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 Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation 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.

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

                                  Recent Developments

                                  Nov 22, 2022 - Utility CEO Warns of Possible New England Gas Shortage
                                  • The CEO of Eversource Energy, the largest utility firm in New England, called on President Biden to exercise emergency powers to avert a possible natural gas shortage in the region this winter. New England lacks adequate pipeline infrastructure to meet winter gas demand and relies on imports of liquified natural gas (LNG) for electricity generation. However, global supplies of LNG are under strain due to the war in Ukraine, and increasing LNG imports to New England is unlikely. Eversource CEO Joseph Nolan has asked Biden for a waiver of the Jones Act, which requires goods shipped between US ports to use US-flagged vessels. There are no US-flagged LNG vessels. A Jones Act waiver would allow New England to bring in US LNG from other US ports.
                                  • Many US households are likely to spend more on energy in the winter of 2022–23 (October through March) compared with recent winters, according to the US Energy Information Administration’s (EIA) winter fuels outlook. The higher forecast energy expenditures are the result of higher fuel prices, combined with higher heating demand because of a forecast of slightly colder weather than last winter. The EIA expects households that use natural gas as the primary heating fuel will spend about $930 this winter, or 28% more than last winter. However, if this winter should be 10% colder than the baseline forecast, residential expenditures could be 51% higher than last year. On average, the price rise for home heating with natural gas is projected to outpace heating using heating oil, electricity, or propane. Nearly half of all US households heat primarily with natural gas.
                                  • Demand from Europe and Asia for US liquified natural gas (LNG) exports will drive triple-digit growth in US annual operating capacity by the end of the decade, CEO of energy infrastructure company Sempra Jeffrey W. Martin told investors in October 2022. “What's interesting is the United States today has [more or less] 70 million tonnes per annum of operating capacity, and we project that over the next eight years that will grow by 130%,” Martin said, adding the nation is fortunate to have adequate or surplus natural gas supplies and an ability to produce about 100 Bcf/d of gas with about 20% earmarked for export, Hart Energy reports. Martin said his forecast “might be a little bit short” owing to potential increased availability. In 2021, the US surpassed Australia in trade and liquefaction capacity, according to recent reports from the Energy Information Administration.
                                  • US consumption of natural gas is forecast to reach 86.6 billion cubic feet per day (Bcf/d) in 2022, up by 3.6 Bcf/d in 2021, according to the US Energy Information Administration (EIA). Consumption is then projected to drop by 1.9 Bcf/d in 2023 because of reduced consumption in the electric power generation and industrial sector.
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