As part of its Financial Risk Management program, NJNG entered into futures
contracts to buy and sell 8.1 Bcf of natural gas through October 1999 at prices
ranging from $1.995 to $2.72 per MMbtu and had a deferred unrealized gain of
approximately $239,000 related to these contracts.
In March 1992, NJR Energy entered into long-term, fixed-price contracts to sell
natural gas to a gas marketing company. In October 1994, in conjunction with a
shift in capital allocation policy, NJR Energy entered into a swap agreement
which hedged its risk for sales volumes under the contract which were in excess
of the estimated production from natural gas reserves owned at that time. NJR
Energy has sold its natural gas reserves pursuant to a plan to exit the oil and
gas production business. In order to hedge its risk for sales volumes under such
contract that would have otherwise been fulfilled by its producing reserve base,
NJR Energy entered into a second swap agreement in June 1995. In connection with
the second swap, NJR Energy received $3.3 million, which is included in Deferred
Revenue and is being amortized to income over the 15-year life of the agreement.
Under the terms of the swap agreements, NJR Energy will pay to the
counterparties the identical fixed price it receives from the gas marketing
company (the fixed price) in exchange for the payment by the counterparties of
an index price plus a spread per MMbtu (the floating price) for the total
volumes under the gas sales contract. The swap agreements were effective as of
November 1995, and will expire on the same date as the underlying gas sales
contract. As of September 30, 1998, NJR Energy would have to pay approximately
$27.5 million to terminate these swap agreements.
In order to secure the physical gas supply to meet the delivery requirements
under its gas sales contracts, NJR Energy entered into a long-term purchase
contract effective November 1995 with a second gas marketing company for the
identical volumes it is obligated to sell under the above mentioned gas sales
contract. NJR Energy has agreed to pay the supplier the identical floating price
it is receiving under the swap agreements. In conjunction with this contract,
NJR Energy received $1.9 million, which is included in Deferred Revenue and is
being amortized to income over the life of the agreement.
40
<PAGE> 21
New Jersey Resources Corporation
The net result of the above swap agreements and purchase contract is that NJR
Energy has hedged both its price and volume risk associated with its long-term,
fixed-price sales contract. The respective obligations of NJR Energy and the
counterparties under the swap agreements are guaranteed, subject to a maximum
amount, by the Company and the respective counterparties' parent corporations.
In the event of nonperformance by the counterparties and their parent
corporations, NJR Energy's financial results would be impacted by the
difference, if any, between the fixed price it is receiving under the gas sales
contract compared with the floating price it is paying under the purchase
contract. However, the Company does not anticipate nonperformance by the
counterparties.
The fair value of cash and temporary investments, accounts 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. The estimated fair value of long-term debt is based on quoted
market prices for similar issues and the fair value of interest rate swap
agreements is based on the estimated amount the Company would receive or pay to
terminate the agreements. The carrying amount of long-term debt was $297.1
million and $259.8 million, with a fair market value of $311.8 million and
$266.3 million at September 30, 1998 and 1997, respectively. The Company would
have to pay approximately $756,000 and $1 million to terminate its interest rate
swap agreement at September 30, 1998 and 1997, respectively.
10. COMMITMENTS AND CONTINGENT LIABILITIES
NJNG has entered into long-term contracts for the supply, storage and delivery
of natural gas with pipeline companies that expire at various dates through
2012. These contracts include fixed charges of approximately $104 million per
year, which are recovered through the LGA.
Capital expenditures are estimated at $54.7 million and $50.5 million in fiscal
1999 and 2000, respectively, and consist primarily of NJNG's construction
program to support its customer growth and maintain its distribution system.
NJNG is participating in environmental investigations and the preparation of
proposals for remedial action at 11 former manufactured gas plant (MGP) sites.
