UGI Corporation’s UGI subsidiary, UGI Energy Services, LLC, has completed the acquisition of a Houston-based renewable natural gas company, GHI Energy, LLC ("GHI").The acquired entity being one of the leading renewable natural gas (RNG) marketers in California is primarily focused on providing RNG to vehicle fleets by coordinating supply from a portfolio of sources across the country.
Rationale Behind the Acquisition
This investment in GHI is in line with the company’s strategy to reduce its greenhouse gas emissions. Also, its unit’s expertise in energy commodity marketing and its strong customer base will provide a platform to expand GHI’s marketing, supply & logistics as well aschannelize its capabilities into other parts of the country.
Moreover, this deal will position UGI Corp as a leading provider of energy solutions, meeting the environmental and social needs of many communities that it serves.
Capital Investment Plans
UGI Corp has been investing heavily in addressing the infrastructural need of various capital projects as well ascompleting many acquisitions to curb competition. Further, this will boost the safety and reliability of its natural gas production and storage facilities. The company also puts money on replacing aging infrastructure tomodernize the system. Notably, in 2019, it acquired Columbia Midstream Group, LLC (“CMG”) and AmeriGas Partners, L.P.
However, considering the COVID-19 impact, UGI Corp slashed its capital expenditure guidance to $730 million from $850 million for fiscal 2020. Also, the company is pushing some of its capital projects to fiscal 2021 forcoping with the pandemic-related unprecedented challenges.
With increasing awareness to trim toxic emissions globally, companies are adopting clean energy sources to provide an environmentally-friendly resource to its end users. Adhering to this policy, UGI Corp and its subsidiaries are set on a mission to produce clean, affordable and reliable energy.
Apart from UGI Corp, companies like Chesapeake Utilities Corporation CPK are undertaking initiatives to reduce toxic emissions. Notably, Chesapeake Utilities recently entered into a partnership with CleanBay Renewables Inc. to bring more renewable natural gas to its Delmarva operations.
Zacks Rank & Price Performance
Currently, the stock carries a Zacks Rank #4 (Sell).
Shares of the company have lost 30.2% in the past six months compared with the industry’s decline of 30.8%.
A few better-ranked stocks are Atmos Energy Corporation ATO and Southwest Gas Corporation SWX, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Atmos Energy’s fiscal 2020 earnings has moved 0.21% north over the past 60 days. It’s long-term (three-five years) earnings are expected to grow at 7.20%.
The long-term earnings growth rate for Southwest Gas is pegged at 6%. The Zacks Consensus Estimate for 2020 earnings has remained unchanged over the past 60 days.
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