Natural gas utilities remain attractive to investors, American and Canadian Gas Associations report

Published on July 18, 2022 by Chris Galford

© Shutterstock

According to a new study released jointly by the American Gas Association (AGA) and Canadian Gas Association (CGA) last week, natural gas utilities remain prized by investors based on their return on investment and return on equity.

“Investors receive stability and consistency in their portfolios from natural gas utilities,” Juan Alvarado, AGA director of energy analysis, said. “Investment in natural gas utilities allows investors to earn a dependable return while managing the risk level of their portfolios, and this study proves it. This report shows that investors positively view utilities that are proactive in addressing decarbonization and also are aware of states where regulatory mechanisms are in place allowing utilities a reasonable opportunity to earn their allowed return.”

The organizations tapped Guidehouse and the Institut de Publique Sondage d’Opinion Secteur to lead the report. That report offered background on the topic, analysis and knowledge provided from interviews with investors, all focused on charting attitudes toward natural gas utility investments, decarbonization opportunities, policy and regulatory framework, and more. Six investment professionals were interviewed and the results were such that CGA and AGA are considering annual surveys to more accurately track the opinions, expectations, and needs of the community.

“Investors are still confident that natural gas utilities have their place in energy transition,” the report said. “Natural gas is still viewed as a low-cost energy resource that currently can’t be easily replaced. Natural gas utilities with a well-communicated decarbonization and energy transition plan are generally viewed as a good investment target by the investment community.”

While the report concluded that gas utilities remain attractive investments. In order to stay that way, the authors noted, investors expect gas utilities to maintain a positive year-over-year rate base and customer growth and for regulatory certainty to be maintained through consistent and transparent rate-setting processes.

Investors also highlighted natural gas’s continued usefulness in a lower emissions economy of the future due to their potential for affordability, resiliency, and energy security.