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.

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



(Thousands)			2012			2011
NJNG
First mortgage bonds:		Maturity date:
5.00%	Series HH	December 1, 2038	$	12,000		$	12,000
4.50%	Series II	August 1, 2023	10,300			10,300
4.60%	Series JJ	August 1, 2024	10,500			10,500
4.90%	Series KK	October 1, 2040	15,000			15,000
5.60%	Series LL	May 15, 2018	125,000			125,000
Variable	Series MM	September 1, 2027	9,545			9,545
Variable	Series NN	August 1, 2035	41,000			41,000
Variable	Series OO	August 1, 2041	46,500			46,500
4.77% Unsecured senior notes		March 15, 2014	60,000			60,000
Capital lease obligation-Buildings		June 1, 2021	21,907			23,314
Capital lease obligation-Meters		Various dates	30,887			30,683
Capital lease obligation-Equipment		December 1, 2013	290			530
Less: Current maturities of long-term debt			(7,760		)	(7,575		)
Total NJNG long-term debt			375,169			376,797
NJR
6.05% Unsecured senior notes		September 24, 2017	50,000			50,000
1.94% Unsecured senior notes		September 17, 2015	25,000			—
2.51% Unsecured senior notes		September 17, 2018	25,000			—
3.25% Unsecured senior notes		September 17, 2022	50,000			—
Total NJR long-term debt			150,000			50,000
Total long-term debt			$	525,169		$	426,797

Annual long-term debt redemption requirements, excluding capital leases, as of September 30, are as follows:



(Millions)	NJNG		NJR
2013	$	—	$	—
2014	$	60.0	$	—
2015	$	—	$	25.0
2016	$	—	$	—
2017	$	—	$	50.0
Thereafter	$	269.8	$	75.0

NJNG First Mortgage Bonds

NJNG's mortgage secures its First Mortgage Bonds and represents a lien on substantially all of its property, including natural gas supply contracts. Certain indentures supplemental to the mortgage include restrictions as to cash dividends and other distributions on NJNG's common stock that apply as long as certain series of First Mortgage Bonds are outstanding. As of September 30, 2012, restricted net assets for unconsolidated subsidiaries and consolidated subsidiaries were $515.9 million and under the most restrictive provision, $314 million of NJNG's retained earnings was available for dividends.

Through September 7, 2011, NJNG was obligated with respect to several loan agreements securing six series of variable rate bonds issued by the New Jersey Economic Development Authority (NJEDA) totaling $97 million. These bonds were commonly referred to as auction-rate securities (ARS) and had an interest rate reset every seven or thirty-five days, depending upon the applicable series. On those dates, an auction was held for the purposes of determining the interest rate of the securities. The interest rates associated with NJNG's variable-rate debt were based on the rates of the related ARS. Through their subsequent redemption, all of the auctions surrounding the ARS had failed, resulting in those bonds bearing interest at their maximum rates, as defined as the lesser of (i) 175 percent of thirty-day London inter-bank offered rate (LIBOR) or (ii) 10 to 12 percent per annum, as applicable to such series of ARS. While the failure of the ARS auctions did not signify or constitute a default on NJNG, the ARS did impact NJNG's borrowing costs of the variable-rate debt. On August 29, 2011, due to the lack of liquidity in the market for ARS, and the resulting exposure of NJNG to the LIBOR-based maximum rate, NJNG completed a refunding of the ARS, whereby the NJEDA issued three series of Variable Rate Demand Notes (VDRN) with a total principal amount of $97 million and maturity dates ranging from September 2027 to August 2041. The proceeds from the issuance of the VRDN were used to refund the entire $97 million principal amount of ARS, which were retired upon redemption. The First Mortgage Bonds were canceled upon the redemption of the EDA ARS and the corresponding loan agreements were terminated and replaced with a new loan agreement securing the payment of principal and interest on the VRDNs by NJNG. Costs associated with the issuance of the VRDNs, as well as remaining unamortized debt costs associated with the ARS, will be amortized over the life of the VRDNs in accordance with ASC 980, Regulated Operations, therefore, there was no impact to income upon extinguishment of the ARS.

The rates on these types of investments are generally correlated with the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index and will initially accrue interest at a daily rate, with a maximum rate of 12 percent per annum. As of September 30, 2012, the interest rate on these securities was .22 percent.

VRDNs are sold to investors on a daily basis with the interest rate set by the remarketing agent. In the case where the remarketing agent is unable to sell the VRDNs to an investor on a given day, NJNG would be required to repurchase the EDA Bonds. Therefore, in conjunction with the issuance of the EDA Bonds, NJNG entered into a $100 million four-year credit facility, which expires on August 31, 2015, to provide liquidity support in the event of a failed remarketing of the EDA Bonds and to ensure payment of principal and interest. There would be no increase in debt if this were to occur.

On October 1, 2010, upon maturity, NJNG redeemed its $20 million, 6.88 percent Series CC First Mortgage bonds.

