NEW JERSEY RESOURCES CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Estimates (form 10-K)

We prepare our financial statements in accordance with GAAP. Application of
these accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosures of contingencies during the reporting period. We regularly
evaluate our estimates, including those related to the calculation of the fair
value of derivative instruments, acquisitions, regulatory assets, income taxes,
pension and postemployment benefits other than pensions and contingencies
related to environmental matters and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. In the normal course of business, estimated
amounts are subsequently adjusted to actual results that may differ from
estimates.

Regulatory Accounting


NJNG and Adelphia Gateway maintain their accounts in accordance with the FERC
Uniform System of Accounts and recognize the impact of regulatory decisions on
their financial statements. As a result of the ratemaking process, NJNG and
Adelphia Gateway are required to apply the accounting principles in ASC 980,
Regulated Operations, which differ in certain respects from those applied by
unregulated businesses. Specifically, NJNG and Adelphia Gateway record
regulatory assets when it is probable that certain operating costs will be
recoverable from customers in future periods and record regulatory liabilities
associated with probable future obligations to customers.

Regulatory decisions can have an impact on the recovery of costs, the rate of
return earned on investment, and the timing and amount of assets to be recovered
by rates. For NJNG, the BPU's regulation of rates is premised on the full
recovery of prudently incurred costs and a reasonable rate of return on invested
capital. Decisions to be made by the BPU in the future will impact the
accounting for regulated operations, including decisions about the amount of
allowable costs and return on invested capital included in rates and any refunds
that may be required. If the BPU indicates that recovery of all or a portion of
a regulatory asset is not probable or does not allow for recovery of and a
reasonable return on investments in property plant and equipment, a charge to
income would be made in the period of such determination.

Environmental Costs


At the end of each fiscal year, NJNG, with the assistance of an independent
consulting firm, updates the environmental review of its MGP sites, including
its potential liability for investigation and remedial action. From this review,
NJNG estimates expenditures necessary to remediate and monitor these MGP sites.
NJNG's estimate of these liabilities is developed from then-currently available
facts, existing technology and current laws and regulations.

In accordance with accounting standards for contingencies, NJNG's policy is to
record a liability when it is probable that the cost will be incurred and can be
reasonably estimated. NJNG will determine a range of liabilities and will record
the most likely amount. If no point within the range is more likely than any
other, NJNG will accrue the lower end of the range. Since we believe that
recovery of these expenditures, as well as related litigation costs, is possible
through the regulatory process, we record a regulatory asset corresponding to
the related accrued liability. Accordingly, NJNG records an MGP remediation
liability and a corresponding regulatory asset on the Consolidated Balance
Sheets, which is based on the most likely amount.

The actual costs to be incurred by NJNG are dependent upon several factors,
including final determination of remedial action, changing technologies and
governmental regulations and the ultimate ability of other responsible parties
to pay, as well as the potential impact of any litigation and any insurance
recoveries. Previously incurred remediation costs, net of recoveries from
customers and insurance proceeds received are included in regulatory assets on
the Consolidated Balance Sheets.

If there are changes in the regulatory position surrounding these costs, or
should actual expenditures vary significantly from estimates in that these costs
are disallowed for recovery by the BPU, such costs would be charged to income in
the period of such determination. See the Legal Proceedings section in Note 15.
Commitments and Contingent Liabilities for more details.


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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Postemployment Employee Benefits

Our costs of providing postemployment employee benefits are dependent upon
numerous factors, including actual plan experience and assumptions of future
experience. Postemployment employee benefit costs are affected by actual
employee demographics including age, compensation levels and employment periods,
the level of contributions made to the plans, changes in long-term interest
rates and the return on plan assets. Changes made to the provisions of the plans
or healthcare legislation may also impact current and future postemployment
employee benefit costs. Postemployment employee benefit costs may also be
significantly affected by changes in key actuarial assumptions, including
anticipated rates of return on plan assets, changes in mortality tables, health
care cost trends and discount rates used in determining the PBO. In determining
the PBO and cost amounts, assumptions can change from period to period and could
result in material changes to net postemployment employee benefit periodic costs
and the related liability recognized.

The remeasurement of plan assets and obligations for a significant event should
occur as of the date of the significant event. We may use a practical expedient
to remeasure the plan assets and obligations as of the nearest calendar
month-end date. When performing interim remeasurements, we obtain new asset
values, roll forward the obligation to reflect population changes and review the
appropriateness of all assumptions, regardless of the reason for performing the
interim remeasurement.

Our postemployment employee benefit plan assets consist primarily of U.S. equity
securities, international equity securities, fixed-income investments and other
assets, with a targeted allocation of 34 percent, 17 percent, 33 percent and 16
percent, respectively. Fluctuations in actual market returns, as well as changes
in interest rates, may result in increased or decreased postemployment employee
benefit costs in future periods. Postemployment employee benefit expenses are
included in O&M and other income, net on the Consolidated Statements of
Operations.

The following is a summary of a sensitivity analysis for each actuarial
assumption as of and for the fiscal year ended September 30, 2022:

Pension Plans
                                                                          Estimated                                  Estimated
                                         Increase/               Increase/(Decrease) on PBO               Increase/(Decrease) to Expense
Actuarial Assumptions                   (Decrease)                       (Thousands)                                (Thousands)
Discount rate                           1.00     %                           $ (30,196)                                  $ (4,599)
Discount rate                          (1.00)    %                           $  36,650                                   $  5,489
Rate of return on plan assets           1.00     %                               n/a                                     $ (3,153)
Rate of return on plan assets          (1.00)    %                               n/a                                     $  3,153


Other Postemployment Benefits
                                                                                       Estimated                                  Estimated
                                                      Increase/               Increase/(Decrease) on PBO               Increase/(Decrease) to Expense
Actuarial Assumptions                                (Decrease)                       (Thousands)                                (Thousands)
Discount rate                                        1.00     %                           $ (21,498)                                  $ (3,475)
Discount rate                                       (1.00)    %                           $  26,748                                   $  4,265
Rate of return on plan assets                        1.00     %                               n/a                                     $ (1,123)
Rate of return on plan assets                       (1.00)    %                               n/a                                     $  1,122

                                                                                       Estimated                                  Estimated
                                                      Increase/               Increase/(Decrease) on PBO               Increase/(Decrease) to Expense
Actuarial Assumptions                                (Decrease)                       (Thousands)                                (Thousands)
Health care cost trend rate                          1.00     %                           $  26,710                                   $  6,992
Health care cost trend rate                         (1.00)    %                           $ (21,853)                                  $ (5,537)



Acquisitions

The Company follows the guidance in ASC 805, Business Combinations, for
determining the appropriate accounting treatment for acquisitions. ASU No.
2017-01, Clarifying the Definition of a Business, provides an initial fair value
screen to determine if substantially all of the fair value of the assets
acquired is concentrated in a single asset or group of similar assets. If the
initial screening test is not met, the set is considered a business based on
whether there are inputs and substantive processes in place. Based on the
results of this analysis and conclusion on an acquisition's classification of a
business combination or an asset acquisition, the accounting treatment is
derived.
                                    Page 31
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
If the acquisition is deemed to be a business, the acquisition method of
accounting is applied. Identifiable assets acquired and liabilities assumed at
the acquisition date are recorded at fair value. If the transaction is deemed to
be an asset purchase, the cost accumulation and allocation model is used,
whereby the assets and liabilities are recorded based on the purchase price and
allocated to the individual assets and liabilities based on relative fair
values.

The determination and allocation of fair values to the identifiable assets
acquired and liabilities assumed are based on various assumptions and valuation
methodologies requiring considerable management judgment. The most significant
variables in these valuations are discount rates and the number of years on
which to base the cash flow projections, as well as other assumptions and
estimates used to determine the cash inflows and outflows. Management determines
discount rates based on the risk inherent in the acquired assets and related
cash flows. The valuation of an acquired business is based on available
information at the acquisition date and assumptions that are believed to be
reasonable. However, a change in facts and circumstances as of the acquisition
date can result in subsequent adjustments during the measurement period, but no
later than one year from the acquisition date.

Investments in Equity Investees


The Company accounts for its investments in Steckman Ridge and PennEast using
the equity method of accounting where it is not the primary beneficiary, as
defined under ASC 810, Consolidation, in that its respective ownership interests
are 50 percent or less and/or it has significant influence over operating and
management decisions. The Company's share of earnings is recognized as equity in
earnings of affiliates on the Consolidated Statements of Operations.

Equity method investments are reviewed for impairment when changes in facts and
circumstances indicate that the current fair value may be less than the asset's
carrying amount. Factors that the Company analyzes in determining whether an
impairment in its equity investments exists include reviewing the financial
condition and near-term prospects of the investees, including economic
conditions and trends in the general market, significant delays in or failure to
complete significant projects, unfavorable regulatory or legal actions expected
to substantially impact future earnings potential and lower-than-expected cash
distributions from investees. If the Company determines the decline in the value
of its equity method investment is other than temporary, an impairment charge is
recorded in an amount equal to the excess of the carrying value of the asset
over its fair value.

When impairment indicators are present, the fair value of the Company's
investment in Steckman Ridge is determined using a discounted cash flow method
and utilizes management's best estimates and assumptions related to expected
future results, including the price and capacity of firm natural gas storage
contracting, operations and maintenance costs, the nature and timing of major
maintenance and capital investment, and discount rates. Fair value
determinations require considerable judgment and are sensitive to changes in
underlying assumptions and other factors. As a result, it is reasonably possible
that unfavorable developments, such as the failure to execute storage contracts
and other services for available capacity at anticipated price levels could
result in an other-than-temporary impairment charge in the Consolidated
Financial Statements.

In June 2021, we evaluated our equity investment in PennEast for impairment and
determined that it was other-than-temporarily impaired. We estimated the fair
value of our investment in PennEast using probability-weighted scenarios
assigned to discounted future cash flows. The impairment is the result of
management's estimates and assumptions regarding the likelihood of certain
outcomes related to required regulatory approvals and pending legal matters (the
timing of which remains uncertain), the timing and magnitude of construction
costs and in-service dates, the evaluation of the current environmental and
political climate as it relates to interstate pipeline development and
transportation capacity revenues and discount rates. The other-than-temporary
impairment was recorded in equity in (losses) earnings from affiliates in the
Consolidated Statements of Operations. In September 2021, it was determined that
this project was no longer supported and all further development has ceased.

Impairment of Long-lived Assets


Property, plant and equipment and finite-lived intangible assets are reviewed
periodically for impairment when changes in facts and circumstances indicate
that the carrying amount of an asset may not be fully recoverable in accordance
with the appropriate accounting guidance. Factors that the Company analyzes in
determining whether an impairment in its long-lived assets exists include
determining if a significant decrease in the market price of a long-lived asset
is present; a significant adverse change in the extent to which a long-lived
asset is being used in its physical condition; legal proceedings or factors;
significant business climate changes; accumulations of costs in significant
excess of the amounts expected; a current-period operating or cash flow loss
coupled with historical negative cash flows or expected future negative cash
flows; and current
                                    Page 32
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
expectations that more likely than not, a long-lived asset will be sold or
otherwise disposed of significantly before the end of its estimated useful life.
When an impairment indicator is present, the Company determines if the carrying
value of the asset is recoverable by comparing it to its expected undiscounted
future cash flows. If the carrying value of the asset is greater than the
expected undiscounted future cash flows, an impairment charge is recorded in an
amount equal to the excess of the carrying value of the asset over its fair
value.

Derivative Instruments


We record our derivative instruments held as assets and liabilities at fair
value on the Consolidated Balance Sheets. In addition, since we choose not to
designate any of our physical and financial natural gas commodity derivatives as
accounting hedges, changes in the fair value of Energy Services' commodity
derivatives are recognized in earnings, as they occur, as a component of
operating revenues or natural gas purchases on the Consolidated Statements of
Operations. Changes in the fair value of foreign exchange contracts are
recognized in natural gas purchases on the Consolidated Statements of
Operations.

The fair value of derivative instruments is determined by reference to quoted
market prices of listed exchange-traded contracts, published price quotations,
pipeline tariff information or a combination of those items. Energy Services'
portfolio is valued using the most current and reasonable market information. If
the price underlying a physical commodity transaction does not represent a
visible and liquid market, Energy Services may utilize additional published
pipeline tariff information and/or other services to determine an equivalent
market price. As of September 30, 2022, the fair value of its derivative assets
and liabilities reported on the Consolidated Balance Sheets that is based on
such pricing is considered immaterial.