Through the RA approved by the BPU, NJNG is recovering expenditures incurred
through June 1997 over a seven-year period. Costs incurred subsequent to June
30, 1997 will be reviewed annually and, subject to BPU approval, recovered over
seven-year periods. In 1996, NJNG, with the assistance of an outside consulting
firm, completed an environmental review of the sites, including a review of its
potential liability for investigation and remedial action. On the basis of such
review, NJNG estimates that, exclusive of any insurance recoveries, total future
expenditures to remediate and monitor known MGP sites will range from $27.5
million to $60 million. NJNG's estimates of these liabilities are based upon
currently available facts, existing technology and presently enacted laws and
regulations. Where available information is sufficient to estimate the amount of
the liability, it is NJNG's policy to accrue the full amount of such estimate.
Where the information is sufficient only to establish a range of probable
liability and no point within the range is more likely than any other, it is
NJNG's policy to accrue the lower end of the range. Accordingly, NJNG has
recorded an accrued liability and corresponding regulatory asset of $27.5
million. 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 any insurance recoveries. NJNG will continue to seek recovery of such
costs through the RA.
NJNR Pipeline Company, a wholly-owned subsidiary of NJR Energy, owns a 2.8%
equity interest in the Iroquois Gas Transmission System, L.P. (Iroquois) which
has constructed and is operating a 375-mile, natural gas pipeline from the
Canadian border to Long Island. The Company has guaranteed a pro-rata share of a
debt service letter of credit obtained by Iroquois which totaled $1 million at
September 30, 1998. The Company does not expect to incur any cash requirements
under the guarantee.
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business and other investigations. In management's
opinion, the ultimate disposition of these matters will not have a material
adverse effect on either its financial condition or results of operations.
41
<PAGE> 22
New Jersey Resources Corporation
11. BUSINESS SEGMENT DATA
Information related to the Company's various business segments, excluding
capital expenditures, which are presented in the Consolidated Statements of Cash
Flows, is detailed below:
<TABLE>
<CAPTION>
(Thousands)
Fiscal years ended September 30, 1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Operating Revenues
Natural gas distribution $ 575,971 $ 561,590 $ 480,629
Energy holdings 151,118 144,343 81,076
Real estate 758 3,193 4,272
Other -- -- 68
-------------------------------------
Total before eliminations 727,847 709,126 566,045
Eliminations
(intersegment revenues) (17,505) (12,582) (11,292)
-------------------------------------
Total $ 710,342 $ 696,544 $ 554,753
=====================================
Depreciation and Amortization
Natural gas distribution $ 27,520 $ 25,102 $ 22,513
Energy holdings 177 192 92
Real estate 56 410 542
Other 82 93 82
-------------------------------------
Total $ 27,835 $ 25,797 $ 23,229
=====================================
Operating income before
income taxes
Natural gas distribution $ 79,969 $ 76,431 $ 71,976
Energy holdings 3,578 5,300 6,052
Real estate (1,490) 119 (531)
Other 1,987 697 950
-------------------------------------
Total $ 84,044 $ 82,547 $ 78,447
=====================================
Assets at Year End
Natural gas distribution $ 866,269 $ 805,440 $ 778,896
Energy holdings 38,106 28,315 23,771
Real estate 22,039 34,205 40,414
Other 16,604 11,101 12,106
-------------------------------------
Total $ 943,018 $ 879,061 $ 855,187
=====================================
</TABLE>
12. SELECTED QUARTERLY DATA (UNAUDITED)
A summary of financial data for each fiscal quarter of 1998 and 1997 follows.
Due to the seasonal nature of the Company's natural gas business, quarterly
amounts vary significantly during the year. In the opinion of management, the
information furnished reflects all adjustments necessary for a fair presentation
of the results of the interim periods.
