FAIR VALUE

3 Months Ended

Dec. 31, 2023

6. FAIR VALUE

Fair Value of Assets and Liabilities

The fair value of cash and cash equivalents, accounts receivable, current loan receivables, accounts payable, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. Non-current loans receivable are recorded based on what the Company expects to receive, which approximates fair value, in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit quality and collection profile of its customers to approximate fair value.

The estimated fair value of long-term debt, including current maturities, excluding natural gas meter finance arrangements, debt issuance costs and solar asset financing obligations, is as follows:


(Thousands)	December 31, 2023		September 30, 2023
Carrying value (1) (2)	$	2,637,845	$	2,587,845
Fair market value	$	2,334,582	$	2,106,536

(1)Excludes NJNG's debt issuance costs of $10.2M and $9.8M as of December 31, 2023 and September 30, 2023, respectively.

(2)Excludes NJR's debt issuance costs of $3.5M and $3.7M as of December 31, 2023 and September 30, 2023, respectively.

The Company enters into sale leaseback transactions for certain commercial solar assets and natural gas meters. These transactions are recorded within long-term debt on the Unaudited Condensed Consolidated Balance Sheets. The carrying value of solar sale leasebacks was $296.3M and $278.4M and the estimated fair value was $297.0M and $268.1M as of December 31, 2023 and September 30, 2023, respectively. The carrying value of the natural gas meter sale leasebacks was $38.2M and $31.4M and the estimated fair value of certain natural gas meter sale leasebacks amounted to $29.8M and $20.9M as of December 31, 2023 and September 30, 2023, respectively.

The Company utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate for the maturity of the specific issue and the Company's credit rating. As of December 31, 2023, the Company discloses its debt within Level 2 of the fair value hierarchy.

Fair Value Hierarchy

The Company applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, investments in equity securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the source of the data used to develop the price inputs.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and includes the following:


Fair Value Hierarchy	Description of Fair Value Level	Fair Value Technique
Level 1	Unadjusted quoted prices for identical assets or liabilities in active markets	The Company’s Level 1 assets and liabilities include exchange-traded natural gas futures and options contracts, listed equities and money market funds. Exchange-traded futures and options contracts include all energy contracts traded on the NYMEX, CME and ICE that the Company refers to internally as basis swaps, fixed swaps, futures and financial options that are cleared through an FCM.
Level 2	Other significant observable inputs, such as interest rates or price data, including both commodity and basis pricing that is observed either directly or indirectly from publications or pricing services	The Company’s Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts, SREC forward sales or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). Inputs are verifiable and do not require significant management judgment. For some physical commodity contracts, the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input were considered to be a “model,” it would still be considered to be a Level 2 input as the data is: •widely accepted and public; •non-proprietary and sourced from an independent third party; and •observable and published. These additional adjustments are generally not considered to be significant to the ultimate recognized values.
Level 3	Inputs derived from a significant amount of unobservable market data	These include the Company’s best estimate of fair value and are derived primarily through the use of internal valuation methodologies.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	Quoted Prices in Active Markets for Identical Assets			Significant Other Observable Inputs			Significant Unobservable Inputs
(Thousands)	(Level 1)			(Level 2)			(Level 3)			Total
As of December 31, 2023
Assets:
Physical commodity contracts		$	—		$	9,893		$	—	$	9,893
Financial commodity contracts		29,056			—			—		29,056


Money market funds		86			—			—		86
Other		3,111			—			—		3,111
Total assets at fair value		$	32,253		$	9,893		$	—	$	42,146
Liabilities:
Physical commodity contracts		$	—		$	16,764		$	—	$	16,764
Financial commodity contracts		3,896			—			—		3,896


Total liabilities at fair value		$	3,896		$	16,764		$	—	$	20,660


	Quoted Prices in Active Markets for Identical Assets			Significant Other Observable Inputs			Significant Unobservable Inputs
(Thousands)	(Level 1)			(Level 2)			(Level 3)			Total
As of September 30, 2023
Assets:
Physical commodity contracts		$	—		$	7,054		$	—	$	7,054
Financial commodity contracts		25,265			—			—		25,265


Money market funds		145			—			—		145
Other		2,641			—			—		2,641
Total assets at fair value		$	28,051		$	7,054		$	—	$	35,105
Liabilities:
Physical commodity contracts		$	—		$	21,115		$	—	$	21,115
Financial commodity contracts		2,997			—			—		2,997

Total liabilities at fair value		$	2,997		$	21,115		$	—	$	24,112

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details