Should there be a significant change in the underlying market prices or pricing
assumptions, Energy Services may experience a significant impact on its
financial position, results of operations and cash flows. Refer to Item 7A.
Quantitative and Qualitative Disclosures About Market Risks for a sensitivity
analysis related to the impact to derivative fair values resulting from changes
in commodity prices. The valuation methods we use to determine fair values
remained consistent for fiscal 2022, 2021 and 2020. We apply a discount to our
derivative assets to factor in an adjustment associated with the credit risk of
its physical natural gas counterparties and to our derivative liabilities to
factor in an adjustment associated with its own credit risk. We determine this
amount by using historical default probabilities corresponding to the
appropriate S&P issuer ratings. Since the majority of our counterparties are
rated investment grade, this results in an immaterial credit risk adjustment.

Gains and losses associated with derivatives utilized by NJNG to manage the
price risk inherent in its natural gas purchasing activities are recoverable
through its BGSS, subject to BPU approval. Accordingly, the offset to the change
in fair value of these derivatives is recorded as either a regulatory asset or
liability on the Consolidated Balance Sheets.

Clean Energy Ventures hedges certain of its expected production of SRECs through
forward and futures contracts. Clean Energy Ventures intends to physically
deliver all SRECs it sells and recognizes SREC revenue as operating revenue on
the Consolidated Statements of Operations upon delivery of the underlying SREC.

We have not designated any derivatives as fair value or cash flow hedges as of
September 30, 2022 and 2021.


Income Taxes

The determination of our provision for income taxes requires the use of
estimates and the interpretation and application of tax laws. Judgment is
required in assessing the deductibility and recoverability of certain tax
benefits. We use the asset and liability method to determine and record deferred
tax assets and liabilities, representing future tax benefits and taxes payable,
which result from the differences in basis recorded in GAAP financial statements
and amounts recorded in the income tax returns. The deferred tax assets and
liabilities are recorded utilizing the statutorily enacted tax rates expected to
be in effect at the time the assets are realized and/or the liabilities settled.
An offsetting valuation allowance is recorded when it is more likely than not
that some or all of the deferred income tax assets won't be realized. Any
significant changes to the estimates and judgments with respect to the
interpretations, timing or deductibility could result in a material change to
earnings and cash flows.


                                    Page 33
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
For state income tax and other taxes, estimates and judgments are required with
respect to the apportionment among the various jurisdictions. In addition, we
operate within multiple tax jurisdictions and are subject to audits in these
jurisdictions. These audits can involve complex issues, which may require an
extended period of time to resolve. We maintain a liability for the estimate of
potential income tax exposure and, in our opinion, adequate provisions for
income taxes have been made for all years reported. Any significant changes to
the estimates and judgments with respect to the apportionment factor could
result in a material change to earnings and cash flows.

Occasionally, the federal and state taxing authorities determine that it is
necessary to make certain changes to the income tax laws. These changes may
include but are not limited to changes in the tax rates and/or the treatment of
certain items of income or expense. Accounting guidance requires that the
Company reflect the effect of changes in tax laws or tax rates at the date of
enactment. Additionally, the Company is required to re-measure its deferred tax
assets and liabilities as of the date of enactment. For non-regulated entities,
the effect of changes in tax laws or tax rates are required to be included in
income from continuing operations for the period that includes the enactment
date. For regulated entities, if as the result of an action by a regulator it is
probable that the future increase or decrease in taxes payable for items such as
changes in tax laws or rates will be recovered from or returned to customers
through future rates, an asset or liability shall be recognized for that
probable increase or decrease in future revenue. Accounting guidance also
requires that regulatory liabilities and/or assets be considered a temporary
difference for which a related deferred tax asset and/or liability shall be
recognized.

Accounting guidance requires that we establish reserves for uncertain tax
positions when it is more likely than not that the positions will not be
sustained when challenged by taxing authorities. Any changes to the estimates
and judgments with respect to the interpretations, timing or deductibility could
result in a change to earnings and cash flows. Interest and penalties related to
unrecognized tax benefits, if any, are recognized within income tax expense, and
accrued interest and penalties are recognized within accrued taxes on the
Consolidated Balance Sheets.

To the extent that NJNG invests in property that qualifies for ITCs, the ITC is
deferred and amortized to income over the life of the equipment in accordance
with regulatory treatment. In general, for our unregulated subsidiaries, we
record ITCs on the balance sheet as a contra-asset as a reduction to property,
plant and equipment when the property is placed in service. The contra asset is
amortized on the Consolidated Statements of Operations as a reduction to
depreciation expense over the useful lives of the related assets.

Changes to the federal statutes related to ITCs, which have the effect of
reducing or eliminating the credits, could have a negative impact on earnings
and cash flows.

Recently Issued Accounting Standards


Refer to Note 2. Summary of Significant Accounting Policies in the accompanying
Consolidated Financial Statements for discussion of recently issued accounting
standards.

Management's Overview

Consolidated

NJR is a diversified energy services holding company providing retail natural
gas service in New Jersey and wholesale natural gas and related energy services
to customers in the U.S. and Canada. In addition, we invest in clean energy
projects and storage and transportation assets and provide various repair, sales
and installation services. A more detailed description of our organizational
structure can be found in Item 1. Business.

The following sections include a discussion of results for fiscal 2022 compared
to fiscal 2021. The comparative results for fiscal 2021 with fiscal 2020 have
been omitted from this Form 10-K, but may be found in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations on Form
10-K of our Annual Report for the fiscal year ended September 30, 2021, filed
with the SEC on November 18, 2021.
                                    Page 34
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Reporting Segments

We have four primary reporting segments as presented in the chart below:
[[Image Removed: njr-20220930_g6.jpg]]
In addition to our four reporting segments above, we have nonutility operations
that either provide corporate support services or do not meet the criteria to be
treated as a separate reporting segment. These operations, which comprise Home
Services and Other, include: appliance repair services, sales and installations
at NJRHS, commercial real estate holdings at CR&R and home warranty contracts at
NJR Retail.

Impacts of the COVID-19 Pandemic


We continue to closely monitor developments related to the COVID-19 pandemic and
have, when appropriate, taken steps intended to limit potential exposure for our
employees and those we serve, including continuity in the safe operation of our
business. These steps include working from home for our office-based employees
utilizing a hybrid schedule, limiting direct contact with our customers and
suspending late payment fees for our utility customers. And while we, along with
other businesses, are continuing to return to normal operating practices, this
remains an evolving situation. The timing for recovery of businesses and local
economies, resurgences or mutations of the virus, and any potential future
shutdowns remains unknown. Throughout the COVID-19 pandemic, we have continued
to provide essential services to our customers. Both NJR and NJNG continue to
have sufficient liquidity to meet their current obligations, and business
operations remain fundamentally unchanged at this time. We cannot predict the
nature and extent of the pandemic's impacts to future operations or its effects
on our financial condition, results of operations and cash flows. We will
continue to monitor developments affecting our employees, customers and
operations and take additional steps to address the COVID-19 pandemic and its
impacts, as necessary.


                                    Page 35
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Operating Results

Net income (loss) and assets by reporting segment and other business operations
for the fiscal years ended September 30, are as follows:


(Thousands)                                          2022                         2021                         2020
                                          Net Income       Assets      Net Income       Assets      Net Income       Assets
Natural Gas Distribution                 $  140,124    $ 4,030,686    $  107,375    $ 3,707,461    $  126,902    $ 3,531,477
Clean Energy Ventures                        39,403      1,015,065        16,789        914,788        22,111        814,277
Energy Services                              69,650        333,064       

58,957 365,423 (11,008) 244,836
Storage and Transportation

                   26,598        999,520       (67,787)       862,407        18,311        844,799
Home Services and Other                        (781)       159,068          (826)       162,134         5,784        138,375
Intercompany (1)                                (72)      (275,987)        3,382       (289,935)          907       (257,287)
Total                                    $  274,922    $ 6,261,416    $  117,890    $ 5,722,278    $  163,007    $ 5,316,477

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


The increase in net income of $157.0 million during fiscal 2022, compared with
fiscal 2021, is due primarily to increased earnings at Natural Gas Distribution
due to higher base rates, increased SREC and electricity sales at Clean Energy
Ventures, the impairment of our equity method investment in PennEast during
fiscal 2021 that did not reoccur in fiscal 2022, and the commencement of AMAs at
Energy Services with an investment grade public utility, which began in November
2021, partially offset by the strong market demand related to the extreme cold
weather during February 2021, which did not reoccur to the same extent during
2022. The primary drivers of the changes noted above are described in more
detail in the individual reporting segment and other business operations
discussions.

The increase in assets during fiscal 2022, compared with fiscal 2021, was
increased infrastructure spend in Storage and Transportation primarily related
to the conversion and construction of the southern end of Adelphia Gateway,
which was put into service during fiscal 2022, additional investment in utility
plant in Natural Gas Distribution and solar asset investments at Clean Energy
Ventures, along with an increase in gas in storage at Natural Gas Distribution.

Non-GAAP Financial Measures


Our management uses NFE, a non-GAAP financial measure, when evaluating our
operating results. Energy Services economically hedges its natural gas inventory
with financial derivative instruments. NFE is a measure of the earnings based on
eliminating timing differences surrounding the recognition of certain gains or
losses, to effectively match the earnings effects of the economic hedges with
the physical sale of natural gas and, therefore, eliminates the impact of
volatility to GAAP earnings associated with the derivative instruments. To the
extent we utilize forwards, futures or other derivatives to hedge forecasted
SREC production, unrealized gains and losses are also eliminated from NFE. NFE
also excludes certain transactions associated with equity method investments,
including impairment charges, which are non-cash charges, and return of capital
in excess of the carrying value of our investment. These are considered unusual
in nature and occur infrequently such that they are not indicative of the
Company's performance for our ongoing operations. Included in the tax effects
are current and deferred income tax expense corresponding with the components of
NFE.

Non-GAAP financial measures are not in accordance with, or an alternative to,
GAAP and should be considered in addition to, and not as a substitute for or a
replacement of, the comparable GAAP measure and should be read in conjunction
with those GAAP results.

                                    Page 36
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Below is a reconciliation of consolidated net income, the most directly
comparable GAAP measure, to NFE for the fiscal years ended September 30:

(Thousands, except per share data)                                   2022         2021         2020
Net income                                                       $ 274,922    $ 117,890    $ 163,007
Add:
Unrealized (gain) loss on derivative instruments and related
transactions                                                       (59,906)      54,203       (9,644)
Tax effect                                                          14,248      (12,887)       2,296
Effects of economic hedging related to natural gas inventory (1)    19,939      (42,405)      12,690
Tax effect                                                          (4,738)      10,078       (3,016)
(Gain on) impairment of equity method investment                    (5,521)      92,000            -
Tax effect                                                           1,377      (11,167)           -

Net financial earnings                                           $ 240,321    $ 207,712    $ 165,333

Basic earnings per share                                         $    2.86    $    1.23    $    1.72
Add:
Unrealized (gain) loss on derivative instruments and related
transactions                                                         (0.62)        0.56        (0.10)
Tax effect                                                            0.15        (0.13)        0.02
Effects of economic hedging related to natural gas inventory (1)      0.21        (0.44)        0.13
Tax effect                                                           (0.05)        0.10        (0.03)
(Gain on) impairment of equity method investment                     (0.06)        0.96            -
Tax effect                                                            0.01        (0.12)           -

Basic NFE per share                                              $    2.50    $    2.16    $    1.74

(1)Effects of hedging natural gas inventory transactions where the economic
impact is realized in a future period.


NFE by reporting segment and other business operations for the fiscal years
ended September 30, discussed in more detail within the operating results
sections of each reporting segment and other business operations, is summarized
as follows:

(Thousands)                         2022                   2021                   2020
Natural Gas Distribution     $ 140,124     58  %    $ 107,375     52  %    $ 126,902     77  %
Clean Energy Ventures           39,403     17          16,789      8          22,111     13
Energy Services                 39,121     16          71,117     34          (7,873)    (5)
Storage and Transportation      22,454      9          13,046      6          18,311     11
Home Services and Other           (781)     -            (826)     -           5,784      4
Eliminations (1)                     -      -             211      -              98      -
Total                        $ 240,321    100  %    $ 207,712    100  %    $ 165,333    100  %

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


The increase in NFE of $32.6 million during fiscal 2022, compared with fiscal
2021, was due primarily to higher base rates at NJNG, increased SREC and
electricity sales at Clean Energy Ventures and the commencement of AMAs at
Energy Services with an investment grade public utility, which began in November
2021, partially offset by the extreme cold weather during February 2021, as
previously discussed.

