avatar South Jersey Industries, Inc. Transportation, Communications, Electric, Gas, And Sanitary Services
  • Location: New Jersey 
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    2020 Annual Report CLEAN ENERGY SAFE. RELIABLE. AFFORDABLE.


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    SJI delivers safe, reliable, affordable clean energy for a better today and tomorrow to 700k+ families and businesses. We are committed to growing and innovating our renewable and sustainable energy assets, including green technologies, to build a clean future and advance critical decarbonization efforts by 2050.


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    LE T TE R T O SH ARE H OLD E RS despite the challenges of CoVid-19, SJi continued to deliver reliable service for customers, safe operations for its employees and communities, record earnings growth, and new commitments to state-of-the-art clean energy investments. We all can agree that 2020 was a year like more essential than ever to our continued no other in recent memory. Not only did the operations and success. novel coronavirus upend our nation almost overnight for school, work, and commerce, Stable Growth for investors it tragically took the lives of over 20,000 of SJI continues to be positioned for measured our New Jersey neighbors. growth. Through its two regulated businesses, SJI has added approximately 12,000 new There was no playbook or manual to consult customers and saw economic earnings in a year like we just experienced. Unlike other increase by $60 million in calendar year 2020. emergencies resulting from natural disasters, Additionally, SJI raised its dividend for its it was not our utility infrastructure that 22nd consecutive year. needed rebuilding or a helping hand, but our customers and the communities we serve. Safe and affordable energy for Customers We continue to modernize critical COVID-19 forced closures of businesses, some infrastructure, investing approximately temporary, and some permanently – from $135 million last year to modernize gas mains mom-and-pop restaurants on Main Street and invest in storm hardening around coastal to the casinos on the Atlantic City Boardwalk. communities. Regulators also approved As ‘stay at home’ orders spilled across the changes to base rates for South Jersey Gas Northeast, remote learning also became the last fall that took effect October 1. These base norm for kids and parents alike. For many, rate changes reflect investments made since homes became classrooms and workplaces 2017 to improve the customer experience and combined, all under the same roof. enhance the safety, reliability, and resiliency Through it all, SJi was there for its more of the company’s gas distribution system. than 700,000 customers –reliably South Jersey Gas’ annual revenues from base delivering affordable energy safely to rates will increase by $39.5 million and include homes, businesses, schools, and hospitals, a return on equity of 9.6%, with a 54% common particularly important at a time of equity component. Even with this base rate unprecedented public health challenges change, customers experienced a net decrease and great economic uncertainty. And we on their bills, as a result of the prudent did it while retaining and supporting our management of gas commodity costs and 1,100-employee workforce, whose commitment changes to other company rates. As we to the job, whether remote or in the field, was continue to navigate the COVID-19 Pandemic, 2 SJI 2020 Annual Report


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    this is more important than ever – we are Additionally, in December SJI acquired a proud to deliver the quality service our minority interest in REV LNG, LLC, a supply, customers expect and deserve, without design and operations company specializing sacrificing affordability. in the development, production, and transportation of renewable natural gas (RNG), Advancing a Cleaner Energy Future liquefied natural gas and compressed SJI remains committed to clean energy and natural gas, along with the rights to develop decarbonization initiatives in support of the RNG production facilities at a portfolio of environmental goals of our State and region. dairy farms. The RNG produced from these SJI has been a leader in advancing New dairy farms will have the lowest carbon Jersey’s clean energy outlook as we do our intensity among transportation fuels. part to decarbonize our natural gas With this investment, SJI is positioned to distribution system, particularly with increased advance our decarbonization goals to lower public focus on low-carbon resources and our carbon footprint. interest in green energy technologies. System upgrades to reduce methane leaks, as well Looking Forward as natural gas conversions away from A special thanks to our more than 1,100 propane and heating oil, and enhanced energy employees for their steadfast commitment efficiency measures are examples of ongoing to our customers, communities, and to each endeavors that continue the progress on other. Throughout the year, they overcame reducing emissions in New Jersey. unprecedented challenges – they innovated, they led with purpose, they operated with A new partnership was announced in excellence, and they laid the foundation December with Atlantic Shores Offshore Wind of a modern 21st Century infrastructure to collaborate on a green hydrogen pilot company, delivering the clean energy of program, to research the future application the future. of hydrogen blending within SJI’s natural gas infrastructure in the years ahead. SJI also Thank you for your continued interest acquired two fuel cell projects in New York to and investment in South Jersey Industries. advance carbon-free generation technologies. Michael J. Renna, Joseph M. Rigby, President & CEO Chairman 3