<TABLE>
<CAPTION>
(Thousands, except First Second Third Fourth
per share data) Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
OPERATING REVENUES $220,395 $266,586 $113,432 $ 109,929
OPERATING INCOME $ 18,762 $ 33,085 $ 7,755 $ 1,020
NET INCOME $ 14,216 $ 28,511 $ 2,894 $ (3,864)
EARNINGS PER
COMMON SHARE
BASIC $ .80 $ 1.61 $ .16 $ (.22)
DILUTED $ .79 $ 1.60 $ .16 $ (.22)
- -------------------------------------------------------------------------------
1997
Operating revenues $188,601 $285,366 $121,150 $ 101,427
Operating income $ 18,548 $ 33,957 $ 7,572 $ 1,385
Net income $ 12,942 $ 28,503 $ 2,526 $ (4,047)
Earnings per
common share
Basic $ .72 $ 1.58 $ .14 $ (.23)
Diluted $ .71 $ 1.57 $ .14 $ (.23)
- -------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 23
DIRECTORS AND SENIOR OFFICERS
New Jersey Resources Corporation
DIRECTORS
Nina Aversano, 53
President
Global Commercial Markets, Lucent Technologies (1998)
Bruce G. Coe, 68 (A,D,E)
President (retired)
New Jersey Business & Industry Association (1984)
Leonard S. Coleman, 49 (B,E)
President
The National League of Professional Baseball Players (1995)
Laurence M. Downes, 41 (A)
Chairman of the Board & Chief Executive Officer
New Jersey Resources Corporation (1985)
Joe B. Foster, 64 (C,D)
Chairman & Chief Executive Officer
Newfield Exploration Company (1994)
Hazel S. Gluck, 64 (B,E)
President
The GluckShaw Group (1995)
Lester D. Johnson, 66 (A,C,D)
Vice Chairman & Chief Financial Officer (retired)
Consolidated Natural Gas Company (1996)
Dorothy K. Light, 61 (A,B,E)
Chairman & Chief Executive Officer
Alden Enterprises, LLC (1990)
Charles G. Stalon, 69 (B,C)
Independent Consultant on Energy Regulation (1994)
John J. Unkles, Jr., 68 (C,D,E)
Managing Director (retired)
Tucker Anthony, Inc. (1982)
Gary W. Wolf, 60 (A,B,C)
Senior Partner
Cahill, Gordon & Reindel (1996)
George R. Zoffinger, 50 (A,C,D)
President & Chief Executive Officer
Value Property Trust (1996)
Duncan Thecker, 83
President
Duncan Thecker Associates
Director Emeritus (1982)
SENIOR OFFICERS
Laurence M. Downes, 41
Chairman of the Board & Chief Executive Officer (1985)
Oleta J. Harden, 49
Senior Vice President, General Counsel & Corporate Secretary (1984)
Glenn C. Lockwood, 37
Senior Vice President & Chief Financial Officer (1988)
Eva I. Szakal, 50
Vice President, Market Development (1997)
(A) Member of Executive Committee
(B) Member of Audit Committee
(C) Member of Financial Policy Committee
(D) Member of Management Development & Compensation Committee
(E) Member of Corporate Governance Committee
Date represents year of affiliation with an NJR Company.
43
<PAGE> 24
DIRECTORS AND SENIOR OFFICERS
New Jersey Resources Corporation Subsidiaries
NEW JERSEY NATURAL GAS COMPANY
DIRECTORS
Bruce G. Coe
Laurence M. Downes
Lester D. Johnson
Dorothy K. Light
Gary W. Wolf
SENIOR OFFICERS
Laurence M. Downes, 41
Chairman of the Board & Chief Executive Officer (1985)
Gary A. Edinger, 48
Senior Vice President, Energy Delivery (1972)
Oleta J. Harden, 49
Senior Vice President & Corporate Secretary (1984)
Timothy C. Hearne, Jr., 42
Senior Vice President, Financial & Administrative Services (1985)
Thomas J. Kononowitz, 56
Senior Vice President, Marketing Services (1963)
Joseph P. Shields, 41
Senior Vice President, Energy Services (1983)
Wayne K. Tarney, 57
Senior Vice President, Customer Services (1996)
Hugo C. Bottino, 47
Vice President, Human Resources (1981)
Francis X. Colford, 46
Vice President & Controller (1978)
David M. Klucsik, 43
Vice President, Government Relations (1984)
Mary Ann Martin, 63
Vice President, Consumer & Community Relations (1959)
Kevin A. Moss, 48
Vice President, Regulatory Affairs (1990)
Deborah G. Zilai, 45
Vice President, Information Systems & Services (1996)
NEW JERSEY NATURAL ENERGY COMPANY
Laurence M. Downes, 41
President & Chief Executive Officer (1985)
Glenn C. Lockwood, 37
Vice President & Chief Financial Officer (1988)
Oleta J. Harden, 49
Secretary (1984)
NJR ENERGY CORPORATION
Laurence M. Downes, 41
President & Chief Executive Officer (1985)
Glenn C. Lockwood, 37
Vice President & Chief Financial Officer (1988)
Oleta J. Harden, 49
Secretary (1984)
Jay B. Corn, 39
Vice President (1990)
NJR ENERGY SERVICES COMPANY
Laurence M. Downes, 41
President & Chief Executive Officer (1985)
Glenn C. Lockwood, 37
Vice President & Chief Financial Officer (1988)
Oleta J. Harden, 49
Secretary (1984)
Joseph P. Shields, 41
Vice President (1983)
COMMERCIAL REALTY &
RESOURCES CORP.