Natural Gas Distribution

Overview


Natural Gas Distribution is comprised of NJNG, a natural gas utility that
provides regulated natural gas service throughout Burlington, Middlesex,
Monmouth, Morris, Ocean and Sussex counties in New Jersey to approximately
569,300 residential and commercial customers in its service territory and also
participates in the off-system sales and capacity release markets. The business
is subject to various risks, including those risks associated with COVID-19,
which may include but are not limited to impacts to customer growth and customer
usage, customer collections, the timing and costs of capital expenditures and
construction of infrastructure projects, operating and financing costs,
fluctuations in commodity prices and customer conservation efforts. In addition,
NJNG may be subject to adverse economic conditions such as inflation and rising
natural gas costs, certain regulatory actions, environmental remediation and
severe weather conditions. It is often difficult to predict the impact of events
or trends associated with these risks.
                                    Page 37
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
NJNG's business is seasonal by nature, as weather conditions directly influence
the volume of natural gas delivered to customers on an annual basis.
Specifically, customer demand substantially increases during the winter months
when natural gas is used for heating purposes. As a result, NJNG generates most
of its natural gas distribution revenues during the first and second fiscal
quarters and is subject to variations in earnings and working capital during the
fiscal year.

As a regulated company, NJNG is required to recognize the impact of regulatory
decisions on its financial statements. See Note 4. Regulation in the
accompanying Consolidated Financial Statements for a more detailed discussion on
regulatory actions, including filings related to programs and associated
expenditures, as well as rate requests related to recovery of capital
investments and operating costs.

NJNG’s operations are managed with the goal of providing safe and reliable
service, growing its customer base, diversifying its Utility Gross Margin,
promoting clean energy programs and mitigating the risks discussed above.

Base Rate Case


On November 17, 2021, the BPU issued an order adopting a stipulation of
settlement approving a $79.0 million increase to base rates, effective
December 1, 2021. In addition, the order also included approval for the final
increase for the NJ RISE/SAFE II programs, which totaled $269,000. These
increases include an overall rate of return on rate base of 6.84 percent, return
on common equity of 9.6 percent, a common equity ratio of 54.0 percent and a
composite depreciation rate of 2.78 percent.

Infrastructure Projects


NJNG has significant annual capital expenditures associated with the management
of its natural gas distribution and transmission system, including new utility
plant associated with customer growth and its associated PIM and infrastructure
programs. Below is a summary of NJNG's capital expenditures, including accruals
for fiscal 2022 and estimates of expected investments over the next fiscal year:
                     [[Image Removed: njr-20220930_g7.jpg]]

Estimated capital expenditures are reviewed on a regular basis and may vary
based on the ongoing effects of regulatory oversight, environmental regulations,
unforeseen events and the ability to access capital.

NJNG continues to implement BPU-approved infrastructure projects that are
designed to enhance the reliability and integrity of NJNG’s natural gas
distribution system.

                                    Page 38
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Infrastructure Investment Program

In February 2019, NJNG filed a petition with the BPU seeking authority to
implement a five-year IIP. The IIP consisted of two components: transmission and
distribution investments and information technology replacement and
enhancements. The total investment for the IIP was approximately $507.0 million.
All approved investments will be recovered through annual filings to adjust base
rates. In October 2020, the BPU approved the Company's transmission and
distribution component of the IIP for $150.0 million over five years, effective
November 1, 2020. NJNG voluntarily withdrew the information technology upgrade
component and will seek to recover associated costs in future rate case
proceedings. On March 31, 2022, NJNG filed its first rate recovery request for
its BPU-approved IIP with capital expenditures estimated through June 30, 2022,
including AFUDC. On July 13, 2022, NJNG filed its update with actual capital
expenditures of $28.9 million through June 30, 2022. On September 7, 2022, the
BPU approved the rate increase resulting in a $3.2 million revenue increase,
effective October 1, 2022.

SAFE II and NJ RISE

The BPU approved the 5-year SAFE II program and the associated rate mechanism to
replace the remaining unprotected steel mains and services from NJNG's natural
gas distribution system at an estimated cost of approximately $200 million,
excluding AFUDC. With the approval of SAFE II, $157.5 million was approved for
accelerated cost recovery methodology. The remaining $42.5 million in capital
expenditures was requested for recovery in base rate cases, of which $23.4
million was approved in NJNG's 2019 base rate case and $19.1 million was
approved in the 2021 base rate case.

The BPU approved NJNG's NJ RISE capital infrastructure program, which consists
of six capital investment projects estimated to cost $102.5 million, excluding
AFUDC, for natural gas distribution storm hardening and mitigation projects,
along with associated depreciation expense. These system enhancements are
intended to minimize service impacts during extreme weather events to customers
in the most storm-prone areas of NJNG's service territory. Recovery of NJ RISE
investments is included in NJNG's base rates.

In March 2021, NJNG filed a petition with the BPU requesting the final base rate
increase for the recovery associated with NJ RISE and SAFE II capital
investments costs of approximately $3.4 million made through June 30, 2021. In
June 2021, this filing was consolidated with the 2021 base rate case. On
November 17, 2021, the BPU issued an order for the consolidated matter which
included approval for the final increase for the NJ RISE and SAFE II programs of
$269,000.With this approval, the filings with respect to NJ RISE and SAFE II are
complete.

Southern Reliability Link

The SRL is an approximately 30-mile, 30-inch transmission main designed to
support improved system reliability and integrity in the southern portion of
NJNG’s service territory. SRL was completed and placed in service in August
2021
.

Customer Growth


In conducting NJNG's business, management focuses on factors it believes may
have significant influence on its future financial results. NJNG's policy is to
work with all stakeholders, including customers, regulators and policymakers, to
achieve favorable results. These factors include the rate of NJNG's customer
growth in its service territory, which can be influenced by political and
regulatory policies, the delivered cost of natural gas compared with competing
fuels, interest rates and general economic and business conditions.

NJNG’s total customers as of September 30, include the following:


                                    2022       2021       2020
Firm customers
Residential                       512,264    502,546    497,779
Commercial, industrial & other     31,227     30,615     28,735
Residential transport              17,316     21,882     22,420
Commercial transport                8,397      8,815      9,184
Total firm customers              569,204    563,858    558,118
Other                                  96         47         48
Total customers                   569,300    563,905    558,166



                                    Page 39
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
During fiscal 2022, 2021 and 2020, NJNG added 7,808, 7,854 and 8,349 new
customers, respectively. NJNG expects new customer additions, and those
customers who added additional natural gas services to their premises to
contribute approximately $6.5 million of incremental Utility Gross Margin on an
annualized basis.

NJNG expects its new customer annual growth rate to be approximately 1.6
percent. Based on information from municipalities and developers, as well as
external industry analysts and management's experience, NJNG estimates that
approximately 65 percent of the growth will come from new construction markets
and 35 percent from customer conversions to natural gas from other fuel sources.
This new customer and conversion growth would increase Utility Gross Margin
under NJNG's base rates by approximately $7.7 million annually, as calculated
under NJNG's CIP tariff.

Energy Efficiency Programs

SAVEGREEN conducts home energy audits and provides various grants, incentives
and financing alternatives designed to encourage the installation of
high-efficiency heating and cooling equipment and other energy efficiency
upgrades. Depending on the specific incentive or approval, NJNG recovers costs
associated with the programs over a two- to 10-year period through a tariff
rider mechanism. In March 2021, the BPU approved a three-year SAVEGREEN program
consisting of approximately $126.1 million of direct investment, $109.4 million
in financing options and approximately $23.4 million in operation and
maintenance expenses, which resulted in a $15.6 million annual recovery
increase, effective July 1, 2021.

In May 2020, NJNG filed a petition with the BPU to decrease its EE recovery
rate. In October, 2020, the BPU approved NJNG to maintain its existing rate,
which resulted in an annual recovery of approximately $11.4 million, effective
November 1, 2020.

In June 2021, NJNG submitted its annual cost recovery filing for the SAVEGREEN
programs established from 2010 through 2021. On January 26, 2022, the BPU
approved the stipulation, which increased annual recoveries by $2.2 million,
effective February 1, 2022.

On June 1, 2022, NJNG submitted its annual cost recovery filing for the
SAVEGREEN programs established from 2010 through the present. On September 28,
2022, the BPU approved the decrease, which will result in an annual decrease of
approximately $3.5 million, effective October 1, 2022.

The following table summarizes loans, grants, rebates and related investments as
of September 30:

(Thousands)                                  2022        2021
Loans                                     $ 152,000   $ 132,800

Grants, rebates and related investments 132,200 98,100
Total

                                     $ 284,200   $ 230,900



Program recoveries from customers during the fiscal years ended September 30,
2022 and 2021, were $25.8 million and $12.4 million, respectively. The recovery
includes a weighted average cost of capital that ranges from 6.69 percent to
7.76 percent, with a return on equity of 9.6 percent to 10.3 percent.

Conservation Incentive Program/BGSS


The CIP facilitates normalizing NJNG's Utility Gross Margin for variances not
only due to weather but also for other factors affecting customer usage, such as
conservation and energy efficiency. Recovery of Utility Gross Margin for the
non-weather variance through the CIP is limited to the amount of certain natural
gas supply cost savings achieved and is subject to a variable margin revenue
test. Additionally, recovery of the CIP Utility Gross Margin is subject to an
annual earnings test. An annual review of the CIP must be filed by June 1,
coincident with NJNG's annual BGSS filing, during which NJNG can request rate
changes to the CIP.

NJNG’s total utility firm gross margin includes the following adjustments
related to the CIP mechanism:

(Thousands)       2022       2021       2020
Weather (1)    $ 22,263   $ 13,273   $ 17,882
Usage             2,032     (1,852)       292
Total          $ 24,295   $ 11,421   $ 18,174

(1)Compared with the 20-year average, weather was 8.3 percent, 6.5 percent and
7.6 percent warmer-than-normal during fiscal 2022, 2021 and 2020 respectively.

                                    Page 40
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Recovery of Natural Gas Costs

NJNG's cost of natural gas is passed through to our customers, without markup,
by applying NJNG's authorized BGSS rate to actual therms delivered. There is no
Utility Gross Margin associated with BGSS costs; therefore, changes in such
costs do not impact NJNG's earnings. NJNG monitors its actual natural gas costs
in comparison to its BGSS rates to manage its cash flows associated with its
allowed recovery of natural gas costs, which is facilitated through BPU-approved
deferred accounting and the BGSS pricing mechanism. Accordingly, NJNG
occasionally adjusts its periodic BGSS rates or can issue credits or refunds, as
appropriate, for its residential and small commercial customers when the
commodity cost varies from the existing BGSS rate. BGSS rates for its large
commercial customers are adjusted monthly based on NYMEX prices.

NJNG's residential and commercial markets are currently open to competition, and
its rates are segregated between BGSS (i.e., natural gas commodity) and delivery
(i.e., transportation) components. NJNG earns Utility Gross Margin through the
delivery of natural gas to its customers and, therefore, is not negatively
affected by customers who use its transportation service and purchase natural
gas from another supplier. Under an existing order from the BPU, BGSS can be
provided by suppliers other than the state's natural gas utilities; however,
customers who purchase natural gas from another supplier continue to use NJNG
for transportation service.

During fiscal 2021, NJNG notified the BPU of its intent to provide BGSS bill
credits to residential and small commercial sales customers. The actual bill
credits given to customers totaled $20.6 million, $19.3 million net of tax.

In November 2021, the BPU approved on a preliminary basis a $2.9 million
increase to the annual revenues credited to BGSS, a $13.0 million annual
increase related to its balancing charge, as well as changes to CIP rates, which
resulted in a $6.3 million annual recovery decrease, effective December 1, 2021,
and approved on a final basis on May 4, 2022.

In November 2021, NJNG submitted notification of its intent to self-implement an
increase to its BGSS rate, which resulted in an approximately $24.2 million
increase to annual revenues credited to BGSS, effective December 1, 2021.


On June 1, 2022, NJNG submitted its annual petition to modify its BGSS,
balancing charge and CIP rates for residential and small business customers,
which was approved by the BPU on a preliminary basis on September 7, 2022. This
includes an $81.9 million increase to the annual revenues credited to BGSS, a
$9.0 million annual increase related to its balancing charge and a $10.2 million
increase to CIP rates, effective October 1, 2022. The balancing charge rate
includes the cost of balancing natural gas deliveries with customer usage for
sales and transportation customers, and balancing charge revenues are credited
to BGSS.

BGSS Incentive Programs

NJNG is eligible to receive financial incentives for reducing BGSS costs through
a series of Utility Gross Margin-sharing programs that include off-system sales,
capacity release and storage incentive programs. These programs are designed to
encourage better utilization and hedging of NJNG's natural gas supply,
transportation and storage assets. Depending on the program, NJNG shares 80 or
85 percent of Utility Gross Margin generated by these programs with firm
customers. Utility Gross Margin from incentive programs was $19.6 million, $13.4
million and $9.5 million during the fiscal years ended September 30, 2022, 2021
and 2020, respectively.