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    PE RF O RMA NC E AT A GLA NC E E C ON OMIC EAR N IN G S U TILI TY CUS TOMER (in millions of dollars) G ROW TH R AT E (as percentage year over year) 163.0 1.7 1.6 116.2 102.8 1.4 1.4 103.0 98.1 1.2 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 4 SJI 2020 Annual Report


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    U TIL ITY CAP ITAL AN N U ALI ZE D E X PEN D ITU R ES D IV ID EN D D ECLAR ED (in millions of dollars) P ER COMMO N S HAR E (in dollars) 504.0 1.21 486.0 1.18 341.1 1.15 278.0 1.12 273.0 1.09 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 5


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    SJ I Performance in 2020 reflected significant progress toward the goals of our strategic plan. in a year that presented challenges for the entire globe, SJi achieved strong results while continuing to strengthen its balance sheet by identifying opportunities that pursue clean energy investments and drive long-term growth. SJI GAAP income from continuing operations and the roll-in to rates of infrastructure totaled $157.3 million in 2020 compared to program investments. $77.2 million in 2019. Economic Earnings Our wholesale marketing and fuel increased to $163.0 million, compared with management businesses within South Jersey $103.0 million in 2019, reflecting a significant Energy Group, contributed $24.6 million in improvement in 2020 financial results, despite GAAP earnings compared with $(0.7) million in the historic challenges of the COVID Pandemic. 2019. South Jersey Energy Group, contributed This was driven by increased profitability from $23.8 million to Economic Earnings in 2020 utility and non-utility operations. compared with $9.5 million in 2019, reflecting GAAP Earnings Per Share totaled $1.62 in 2020 new contracts that became operational over compared with $0.84 in the prior year. We are the last 12 months, increased volumes in our pleased with the full results with an increased fuel management business, improved asset Economic Earnings per share of $1.68 from optimization opportunities, a reshaped $1.12 in the prior year, significantly above portfolio, and pipeline supplier refunds in the midpoint of our guidance. SJI Utilities our wholesale marketing business. contributed $156.1 million to GAAP income from Our energy production and account services continuing operations in 2020 compared with businesses, housed within South Jersey $122.2 million in 2019. SJI Utilities contributed Energy Services, produced 2020 GAAP $157.3 million to Economic Earnings, compared earnings of $17.1 million compared with to $122.2 million in 2019 due to an increase in $(6.7) million in 2019. South Jersey Energy base rates as the New Jersey Board of Public Services, produced 2020 Economic Earnings Utilities approved the settlement of South of $18.0 million as compared to $0.1 million for Jersey Gas’ rate case in September 2020, the prior year primarily reflecting the recognition along with customer growth, and the roll-in to of investment tax credits (ITC’s) related to rates of infrastructure program investments. Fuel Cell and Solar acquisitions that were South Jersey Gas contributed $109.3 million to announced and/or achieved operation in 2020. earnings through infrastructure investments and customer growth. Elizabethtown Gas SJI Midstream contributed GAAP/Economic contributed $47.7 million, primarily driven Earnings of $4.2 million, which is consistent by favorable changes in base rates resulting with 2019, reflecting Allowance for Funds from the completion of Elizabethtown Gas’ Used During Construction (AFUDC) related rate case in November 2019, customer growth to the PennEast Pipeline project. 6 SJI 2020 Annual Report


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    2020 Highlights will, in an environmentally responsible We continue to make progress on optimizing manner, bring critical new supply to our the value of our non-core, non-regulated region. On January 30, 2020, FERC approved businesses. In 2020, SJI sold both its Marina PennEast’s petition for a declaratory order Thermal Facility in Atlantic City, NJ and Elkton and expedited action requesting that the Gas in Elkton, MD. These asset sales support body issue an order interpreting the Natural our strategic plan – focusing investments, Gas Act’s eminent domain authority. On the energy, and resources on our core utilities same day, PennEast filed an amendment with in New Jersey – while also helping strengthen FERC to construct PennEast in two phases. our balance sheet in support of further PennEast has provided all required documents opportunities for innovation and growth. and is awaiting action to be taken by FERC. Concurrently, PennEast has been granted Our fuel supply management remains writ of certiorari from the United States consistent in 2020. We currently serve nine Supreme Court. A decision is expected in facilities with a contracted total volume of or about June 2021. 1.23 BCF/day and continue evaluating new opportunities to add contracted margin to The economic benefit to New Jersey support repeatable earnings. homeowners and businesses from access to A non-utility business focused on wholesale this natural gas, which is among the lowest commodity marketing, asset optimization, and priced in the country, means lower energy bills fuel supply management best supports our and lower costs to heat homes, cook food long-term growth strategy – delivering strong and power businesses. In addition to supplying results, while ensuring we have the flexibility to safe, reliable, affordable, clean energy, pursue investments demanded by consumer PennEast will also support 12,160 direct and preference and the changing political indirect jobs to the region. Once operational, environment. PennEast will deliver 1 BCF of clean and reliable natural gas from the Marcellus region in Midstream Highlights Pennsylvania to New Jersey, geographically We look forward with our PennEast partners diversifying the region’s fuel supply, enhancing to advance this important project – one that system reliability, and supporting clean energy. 7


