AGA Touts Gas Utility Stocks to Small Investors
The natural gas utility industry may be small when compared to
other investment opportunities, but it's still an extremely
attractive stock play - especially for the small- to medium-sized
investor, said a representative of the American Gas Association
(AGA) last week.
Utilities have comparatively small market capitalization,
ranging from $100 million to $4-$5 billion, said Jay Copan, AGA's
senior vice president of corporate affairs. Most of the companies
on the high end are the combination gas-electric utilities. But
despite its low capitalization, "this industry has a very strong
balance sheet, [it's] a very creditworthy industry and the gas
utility stocks are generally trading in undervalued areas..."
Other strong selling points are "the growing demand for natural
gas, solid supply base, competitive prices, flexible regulatory
environment and solid financial fundamentals," he told reporters at
a briefing at AGA's headquarters in Rosslyn, VA, last Tuesday.
From an investor standpoint, AGA has found that the "real target
market" for utility stocks isn't Wall Street so much as it is "the
smaller market capitalization value managers," such as portfolio
managers and institutional investors, Copan said.
The "biggest thing affecting [utility] stocks right now is the
weather." However, he pointed out that many utilities have been
shielded from the warmer-than-normal temperatures because of
weather normalization clauses in their rates.
Separately, AGA President David Parker dismissed the latest
industry speculation that the gas LDC group is exploring the
prospect of combining with its counterpart in the electric
industry, the Edison Electric Institute (EEI).
He emphatically said the AGA was not now in any merger
discussions with EEI, nor did it anticipate there would be any such
talks in the near future. Speculation about a possible union of the
two trade groups has dogged Parker ever since he joined AGA more
than a year ago due to his previous affiliation with EEI and the
increasingly common membership of the two associations, as well as
their similar legislative and regulatory priorities.
From the outset, "the discussion came up - did I come on board
at AGA to help bring about an amalgamation or a merger...The answer
is 'no,'" Parker said. He acknowledged that he and Thomas R. Kuhn,
EEI's president, are "very good friends" and "work very closely"
because "we recognize that we have joint membership," namely
combination electric and gas utilities. But, he added, neither
association's board of directors has ever discussed a
Parker didn't preclude the possibility of an AGA-EEI union being
"seriously considered" further down the road, however. "[I]f in the
strategic planning process, somebody started thinking that maybe
that's something you ought to look at X years down the road, there
could be some discussions" along those lines.
The LDC group has kicked off a strategic planning process to
ensure that "AGA [is] responsive to the changing needs of the
members" during 1999 and beyond, he said. Participating in the
effort will be Parker, two high-level AGA officials and the
association's board of directors.
Interestingly, AGA plans to remain neutral on the highly-charged
issue of electricity restructuring, Parker said, adding it would
not insert itself into "other people's fights" in Congress. "Our
position will be to protect the interest of the natural gas
utility...Hopefully we will not be involved in those issues that
they're dealing with."
Richard Shelby, senior vice president of public affairs, said
AGA was interested in the current congressional effort to
reauthorize the pipeline safety bill, adding the group was
"cautiously optimistic" that the measure would move forward without
"any difficulty." Also, he noted that Senate Energy Committee
Chairman Frank Murkowski (R-AK) has indicated Congress may pass a
stand-alone bill to repeal the Public Utility Holding Company Act.
On an unrelated issue, AGA officials unveiled a new logo for the
LDC association, which includes a blue natural gas flame and the
group's name in forest green (and less bold) typeface. AGA plans to
launch the new logo when it moves in mid-March to its new Capitol
Hill headquarters (400 North Capitol St. NW), which will put it
within close proximity to Senate and House offices and the Federal
Energy Regulatory Commission.
Also, the group announced the domain name for AGA's home page on
the World Wide Web will change from www.aga.com to www.aga.org
effective today (Feb. 15th). It said it originally wanted aga.org
when it first created its web site several years ago, but it was
reserved by the Abrasive Grains Association. The aga.org address
since has become available to AGA, and it has sold the rights to
aga.com to a Swedish industrial gas firm - AGA AB.
Those wishing to contact AGA staff members may continue to use
their current e-mail addresses until March 15th, according to the
"It's time for a fresh look and a fresh start for AGA as we move
out of the offices we've occupied in northern Virginia for nearly
30 years and relocate to Capitol Hill to enhance our advocacy
efforts and outreach activities on behalf of natural gas
utilities," Parker said.