12/26/2023 0 Comments Encore energy stock forecast![]() “Texas exposure: CenterPoint's Houston Electric subsidiary owns the regulated transmission and distribution network serving 2.5 million customers in the Texas Gulf Coast area, including Houston. This should continue to drive dividend growth near the top end of management's 6%-8% target over at least the next five years and possibly much longer.” We expect this growth investment to receive regulatory support and continue well beyond this decade. Over 85% of the total investment is for safety and reliability, such as replacing bare steel, cast iron, and vintage plastic pipes. ![]() We expect over $12 billion of capital expenditures during the next five years, exceeding the top end of management's $11 billion-$12 billion target. Favorable regulatory frameworks and large infrastructure investment opportunities have driven strong earnings growth and steady dividend increases averaging more than 8% annually in recent years. Yet Atmos' operations, earnings, and dividend remain a model of consistency. Once one of the priciest utilities, Atmos is now one of the cheapest after a 24% drop in the stock price since January 2020. 18.Ītmos is one of our top utilities picks, based on its attractive valuation and long-term growth. Atmos had $3.0 billion of liquidity as of Feb. Atmos maintains one of the strongest balance sheets in the sector and we expect it will be able to finance these payments through cash on hand and short-term debt without issuing additional equity beyond the $500 million we estimate will be needed to finance its 2021 infrastructure investments. Although there will be a cash timing lag, we don't expect a material impact on 2021 earnings or long-term value. As a regulated gas distribution utility, Atmos is allowed to recover all supply costs from customers in the states it serves. In the near term, Atmos management said it could face $2.5 billion-$3.5 billion of natural gas purchase costs payable next month due to the extreme gas price movements across its service territories. Atmos also operates APT, a 5,700-mile intrastate pipeline in Texas spanning several key shale gas formations and interconnected with five storage facilities. “Texas exposure: Regulated gas distribution system serves more than 2 million customers in Texas. Our equity research team believes heating electrification will stretch an already-stressed electric grid, especially during cold winter months. Using gas to heat homes and water is cheaper than electricity. This has led to a sell-off of gas utilities, but we think the market is overreacting to this long-term threat. New policies would prohibit natural gas in new buildings. Opposition to carbon-emitting fossil fuels is driving a fringe movement to eliminate residential and commercial use of natural gas, particularly in California. electricity demand to increase by 1.2% annually over the next 10 years. States like Illinois, Wisconsin, and Massachusetts face falling electricity demand. Texas, Arizona, and Virginia are three states with increasing electricity demand due to a rebounding economy, data center expansion, and increasing interest in electric vehicles. In addition, wind turbines can produce energy in cold temperatures, but investment is required for them to operate more efficiently during extreme cold.Īn already-stressed Texas electric grid will likely see further issues. The biggest challenge is intermittency: producing solar and wind energy when it isn’t sunny or windy. Despite Texas being a large producer of wind and solar energy, there will be hurdles to expand renewable energy across the U.S. That includes 50 gigawatts in wind and solar energy to go online in the next three years-with a significant portion going to Texas. We expect wind and solar energy to double their market share in the United States by 2030. This focused attention on utilities companies nationwide, and our Utilities equity research team believes they must address three key areas going forward. Widespread power outages in Texas left millions without power during severe winter weather last month.
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