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    SJ I UT I LIT I E S SJi Utilities, the holding company for our regulated natural gas utilities, serves more than 700,000 customers across two utilities, South Jersey Gas and elizabethtown Gas in new Jersey. Every day, our employees play a critical role relates to meeting the energy demands of in building the foundation that will support the our citizens that depend on us. future growth of SJI. Through our emphasis To ensure the continued safety and health on safety, community outreach efforts, our of our employees, SJI established a Pandemic commitment to service, and focus on diversity Task Force and set into motion a Pandemic and inclusion initiatives, we are invested in Management Plan to guide our actions. creating a truly empowered workforce to meet Beginning in March and continuing into 2021, we the needs of our customers. successfully transitioned all employees, except for field representatives, to work-from-home Safety reporting. For those in the field at South Jersey Safety is a core value. In 2020 we faced many Gas and Elizabethtown Gas, we instituted challenges, but we worked together as One SJI special safety measures, including the use of to develop meaningful solutions and to Make Personal Protective Equipment (“PPE”) such as Every Day a Safe Day. Our safety performance face coverings and gloves, as well as following was one of our most notable accomplishments CDC guidelines for social distancing. Our utilities in 2020. Together we achieved record, AGA also postponed work (other than emergency top-quartile safety performance across the response) for 14 days at any property where organization. These results were driven by the a resident reported sickness or exposure to implementation of new safety programs such COVID-19 and enhanced training to ensure as new safety management system, safe our field employees and contractors exercise driving incentive and near miss program. caution and utilize all precautionary measures. Every employee across the organization has a role to play in achieving our safety goals. inclusion we foster a culture that values differences, Keeping our Customers and employees creates a sense of belonging, and encourages Safe Through CoVid-19 everyone to be their best self. For over Since the onset of the COVID-19 Pandemic, a century, South Jersey Industries has served SJI has committed to helping our customers as one of the leading energy providers in maintain energy security by providing the New Jersey. With over 700,000 customers uninterrupted delivery of safe and reliable and 1,100 employees, respect, inclusion natural gas. As the operator of two natural gas and acceptance are central to SJI’s values. distribution companies in New Jersey, we We believe that to deliver value to our recognize our responsibility to help support stakeholders, our company should reflect the the State’s response to the pandemic as it diversity of the communities where we serve. 8 SJI 2020 Annual Report


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    All of us at SJI have a responsibility to fulfill our financial support for community, civic, and commitment to inclusion. Our inclusion efforts business organizations across New Jersey. are rooted in three pillars, supporting our Underserved communities, veterans, first employees, supplier diversity, and community responders, food banks, college foundations, partnerships. We’re hard at work to create hospital foundations, and more benefited from a culture of inclusion for all – one where every our giving – as we forged partnerships to employee can feel comfortable bringing their create lasting impacts. best selves to work each day. We create an environment that fosters diverse perspectives and a support structure that champions our employees. At SJI, we value Service safety, inclusion, We deliver exceptional service to our customers. The importance of delivering an outstanding experience for our customers service, and our is core to everything we do at our utilities – and the results of our commitment are clear. Elizabethtown Gas ranked #1 in Customer community while Satisfaction with Residential Gas Service in the East among Midsize Utilities, 6 years in a row. Additionally, this year, we launched providing energy My Account and a new dispatch team for Elizabethtown Gas, we integrated a new email solutions that fit our management tool to better serve a growing customer channel for South Jersey Gas, and we expanded training offerings for both customers’ lives. utilities. In addition, we continue to expand our energy assistance outreach efforts to keep our customers informed about resources Energy Assistance available to meet their needs. Both of our Across all our utilities, we continued to partner utilities continue to make great strides in with providers to promote financial assistance improving service delivery and remain focused for those in need, advocating for programs on enhancing the customer experience for including the Low-Income Home Energy all those we serve. Assistance Program (LIHEAP), Payment Disclaimer: Elizabethtown Gas received the highest score Assistance for Gas and Electric (PAGE), and in the East Midsize segment of the J.D. Power 2015-2020 Gas Utility Residential Customer Satisfaction Studies NJ SHARES, as well as other grants and relief (tied in 2015) of customers’ satisfaction with their funds administered by our State and Federal residential gas provider. Visit jdpower.com/awards agency partners. In 2020, these programs provided over 78,000 eligible households in Community the South Jersey Gas and Elizabethtown Gas We invest in the communities where we live service areas with nearly $18 million, aided and work. SJI’s investments during 2020 by the strategic outreach efforts of our own totaled more than half a million dollars in Energy Assistance teams. 9