Hedging

In order to provide relative price stability to its natural gas supply
portfolio, NJNG employs a hedging strategy with the goal of having at least 75
percent of the Company's projected winter periodic BGSS natural gas sales
volumes hedged by each November 1 and at least 25 percent of the projected
periodic BGSS natural gas sales hedged for the following April-through-March
period. The hedging goal is typically achieved with gas in storage and the use
of financial instruments to hedge storage injections. NJNG may also use various
financial instruments including futures, swaps, options and weather related
products to hedge its future delivery obligations.

Commodity Prices


Natural Gas Distribution is affected by the price of natural gas, which can have
a significant impact on our cash flows, short-term financing costs, the price of
natural gas charged to our customers through the BGSS clause, our ability to
collect accounts receivable, which impacts our bad debt expense, and our ability
to maintain a competitive advantage over other energy sources.

                                    Page 41
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Natural gas commodity prices are shown in the graph below, which illustrates the
daily natural gas prices(1) in the Northeast market region, also known as TETCO
M-3.
                     [[Image Removed: njr-20220930_g8.jpg]]
(1) Data sourced from Standard & Poor's Financial Services, LLC Global Platts.
The maximum price per MMBtu was $17.69, $14.57 and $5.59 and the minimum price
was $2.42, $0.28 and $0.68 for the fiscal years ended September 30, 2022, 2021
and 2020, respectively. A more detailed discussion of the impacts of the price
of natural gas on operating revenues, natural gas purchases and cash flows can
be found in the Operating Results and Cash Flow sections of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.

Societal Benefits Charge

NJNG’s qualifying customers are eligible for the USF program, which is
administered by the New Jersey Department of Community Affairs, to help make
energy bills more affordable.

In April 2021, the BPU approved on a final basis NJNG’s annual SBC application
to recover remediation expenses, including an increase in the RAC, of
approximately $1.3 million annually and an increase to the NJCEP factor, of
approximately $6.0 million, which was effective May 1, 2021.

In September 2021, the BPU approved on a final basis NJNG’s annual USF
compliance filing, which resulted in an annual increase of approximately $4.9
million
, effective October 1, 2021.

On March 23, 2022, the BPU approved on a final basis NJNG’s annual SBC
application to recover remediation expenses, including an increase in the RAC,
of approximately $600,000 annually and a decrease to the NJCEP factor of
approximately $2.9 million, effective April 1, 2022.


On June 27, 2022, NJNG filed its annual USF compliance filing proposing a
decrease to the statewide USF rate. On August 25, 2022, an additional update was
submitted on behalf of all NJ utilities with actual information through July 31,
2022. On September 28, 2022, the BPU approved a decrease based on the August
update, which resulted in an annual decrease of approximately $1.6 million,
effective October 1, 2022.

On September 13, 2022, NJNG submitted its annual SBC filing to the BPU
requesting approval of RAC expenditures through June 30, 2022, as well as an
increase to the RAC annual recoveries of $3.8 million and an increase to the
NJCEP annual recoveries of $2.2 million, with a proposed effective date of
April 1, 2023.

                                    Page 42
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Environmental Remediation

NJNG is responsible for the environmental remediation of former MGP sites, which
contain contaminated residues from former gas manufacturing operations that
ceased operating at these sites by the mid-1950s and, in some cases, had been
discontinued many years earlier. Actual MGP remediation costs may vary from
management's estimates due to the developing nature of remediation requirements,
regulatory decisions by the NJDEP and related litigation. NJNG reviews these
costs at the end of each fiscal year and adjusts its liability and corresponding
regulatory asset as necessary to reflect its expected future remediation
obligation. Accordingly, NJNG recognized a regulatory asset and an obligation of
$127.1 million as of September 30, 2022, a decrease of $7.9 million compared
with the prior fiscal period.

In June 2019, NJNG initiated a preliminary assessment of a site in Aberdeen, New
Jersey to determine prior ownership and if former MGP operations were active at
the location. The preliminary assessment and site investigation activities are
ongoing at the Aberdeen site and, based on initial findings, will be moving to
the remedial investigation phase. The costs associated with preliminary
assessment, site investigation and remedial investigation activities are
considered immaterial and are included as a component of NJNG's annual SBC
application to recover remediation expenses. We will continue to gather
information to further refine and enhance the estimate of potential costs for
this site as it becomes available. See Note 15. Commitments and Contingent
Liabilities for a more detailed description.

Other regulatory filings and a more detailed discussion of the filings in this
section can be found in Note 4. Regulation in the accompanying Consolidated
Financial Statements.

Operating Results


NJNG's operating results for the fiscal years ended September 30, are as
follows:

(Thousands)                                         2022         2021        2020
Operating revenues (1)                          $ 1,128,767   $ 731,796   $ 729,923
Operating expenses
Natural gas purchases (2) (3)                       557,232     260,714     287,307
Operation and maintenance                           198,546     203,740     162,792
Regulatory rider expense (4)                         59,437      38,304      34,529
Depreciation and amortization                        94,579      80,045      71,883
Total operating expenses                            909,794     582,803     556,511
Operating income                                    218,973     148,993     173,412
Other income, net                                     7,686      13,841      11,486

Interest expense, net of capitalized interest 46,394 36,405

 30,975
Income tax provision                                 40,141      19,054      27,021
Net income                                      $   140,124   $ 107,375   $ 126,902


(1)Includes nonutility revenue of approximately $1.4 million and $337,000 for
fiscal 2022 and 2021, respectively, for lease agreements with various NJR
subsidiaries leasing office space from NJNG at the Company's headquarters that
commenced in July 2021, which are eliminated in consolidation. There was no
nonutility revenue for fiscal 2020.
(2)Includes the purchased cost of the natural gas, fees paid to pipelines and
storage facilities, adjustments as a result of BGSS incentive programs and
hedging transactions. These expenses are passed through to customers and are
offset by corresponding revenues.
(3)Includes related party transactions of approximately $9.3 million, $13.0
million and $11.5 million for fiscal 2022, 2021 and 2020, respectively, a
portion of which is eliminated in consolidation.
(4)Consists of expenses associated with state-mandated programs, the RAC and
energy efficiency programs, calculated on a per-therm basis. These expenses are
passed through to customers and are offset by corresponding revenues.

Operating Revenues and Natural Gas Purchases

Operating revenues increased 54.2 percent during fiscal 2022 compared with
fiscal 2021. Natural gas purchases increased 113.7 percent during fiscal 2022
compared with fiscal 2021.

                                    Page 43
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
The factors contributing to the increases and decreases in operating revenues
and natural gas purchases during fiscal 2022, are as follows:
                                    2022 v. 2021
                              Operating   Natural gas
(Thousands)                   revenues     purchases
BGSS incentives              $ 231,496   $    225,324
Base rate impact                65,819              -
Average BGSS rates              54,347         54,347
Bill credits                    20,590         20,590
CIP adjustments                 12,874              -
Firm sales                     (11,040)        (4,199)
Riders and other (1)            22,885            456
Total increase (decrease)    $ 396,971   $    296,518

(1)Other includes changes in rider rates, including those related to EE, NJCEP
and other programs, which is offset in regulatory rider expense.

Non-GAAP Financial Measures


Management uses Utility Gross Margin, a non-GAAP financial measure, when
evaluating the operating results of NJNG. NJNG's Utility Gross Margin is defined
as operating revenues less natural gas purchases, sales tax, and regulatory
rider expenses. This measure differs from gross margin as presented on a GAAP
basis, as it excludes certain operations and maintenance expense and
depreciation and amortization. Utility Gross Margin may also not be comparable
to the definition of gross margin used by others in the natural gas distribution
business and other industries. Management believes that Utility Gross Margin
provides a meaningful basis for evaluating utility operations since natural gas
costs, sales tax and regulatory rider expenses are included in operating
revenues and passed through to customers and, therefore, have no effect on
Utility Gross Margin. Non-GAAP financial measures are not in accordance with, or
an alternative to, GAAP and should be considered in addition to, and not as a
substitute for, the comparable GAAP measure.

Utility Gross Margin


A reconciliation of gross margin, the closest GAAP financial measure to NJNG's
Utility Gross Margin for the fiscal years ended September 30, is as follows:

(Thousands)                          2022         2021        2020
Operating revenues               $ 1,128,767   $ 731,796   $ 729,923
Less:
Natural gas purchases                557,232     260,714     287,307
Operation and maintenance (1)         93,164     110,364      88,883
Regulatory rider expense              59,437      38,304      34,529
Depreciation and amortization         94,579      80,045      71,883
Gross margin                         324,355     242,369     247,321
Add:
Operation and maintenance (1)         93,164     110,364      88,883
Depreciation and amortization         94,579      80,045      71,883
Utility Gross Margin             $   512,098   $ 432,778   $ 408,087


(1)Excludes selling, general and administrative expenses of approximately $102.8
million, $97.0 million and $77.9 million for the fiscal years 2022, 2021 and
2020, respectively

Utility Gross Margin consists of three components:

•Utility firm gross margin generated from only the delivery component of either
a sales tariff or a transportation tariff from residential and commercial
customers who receive natural gas service from NJNG;


•BGSS incentive programs, where revenues generated or savings achieved from
BPU-approved off-system sales, capacity release or storage incentive programs
are shared between customers and NJNG; and

•Utility Gross Margin generated from off-tariff customers, as well as
interruptible customers.

                                    Page 44
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
The following provides more information on the components of Utility Gross
Margin and associated throughput (Bcf) of natural gas delivered to customers:

                                                             2022                          2021                          2020
($ in thousands)                                       Margin       Bcf              Margin       Bcf              Margin       Bcf
Utility Gross Margin/Throughput
Residential                                         $ 341,167       45.5          $ 288,723       46.2            275,033       44.6
Commercial, industrial and other                       77,629        8.7             64,950        8.6             57,929        8.2
Firm transportation                                    69,933       13.0             61,870       13.7             60,199       13.3
Total utility firm gross margin/throughput            488,729       67.2            415,543       68.5            393,161       66.1
BGSS incentive programs                                19,587       95.2             13,415      101.3              9,471      118.4
Interruptible/off-tariff agreements                     3,782       32.4              3,820       22.9              5,455       30.9
Total Utility Gross Margin/Throughput               $ 512,098      194.8          $ 432,778      192.7          $ 408,087      215.4



Utility Firm Gross Margin

Utility firm gross margin increased $73.2 million during fiscal 2022 compared
with fiscal 2021, due primarily to the increase in base rates and the impact of
riders, most notably EE, as previously discussed.

BGSS Incentive Programs

The factors contributing to the change in Utility Gross Margin generated by BGSS
incentive programs are as follows:

(Thousands)            2022 v. 2021
Off-system sales           $ 6,897
Storage                      1,737
Capacity release            (2,462)
Total increase             $ 6,172



The increase in BGSS incentive programs was due primarily to increased margins
from off-system sales and storage incentive, partially offset by lower capacity
release volumes.

Operation and Maintenance Expense


O&M expense decreased $5.2 million during fiscal 2022 compared with fiscal 2021,
due primarily to the deferral of bad debt costs in accordance with the July 2,
2020 BPU deferral order, partially offset by an increase in compensation and
information technology expenditures.

Depreciation Expense

Depreciation expense increased $14.5 million in fiscal 2022, compared with
fiscal 2021, as a result of additional utility plant being placed into service.

Interest Expense


Interest expense increased $10.0 million in fiscal 2022, compared with fiscal
2021, due primarily to increased outstanding long-term debt and lower AFUDC debt
related to infrastructure projects completed and placed in service at the end of
fiscal 2021.

Other Income

Other income decreased $6.2 million during fiscal 2022, compared with fiscal
2021, due primarily to decreased AFUDC equity as previously discussed, partially
offset by increased pension costs.


                                    Page 45
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Income Tax Provision

Income taxes increased $21.1 million during fiscal 2022, compared with fiscal
2021, due to higher income before income taxes.

Net Income

Net income increased $32.7 million during fiscal 2022, compared with fiscal
2021, due primarily to higher Utility Gross Margin, partially offset by the
related increase in income taxes as previously discussed.

Clean Energy Ventures

Overview


Clean Energy Ventures actively pursues opportunities in the renewable energy
markets. Clean Energy Ventures enters into various agreements to install solar
net-metered systems for residential and commercial customers, as well as large
commercial grid-connected projects. In addition, Clean Energy Ventures enters
into various long-term agreements, including PPAs, to supply energy from
commercial solar projects.

