DEBT

12 Months Ended

Sep. 30, 2019

9. DEBT

NJNG and NJR finance working capital requirements and capital expenditures through the issuance of various long-term debt and other financing arrangements, including unsecured credit and private placement debt shelf facilities. Amounts available under credit facilities are reduced by bank or commercial paper borrowings, as applicable, and any outstanding letters of credit.

Long-term Debt

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



(Thousands)			2019			2018
NJNG
First mortgage bonds:		Maturity date:
3.00%	Series OO	August 1, 2041	46,500			46,500
3.15%	Series PP	April 15, 2028	50,000			50,000
3.58%	Series QQ	March 13, 2024	70,000			70,000
4.61%	Series RR	March 13, 2044	55,000			55,000
2.82%	Series SS	April 15, 2025	50,000			50,000
3.66%	Series TT	April 15, 2045	100,000			100,000
3.63%	Series UU	June 21, 2046	125,000			125,000
4.01%	Series VV	May 11, 2048	125,000			125,000
3.50%	Series WW	April 1, 2042	10,300			—
3.38%	Series XX	April 1, 2038	10,500			—
2.45%	Series YY	April 1, 2059	15,000			—
3.76%	Series ZZ	July 17, 2049	100,000			—
3.86%	Series AAA	July 17, 2059	85,000			—
2.75%	Series BBB (formally MM)	August 1, 2039	9,545			9,545
3.00%	Series CCC (formally NN)	August 1, 2043	41,000			41,000
Capital lease obligation-buildings		June 1, 2021	5,637			8,749
Capital lease obligation-meters		Various dates	29,744			27,188
Less: Debt issuance costs			(9,027		)	(6,515		)
Less: Current maturities of long-term debt			(10,420		)	(9,502		)
Total NJNG long-term debt			908,779			691,965
NJR
3.25%	Unsecured senior notes	September 17, 2022	50,000			50,000
3.48%	Unsecured senior notes	November 7, 2024	100,000			100,000
3.20%	Unsecured senior notes	August 18, 2023	50,000			50,000
3.54%	Unsecured senior notes	August 18, 2026	100,000			100,000
3.96%	Unsecured senior notes	June 8, 2028	100,000			100,000
3.29%	Unsecured senior notes	July 17, 2029	150,000			—
Variable	Term loan	August 16, 2019	—			100,000
Less: Debt issuance costs			(2,004		)	(1,136		)
Less: Current maturities of long-term debt			—			(100,000		)
Total NJR long-term debt			547,996			398,864
Clean Energy Ventures
Solar asset financing obligation		Various dates	91,401			103,923
Less: Current maturities of long-term debt			(10,999		)	(14,133		)
Total Clean Energy Ventures long-term debt			80,402			89,790
Total long-term debt			$	1,537,177		$	1,180,619

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



(Thousands)	NJNG		NJR
2020	$	—	$	—
2021	$	—	$	—
2022	$	—	$	50,000
2023	$	—	$	50,000
2024	$	70,000	$	100,000
Thereafter	$	822,845	$	350,000

NJNG

First Mortgage Bonds

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

NJNG’s Mortgage Indenture no longer contains a restriction on NJNG’s ability to pay dividends. New Jersey Administrative Code 14:4-4.7 states that a public utility cannot issue dividends, without regulatory approval, if its equity to total capitalization ratio falls below 30 percent. As of September 30, 2019, NJNG’s equity to total capitalization ratio is 56.3 percent and has the ability to issue up to $1 billion of FMB under the terms of the Mortgage Indenture.

On April 18, 2019, NJNG completed the remarketing of three FMBs, in the amount of $35.8 million, with a weighted average interest rate of 3.02 percent. The bonds have maturity dates ranging from April 2038 to April 2059. The bonds were previously purchased in lieu of redemption and were being held by the Company.

On July 17, 2019, NJNG entered into a Note Purchase Agreement, under which NJNG issued $100 million of 3.76 percent senior notes due July 17, 2049 and $85 million of 3.86 percent senior notes due July 17, 2059. The senior notes are secured by an equal principal amount of NJNG's FMBs issued under NJNG's Mortgage Indenture.

On August 1, 2019, NJNG completed a remarketing of three existing variable rate FMBs, with a total principal amount of $97 million, which fixed the interest rates of the bonds. NJNG remarketed $46.5 million at 3.00 percent due August 1, 2041, $41 million at 3.00 percent due August 2043 and $9.5 million at 2.75 percent due August 1, 2039. EDA Bonds are special, limited obligations of the EDA payable solely from payments made by NJNG pursuant to a Loan Agreement and are secured by the pledge of $97 million principal amount of the FMB issued by the Company.

Sale-Leasebacks

NJNG has entered into a sale-leaseback for its headquarters building, which has a 25.5-year term that expires in June 2021, subject to an option by NJNG to renew the lease for additional five-year terms a maximum of four times. The present value of the agreement’s minimum lease payments is reflected as both a capital lease asset and a capital lease obligation, which are included in utility plant and long-term debt, respectively, on the Consolidated Balance Sheets.

NJNG received $9.9 million, $7.8 million and $9.6 million for fiscal 2019, 2018 and 2017, respectively, in connection with the sale-leaseback of its natural gas meters. NJNG records a capital 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. During fiscal 2019, 2018 and 2017, NJNG exercised early purchase options with respect to meter leases by making final principal payments of $1.1 million, $2.2 million and $2.4 million, respectively. NJNG continues to evaluate this sale-leaseback program based on current market conditions.

