Is Natural Gas Heating Going the Way of Buggy Whips?
We think not, and the market's misperception results in an attractive share price for NiSource.
In 2019, Berkeley, California, became the first city in the country to pass a ban on natural gas in new buildings. One liberal college town does not make a trend, but other cities followed, and several utilities have gone wobbly on natural gas. Dominion Energy (D), for example, sold its gas transmission business and abandoned the Atlantic Coast Pipeline with its partner Duke Energy (DUK). At Consolidated Edison’s (ED) presentation on environmental, social, and governance issues, the CEO said the utility does not expect to make further gas transmission investments. DTE Energy (DTE) plans to spin off its midstream business, and CenterPoint Energy (CNP) and OGE Energy (OGE) are exploring the sale of theirs. And fracking has become a political issue. No wonder NiSource (NI), with 60% of operating earnings from natural gas distribution, has lagged the Morningstar Utilities Index as the economy recovers from COVID-19.
We don’t believe natural gas heating is going the way of buggy whips. Electrification of building space and water heating has significant technical and economic obstacles, and the market’s misperception of the future of natural gas results in an attractive price for NiSource shares. NiSource has accelerated the pace of gas pipeline restoration investment following a tragic natural gas explosion in 2018, and this will reduce risk and cut methane emissions. NiSource’s electric utility will close its last coal-fired power plant in 2028 and replace the capacity with wind, solar, and energy storage. These actions should result in better than 7% earnings growth, strong dividend growth, an improved ESG profile, and reduced risk for investors.
Charles Fishman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.