Capital expenditures related to clean energy projects are subject to change due
to a variety of factors that may affect our ability to commence operations at
these projects on a timely basis or at all, including logistics associated with
the start-up of residential and commercial solar projects, such as timing of
construction schedules, the permitting and regulatory process, any delays
related to electric grid interconnection, economic trends, unforeseen events and
the ability to access capital or allocation of capital to other investments or
business opportunities. Clean Energy Ventures is also subject to various risks,
including those associated with COVID-19, which may include impacts to
residential solar customer growth and customer collections, our ability to
identify and develop commercial solar asset investments, impacts to our supply
chain and our ability to source materials for construction.

The primary contributors toward the value of qualifying clean energy projects
are tax incentives and RECs. Changes in the federal statutes related to the ITC
and/or relevant state legislation and regulatory policies affecting the market
for solar renewable energy credits could significantly affect future results.

Solar

Solar projects placed in service and related expenditures for the fiscal years
ended September 30, are as follows:

($ in Thousands)                                         2022                                2021                                 2020
Placed in service                           Projects       MW        Costs      Projects       MW        Costs      Projects       MW        Costs
Grid-connected (1) (2)                           3        14.0    $ 31,411           1         2.9    $  3,433           9        60.1    $ 121,516
Net-metered:
Commercial (1)                                   2         1.0       2,440           1         2.7       5,576           -           -           43
Residential                                    360         3.9      11,544         421         4.8      13,885         481         5.9       17,474
Total placed in service                        365        18.9    $ 45,395         423        10.4    $ 22,894         490        66.0    $ 139,033

(1)Includes projects subject to sale leaseback arrangements.
(2)Includes an operational 2.9 MW commercial solar project acquired in December
2020
.


Clean Energy Ventures has approximately 386.6 MW of solar capacity in service.
Projects that were placed in service through December 31, 2019, qualified for a
30 percent federal ITC. The credit declined to 26 percent for property under
construction during 2020. In December 2020, the 26 percent federal ITC was
extended through the end of 2022. Following the signing of the Inflation
Reduction Act into law in August 2022, the federal ITC was restored to 30
percent through the end of 2032. There are additional opportunities to increase
the credit amount up to 20 percent for certain facilities that are placed in
service after December 31, 2022, based upon the type of project and location.
ITC-eligible projects placed in service prior to the enactment of the Inflation
Reduction Act are not impacted by the change.

                                    Page 46
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Clean Energy Ventures may enter into transactions to sell certain of its
commercial solar assets concurrent with agreements to lease the assets back over
a period of five to 15 years. The Company will continue to operate the solar
assets and is responsible for related expenses and entitled to retain the
revenue generated from RECs and energy sales. The ITCs and other tax benefits
associated with these solar projects transfer to the buyer if applicable;
however, the lease payments are structured so that Clean Energy Ventures is
compensated for the transfer of the related tax incentives. Accordingly, for
solar projects financed under sale leasebacks for which the assets were sold
during the first 5 years of in-service life, Clean Energy Ventures recognizes
the equivalent value of the ITC in other income on the Consolidated Statements
of Operations over the respective five-year ITC recapture periods, starting with
the second year of the lease. During fiscal 2022, 2021 and 2020, Clean Energy
Ventures received proceeds of $24.1 million, $17.7 million and $42.9 million,
respectively, in connection with the sale leaseback of commercial solar assets.

As part of its solar investment portfolio, Clean Energy Ventures operates a
residential and small commercial solar program, The Sunlight Advantage®, that
provides qualifying homeowners and small business owners the opportunity to have
a solar system installed at their home or place of business with no installation
or maintenance expenses. Clean Energy Ventures owns, operates and maintains the
system over the life of the contract in exchange for monthly payments.

For solar installations placed in-service in New Jersey prior to April 30, 2020,
each MWh of electricity produced creates an SREC that represents the renewable
energy attribute of the solar-electricity generated that can be sold to third
parties, predominantly load-serving entities that are required to comply with
the solar requirements under New Jersey's renewable portfolio standard.

In December 2019, the BPU established the TREC as the successor program to the
SREC program. TRECs provide a fixed compensation base multiplied by an assigned
project factor in order to determine their value. The project factor is
determined by the type and location of the project, as defined. All TRECs
generated are required to be purchased monthly by a TREC program administrator
as appointed by the BPU.

In July 2021, the BPU established a new successor solar incentive program. This
Administratively Determined Incentive Program, which we refer to as SREC IIs,
provides administratively set incentives for net metered residential projects
and net metered non-residential projects of 5 MW or less.

REC activity consisted of the following:

                                                2022                             2021                  2020
                                   SRECs                    TRECs                  SRECs            TRECs               SRECs          TRECs
Inventory balance as of
October 1,                         108,104                   6,944                    35,011          9,270             53,395             -
RECs generated                     425,453    (1)           38,914                   406,118         31,767            389,716         9,270
RECs delivered                    (417,305)                (35,099)                 (333,025)       (34,093)          (408,100)            -
Inventory balance as of
September 30,                      116,252                  10,759                   108,104          6,944             35,011         9,270


(1)Includes 247 SREC IIs generated during fiscal 2022 related to residential
solar.


The average SREC sales price was $202 during fiscal 2022, $196 in fiscal 2021
and $199 in fiscal 2020, and the average TREC price was $139 during fiscal 2022
and $144 in both fiscal 2021 and 2020.

Clean Energy Ventures hedges its expected SREC production through the use of
forward sales contracts. The following table reflects the hedged percentage of
our projected inventory of SRECs related to its in-service commercial and
residential assets at September 30, 2022:

                    Energy Year (1)    Percent of SRECs Hedged
                    2023                         98%
                    2024                         98%
                    2025                         89%
                    2026                         29%

(1)Energy years are compliance periods for New Jersey’s renewable portfolio
standard that run from June 1 to May 31.


There are no direct costs associated with the production of RECs by our solar
assets. All related costs are included as a component of O&M expenses on the
Consolidated Statements of Operations, including such expenses as facility
maintenance and broker fees.

                                    Page 47
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Operating Results

Clean Energy Ventures’ financial results for the fiscal years ended September
30
, are summarized as follows:


(Thousands)                            2022        2021       2020
Operating revenues                  $ 128,280   $ 95,275   $ 102,617
Operating expenses
Operation and maintenance              40,706     36,715      30,310

Depreciation and amortization (1) 21,396 20,567 25,329
Total operating expenses (1)

           62,102     57,282      55,639
Operating income (1)                   66,178     37,993      46,978
Other income, net                       6,554      6,392       6,420
Interest expense, net                  21,968     22,548      20,253
Income tax provision (1)               11,361      5,048      11,034
Net income (1)                      $  39,403   $ 16,789   $  22,111


(1)Amounts in fiscal 2020 have been adjusted for the change in accounting method
related to ITCs; see Note 2. Summary of Significant Accounting Policies for more
detail.

Operating Revenues

Operating revenues increased $33.0 million in fiscal 2022, compared with fiscal
2021, due primarily to increased SREC and electricity sales.

Operation and Maintenance Expense

O&M expense increased $4.0 million in fiscal 2022, compared with fiscal 2021,
due primarily to increased project maintenance, compensation, lease and
consulting expenses.

Income Tax Provision

Income taxes increased $6.3 million during fiscal 2022, compared with fiscal
2021, due primarily to higher operating income.

Net Income

Net income in fiscal 2022 increased $22.6 million, compared with fiscal 2021,
due primarily to the increased operating revenues, as previously discussed,
partially offset by higher operating expenses and related income taxes.

Energy Services

Overview


Energy Services markets and sells natural gas to wholesale and retail customers
and manages natural gas transportation and storage assets throughout major
market areas across North America. Energy Services maintains a strategic
portfolio of natural gas transportation and storage contracts that it utilizes
in conjunction with its market expertise to provide service and value to its
customers. Availability of these transportation and storage contracts allows
Energy Services to generate market opportunities by capturing price
differentials over specific time horizons and between geographic market
locations.

Energy Services also provides management of transportation and storage assets
for natural gas producers and regulated utilities. These management transactions
typically involve the release of producer/utility-owned storage and/or
transportation capacity in combination with an obligation to either purchase
and/or deliver physical natural gas. In addition to the contractual purchase
and/or sale of physical natural gas, Energy Services generates or pays fee-based
margin in exchange for its active management and may provide the producer and/or
utility with additional margin based on actual results.

In conjunction with the active management of these contracts, Energy Services
generates Financial Margin by identifying market opportunities and
simultaneously entering into natural gas purchase/sale, storage or
transportation contracts and financial derivative contracts. In cases where
storage is utilized to fulfill these contracts, these forecast sales and/or
purchases

                                    Page 48
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
are economically hedged through the use of financial derivative contracts. The
financial derivative contracts consist primarily of exchange-traded futures,
options and swap contracts, and are frequently used to lock in anticipated
transactional cash flows and to help manage volatility in natural gas market
prices. Generally, when its transportation and storage contracts are exposed to
periods of increased market volatility, Energy Services is able to implement
strategies that allow it to capture margin by improving the respective time or
geographic spreads on a forward basis.

Energy Services accounts for its physical commodity contracts and its financial
derivative instruments at fair value on the Consolidated Balance Sheets. Changes
in the fair value of physical commodity contracts and financial derivative
instruments are included in earnings as a component of operating revenues or
natural gas purchases on the Consolidated Statements of Operations. Volatility
in reported net income at Energy Services can occur over periods of time due to
changes in the fair value of derivatives, as well as timing differences related
to certain transactions. Unrealized gains and losses can fluctuate as a result
of changes in the price of natural gas, SRECs and foreign currency from the
original transaction price. Volatility in earnings can also occur as a result of
timing differences between the settlement of financial derivatives and the sale
of the underlying physical commodity. For example, when a financial instrument
settles and the physical natural gas is injected into inventory, the realized
gains and losses associated with the financial instrument are recognized in
earnings. However, the gains and losses associated with the physical natural gas
are not recognized in earnings until the natural gas inventory is withdrawn from
storage and sold, at which time Energy Services realizes the entire margin on
the transaction.

During December 2020, Energy Services entered into a series of AMAs with an
investment grade public utility to release pipeline capacity associated with
certain natural gas transportation contracts. The utility provides certain asset
management services, and Energy Services may deliver natural gas to the utility
in exchange for aggregate net proceeds of approximately $500 million, payable
through November 1, 2030. The AMAs include a series of initial and permanent
releases, which commenced on November 1, 2021. NJR will receive a total of
approximately $260 million in cash from fiscal 2022 through fiscal 2024 and $34
million per year from fiscal 2025 through fiscal 2031 under the agreements.
Energy Services recognized $53.0 million of operating revenue during fiscal 2022
on the Consolidated Statements of Operations. Amounts received in excess of
revenue recognized, totaling $33.8 million, are included in deferred revenue on
the Consolidated Balance Sheets.

Operating Results


Energy Services' financial results for the fiscal years ended September 30, are
summarized as follows:

(Thousands)                                                      2022           2021           2020
Operating revenues (1)                                      $ 1,529,272    $ 1,228,420    $ 1,030,419
Operating expenses
Natural gas purchases (including demand charges (2)(3))       1,394,405      1,098,261      1,024,579
Operation and maintenance                                        39,080         50,885         17,368
Depreciation and amortization                                       148            111            123
Total operating expenses                                      1,433,633      1,149,257      1,042,070
Operating income (loss)                                          95,639         79,163        (11,651)
Other income, net                                                   512            369            304
Interest expense, net                                             4,725          2,204          3,276
Income tax provision (benefit)                                   21,776         18,371         (3,615)
Net income (loss)                                           $    69,650    $    58,957    $   (11,008)


(1)Includes related party transactions of approximately $94,000, $426,000 and
$1.1 million for fiscal 2022, 2021 and 2020, respectively, which are eliminated
in consolidation.
(2)Costs associated with pipeline and storage capacity are expensed over the
term of the related contracts, which generally varies from less than one year to
ten years.
(3)Includes related party transactions of approximately $1.0 million, $841,000
and $183,000 for fiscal 2022, 2021 and 2020, respectively, a portion of which is
eliminated in consolidation.


                                    Page 49
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Energy Services' portfolio of financial derivative instruments are composed of:

(in Bcf)                                   2022   2021    2020

Net short futures and swaps contracts 0.7 13.7 29.3

During fiscal 2022 and 2021, the net short position resulted in an unrealized
loss of $8.5 million and $53.5 million, respectively.

