Natural Gas Distribution

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,500 natural gas local distribution companies (LDCs) in the US supply gas for residential usage, commercial usage, industrial usage, and electric power generation. The operations and financial performance of a natural gas distributor are highly dependent on the regulatory structure in which the company operates.

Threat of Accidents Due to Natural Disasters or Terrorist Acts

Natural disasters are always a threat to assets and operations.

Expanding Use for Electric Power Production

Environmental concerns about greenhouse gas emissions is causing many power producers to begin replacing the coal burning plants with alternatives.

Industry size & Structure

A typical local distribution company has 43-44 employees and annual revenues of $41-42 million.

    • About 2,500 local distribution establishments provide natural gas distribution services in the US.
    • The natural gas distribution industry is concentrated with the 20 largest firms representing 64% of revenue.
    • Large natural gas distribution firms include: ATMOS Energy, NiSource, New Jersey Resources, and Energy Transfer.
    • Entry into the business is difficult as a built out pipeline infrastructure (valued in the billions of dollars), approval of the public utility commission, and a demonstrated competence in safety and environmental compliance is required to provide service.
                                  Industry Forecast
                                  Natural Gas Distribution Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Coronavirus Update

                                  Apr 19, 2022 - War in Europe Pushes Natural Gas Prices Higher
                                  • The spot price of Henry Hub natural gas increased to $6.08 per million Btus for the week ending April 8, a 29% uptick compared to the comparable week a year earlier. The spot price of gas has been volatile during the coronavirus pandemic. Still, pricing and inventory conditions have been made worse by Russia’s invasion of Ukraine, which roiled global energy markets. In response to the invasion, the US agreed to send more liquified natural gas (LNG) exports to its European allies to reduce their dependence on gas from Russia.
                                  • The CARES act and the American Rescue Plan Act allocated an additional $5.4 billion for the Low Income Home Energy Assistance Program (LIHEAP). The funding is intended to help states, localities, and tribes address the home energy costs of consumers who were hard-hit during the pandemic. In March 2022, Congressional leaders of the House Energy and Commerce Committee sent letters to six major utility companies regarding “the alarming reports of shutoffs over the last two years.” The committee has requested the firms provide arrearage data for residential customers, including how many of them receive LIHEAP funding. Other data requested by the committee included shutoff data and company plans for addressing the needs of vulnerable customers.
                                  • Industry experts say that price volatility is driving interest in renewable energy. Utilities, businesses, and industries making long-term capital and investment can no longer be certain about fossil fuel prices over any time period. That weighs in favor of the predictability and falling costs of wind and solar. Russia’s aggression in Europe has increased the sense of urgency in adopting renewable sources of energy.
                                  • During much of the pandemic, major oil and gas exploration and production firms kept a tight lid on capital investments, despite rallying oil and natural gas prices. They instead focused on paying down debt, returning cash to shareholders, and preparing for longer-term energy transition challenges, including the growth of their renewables businesses. The lack of investment during the pandemic and rising global energy demand were expected to spur oil and gas exploration and production investments in 2022 and beyond. However, the conflict in Europe has pushed inflation ever higher, which could leave previously budgeted investments underfunded, or prompt firms to further postpone some capital outlays, according to Grant Thornton.
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