SEGMENTS OF BUSINESS:

SJI operates in several different reportable operating segments which reflect the financial information regularly evaluated by the chief operating decision maker. These segments are as follows:


•	Gas utility operations (SJG) consist primarily of natural gas distribution to residential, commercial and industrial customers. The result of SJG only are included in this operating segment.


•	Wholesale energy operations include the activities of SJRG and SJEX.


•	SJE is involved in both retail gas and retail electric activities.


◦	Retail gas and other operations include natural gas acquisition and transportation service business lines.


◦	Retail electric operations consist of electricity acquisition and transportation to commercial, industrial and residential customers.


•	On-site energy production consists of Marina's thermal energy facility and other energy-related projects. Also included in this segment are the activities of ACB, ACLE, BCLE, SCLE, SXLE, MCS, NBS and SBS.

•

Appliance service operations includes SJESP, which serviced residential and small commercial HVAC systems, installed small commercial HVAC systems, provided plumbing services and serviced appliances under warranty via a subcontractor arrangement as well as on a time and materials basis. On September 1, 2017, SJESP sold certain assets of its residential and small commercial HVAC and plumbing business to a third party. SJESP will receive commissions paid on service contracts from the third party on a go forward basis. This transaction did not have a material impact on the consolidated financial statements.


•	Midstream was formed to invest in infrastructure and other midstream projects, including a current project to build a natural gas pipeline in Pennsylvania and New Jersey.


•	Costs incurred related to the agreement to acquire Elizabethtown Gas and Elkton Gas are recorded in the Corporate & Services segment.

SJI groups its nonutility operations into two categories: Energy Group and Energy Services. Energy Group includes wholesale energy, retail gas and other, and retail electric operations. Energy Services includes on-site energy production and appliance service operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are treated as if the sales or transfers were to third parties at current market prices.

Information about SJI’s operations in different reportable operating segments is presented below (in thousands):



	2017			2016			2015
Operating Revenues:
Gas Utility Operations	$	517,254		$	461,055		$	534,290
Energy Group:
Wholesale Energy Operations	352,613			220,707			129,098
Retail Gas and Other Operations	111,048			92,371			87,198
Retail Electric Operations	179,534			182,540			150,049
Subtotal Energy Group	643,195			495,618			366,345
Energy Services:
On-Site Energy Production	99,517			94,375			63,665
Appliance Service Operations	6,488			7,898			11,186
Subtotal Energy Services	106,005			102,273			74,851
Corporate & Services	45,024			35,147			31,156
Subtotal	1,311,478			1,094,093			1,006,642
Intersegment Sales	(68,410		)	(57,593		)	(47,074		)
Total Operating Revenues	$	1,243,068		$	1,036,500		$	959,568



	2017			2016			2015
Operating Income:
Gas Utility Operations	$	136,487		$	122,455		$	119,585
Energy Group:
Wholesale Energy Operations	(36,815		)	41,667			35,024
Retail Gas and Other Operations	(2,468		)	4,680			(3,218		)
Retail Electric Operations	3,620			7,007			1,042
Subtotal Energy Group	(35,663		)	53,354			32,848
Energy Services:
On-Site Energy Production	(83,654		)	13,301			2,027
Appliance Service Operations	217			582			468
Subtotal Energy Services	(83,437		)	13,883			2,495
Corporate and Services	(12,977		)	(416		)	1,966
Total Operating Income	$	4,410		$	189,276		$	156,894

Depreciation and Amortization:
Gas Utility Operations	$	71,654		$	63,901		$	58,668
Energy Group:
Wholesale Energy Operations	125			484			435
Retail Gas and Other Operations	323			337			161
Subtotal Energy Group	448			821			596
Energy Services:
On-Site Energy Production	46,928			43,395			30,242
Appliance Service Operations	153			301			316
Subtotal Energy Services	47,081			43,696			30,558
Corporate and Services	4,303			1,400			1,220
Total Depreciation and Amortization	$	123,486		$	109,818		$	91,042

Interest Charges:
Gas Utility Operations	$	24,705		$	17,875		$	19,906
Energy Group:
Wholesale Energy Operations	3,150			—			441
Retail Gas and Other Operations	250			350			185
Subtotal Energy Group	3,400			350			626
Energy Services:
On-Site Energy Production	16,838			11,961			8,169
Corporate and Services	24,804			12,118			11,822
Subtotal	69,747			42,304			40,523
Intersegment Borrowings	(15,728		)	(10,855		)	(8,901		)
Total Interest Charges	$	54,019		$	31,449		$	31,622



	2017			2016			2015

Income Taxes:
Gas Utility Operations	$	45,700		$	39,366		$	36,945
Energy Group:
Wholesale Energy Operations	(14,720		)	15,882			14,410
Retail Gas and Other Operations	(544		)	2,118			(978		)
Retail Electric Operations	1,480			2,862			426
Subtotal Energy Group	(13,784		)	20,862			13,858
Energy Services:
On-Site Energy Production	(39,262		)	(6,353		)	(49,225		)
Appliance Service Operations	4			232			186
Subtotal Energy Services	(39,258		)	(6,121		)	(49,039		)
Corporate and Services	(17,595		)	44			(404		)
Total Income Taxes	$	(24,937	)	$	54,151		$	1,360

Property Additions (See Note 1):
Gas Utility Operations	$	253,545		$	228,275		$	218,260
Energy Group:
Wholesale Energy Operations	14			7			382
Retail Gas and Other Operations	889			1,642			2,053
Subtotal Energy Group	903			1,649			2,435
Energy Services:
On-Site Energy Production (1)	12,588			38,193			139,018
Appliance Service Operations	260			431			379
Subtotal Energy Services	12,848			38,624			139,397
Midstream	218			505			—
Corporate and Services	2,233			636			1,902
Total Property Additions	$	269,747		$	269,689		$	361,994

(1) The property additions for On-Site Energy Production in 2016 and 2015 do not include the approximately $5.6 million and $40.9 million of Property, Plant and Equipment obtained through the acquisition of eight Energenic projects as discussed in Note 3.



	2017			2016
Identifiable Assets (See Note 1):
Gas Utility Operations	$	2,865,974		$	2,551,923
Energy Group:
Wholesale Energy Operations	208,785			233,019
Retail Gas and Other Operations	56,935			52,729
Retail Electric Operations	34,923			41,280
Subtotal Energy Group	300,643			327,028
Energy Services:
On-Site Energy Production	582,587			767,710
Appliance Service Operations	1,338			2,879
Subtotal Energy Services	583,925			770,589
Discontinued Operations	1,757			1,756
Midstream	63,112			26,636
Corporate and Services	711,038			623,159
Intersegment Assets	(661,363		)	(570,524		)
Total Identifiable Assets	$	3,865,086		$	3,730,567