Operating Revenues and Natural Gas Purchases


Operating revenues increased $300.9 million and natural gas purchases increased
$296.1 million during fiscal 2022, compared with fiscal 2021, due primarily to a
114.3 percent increase in natural gas prices. To a lesser extent, operating
revenues also increased $53.0 million, due to AMAs with an investment grade
public utility that commenced in November 2021, partially offset by increased
natural gas price volatility related to the extreme weather in the mid-continent
and southern regions of the U.S. during February 2021, which did not reoccur to
the same extent during 2022.

Future results at Energy Services are contingent upon natural gas market price
volatility driven by variations in both the supply and demand balances caused by
weather and other factors. As a result, variations in weather patterns in the
key market areas served may affect earnings during the fiscal year. Changes in
market fundamentals, such as an increase in supply and decrease in demand due to
warmer temperatures and reduced volatility, can negatively impact Energy
Services' earnings. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Natural Gas Distribution for
TETCO M-3 Daily Prices, which illustrates the daily natural gas prices in the
Northeast market region.

Operation and Maintenance Expense

O&M expense decreased $11.8 million during fiscal 2022, compared with fiscal
2021, due primarily to decreased compensation costs, bad debt expense and
charitable contributions.

Income Tax Provision

Income taxes increased $3.4 million during fiscal 2022, compared with fiscal
2021, due primarily to increased income before income taxes related to the
increased natural gas price volatility, partially offset by decreased O&M.

Net Income

Net income increased $10.7 million during fiscal 2022, compared with fiscal
2021, due primarily to increased operating income, partially offset by higher
income taxes, as previously discussed.

Non-GAAP Financial Measures


Management uses Financial Margin and NFE, non-GAAP financial measures, when
evaluating the operating results of Energy Services. Financial Margin and NFE
are based on removing timing differences associated with certain derivative
instruments. GAAP also requires us, during the interim periods, to estimate our
annual effective tax rate and use this rate to calculate the year-to-date tax
provision. We also determine an annual estimated effective tax rate for NFE
purposes and calculate a quarterly tax adjustment based on the differences
between our forecasted net income and our forecasted NFE for the fiscal year.
This adjustment is applied to Energy Services, as the adjustment primarily
relates to timing differences associated with certain derivative instruments
which impacts the estimate of the annual effective tax rate for NFE. No
adjustment is needed during the fourth quarter, since the actual effective tax
rate is calculated at year end.

Management views these measures as representative of the overall expected
economic result and uses these measures to compare Energy Services' results
against established benchmarks and earnings targets, as these measures eliminate
the impact of volatility on GAAP earnings as a result of timing differences
associated with the settlement of derivative instruments. To the extent that
there are unanticipated impacts from changes in the market value related to the
effectiveness of economic hedges, Energy Services' actual non-GAAP results can
differ from the results anticipated at the outset of the transaction. Non-GAAP
financial measures are not in accordance with, or an alternative to, GAAP and
should be considered in addition to, and not as a substitute for, the comparable
GAAP measure.

                                    Page 50
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
When Energy Services reconciles the most directly comparable GAAP measure to
both Financial Margin and NFE, the current period unrealized gains and losses on
derivatives are excluded as a reconciling item. Financial Margin and NFE also
exclude the effects of economic hedging of the value of our natural gas in
storage and, therefore, only include realized gains and losses related to
natural gas withdrawn from storage, effectively matching the full earnings
effects of the derivatives with realized margins on the related physical natural
gas flows. Financial Margin differs from gross margin as defined on a GAAP
basis, as it excludes certain operations and maintenance expense and
depreciation and amortization as well as the effects of derivatives as discussed
above.

Financial Margin

A reconciliation of gross margin, the closest GAAP financial measure, to Energy
Services’ Financial Margin is as follows:


(Thousands)                                                          2022           2021           2020
Operating revenues                                              $ 1,529,272    $ 1,228,420    $ 1,030,419
Less:
 Natural gas purchases                                            1,394,405 

1,098,261 1,024,579

 Operation and maintenance (1)                                       23,709 

33,263 15,477

 Depreciation and amortization                                          148            111            123
Gross margin                                                        111,010         96,785         (9,760)
Add:
 Operation and maintenance (1)                                       23,709 

33,263 15,477

 Depreciation and amortization                                          148            111            123

Unrealized (gain) loss on derivative instruments and related
transactions (2)

                                                    (60,000)        58,362         (8,583)
Effects of economic hedging related to natural gas inventory
(3)                                                                  19,939        (42,405)        12,690
Financial margin                                                $    94,806    $   146,116    $     9,947


(1)Excludes administrative and general expenses of $15.4 million, $17.6 million
and $1.9 million for fiscal years ended September 30, 2022, 2021 and 2020,
respectively.
(2)Includes unrealized losses (gains) related to an intercompany transaction
between NJNG and Energy Services that have been eliminated in consolidation of
approximately $72,000, $(3.2) million and $(809,000), net of taxes for the
fiscal years ended September 30, 2022, 2021 and 2020, respectively.
(3)Effects of hedging natural gas inventory transactions where the economic
impact is realized in a future period.

Financial Margin decreased $51.3 million during fiscal 2022, compared with
fiscal 2021, due primarily to price volatility related to the extreme weather in
the mid-continent and southern regions of the U.S. during February 2021, which
did not reoccur to the same extent during 2022, partially offset by the AMAs
which commenced November 2021, as previously discussed.

Net Financial Earnings


A reconciliation of Energy Services' net income (loss), the most directly
comparable GAAP financial measure to NFE, is as follows for the fiscal years
ended September 30:

(Thousands)                                                          2022        2021         2020
Net income (loss)                                                 $ 69,650    $ 58,957    $ (11,008)
Add:
Unrealized (gain) loss on derivative instruments and related
transactions                                                       (60,000)     58,362       (8,583)
Tax effect (1)                                                      14,270     (13,875)       2,044
Effects of economic hedging related to natural gas inventory        19,939     (42,405)      12,690
Tax effect                                                          (4,738)     10,078       (3,016)

Net financial earnings                                            $ 39,121    $ 71,117    $  (7,873)


(1)Includes taxes related to an intercompany transaction between NJNG and Energy
Services that have been eliminated in consolidation of approximately $(21,000),
$988,000 and $252,000 for the fiscal years ended September 30, 2022, 2021 and
2020, respectively.

NFE decreased $32.0 million during fiscal 2022, compared with fiscal 2021, due
primarily to lower Financial Margin, as previously discussed.

                                    Page 51
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Future results are subject to Energy Services' ability to expand its wholesale
sales and service activities and are contingent upon many other factors,
including an adequate number of appropriate and credit-qualified counterparties
in an active and liquid natural marketplace; volatility in the natural gas
market due to weather or other fundamental market factors impacting supply
and/or demand; transportation, storage and/or other market arbitrage
opportunities; sufficient liquidity in the overall energy trading market; and
continued access to liquidity in the capital markets.

Storage and Transportation

Overview


Storage and Transportation invests in natural gas assets, such as natural gas
transportation and storage facilities. We believe that acquiring, owning and
developing these storage and transportation assets, which operate under a tariff
structure that has either cost- or market-based rates, can provide us a growth
opportunity. Storage and Transportation is subject to various risks, including
the construction, development and operation of our transportation and storage
assets, obtaining necessary governmental, environmental and regulatory
approvals, our ability to obtain necessary property rights and our ability to
obtain financing at reasonable costs for the construction, operation and
maintenance of our assets. In addition, our storage and transportation assets
may be subject to risk associated with the COVID-19 pandemic, such as disruption
to the supply chain and availability of critical equipment and supplies,
disruptions to the availability of our specialized workforce and contractors and
changes to demand for natural gas, transportation and other downstream
activities.

Storage and Transportation is comprised of Leaf River, a 32.2 million Dth salt
dome natural gas storage facility that operates under market-based rates, and
Adelphia Gateway, an existing 84-mile pipeline in southeastern Pennsylvania.
Adelphia Gateway operates under cost-of-service rates but can enter into
negotiated rates with counterparties. The northern portion of the pipeline was
operational upon acquisition, and it currently serves two natural gas generation
facilities. On October 5, 2020, we began the conversion of the southern zone of
the pipeline to natural gas, which became fully operational on September 2,
2022.

Storage and Transportation also has a 50 percent ownership interest in Steckman
Ridge, a storage facility located in western Pennsylvania that operates under
market-based rates. As of September 30, 2022, our investment in Steckman Ridge
was $106.6 million.

Storage and Transportation also has a 20 percent interest in PennEast, a
partnership whose purpose was to construct and operate a 120-mile natural gas
pipeline that would have extended from northeast Pennsylvania to western New
Jersey. PennEast received a Certificate of Public Convenience and Necessity for
the project from FERC in January 2018. However, because of numerous regulatory
and legal challenges, we evaluated our equity investment in PennEast for
impairment during fiscal 2021, and determined that it was other-than-temporarily
impaired. We estimated the fair value of our investment in PennEast using
probability weighted scenarios assigned to discounted future cash flows. The
impairment was the result of management's estimates and assumptions regarding
the likelihood of certain outcomes related to required regulatory approvals and
pending legal matters, the timing and magnitude of construction costs and
in-service dates, the evaluation of the current environmental and political
climate as it relates to interstate pipeline development, and transportation
capacity revenues and discount rates.

During the third quarter of fiscal 2021, the PennEast partnership determined
that this project is no longer supported, and all further development ceased.
The Company recognized an other-than-temporary impairment charge of $92.0
million, or approximately $74.5 million, net of income taxes, which represents
the best estimate of the salvage value of the remaining assets of the project.
Other-than-temporary impairments are recorded in equity in (losses) earnings
from affiliates in the Consolidated Statements of Operations.

On December 16, 2021, the FERC dismissed PennEast's pending applications. The
order vacates the certificate authorization for the PennEast pipeline project in
light of PennEast's response to FERC staff's November 23, 2021 request for a
status update, in which PennEast informed the Commission it is no longer
developing the project. The order vacates the certificate authorization, subject
to leave of the U.S. Court of Appeals for the D.C. Circuit where the
Commission's certificate and rehearing orders are under review.

During fiscal 2022, the PennEast board of managers approved cash distributions
to members of the partnership following the sale of certain project-related
assets and refunds of interconnection fees received from interstate pipelines.
The return of capital received by the Company, which totaled $11.0 million,
reduced the remaining carrying value of its equity method investment in PennEast
to zero, with the excess recorded in equity in earnings (loss) of affiliates in
the Consolidated Statements of Operations.

                                    Page 52
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Operating Results

The financial results of Storage and Transportation for the fiscal years ended
September 30, are summarized as follows:

(Thousands)                                   2022       2021        2020
Operating revenues (1)                     $ 67,735   $  51,020   $ 44,728
Operating expenses
Natural gas purchases                         2,702       1,266      1,122
Operation and maintenance                    30,568      29,135     21,862
Depreciation and amortization                12,302       9,960      9,293
Total operating expenses                     45,572      40,361     32,277
Operating income                             22,163      10,659     12,451
Other income, net                             8,546       5,931      7,328
Interest expense, net                        12,097      13,348     13,124
Income tax provision (benefit)                1,879     (10,043)     4,247

Equity in earnings (loss) of affiliates 9,865 (81,072) 15,903
Net income (loss)

                          $ 26,598   $ (67,787)  $ 18,311


(1)Includes related party transactions of approximately $2.4 million, $1.8
million
and $2.7 million for the fiscal years ended September 30, 2022, 2021 and
2020, respectively, which are eliminated in consolidation.

Operating Revenues

Operating revenue increased $16.7 million during fiscal 2022, compared with
fiscal 2021, due primarily to increased natural gas transportation revenue for
Adelphia Gateway and increased hub services revenue for Leaf River.


Equity in earnings of affiliates increased $90.9 million during fiscal 2022,
compared with fiscal 2021, due primarily to the impairment of our equity method
investment in PennEast during fiscal 2021, which did not reoccur during fiscal
2022.

Operation and Maintenance Expense

O&M expense increased $1.4 million during fiscal 2022, compared with fiscal
2021, due primarily to increased compensation expense.

Depreciation Expense


Depreciation expense increased $2.3 million during fiscal 2022, compared with
fiscal 2021, due primarily to the southern end of Adelphia Gateway, which was
not operational during fiscal 2021, being placed into service in fiscal 2022.

Other Income, Net


Other income increased $2.6 million during fiscal 2022, compared with fiscal
2021, due primarily to increased AFUDC equity related to the Adelphia Gateway
project.

Interest Expense

Interest expense, net decreased $1.3 million during fiscal 2022, compared with
fiscal 2021, due primarily to reduced debt related to the PennEast project.

Net Income

Net income increased $94.4 million during fiscal 2022, compared with fiscal
2021, due primarily to the absence of the impairment of our equity method
investment in PennEast, as previously discussed.

