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 consolidation.

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 to effective today (Feb. 15th). It said it originally wanted when it first created its web site several years ago, but it was reserved by the Abrasive Grains Association. The address since has become available to AGA, and it has sold the rights to 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 LDC group.

"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.

Susan Parker

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