燃气公用事业Q4盈利手册

1、GlobalResearch31 January2019EquitiesThe Gas MeterEquitiesGas UtilitiesAmericasCY4Q18 Earnings PlaybookGas UtilitiesAmericasWhat to Watch For During EarningsDuringCY4Q18earnings,CNP,NI,NWNandSWXwillprovide2019EPSguidanceand they will likely update their long term capex outlook. We expect capex to be

2、revised higher for most names as companies accelerate the replacement of aging pipelines. Earliertoday,OhioPUCapprovedCNP/VVCmergerandthetransactionwilllikelyclose in the next few days. We expect CNP will provide an updated pro-forma 20 EPS guidance and we see an upside to the combined capex and rat

3、e base growth as both CNP and VVC own a large backlog of vintage pipelines. CY4Q18 Cons EPS for ATO seems low and they should benefit from higher rates (incl. GRIP) and wide Waha to Katy spread. See company specific details on p. 2-5 and changes to Most & Least Preferred list ahead of earnings below

4、.Regulatory Updates: SWX, UGI, NWNThe past few weeks have been active on the regulatory front. In late December, NV PUC published its order on SWX NV rate case and authorized ROE of 9.25%, which was disappointing and below peer group avg of 9.6%. The approved rate increase was$7.5MMvs.requested$29.7

5、MM.OnJan8th,SWXfiledforareconsiderationand weexpectPUCtorespondtoSWXscommentswithin40days HYPERLINK /shared/d2rDFPiZJobJ (clickhere).Currently, we model 30% of the requested amount, but higher approved amount would be a positive. On Jan 28th, UGI filed a rate case in PA and requested a rate increase

6、 by$71.1MM and ROE of 11.25%. We expect UGI will receive 50% of the requested amountandrevisedhigherour20EPSto$3.15aboveConsof$3.07.NWNfiledarate caseinWashingtonandrequestedarevenueincreaseof$8.3MMandROEof10.3%.Valuation: Post Solid Performance in 18, LDCs Underperform S&P 500 YTDThe gas utilities

7、average has been up 4.85% YTD, but 222bps below the S&P 500 performance.10-yrTreasuryyieldhasbeenflatYTD.UBSEconomistsexpectonly1 hike in 19 vs. Fed projection of 2 hikes, but they noted todays press conf wasdovish HYPERLINK /shared/d2QEeIdst3IxMXO (click here). Lower interest rates should be positi

8、ve forLDCs.Most and Least Preferred Ahead of CY4Q18 EarningsAhead of earnings, we are removing SWX from our Most Preferred List due to the uncertaintyaroundNVratecase.CNPremainsontheMostPreferredListasproforma 20EPSandcapexguidanceshouldbepositivecatalysts.WeareremovingNWNfrom ourLeastPreferredlista

9、headofearningsaswebelieve19EPSConsistoolow.OGS remains on the Least Preferredlist.TickerReportingDateTickerReportingDateTimeConsensus Q UBSe vs 2019 UBSe2019EPSConsensusEPSConsensus ConsensusYr UBSe vsAga Zmigrodzka,CFA HYPERLINK mailto:agnieszka.zmigrodzka +1-212-7133014ShneurZ.Gershuni,CFA HYPERLI

10、NK mailto:shneur.gershuni +1-212-7133974Brian ReynoldsAssociateAnalyst HYPERLINK mailto:brian.reynolds +1-212-7132563EPSATO2/5/2019AMC$1.37$1.33$0.04$4.33$4.28$0.05NI2/20/2019BMO$0.38$0.36$0.02$1.35$1.34$0.01CNP2/28/2019BMO$0.36$0.34$0.02$1.70$1.69$0.01OGS2/5/2019AMC$0.86$0.85$0.01$3.43$3.43$0.00NWN

11、2/21/2019BMO$1.20$1.19$0.01$2.49$2.46$0.03UGI3/1/2019*NA$1.08$1.09-$0.01$2.85$2.88-$0.03SWX3/4/2019*NA$1.47$1.54-$0.07$3.99$4.02-$0.03Source: UBSe, Factset, Company Reports; Note: *Factset estimates HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities LLC.

12、 ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 17. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should

13、consider this report as only a single factor in making their investment decision.CY 4Q18 Earnings PlaybookIn this section we include company specific updates ahead of CY4Q18 earnings season with UBS EPS estimates vs. Consensus and what to listen for during the conference calls. We also highlight UBS

14、 CY2019 EPS estimates vs. Consensus (Figure2)andwenotethatCNP,NI,NWNandSWXwilllikelyprovidetheir2019 EPSguidance(seeFigure2).SeeFigure3forUBSCY4Q18EPSvs.Consensusand earnings timing.NI$1.21$1.30$1.28$1.26-$1.32$1.35$1.34NAFigure 2: 2018/2019 UBSe vs ConsNI$1.21$1.30$1.28$1.26-$1.32$1.35$1.34NATicker

15、2017 EPS2018 UBSe EPS2018Consensus Guidance2019 UBSe EPS2019Consensus GuidanceATO$3.61$4.00$4.33$4.28$4.20-$4.35CNP$1.37$1.59$1.58$1.50-$1.60$1.70$1.69NANWN$2.25$2.20$2.23$2.10-$2.30$2.49$2.46NASWX$3.62$3.80$3.83NA$3.99$4.02NA$3.08$3.27$3.26$3.08$3.27$3.26$3.43$3.43UGI$2.29$2.75$2.85$2.88Atmos Energ

16、y (ATO)UBS Estimates vs Consensus: UBSe of $1.37 above Consensus of $1.33. We expect 1Q19 to be up $0.12 YOY, excluding the benefit from the tax reform reportedlastyear.RegulatedPipelinesegmentnetincomeisexpectedtobenefit from GRIP approved in May ($42.2MM) and wide Waha to Katy spread ($1.95/MMBtu