                                    Page 53
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Non-GAAP Financial Measures

Management uses NFE, a non-GAAP financial measure, when evaluating the operating
results of Storage and Transportation. Certain transactions associated with
equity method investments and their impact, including impairment charges, which
are non-cash charges, and the return of capital in excess of the carrying value
of our investment, are excluded for NFE purposes. The details of such
adjustments can be found in the table below. Non-GAAP financial measures are not
in accordance with, or an alternative to, GAAP, and should be considered in
addition to, and not as a substitute for the comparable GAAP measure. A
reconciliation of Storage and Transportations' net income, the most directly
comparable GAAP financial measure to NFE, is as follows:

(Thousands)                                           2022       2021        2020
Net income (loss)                                  $ 26,598   $ (67,787)  $ 18,311
Add:

(Gain on) impairment of equity method investment (5,521) 92,000

     -
Tax effect                                            1,377     (11,167)         -
Net financial earnings                             $ 22,454   $  13,046   $ 18,311



NFE increased $9.4 million during fiscal 2022, compared with fiscal 2021, due
primarily to increased operating revenue at both Adelphia Gateway and Leaf River
along with and higher AFUDC at Adelphia Gateway as previously discussed.
Home Services and Other

Overview


The financial results of Home Services and Other consist primarily of the
operating results of NJRHS. NJRHS provides service, sales and installation of
appliances to service contract customers and has been focused on growing its
installation business and expanding its service contract customer base. Home
Services and Other also includes organizational expenses incurred at NJR and
home warranty contract income at NJR Retail.

Operating Results

The condensed financial results of Home Services and Other for the fiscal years
ended September 30, are summarized as follows:


(Thousands)                            2022       2021       2020
Operating revenues                  $ 56,182   $ 52,229   $ 51,017

Income (loss) before income taxes $ 278 $ (1,022) $ 3,306
Income tax provision (benefit) $ 1,059 $ (196) $ (2,478)
Net (loss) income

                   $   (781)  $   (826)  $  5,784



Operating Revenues

Operating revenues increased $4.0 million during fiscal 2022, compared with
fiscal 2021, due primarily to increased installation revenue at NJRHS.

Net Income


Net income increased $45,000 during fiscal 2022, compared with fiscal 2021, due
primarily to increased revenue as previously discussed, partially offset by an
increase in income taxes.



                                    Page 54
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Liquidity and Capital Resources

Our objective is to maintain an efficient consolidated capital structure that
reflects the different characteristics of each reporting segment and other
business operations and provides adequate financial flexibility for accessing
capital markets as required. Our consolidated capital structure as of September
30, was as follows:
                         2022    2021
Common stock equity       38  %   38  %
Long-term debt            52      51
Short-term debt           10      11
Total                    100  %  100  %



Common Stock Equity

We satisfy our external common equity requirements, if any, through issuances of
our common stock, including the proceeds from stock issuances under our DRP. The
DRP allows us, at our option, to use treasury shares or newly issued shares to
raise capital. NJR raised approximately $14.7 million and $15.1 million of
equity through the DRP during fiscal 2022 and 2021, respectively.

In December 2019, we completed an equity offering of 6,545,454 common shares,
consisting of 5,333,334 common shares issued directly by NJR and 1,212,120
common shares issuable pursuant to forward sales agreements with investment
banks. In March 2021, we cash settled a portion of the forward sale agreement
for a payout of approximately $388,000 in lieu of the issuance of 727,272 common
shares. In May 2021, we cash settled the rest of the forward sale agreements for
a payout of approximately $2.4 million in lieu of the issuance of 484,848 common
shares.

In 1996, the Board of Directors authorized us to implement a share repurchase
program, which has been expanded seven times since the inception of the program,
authorizing a total of 19.5 million shares of common stock for repurchase. As of
September 30, 2022, we had repurchased a total of approximately 17.8 million of
those shares and may repurchase an additional 1.7 million shares under the
approved program. There were no shares repurchased during fiscal 2022 and
746,000 shares repurchased during fiscal 2021.
Debt

NJR and its unregulated subsidiaries generally rely on cash flows generated from
operating activities and the utilization of committed credit facilities to
provide liquidity to meet working capital and short-term debt financing
requirements. NJNG also relies on the issuance of commercial paper for
short-term funding. NJR and NJNG, as borrowers, periodically access the capital
markets to fund long-life assets through the issuance of long-term debt
securities.

We believe that our existing borrowing availability, equity proceeds and cash
flows from operations will be sufficient to satisfy our working capital, capital
expenditures and dividend requirements for at least the next 12 months. NJR,
NJNG, Clean Energy Ventures, Storage and Transportation and Energy Services
currently anticipate that each of their financing requirements for the next 12
months will be met primarily through the issuance of short- and long-term debt,
and meter or solar asset sale leasebacks.

We believe that as of September 30, 2022, NJR and NJNG were, and currently are,
in compliance with all existing debt covenants, both financial and
non-financial.


As a result of the COVID-19 pandemic, recent geopolitical tensions and
inflationary pressures, there has been uncertainty and volatility in the credit
and capital markets. We have been able to obtain sufficient financing to meet
our funding requirements for operations and capital expenditures; however, our
ability to access funds from financial institutions at a reasonable cost in the
future may impact the nature and timing of future capital market transactions.

Short-Term Debt


We use our short-term borrowings primarily to finance Energy Services'
short-term liquidity needs, Storage and Transportation investments, share
repurchases and, on an initial basis, Clean Energy Ventures' investments. Energy
Services' use of high-volume storage facilities and anticipated pipeline park
and loan arrangements, combined with related economic hedging activities in the
volatile wholesale natural gas market, create significant short-term cash
requirements.

As of September 30, 2022, NJR had a revolving credit facility and a term loan
totaling $800 million, with $440.2 million available under the facility and term
loan.

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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
NJNG satisfies its debt needs by issuing short-term and long-term debt based on
its financial profile. The seasonal nature of NJNG's operations creates large
short-term cash requirements, primarily to finance natural gas purchases and
customer accounts receivable. NJNG obtains working capital for these
requirements, and for the temporary financing of construction and MGP
remediation expenditures and energy tax payments, based on its financial
profile, through the issuance of commercial paper supported by the NJNG Credit
Facility or through short-term bank loans under the NJNG Credit Facility.

NJNG's commercial paper is sold through several commercial banks under an
issuing and paying agency agreement and is supported by the $250 million NJNG
Credit Facility. As of September 30, 2022, the unused amount available under the
NJNG Credit Facility, including amounts allocated to the backstop under the
commercial paper program and the issuance of letters of credit, was $175.5
million.

Short-term borrowings were as follows:

                                                         Twelve Months Ended
(Thousands)                                              September 30, 2022
NJR
Notes Payable to banks:
Balance at end of period                                $          350,150
Weighted average interest rate at end of period                       3.90  %
Average balance for the period                          $          362,429
Weighted average interest rate for average balance                    1.84  %
Month end maximum for the period                        $          494,060

NJNG

Commercial Paper and Notes Payable to banks:
Balance at end of period                                $           73,800
Weighted average interest rate at end of period                       3.34  %
Average balance for the period                          $           65,480
Weighted average interest rate for average balance                    0.80  %
Month end maximum for the period                        $          177,700



Due to the seasonal nature of natural gas prices and demand, and because
inventory levels are built up during its natural gas injection season (April
through October), NJR and NJNG’s short-term borrowings tend to peak in the
November through January time frame.

NJR


During fiscal 2021, NJR entered into a Second Amended and Restated Credit
Agreement governing a $500 million NJR Credit Facility, which was to expire on
September 2, 2026. The NJR Credit Facility is subject to two mutual options for
a one-year extension beyond that date and includes an accordion feature, which
allows NJR, in the absence of a default or event of default, to increase from
time to time, with the existing or new lenders, the revolving credit commitments
under the NJR Credit Facility in increments of $50 million up to a maximum of
$250 million. The NJR Credit Facility also permits the borrowing of revolving
loans and swingline loans, as well as a $75 million sublimit for the issuance of
letters of credit. On August 30, 2022, NJR amended the Second Amended and
Restated Credit Agreement to $650 million and extended the maturity date of the
facility to September 2, 2027. The amendment also increased the swingline to $70
million from $60 million and moved to SOFR as the benchmark rate, replacing the
existing LIBOR. Certain of NJR's unregulated subsidiaries have guaranteed all of
NJR's obligations under the NJR Credit Facility. The credit facility is used
primarily to finance its share repurchases, to satisfy Energy Services'
short-term liquidity needs and to finance, on an initial basis, unregulated
investments.

As of September 30, 2022, NJR had seven letters of credit outstanding totaling
$9.7 million, which reduced the amount available under the NJR Credit Facility
by the same amount. NJR does not anticipate that these letters of credit will be
drawn upon by the counterparties.

On February 8, 2022, NJR entered into a 364-day $150 million term loan credit
agreement with an interest rate based on SOFR plus 0.85 percent, which expires
on February 7, 2023. The Company borrowed $50 million on February 9, 2022 and
$100 million on February 14, 2022 under the term loan.

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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Based on its average borrowings during fiscal 2022, NJR's average interest rate
was 1.84 percent, resulting in interest expense of approximately $7.1 million.
Based on average borrowings of $362.4 million during the period, a 100 basis
point change in the underlying average interest rate would have caused a change
in interest expense of approximately $3.7 million during fiscal 2022.

Neither NJNG nor its assets are obligated or pledged to support the NJR Credit
Facility.


NJNG

During fiscal 2021, NJNG entered into a Second Amended and Restated Credit
Agreement governing a $250 million NJNG Credit Facility, which was to expire on
September 2, 2026. The NJNG Credit Facility is subject to two mutual options for
a one-year extension beyond that date and permits the borrowing of revolving
loans and swingline loans, as well as a $30 million sublimit for the issuance of
letters of credit. The NJNG Credit Facility also includes an accordion feature,
which would allow NJNG, in the absence of a default or event of default, to
increase from time to time, with the existing or new lenders, the revolving
credit commitments under the NJNG Credit Facility in minimum increments of $50
million up to a maximum of $100 million. On August 30, 2022, NJNG amended the
Second Amended and Restated Credit Agreement to extend the maturity date of the
facility to September 2, 2027 and moved to SOFR as the benchmark rate, replacing
the existing LIBOR.

As of September 30, 2022, NJNG had two letters of credit outstanding for
$731,000, which reduced the amount available under the NJNG Credit Facility by
the same amount. NJNG does not anticipate that these letters of credit will be
drawn upon by the counterparties.

Based on its average borrowings during fiscal 2022, NJNG's average interest rate
was 0.80 percent, resulting in interest expense of $223,000. Based on average
borrowings of $65.5 million during the period, a 100 basis point change in the
underlying average interest rate would have caused a change in interest expense
of approximately $667,000 during fiscal 2022.

Short-Term Debt Covenants


Borrowings under the NJR Credit Facility, term loan credit agreement and NJNG
Credit Facility are conditioned upon compliance with a maximum leverage ratio
(consolidated total indebtedness to consolidated total capitalization as defined
in the applicable agreements) of not more than .70 to 1.00 for NJR and .65 to
1.00 for NJNG. These revolving credit facilities and term loan credit agreement
contain customary representations and warranties for transactions of this type.
They also contain customary events of default and certain covenants that will
limit NJR's or NJNG's ability, beyond agreed upon thresholds, to, among other
things:

•incur additional debt;
•incur liens and encumbrances;
•make dispositions of assets;
•enter into transactions with affiliates; and
•merge, consolidate, transfer, sell or lease all or substantially all of the
borrowers' or guarantors' assets.

These covenants are subject to a number of exceptions and qualifications set
forth in the applicable agreements.

Default Provisions


The agreements governing our long-term and short-term debt obligations include
provisions that, if not complied with, could require early payment or similar
actions. Default events include, but are not limited to, the following:

•defaults for non-payment;
•defaults for breach of representations and warranties;
•defaults for insolvency;
•defaults for non-performance of covenants;
•cross-defaults to other debt obligations of the borrower; and
•guarantor defaults.

The occurrence of an event of default under these agreements could result in all
loans and other obligations of the borrower becoming immediately due and payable
and the termination of the credit facilities or term loan.