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    A PA RT NE R FO R A C LE AN E NE RG Y F UT U RE SJi remains committed to investments that advance the clean energy and decarbonization goals of new Jersey and our region. SJI invested $84.0 million in traditional clean eliminating the link between utility profits and energy investments in 2020, recognizing the quantity of natural gas sold. Since its $21.3 million in investment tax credits (ITCs). inception, customers have reduced their natural SJI now holds ownership interests across the gas usage by a total of 101.1 billion cubic feet, clean energy spectrum. enabling them to save $920.2 million in energy costs and reduce 5.18 million metric tons of CO2. Our employees, customers, shareholders, and regulators are looking to us for the At SJI, we are dedicated to involving and cleanest energy solutions we can deliver. engaging customers in our efforts to protect SJI is inspired to help build a clean energy the environment and sustain our natural future for New Jersey and is committed to resources. Combined, South Jersey Gas and advancing positive environmental outcomes, Elizabethtown Gas have invested more than including reducing carbon emissions, $133 million in energy efficiency programs to promoting energy efficiency, and enhancing help customers reduce their energy footprint. the deployment of clean energy technologies. In 2018, South Jersey Gas expanded its energy efficiency programs, making them more energy efficiency and accessible to our customers and offering Conservation $72 million in rebates, financing, an efficient In 2020, SJI formed the Clean Energy and products marketplace, residential Sustainability team that is responsible for the weatherization program for low-to-moderate development, execution, and oversight of all income customers, and home energy audits clean energy and sustainability initiatives for as well as solutions for commercial customers. the organization. With the formation of this SJI’s utilities, South Jersey Gas and team, SJI is poised to be a leader in clean Elizabethtown Gas, filed petitions with the energy, energy efficiency, and carbon New Jersey Board of Public Utilities to meet reduction initiatives, allowing us to expand Statewide energy efficiency goals and create on the progress we have already made, while and expand energy efficiency programs for continuing to deliver on our mission to provide the next three years beginning in July 2021. safe, reliable, affordable energy. In 2006 South Jersey Gas became one of infrastructure enhancements the first utilities in the country to implement For many years, SJI has pursued and a Conservation Incentive Program. Today, the implemented programs to accelerate the program continues to encourage customers to replacement of aging infrastructure to improve use natural gas more efficiently and benefits safety and reliability for customers while both South Jersey Gas and its customers by reducing greenhouse gas emissions (GHG). 10 SJI 2020 Annual Report


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    In November of 2020, South Jersey Gas filed Clean Energy Investments a petition with the New Jersey Board of Public Consistent with our commitment to a clean Utilities seeking approval of an Infrastructure energy future, SJI announced the formation of Investment Program (IIP) that would accelerate Catamaran Renewables (Catamaran), a joint planned capital expenditures to enhance venture between SJI subsidiary Marina Energy the delivery of safe, reliable, affordable natural and renewable industry-leader Captona, to gas, create jobs, and support the State’s develop, own, and operate renewable energy environmental goals. Under the proposed projects. The Catamaran joint venture brings five-year program beginning in June 2021, more than 1.3 GW of operational experience South Jersey Gas seeks to invest across all types of renewable energy and has approximately $742.5 million to replace 825 financed more than $1 billion in renewable miles of aging steel mains, and install Excess energy transactions. Flow Valves (EFVs) on new service lines. EFVs are mechanical safety devices designed to shut Fuel Cells off the flow of natural gas automatically in the In conjunction with the formation of event of a service line break. Catamaran, the partners announced the Elizabethtown Gas submitted its annual filing acquisition of two fuel cell projects in Staten to the New Jersey Board of Public Utilities for Island, New York from NineDot Energy, an updated rates to recover investments made experienced renewable development company under its IIP, which was originally approved in based in the NYU Urban Future Lab cleantech June 2019. Elizabethtown Gas’ approved incubator in Brooklyn, NY. The projects, program authorizes the recovery of costs reflecting 7.5 MW of installed capacity, qualify associated with investments of approximately under New York’s Value of Distributed Energy $300 million between 2019-2024 to replace Resources (VDER) program, with 75% of cast-iron and bare steel vintage mains and revenues fixed over 25 years. The projects related services. The NJBPU issued an Order are further supported by a 95% availability in September 2020 approving the updated guaranty from the operator. The projects IIP rates effective October 1, 2020. achieved commercial operation in December 11


