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!