John Lishak, Jr., 58
President (1981)
Glenn C. Lockwood, 37
Vice President & Chief Financial Officer (1988)
Oleta J. Harden, 49
Secretary (1984)
44
<PAGE> 1
EXHIBIT 21-1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OF INCORPORATION
New Jersey Natural Gas Company New Jersey
NJR Energy Holdings Corporation (formerly known as
NJR Energy Services Corp.) New Jersey
Subsidiaries:
New Jersey Natural Energy Company New Jersey
NJR Energy Services Company (formerly known as
NJR Power Services Corporation) New Jersey
NJR Energy Corp. New Jersey
Subsidiaries:
New Jersey Natural Resources Company New Jersey
NJNR Pipeline Company New Jersey
Natural Resources Compressor Company New Jersey
NJR Development Corp. New Jersey
Subsidiaries:
Commercial Realty & Resources Corp. . New Jersey
Paradigm Power, Inc. New Jersey
Subsidiaries:
Lighthouse One, Inc. New York
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NEW JERSEY RESOURCES CORPORATION'S 1998 ANNUAL REPORT TO
STOCKHOLDERS INCLUDING THE CONSOLIDATED STATEMENTS OF INCOME,
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONSOLIDATED BALANCE SHEETS
AND CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 658,171
<OTHER-PROPERTY-AND-INVEST> 21,826
<TOTAL-CURRENT-ASSETS> 161,477
<TOTAL-DEFERRED-CHARGES> 101,544
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 943,018
<COMMON> 45,834
<CAPITAL-SURPLUS-PAID-IN> 201,538
<RETAINED-EARNINGS> 43,432
<TOTAL-COMMON-STOCKHOLDERS-EQ> 290,804
20,000
640
<LONG-TERM-DEBT-NET> 295,345
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 60,700
<LONG-TERM-DEBT-CURRENT-PORT> 1,957
0
<CAPITAL-LEASE-OBLIGATIONS> 31,396
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 242,176
<TOT-CAPITALIZATION-AND-LIAB> 943,018
<GROSS-OPERATING-REVENUE> 710,342
<INCOME-TAX-EXPENSE> 23,422
<OTHER-OPERATING-EXPENSES> 626,298
<TOTAL-OPERATING-EXPENSES> 649,720
<OPERATING-INCOME-LOSS> 60,622
<OTHER-INCOME-NET> 2,353
<INCOME-BEFORE-INTEREST-EXPEN> 62,975
<TOTAL-INTEREST-EXPENSE> 19,633
<NET-INCOME> 43,342
1,585
<EARNINGS-AVAILABLE-FOR-COMM> 41,757
<COMMON-STOCK-DIVIDENDS> 29,076
<TOTAL-INTEREST-ON-BONDS> 13,344
<CASH-FLOW-OPERATIONS> 21,060
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.33
</TABLE>