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    continued from previous page and are expected to deliver an unlevered in have the lowest (negative) carbon intensity internal rate of return (IRR) of 11%. of key transportation fuels. Solar Hydrogen. In December 2020, SJI announced In 2020, SJI also made strides in solar a partnership with Atlantic Shores Offshore development including the installation of Wind (Atlantic Shores) to collaborate on a solar platforms at SJI corporate facilities and green hydrogen pilot program, which will the installation of four small solar platforms research, monitor, and analyze the deployment in New Jersey for a total investment of of green hydrogen technology and natural gas $3.8 million. The projects, reflecting 1.3 MW blending in New Jersey. Atlantic Shores is of installed capacity, qualify under the a partnership between Shell New Energies NJ Transition Renewable Energy Certificates US LLC and EDF Renewables North America, (TREC) program. representing years of technical, operational, and commercial energy expertise. Decarbonization SJI has announced important partnerships Forward Looking and investments in recent months to reduce Our employees, customers, shareholders, carbon emissions from our operations. and regulators are looking to us for the cleanest energy solutions we can deliver. Renewable Natural Gas For many years, SJI has been an industry In December 2020, SJI entered into an leader in reducing methane leaks through agreement to acquire a minority equity system modernization, and in advancing interest and development rights in REV LNG, energy efficiency goals through a suite of LLC (REV), a vertically integrated services products and services aimed at reducing and development company specializing in consumption. renewable natural gas (RNG), liquefied natural gas (LNG), and compressed natural gas (CNG) While we will continue to focus on these assets in North America. Over the last few important issues, the future of our company years, REV has become one of the country’s will be built around the efficient and effective leading developers of dairy RNG projects deployment of clean energy technologies. through capturing, cleaning, and converting Advancements in the production of these bio-methane to RNG. REV works with dairy energy sources will help us to decarbonize farms to acquire the rights to manure our gas supply while continuing to achieve feedstock and land leases, along with presiding our core mission of providing safe, reliable, over the development and construction of affordable, clean energy for the customers anaerobic digesters and gas processing to and communities we serve. produce RNG. We look forward to continuing to provide SJI’s investment in REV includes an interest in high-quality services to our customers, multiple proven producing portfolios of RNG being a trusted partner in our communities, projects, a developing pipeline of RNG projects, and consistently providing excellent value as well as energy infrastructure assets to our shareholders. associated with transporting and supplying RNG to market. The farms that SJI is investing 12 SJI 2020 Annual Report


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    B OA RD A ND OF F IC E RS SJI Board of Directors Joseph M. Rigby (Chairman) Sarah M. Barpoulis Keith S. Campbell Victor A. Fortkiewicz Sheila Hartnett-Devlin, CFA G. Edison Holland Sunita Holzer Kevin M. O’Dowd Christopher J. Paladino Michael J. Renna (President & CEO) Frank L. Sims SJI Senior Executives Michael J. Renna President & Chief Executive Officer Steven R. Cocchi Senior Vice President & Chief Financial Officer David Robbins Jr. Senior Vice President and President, SJI Utilities Annual Meeting Information Melissa Orsen The Annual Meeting of Shareholders Senior Vice President, SJI and will be held online President and Chief Operations Officer, SJG Friday, April 30, 2021 9:00 a.m. Kathleen Larkin www.virtualshareholdermeeting.com/SJI2021 Senior Vice President & Chief Human Resources Officer Leonard Brinson Jr. Transfer Agent/Shareholder Inquiries Vice President & Chief Information Officer Broadridge Corporate Issuer Solutions PO Box 1342, Brentwood, NY 11717-0718 Eric Stein shareholder.broadridge.com/sji Vice President General Counsel Toll-Free: 1.888.754.3100 International Calls: 1.720.358.3580 TDD: 1.855.627.5080


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    “SJI is 100+ year old trusted energy leader providing safe, reliable, affordable clean energy for a better today and tomorrow to over 700,000 families and businesses.” 1 South Jersey Plaza Folsom, NJ 08037 609.561.9000 sjindustries.com


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