AFFILIATIONS AND DISCONTINUED OPERATIONS:

AFFILIATIONS — The following affiliated entities are accounted for under the equity method:

Energenic – US, LLC (Energenic) - Marina and a joint venture partner formed Energenic, in which Marina has a 50% equity interest. Energenic develops and operates on-site, self-contained, energy-related projects.

On December 31, 2015, Energenic, Marina and its joint venture partner entered into two Equity Distribution and Purchase Agreements (the "Transaction"), pursuant to which Marina became the sole owner of eight of the Energenic projects ("Marina Projects") and its joint venture partner became the sole owner of seven other Energenic projects ("Partner Projects"). The Transaction has been accounted for as a distribution of member interests by Energenic to its owners and a business combination through the exchange of member interests in various projects between Marina and its joint venture partner. In connection with the distribution, Energenic revalued the projects to fair value, resulting in a net gain of $2.7 million, 50% of which the Company has recognized in Equity in Loss (Earnings) of Affiliated Companies. In connection with the exchange, the joint venture partner also provided a $19.5 million note payable to Marina. The note and other existing obligations of the joint venture partner to Marina (including the note receivable discussed below under LVE Energy Partners and amounts previously included in Notes Receivable - Affiliate) are included in Notes Receivable on the consolidated balance sheets, with approximately $1.8 million being included as a current asset as it is due within one year. This note is collateralized by security interests in various energy project assets owned by the joint venture partner as well as personal guarantees from its principals.

As part of the transaction, each party is relieved of any guarantees related to the Projects in which it no longer has an ownership interest.

The projects that are now wholly-owned by Marina are ACB, ACLE, BCLE, SCLE, SXLE, MCS, NBS & SBS.

Through December 31, 2015, Marina’s investment in Energenic has been accounted for under the equity method of accounting. As such, Marina’s share of the equity value of the projects has been included within Investment in Affiliates on the consolidated balance sheets and Marina’s share of the loss or earnings from the projects has been included within Equity in (Loss) Earnings of Affiliated Companies on the statements of consolidated income. As of December 31, 2015, the assets and liabilities of the projects that are now wholly-owned by Marina are consolidated into the consolidated balance sheets. The respective results from operations and cash flows of the projects that are now wholly-owned by Marina will be consolidated into the statements of consolidated income and cash flows beginning in 2016. This transaction represents a non-cash investing and financing activity. The results of the acquired projects will be included in the On-Site Energy Production segment.

The following table summarizes the preliminary purchase price allocation and reflects 100% of the fair values of the assets acquired and the liabilities assumed by the Company in connection with the Transaction. The Company is still awaiting final valuation reports supporting the allocation of the purchase price to certain identifiable intangibles. Total consideration for the step acquisition of the remaining interest in the Marina Projects was $46.1 million, which represents the fair value of the Company’s interest in the Partner Projects exchanged ($31.5 million) as well as the existing value of the Marina Projects immediately prior to the exchange ($14.6 million) (in thousands):




Current assets (excluding inventory)	$	7,804
Inventory	3,154
Note Receivable Received	19,504
Fixed Assets	40,854
Intangible Assets:
Identifiable Intangibles	21,553
Goodwill	8,880
Non-Current Assets	1,873
Current Liabilities	(8,196		)
Note Payable - Affiliate	(16,986		)
Long-Term Debt, including current portion	(21,457		)
Capital Lease Payable	(10,357		)
Other Non-Current Liabilities	(572		)
Fair Value of Consolidated Assets and Liabilities of Acquired Projects	$	46,054

The pro forma impact of this transaction on the operations of the Company is not significant.

Potato Creek, LLC (Potato Creek) - SJI and a joint venture partner formed Potato Creek, in which SJI has a 30% equity interest. Potato Creek owns and manages the oil, gas and mineral rights of certain real estate in Pennsylvania.

PennEast Pipeline Company, LLC (PennEast) - Midstream has a 20% investment in PennEast, which is planning to construct an approximately 100-mile natural gas pipeline that will extend from Northeastern Pennsylvania into New Jersey, with a target completion of late 2017.

