AFFILIATIONS, DISCONTINUED OPERATIONS AND RELATED-PARTY TRANSACTIONS:

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

Energenic - Marina and a joint venture partner formed Energenic, in which Marina has a 50% equity interest. Energenic developed and operated on-site, self-contained, energy-related projects. Energenic currently does not have any projects that are operational.

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 - Midstream has a 20% investment in PennEast, which is planning to construct an approximately 118-mile natural gas pipeline that will extend from Northeastern Pennsylvania into New Jersey.

Millennium - SJI and a joint venture partner formed Millennium, in which SJI has a 50% equity interest. Millennium reads utility customers’ meters on a monthly basis for a fee.

EnergyMark - SJE has a 33% investment in EnergyMark, an entity that acquires and markets natural gas to retail end users.

For the years ended December 31, 2018, 2017 and 2016, SJRG had net sales to EnergyMark of $41.6 million, $37.5 million and $31.4 million, respectively.

EnerConnex - In the second quarter of 2018, SJI entered into an agreement to obtain a 25% investment in EnerConnex, which is a retail and wholesale broker and consultant that matches end users with suppliers for the procurement of natural gas and electricity. The investment made by SJI in EnerConnex was not material.

The Company made net investments in unconsolidated affiliates of $6.6 million and $32.1 million in 2018 and 2017, respectively. As of December 31, 2018 and 2017, the outstanding balance of Notes Receivable – Affiliate was $15.2 million and $18.2 million, respectively. As of December 31, 2018, approximately $13.6 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 $1.6 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, 2018, the Company had a net asset of approximately $76.1 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, 2018 is limited to its combined equity contributions and the Notes Receivable-Affiliate in the aggregate amount of $91.3 million.

DISCONTINUED OPERATIONS - Discontinued Operations consist of the environmental remediation activities related to the properties of SJF and the product liability litigation and environmental remediation activities related to the prior business of Morie. SJF is a subsidiary of 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 (see Note 15).

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



	2018			2017			2016
Loss before Income Taxes:
Sand Mining	$	(118	)	$	(84	)	$	(205	)
Fuel Oil	(184		)	(175		)	(179		)
Income Tax Benefits	62			173			133
Loss from Discontinued Operations — Net	$	(240	)	$	(86	)	$	(251	)
Earnings Per Common Share from
Discontinued Operations — Net:
Basic and Diluted	$	—		$	—		$	—

SJG RELATED-PARTY TRANSACTIONS - SJG conducts business with its parent, SJI, and several other related parties. A description of each of these affiliates and related transactions is as follows:

SJES - a wholly-owned subsidiary of SJI that serves as a holding company for all of SJI’s nonutility operating businesses:


•	SJE - Prior to the sale of SJE's retail gas business (see Note 1), for SJE’s commercial customers for which SJG performed billing services, SJG purchased the related accounts receivable at book value and charged them a purchase of receivable fee for potential uncollectible accounts, and assumed all risk associated with collection.


•	SJRG - SJG sells natural gas for resale and capacity release to SJRG and also meets some of SJG's gas purchasing requirements by purchasing natural gas from SJRG.


•	Marina - SJG provides natural gas transportation services to Marina under BPU-approved tariffs.


•	Millennium - Reads SJG's utility customers’ meters on a monthly basis for a fee.

Sales of gas to SJRG and SJE comply with Section 284.02 of the Regulations of the FERC.

In addition to the above, SJG provides various administrative and professional services to SJI and each of the affiliates discussed above. Likewise, SJI provides substantial administrative services on SJG's behalf. For certain types of transactions, SJG served as central processing agents for the related parties discussed above. Amounts due to and due from these related parties for pass-through items are not considered material to SJG's financial statements as a whole.

A summary of related party transactions involving SJG, excluding pass-through items, included in SJG's Operating Revenues were as follows (in thousands):



	2018		2017		2016
Operating Revenues/Affiliates:
SJRG	$	5,813	$	4,458	$	6,934
Marina	379		314		302
Other	91		86		83
Total Operating Revenues/Affiliates	$	6,283	$	4,858	$	7,319

Related-party transactions involving SJG, excluding pass-through items, included in SJG's Cost of Sales and Operating Expenses were as follows (in thousands):



	2018			2017			2016
Costs of Sales/Affiliates (Excluding depreciation and amortization)
SJRG*	$	33,313		$	24,337		$	16,306

Operations Expense/Affiliates:
SJI	$	31,740		$	22,154		$	20,296
Millennium	2,920			2,856			2,803
Other	(569		)	(653		)	(198		)
Total Operations Expense/Affiliates	$	34,091		$	24,357		$	22,901

*These costs are included in either SJG's Cost of Sales on the statements of income, or Regulatory Assets on the balance sheets. As discussed in Note 1, revenues and expenses related to the energy trading activities of the wholesale energy operations at SJRG are presented on a net basis in Operating Revenues - Nonutility on the statements of consolidated income.