                                    Page 57
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
Long-Term Debt

NJR

As of September 30, 2022, NJR had the following outstanding:
•$50 million of 3.20 percent senior notes due August 18, 2023;
•$100 million of 3.48 percent senior notes due November 7, 2024;
•$100 million of 3.54 percent senior notes due August 18, 2026;
•$110 million of 4.38 percent senior notes due June 23, 2027;
•$100 million of 3.96 percent senior notes due June 8, 2028;
•$150 million of 3.29 percent senior notes due July 17, 2029;
•$130 million of 3.50 percent senior notes due July 23, 2030;
•$130 million of 3.60 percent senior notes due July 23, 2032;
•$80 million of 3.25 percent senior notes due September 1, 2033;
•$120 million of 3.13 percent senior notes due September 1, 2031; and
•$50 million of 3.64 percent senior notes due September 19, 2034.


On June 23, 2022, NJR entered into a Note Purchase Agreement under which NJR
issued $110 million, Series 2022A senior notes at a fixed rate of 4.38 percent,
maturing in 2027. On September 16, 2022, NJR amended an existing Note Purchase
Agreement to provide for the issuance of $50 million, Series C senior notes at a
fixed rate of 3.64 percent, maturing in 2034. The senior notes are unsecured and
guaranteed by certain unregulated subsidiaries of NJR.

Neither NJNG nor its assets are obligated or pledged to support NJR’s long-term
debt.


NJNG

As of September 30, 2022, NJNG's long-term debt consisted of $1.3 billion in
fixed-rate debt issuances secured by the Mortgage Indenture, with maturities
ranging from 2024 to 2061, and $23.8 million in finance leases with various
maturities ranging from 2024 to 2028.

On October 28, 2021, NJNG entered into a Note Purchase Agreement providing for
the issuance of $100 million of its senior notes, of which $50 million were
issued at an interest rate of 2.97 percent, maturing in 2051, and $50 million
were issued at an interest rate of 3.07 percent, maturing in 2061.

On May 27, 2022, NJNG entered into a Note Purchase Agreement for $100 million of
its senior notes, of which $50 million were issued at an interest rate of 4.37
percent, maturing in 2037, and $50 million were issued at an interest rate of
4.71 percent, maturing in 2052.

On October 24, 2022, NJNG entered into a Note Purchase Agreement for $125
million
of its senior notes at an interest rate of 5.47 percent, maturing in
2052.

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

NJR is not obligated directly or contingently with respect to the NJNG’s
fixed-rate debt issuances.

Long-Term Debt Covenants and Default Provisions


The NJR and NJNG long-term debt instruments contain customary representations
and warranties for transactions of their type. They also contain customary
events of default and certain covenants that will limit NJR or NJNG's ability
beyond agreed upon thresholds to, among other things:

•incur additional debt (including a covenant that limits the amount of
consolidated total debt of the borrower at the end of a fiscal quarter to 70
percent for NJR and 65 percent for NJNG of the consolidated total capitalization
of the borrower, as those terms are defined in the applicable agreements, and a
covenant limiting priority debt to 20 percent of the borrower's consolidated
total capitalization, as those terms are defined in the applicable agreements);
•incur liens and encumbrances;
•make loans and investments;
                                    Page 58
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
•make dispositions of assets;
•make dividends or restricted payments;
•enter into transactions with affiliates; and
•merge, consolidate, transfer, sell or lease substantially all of the borrower's
assets.

The aforementioned covenants are subject to a number of exceptions and
qualifications set forth in the applicable note purchase agreements.

In addition, the FMBs issued by NJNG under the Mortgage Indenture are subject to
certain default provisions. Events of Default, as defined in the Mortgage
Indenture, consist mainly of:


•failure for 30 days to pay interest when due;
•failure to pay principal or premium when due and payable;
•failure to make sinking fund payments when due;
•failure to comply with any other covenants of the Mortgage Indenture after 30
days' written notice from the Trustee;
•failure to pay or provide for judgments in excess of $30 million in aggregate
amount within 60 days of the entry thereof; or
•certain events that are or could be the basis of a bankruptcy, reorganization,
insolvency or receivership proceeding.

Upon the occurrence and continuance of such an Event of Default, the Mortgage
Indenture, subject to any provisions of law applicable thereto, provides that
the Trustee may take possession and conduct the business of NJNG, may sell the
trust estate or proceed to foreclose the lien of the Mortgage Indenture. The
interest rate on defaulted principal and interest, to the extent permitted by
law, on the FMBs issued under the Mortgage Indenture is the rate stated in the
applicable supplement or, if no such rate is stated, six percent per annum.

Sale Leaseback

NJNG


NJNG received $17.3 million and $4.0 million in fiscal 2022 and 2020,
respectively, in connection with the sale leaseback of its natural gas meters.
NJNG records a financing lease obligation that is paid over the term of the
lease and has the option to purchase the meters back at fair value upon
expiration of the lease. NJNG continues to evaluate this sale leaseback program
based on current market conditions. Natural gas meters are excepted from the
lien on NJNG property under the Mortgage Indenture. There were no natural gas
meter sale leasebacks recorded during fiscal 2021.

Clean Energy Ventures


Clean Energy Ventures enters into transactions to sell the commercial solar
assets concurrent with agreements to lease the assets back over a period of five
to 15 years. These transactions are considered failed sale leasebacks for
accounting purposes and are therefore treated as financing obligations, which
are typically secured by the renewable energy facility asset and its future cash
flows from RECs and energy sales. ITCs and other tax benefits associated with
these solar projects are transferred to the buyer, if applicable; however, the
lease payments are structured so that Clean Energy Ventures is compensated for
the transfer of the related tax incentives. Clean Energy Ventures continues to
operate the solar assets, including related expenses, and retain the revenue
generated from RECs and energy sales, and has the option to renew the lease or
repurchase the assets sold at the end of the lease term. During fiscal 2022,
2021 and 2020, Clean Energy Ventures received proceeds of $24.1 million, $17.7
million and $42.9 million, respectively, in connection with the sale leaseback
of commercial solar projects. The proceeds received were recognized as a
financing obligation on the Consolidated Balance Sheets.

Contractual Obligations and Capital Expenditures


As of September 30, 2022, there were NJR guarantees covering approximately
$261.7 million of natural gas purchases and Energy Services demand fee
commitments and nine outstanding letters of credit totaling $10.4 million, as
previously mentioned, not yet reflected in accounts payable on the Consolidated
Balance Sheets.

Estimated capital expenditures are reviewed on a regular basis and may vary
based on the ongoing effects of regulatory constraints, environmental
regulations, unforeseen events and the ability to access capital.

                                    Page 59
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
NJNG's total capital expenditures are projected to be between $352 million and
$378 million during fiscal 2023. Total capital expenditures spent or accrued
during fiscal 2022 were $282.2 million. NJNG expects to fund its obligations
with a combination of cash flows from operations, cash on hand, issuance of
commercial paper, available capacity under its revolving credit facility and the
issuance of long-term debt. As of September 30, 2022, NJNG's future MGP
expenditures are estimated to be $127.1 million. For a more detailed description
of MGP expenditures, see Note 15. Commitments and Contingent Liabilities in the
accompanying Consolidated Financial Statements.

During fiscal 2022, Storage and Transportation had capital expenditures spent or
accrued for the Adelphia Gateway project totaling $123.8 million, and capital
expenditures spent or accrued for Leaf River totaling $17.6 million. During
fiscal 2023, we expect expenditures related to the Adelphia Gateway project to
be between $12 million and $16 million and expenditures related to Leaf River to
be between $8 million and $12 million.

During fiscal 2022, total capital expenditures spent or accrued related to the
purchase and installation of solar equipment were $144.9 million. Clean Energy
Ventures' expenditures include clean energy projects that support our goal to
promote renewable energy. Accordingly, Clean Energy Ventures enters into
agreements to install solar equipment involving both residential and commercial
projects. We estimate solar-related capital expenditures for projects placed in
service during fiscal 2023 to be between $100 million and $200 million.

Capital expenditures related to clean energy projects are subject to change due
to a variety of factors that may affect our ability to commence operations at
these projects on a timely basis or at all, including sourcing projects that
meet our investment criteria, logistics associated with the start-up of
residential and commercial solar projects, such as timing of construction
schedules, the permitting and regulatory process, any delays related to electric
grid interconnection, economic trends or unforeseen events and the ability to
access capital or allocation of capital to other investments or business
opportunities.

Energy Services does not currently anticipate any significant capital
expenditures during fiscal 2023 and 2024.


During December 2020, Energy Services entered into a series of AMAs with an
investment grade public utility to release pipeline capacity associated with
certain natural gas transportation contracts. The utility provides certain asset
management services, and Energy Services may deliver natural gas to the utility
in exchange for aggregate net proceeds of approximately $500 million, payable
through November 1, 2030. The AMAs include a series of initial and permanent
releases which commenced on November 1, 2021. NJR will receive a total of
approximately $260 million in cash from fiscal 2022 through fiscal 2024 and $34
million per year from fiscal 2025 through fiscal 2031 under the agreements.
During fiscal 2022, Energy Services recognized $53.0 million of operating
revenue on the Consolidated Statements of Operations. Amounts received in excess
of revenue, totaling $33.8 million as of September 30, 2022, are included in
deferred revenue on the Consolidated Balance Sheets.

Cash Flows

Operating Activities


Cash flows from operating activities during fiscal 2022 totaled $323.5 million
compared with $391.0 million during fiscal 2021. Operating cash flows are
primarily affected by variations in working capital, which can be impacted by
several factors, including:

•seasonality of our business;

•fluctuations in wholesale natural gas prices and other energy prices, including
changes in derivative asset and liability values;

•timing of storage injections and withdrawals;

•the deferral and recovery of natural gas costs;

•changes in contractual assets utilized to optimize margins related to natural
gas transactions;

•broker margin requirements;

•impact of unusual weather patterns on our wholesale business;

                                    Page 60
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                        New Jersey Resources Corporation
                                    Part II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)
•timing of the collections of receivables and payments of current liabilities;

•volumes of natural gas purchased and sold; and

•timing of SREC deliveries.


The decrease of $67.5 million in cash flows from operating activities during
fiscal 2022, compared with fiscal 2021, was due primarily to additional working
capital requirements related to the rising energy prices along with the outsized
performance at Energy Services during February 2021 that did not reoccur during
fiscal 2022, partially offset by the AMAs, which commenced November 2021, as
previously discussed.

Investing Activities

Cash flows used in investing activities totaled $590.6 million during fiscal
2022, compared with $622.1 million during fiscal 2021. The decrease of $31.5
million was due primarily to decreased utility plant expenditures, partially
offset by an increase in capital expenditures for Storage and Transportation
related to the conversion of the southern portion of Adelphia Gateway's pipeline
to natural gas along with increased solar expenditures.

Financing Activities


Financing cash flows generally are seasonal in nature and are impacted by the
volatility in pricing in the natural gas and other energy markets. NJNG's
inventory levels are built up during its natural gas injection season (April
through October) and reduced during withdrawal season (November through March)
in response to the supply requirements of its customers. Changes in financing
cash flows can also be impacted by natural gas management and marketing
activities at Energy Services and clean energy investments at Clean Energy
Ventures.

Cash flows from financing activities totaled $262.5 million during fiscal 2022,
compared with $117.8 million during fiscal 2021. The increase of $144.7 million
is due primarily to the issuance of $360 million in long-term debt, a new $150
million term loan, along with proceeds of $17.3 million for meter sale
leasebacks and higher proceeds of $6.4 million from solar sale leasebacks,
partially offset by increased net payments of short-term debt of $355.3 million
and increased dividend payments of $10.7 million.

Credit Ratings

The table below summarizes NJNG’s credit ratings as of September 30, 2022,
issued by two rating entities, Moody’s and Fitch:

                       Moody's    Fitch
Corporate Rating         N/A        A-
Commercial Paper         P-2       F-2
Senior Secured           A1         A+
Ratings Outlook        Stable     Stable


Fitch ratings and outlook were reaffirmed on April 14, 2022. The Moody’s ratings
and outlook were reaffirmed on September 28, 2022. NJNG’s Moody’s and Fitch
ratings are investment-grade ratings. NJR is not rated by Moody’s or Fitch.


Although NJNG is not party to any lending agreements that would accelerate the
maturity date of any obligation caused by a failure to maintain any specific
credit rating, if such ratings are downgraded below investment grade, borrowing
costs could increase, as would the costs of maintaining certain contractual
relationships, and future financing and our access to capital markets would be
reduced. Even if ratings are downgraded without falling below investment grade,
NJR and NJNG could face increased borrowing costs under their credit facilities.
A rating set forth above is not a recommendation to buy, sell or hold NJR's or
NJNG's securities and may be subject to revision or withdrawal at any time. Each
rating set forth above should be evaluated independently of any other rating.

The timing and mix of any external financings will target a common equity ratio
that is consistent with maintaining NJNG’s current short-term and long-term
credit ratings.

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                        New Jersey Resources Corporation
                                    Part II

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