In part one we looked at Sempra Energy (SRE). In part two, I will explore a very similar company with profitable utility business and a great future due to a LNG export permit. That company is Dominion Resources, Inc. (D). This one is a little tastier in the short term as current yield is 3.6%. We get paid a little more while we wait on this one.

The nice thing about D is it is going to have at least for a time a monopoly on East Coast LNG exports. It has the only approved terminal on the entire East Coast. Dominion also has a profitable midstream business owning the pipelines that connect the Marcellus and Utica shales to the Northeast pipeline grid and link directly into the export terminal. D is thus, a fully integrated LNG exporter buying its gas direct from the producer, controlling the transportation to the liquification plant, and owning the export capability. Dominion should realize fat profit margins as a result.

Where is our safety while this expensive export facility is built out? There are two more businesses besides the midstream pipeline business. D owns a federally regulated utility, generating and distributing energy to over five million customers across 10 states. There is also an energy transmission business. Basically Dominion owns over 63,000 miles of electrical transmission lines. There is another 11,000 miles of natural gas production pipelines and almost 22,000 miles of distribution pipelines. To round things out, there is almost a trillion cubic feet of natural gas storage capability. All this infrastructure is hard to replicate and is thus hard to compete against. It is another monopoly source of stable income while we wait on the LNG export thesis.

Devour your prey raptors!

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Safe Utilities With LNG Upside Part 2 of 2

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7 thoughts on “Safe Utilities With LNG Upside Part 2 of 2

  • April 17, 2015 at 9:47 pm
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    I have heard of this company a couple of times, but I never knew really who they were or what they did. They sound like a really interesting play… will check them out for when the $ returns to a more reasonable level against £.

    Cheers

    Reply
  • April 28, 2015 at 3:58 am
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    Buy below 70 ?

    What about DM ??

    Thanks

    Reply
    • April 28, 2015 at 1:27 pm
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      Vish, below 70 is a fine price. I don’t think DM pays enough in distribution to be a good MLP play.

      Reply
  • June 10, 2015 at 3:43 am
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    I liked the article but as a Dominion Resources and Dominion Midstream shareholder I think you left out one important fact about Dominion. Their Liquification plant (Cove Point) will cost less than half of Sempra and they will own 100% of it.

    Also, in regards to DM not paying enough dividends, Dominion’s last conference call the CEO says the distribution will double in the next 5 years.

    Reply
    • June 10, 2015 at 1:03 pm
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      Thanks for reading. This play is definitely more about future upside than current income.

      Reply
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