On October 4, 2012, the BPU approved a petition filed by NJNG requesting authorization over a three-year period to issue debt, renew its revolving credit facility expiring August 2014, renew its credit facility supporting NJNG's obligations with respect to bonds issued by the New Jersey Economic Development Authority, enter into interest rate risk management transactions and increase the size of its meter leasing program on a permanent basis.

NJNG Sale-Leasebacks

NJNG's master lease agreement for its headquarters building has a twenty-five and a half-year term that expires in June 2021, with two five-year renewal options. 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 $6.5 million, $5.9 million and $4.9 million for fiscal 2012, 2011 and 2010, respectively, in connection with the sale-leaseback of its natural gas meters. During fiscal 2012 and 2011, NJNG exercised early purchase options with respect to meter leases by making final principal payments of $1 million and $3.9 million, respectively. There was no early purchase option exercised in fiscal 2010. This sale-leaseback program is expected to continue on an annual basis.

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



(Millions)	Lease Payments
2013		$	10.7
2014		10.2
2015		9.6
2016		9.9
2017		8.7
Thereafter		16.7
Subtotal		65.8
Less: interest component		(12.7		)
Total		$	53.1

NJR Debt

NJR has two unsecured, uncommitted private placement debt shelf note agreements. The first agreement was entered into on May 12, 2011, in the amount of $100 million, and expires on May 10, 2013. As of September 30, 2012, NJR had two borrowings outstanding under this agreement, $25 million at 1.94 percent, which will mature on September 15, 2015 and $25 million at 2.51 percent, which will mature on September 15, 2018. The second agreement became effective on June 30, 2011, in the amount of $75 million, and expires on June 30, 2014. As of September 30, 2012, NJR had $50 million at 3.25 percent outstanding under this agreement, which will mature on September 17, 2022. Notes issued under these agreements are guaranteed by certain unregulated subsidiaries of the Company. The additional credit lines will be used for general corporate purposes, including working capital and capital expenditures.

NJR had no long-term, variable-rate debt outstanding at September 30, 2012 and 2011.

A summary of NJNG's and NJR's debt shelf and credit facilities as of September 30, are as follows:



(Thousands)	2012			2011
NJNG
Bank credit facility dedicated to EDA Bonds ⁽¹⁾	$	100,000		$	100,000
Bank credit facilities ⁽¹⁾	$	200,000		$	200,000
Amount outstanding at end of period	$	135,000		$	26,500
Weighted average interest rate at end of period	.18		%	.24		%
Amount available at end of period	$	65,000		$	173,500
NJR
Debt shelf facilities ⁽²⁾	$	175,000		$	175,000
Amount outstanding at end of period	$	100,000		$	—
Weighted average interest rate at end of period	2.74		%	—		%
Amount available at end of period	$	75,000		$	175,000
Bank credit facilities⁽¹⁾	$	325,000		$	325,000
Amount outstanding at end of period	$	144,800		$	132,850
Weighted average interest rate at end of period	1.16		%	.54		%
Amount available at end of period ⁽³⁾	$	166,339		$	157,853


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


(2)	Uncommitted, long-term debt shelf facilities, which require no commitment fees on the unused amounts.


(3)	Letters of credit outstanding total $13.9 million and $34.3 million as of September 30, 2012 and 2011, respectively, which reduces amount available.

NJNG

NJNG had a $200 million revolving unsecured committed credit facility, which was due to expire in December 2012. On August 24, 2011, NJNG replaced the facility with a new $200 million unsecured committed credit facility expiring August 2014. The credit facility is used to support NJNG's commercial paper program and provides for the issuance of letters of credit. It also permits an increase to the facility, from time to time, with the existing or new lenders, in a minimum of $15 million increments up to a maximum of $50 million at the lending banks' discretion. As of September 30, 2012, NJNG had $135 million in borrowings outstanding under the facility.

NJR

NJR had a $325 million revolving unsecured committed credit facility, which was due to expire in December 2012. On August 22, 2012, NJR replaced the facility with a new $325 million unsecured committed credit facility expiring August 22, 2017. The credit facility is used primarily to finance its share repurchases, to satisfy NJRES' short-term liquidity needs and to finance, on an initial basis, unregulated investments. It also permits an increase to the facility, from time to time, with the existing or new lenders, in a minimum of $5 million increments up to a maximum of $100 million at the lending banks' discretion.

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

As of September 30, 2012, NJR has three letters of credit outstanding totaling $13.9 million. Two of the letters of credit, which total $11 million, are on behalf of NJRES and one letter of credit on behalf of NJRCEV totaling $2.9 million. 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.

NJRES' letters of credit are used to secure the purchase and/or sale of natural gas and for margin requirements for natural gas transactions; one expires on December 31, 2012 and the other expires on June 30, 2013. NJRCEV's letter of credit secures construction of a ground-mounted solar project and expires on November 27, 2013.