Contractual commitments for capital lease payments, as of the fiscal years ended September 30, are as follows:



(Thousands)	Lease Payments
2020		$	11,707
2021		6,603
2022		7,494
2023		3,995
2024		4,652
Thereafter		4,173
Subtotal		38,624
Less: Interest component		(3,243		)
Total		$	35,381

NJR

On July 17, 2019, NJR entered into a Note Purchase Agreement for $150 million of 3.29 percent senior notes due on July 17, 2029. NJR issued $50 million of these senior notes on July 17, 2019 and issued the remaining $100 million of these senior notes on August 15, 2019.

On January 26, 2018, NJR entered into a variable-for-fixed interest rate swap on its $100 million variable rate term loan, which fixed the variable rate at 2.84 percent. The swap terminated on August 16, 2019, which coincided with the maturity of the debt. NJR had no long-term variable-rate debt outstanding as of September 30, 2019.

Clean Energy Ventures

Clean Energy Ventures received proceeds of $71.5 million and $32.9 million in fiscal 2018 and 2017, respectively, in connection with the sale-leaseback of commercial solar assets. Clean Energy Ventures did not receive proceeds related to the sale-leaseback of commercial solar assets during fiscal 2019. Clean Energy Ventures enters into transactions to sell the commercial solar assets concurrent with agreements to lease the assets back over a period of six to 15 years. These sale-leasebacks are treated as financing obligations, which are typically secured by the renewable energy facility asset and its future cash flows from SREC and energy sales. ITCs and other tax benefits associated with these solar projects are transferred to the buyer. Clean Energy Ventures continues to operate the solar assets, including related expenses, and retain the revenue generated from SRECs and energy sales, and has the option to renew the lease or repurchase the assets sold at the end of the lease term.

Contractual commitments for solar sale-leaseback lease payments, as of the fiscal years ended September 30, are as follows:



(Thousands)	Lease Payments
2020		$	7,830
2021		7,803
2022		7,802
2023		7,878
2024		7,359
Thereafter		30,945
Subtotal		69,617
Less: Interest component		(22,971		)
Total		$	46,646

Short-term Debt

A summary of NJR’s and NJNG’s short-term bank facilities as of September 30, are as follows:



(Thousands)	2019			2018
NJR
Bank revolving credit facilities:⁽¹⁾	$	425,000		$	425,000
Notes outstanding at end of period	$	25,450		$	87,950
Weighted average interest rate at end of period	3.04		%	3.07		%
Amount available at end of period ⁽²⁾	$	394,800		$	322,144
NJNG
Bank revolving credit facilities: ⁽³⁾	$	250,000		$	250,000
Commercial paper outstanding at end of period	$	—		$	64,000
Weighted average interest rate at end of period	—		%	2.18		%
Amount available at end of period ⁽⁴⁾	$	249,269		$	185,269


(1)	Committed credit facilities, which require commitment fees of .075 percent on the unused amounts.


(2)	Letters of credit outstanding total $4.8 million and $14.9 million as of September 30, 2019 and 2018, respectively, which reduces amount available by the same amount.


(3)	Committed credit facilities, which require commitment fees of .075 percent on the unused amounts.


(4)	Letters of credit outstanding total $731,000 as of September 30, 2019 and 2018, which reduces amount available by the same amount.

NJR

On December 5, 2018, NJR entered into an Amended and Restated Credit Agreement governing a $425 million NJR Credit Facility. The NJR Credit Facility expires on December 5, 2023, subject to two mutual options for a one-year extension beyond that date. The NJR Credit Facility permits the borrowing of revolving loans and swingline loans, as well as the issuance of letters of credit. The NJR Credit Facility also includes an accordion feature, which would allow 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 minimum increments of $50 million increments up to a maximum of $250 million. 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.

On June 25, 2018, the $425 million NJR Credit Facility was amended to permit liens and the disposition of assets relating to sale-leaseback or other similar tax equity financing arrangements of meter assets or of solar facilities. These transactions are permissible so long as NJR is in compliance with certain covenants both before and after such incurrence, and if no event of default may be caused by such sale-leaseback or similar arrangement.

In December 2018, NJR entered into a four-month, $100 million revolving line of credit facility. This facility expired on April 18, 2019 and was not renewed. There were no amounts outstanding under this credit facility at expiration.

As of September 30, 2019, NJR had two letters of credit outstanding totaling $4.8 million on behalf of Energy Services. These letters of credit reduce the amount available under NJR’s committed credit facility by the same amount. NJR does not anticipate that these letters of credit will be drawn upon by the counterparties, and they will be renewed as necessary.

Energy Services’ letters of credit are used for margin requirements for natural gas transactions, collateral and security deposit for retail gas sales and expire on dates ranging from December 2019 to September 2020.

Neither NJNG nor the results of its operations are obligated or pledged to support the NJR credit or debt shelf facilities.

NJNG

On December 5, 2018, NJNG entered into an Amended and Restated Credit Agreement governing a $250 million, NJNG Credit Facility. The NJNG Credit Facility expires on December 5, 2023, subject to two mutual options for a one-year extension beyond that date. The NJNG Credit Facility permits the borrowing of revolving loans and swingline loans, as well as 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.

As of September 30, 2019, NJNG has two letters of credit outstanding for $731,000. NJNG’s letters of credit are used as collateral for remediation projects and expire in August 2020. These letters of credit reduce the amount available under NJNG’s committed credit facility by the same amount. NJNG does not anticipate that these letters of credit will be drawn upon by the counterparty and they will be renewed as necessary.