LVE Energy Partners, LLC (LVE) - In March 2013, substantially all of the assets of this joint venture, in which Marina had a 50% equity interest, were sold. In 2013, the Company received (a) $57.9 million of repayments of advances to LVE; and (b) a $7.9 million note receivable from a third party, which is recorded in the consolidated balance sheets as of December 31, 2014. As of December 31, 2013, LVE was dissolved and the Company incurred a $0.8 million charge to write-off the remaining interest in 2013.

During 2015, the Company made net investments in unconsolidated affiliates of $18.0 million. During 2014, the Company provided net advances to unconsolidated affiliates of $2.4 million. During 2013, the Company made investments in, and provided net advances to, unconsolidated affiliates of $9.6 million, which does not include the cash proceeds related to the sale of LVE as discussed above. As of December 31, 2015 and 2014, the outstanding balance of Notes Receivable – Affiliate was $16.4 million and $51.5 million, respectively. As of December 31, 2015, approximately $13.7 million of these notes are secured by property, plant and equipment of the affiliates, accrue interest at 7.5% and are to be repaid through 2025, and the remaining $2.7 million of these notes are unsecured and accrue interest at variable rates.

SJI holds significant variable interests in these entities but is not the primary beneficiary. Consequently, these entities are accounted for under the equity method because SJI does not have both a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity that could potentially be significant to the entity or the right to receive benefits from the entity that could potentially be significant to the entity. As of December 31, 2015, the Company had a net asset of approximately $17.0 million included in Investment in Affiliates on the consolidated balance sheets related to equity method investees, in addition to Notes Receivable – Affiliate as discussed above. SJI’s maximum exposure to loss from these entities as of December 31, 2015 is limited to its combined equity contributions and the Notes Receivable-Affiliate in the amount of $33.4 million.

The following tables present summarized financial information of the total balances for all Affiliates (of which, on average, SJI has only a 50% equity interest) accounted for under the equity method (in thousands):



	2015			2014
Current assets		$	21,914		$	46,683
Noncurrent assets		$	117,091		$	478,240
Current liabilities		$	47,797		$	75,260
Noncurrent liabilities		$	112,438		$	315,801

As of December 31, 2015, the assets and liabilities of the projects that are now wholly owned by Marina as discussed above are consolidated into the consolidated balance sheets. As such, they are not included in the above table.



	2015				2014				2013
Revenues		$	163,479			$	207,031			$	178,026
Cost of sales		$	86,452			$	107,042			$	91,228
(Loss) Income from continuing operations		$	(56,962	)		$	(11,666	)		$	6,229
Net (Loss) Income		$	(56,962	)		$	(11,666	)		$	6,229

The respective results from operations of the projects that are now wholly owned by Marina as discussed above were not consolidated into the statements of consolidated income during 2015. As such, they are included in the above table.

DISCONTINUED OPERATIONS - Discontinued Operations consist of the environmental remediation activities related to the properties of South Jersey Fuel, Inc. (SJF) and the product liability litigation and environmental remediation activities related to the prior business of The Morie Company, Inc. (Morie). SJF is a subsidiary of Energy & Minerals, Inc. (EMI), an SJI subsidiary, which previously operated a fuel oil business. Morie is the former sand mining and processing subsidiary of EMI. EMI sold the common stock of Morie in 1996.

SJI conducts tests annually to estimate the environmental remediation costs for these properties.

Summarized operating results of the discontinued operations for the years ended December 31, were (in thousands, except per share amounts):



	2015			2014			2013
Loss before Income Taxes:
Sand Mining	$	(422	)	$	(620	)	$	(406	)
Fuel Oil	(338		)	(274		)	(816		)
Income Tax Benefits	257			312			426
Loss from Discontinued Operations — Net	$	(503	)	$	(582	)	$	(796	)
Earnings Per Common Share from
Discontinued Operations — Net:
Basic and Diluted	$	(0.01	)	$	(0.01	)	$	(0.01	)