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 exchange, the joint venture partner provided a $19.5 million note payable to Marina. The note and other existing obligations of the joint venture partner to Marina are included in Notes Receivable on the condensed consolidated balance sheets, with approximately $1.8 million being included as a current asset as of March 31, 2016, 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 and SBS.

Through December 31, 2015, Marina’s investment in Energenic was accounted for under the equity method of accounting. As such, Marina’s share of the equity value of the projects was included within Investment in Affiliates on the condensed consolidated balance sheets and Marina’s share of the loss or earnings from the projects for the three months ended March 31, 2015 was included within Equity in Earnings of Affiliated Companies on the condensed consolidated statements of income. As of December 31, 2015, the assets and liabilities of the projects that are now wholly-owned by Marina are consolidated into the condensed consolidated balance sheets. Beginning in 2016, the respective results from operations and cash flows of the projects that are now wholly-owned by Marina are consolidated into the condensed consolidated statements of income and cash flows. The results of the acquired projects are 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 $46.0 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 ($14.5 million) (in thousands):




Current assets (excluding inventory)	$	7,804
Inventory	3,154
Note Receivable Received	19,504
Fixed Assets	41,190
Intangible Assets:
Identifiable Intangibles	22,220
Goodwill	8,139
Non-Current Assets	1,873
Current Liabilities	(8,196		)
Note Payable - Affiliate	(16,986		)
Long-Term Debt, including current portion	(21,642		)
Capital Lease Payable	(10,458		)
Other Non-Current Liabilities	(572		)
Fair Value of Consolidated Assets and Liabilities of Acquired Projects	$	46,030

The recorded amounts for assets and liabilities represent the Company's best estimate as of March 31, 2016. The measurement period adjustments recorded during the three months ended March 31, 2016 did not have a significant impact on the Company's condensed consolidated balance sheet. 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 2018.

During the first three months of 2016 and 2015, the Company made net investments in unconsolidated affiliates of $1.5 million and $1.7 million, respectively. As of March 31, 2016 and December 31, 2015, the outstanding balance of Notes Receivable – Affiliate was $14.8 million and $16.4 million, respectively. As of March 31, 2016, 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. The remaining $1.1 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 March 31, 2016, the Company had a net asset of approximately $20.3 million included in Investment in Affiliates on the condensed 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 March 31, 2016, is limited to its combined equity contributions and the Notes Receivable-Affiliate in the aggregate amount of $35.1 million.

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 three months ended March 31, 2016 and 2015, were (in thousands, except per share amounts):



	Three Months Ended March 31,
	2016			2015
Loss before Income Taxes:
Sand Mining	$	(146	)	$	(347	)
Fuel Oil	(35		)	(66		)
Income Tax Benefits	63			137
Loss from Discontinued Operations — Net	$	(118	)	$	(276	)
Earnings Per Common Share from
Discontinued Operations — Net:
Basic and Diluted	$	—		$	—