MDU Resources (MDU) Focuses on Organic Growth, To Invest $3B

MDU Resources Group, Inc. MDU announces five-year capital investment plan worth $3,025 million, starting 2022 and increased the current-year expectation to $992 million from its earlier projection of $775 million. Acquisition values are excluded from the plan.

The outlined plan will help MDU carter to the increasing customer base with more reliable and safer services by replacing, expanding and modernizing infrastructure within the electric and natural gas distribution systems. In fact MDU Resources expects to witness 1-2% customer growth in electric and natural gas segments, annually, along with seeing a rate base CAGR of 5% over the next five years.

Details of the Capex Plan

The five-year capital expenditure plan includes the construction of the previously-announced Heskett Station Unit IV project to replace MDU’s Heskett Station Units I and II, which are coal-fired stations. These are planned to be retired in early 2022.

For the pipeline business, the plan includes the previously-announced North Bakken Expansion project, which is expected to come online in early 2022, and the Wahpeton Expansion project that aims to enter service in 2024. Both these projects will total pipeline system capacity to more than 2.4 billion cubic feet of natural gas per day.

For the construction materials and services businesses, the forecast includes the construction of a prestress concrete plant in Spokane, WA, besides the continued development of MDU’s Honey Creek Quarry in Texas and completion of the training facility in Oregon. Also, these segments continue to evaluate additional acquisition and other growth opportunities for both businesses, which will be exclusive of the current plan.

Utilities Investing Infrastructure

To provide 24X7 supply of electricity, natural gas and water to consumers, utilities are investing heavily in strengthening their infrastructure. They are replacing old infrastructure and adopting technological upgrade to increase the resilience of the infrastructure. These investments make the infrastructure more reliable and efficient during extreme conditions. Some such utilities are UGI Corp. UGI, Spire Inc. SR and Atmos Energy Corporation ATO.

UGI Corp. continues to make systematic capital investments to address the infrastructural need for various capital projects, carry out acquisitions to curb competition for increasing the safety and reliability of natural gas production and storage facilities, plus replace the aging infrastructure for modernizing the system. UGI spent $674 million in fiscal 2021, marginally up from $665 million in the last fiscal year, and expects the same to amount to $990 million in fiscal 2022.These investments will assist it in achieving the long-term annual earnings per share growth target in the range of 6-10%.

Spire makes consistent investments to upgrade and maintain the existing infrastructure as well as expand its operations. SR invested $624.8 million in fiscal 2021 and plans to spend $3.1 billion during the fiscal 2022-2026 time period. These investments will increase the reliability of gas services, enabling it to serve an increasing customer base, effectively. SR expects this systematic investment to drive 7-8% rate base growth over the long term.

Atmos Energy invested $2 billion in fiscal 2021, of which 88% was spent to increase the safety and reliability of operations. ATO plans to invest in the band of $2.4-$2.5 billion for fiscal 2022 and spend $13-$14 billion from fiscal 2022 through 2026, of which more than 80% will be allocated to enhance the safety of its existing operations. The planned capex will result in 6-8% annual earnings growth over the same time frame.

Zacks Rank & Price Performance

MDU Resources currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past year, shares of MDU have gained 13.2%, outperforming the industry’s 13.1% growth.

One Year Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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