17、in CY4Q up from $1.09/MMBtu in CY3Q) as ATO completed the expansionofitssystemandaddedcompressioninCY4Q18.Higherearningswill be partially offset by dilution from equityissuance.Focus for the Call: On the call we will listen for an update on the APT maintenance and the new compression which was expec

18、ted to come online into service in November 2019. We will listen to any potential update to guidance provided at the analyst day including potential dividend step up in 2019 to maintain its equity/capital ratio within its historical 50-55% range. Management will also likely provide an update on the

19、investigation conducted by NTSB and RailroadCommissionaftertheincidentsinNorthwestDallasinFebruary2018.On the regulatory side, we expect to hear updates on pending rate cases, including$15MM requested rate case increase in KY as the attorney general recently recommended a reduction in distribution r

20、ates by $8MM on a 9.7% ROE (vs requested 10.4% ROE). ATO has recently reported strong consumption and we will look for an update on consumptions trend and customer growth as we enter into FY2019.2019 EPS Guidance: $4.20-$4.35 UBSe: $4.33Consensus: $4.28CenterPoint Energy Corp (CNP)UBSEstimatesvsCons

21、ensus:UBSeof$0.36,up$0.04YOYandmodestlyabove Consensus of $0.34, excluding the impact of the pre-funding of VVC acquisition. EPSgrowthwillbedrivenbyElectricT&Dsegmentasweseehigherraterelieffrom DCRF/TCOSandhigherequityreturnYOY.Concurrently,ENBLshouldcontinueto benefit from growing production in the

22、 Anadarko and Haynesville basins HYPERLINK /shared/d2RffMDyEjDjO (click HYPERLINK /shared/d2RffMDyEjDjO here to see MLP preview).Focus for the Call: Based on our discussion with the company, the merger with VVCcouldbeclosedshortlyafterOhioPUCclosesitsdocket.WenotethatVVC transactionwasapprovedbyOhio

23、PUConJanuary30th.Duringtheearningscall, we will be listening for an update on proforma 2020 EPS outlook and long term growth capex. Management highlighted that it expects 5-10% higher capex in 2019-2023 vs. 2018-2022 for CNP. We analysed backlog of vintage pipeline at CNP and VVC and we believe that

24、 there is room to accelerate the replacement programsatbothLDCs.Higherproformacapexcoulddrivehigherearnings.NiSource (NI)UBS Estimates vs Consensus: UBSe of $0.38 is modestly above Consensus of$0.36.WeexpectEPSup$0.05YOYdrivenbyrateincreasesfromgasdistribution utilityoffsetbydividendtopreferredequit

25、yandequityissuancedilution.NIissued$500mm preferred equity in December 18 and $400MM in June 18 as well as$600MMofcommonequityinMay.Weexpectthatin4Q,NIwilllikelyissueupto$80MM on its ATM. NI will likely exclude an impact of the incidents in MA from adj EPS.Focus for the Call: On December 12th, Colum

26、bia Gas of Massachusetts announcedthattherestorationofgasserviceintheimpactedarea(theMerrimack Valley)issubstantiallycomplete.Duringthe4Q18call,focuswilllikelyremainon incidentsinMA,includingtimingofthecostrecoveryviainsuranceproceedsand potential fines. We dont expect to hear an update on the MA ra

27、te case filing. NI willlikelyprovide2019EPSguidanceandweestimateEPSof$1.35(up4%YOY) vs. Consensus of $1.34. We will also listen for an update on long-term capex. ManagementwilllikelyprovideanupdateonIntegratedResourcePlan(IRP)and potentiallydiscusscapexrelatedtonewinvestments.InOctober,NIfiledanelec

28、tric base rate case in Indiana and we will listen for an update on this filing. NI requestedarateincreaseof$21.4MM,ROEof10.8%andequity/capitalstructure of 47.86%.Northwest Natural (NWN)UBS Estimates vs Consensus: UBSe 4Q18 EPS of $1.19 inline with Consensus andup$0.16/shareYOY.NewratesfromOregonrate

29、case(approvednetbenefit to company of $14.2MM) are effective November 1st, 2018. Weather in Pacific regon was colder YOY which should also drive higher earnings (HDD up 6.5% YOY).In4Q,weexpectthecustomergrowthof1.7%YOYin-linewith3Q18.Focus for the Call: We expect NWN to provide 2019 EPS guidance wit

30、h the 4Q earningsandweestimateEPSof$2.49,aboveConsof$2.46.NWNwillalsolikely update the long-term capex guidance and we expect they will revise higher their capex and rate base target, but it will likely remain below peer group average. In thepastfewweeks,NWNfiledtheWashingtonratecaseandrequestedarev

31、enue increase of $8.3MM, ROE of 10.3% and equity to capital structure of 49.50%.2019 EPS Guidance: NA UBSe: $1.70Consensus: $1.692019 EPS Guidance: NA UBSe: $1.35Consensus: $1.342019 EPS Guidance: NA UBSe: $2.49Consensus: $2.46During the call, we will listen for an update on the Washington general r

32、ate case andtherequestedmechanisms,includingfulldecouplingandenvironmentalcost recovery.NewratesareexpectedtobeeffectiveonDec.1,2019.Wemodelthat NWNwillreceive50%oftherequestedincreased.Higherapprovedhikeremains an upside. During the 3Q18 call, NWN announced the water investments(closed and pending)

33、 represent $67MM and we will listen for an update on the future water acquisitions and timing of the impact on earnings. NWN delayed the completionoftheNorthMistexpansionprojecttoMarch31st,2019.Management will likely provide an update on this expansion project. NWN announced the agreement to sell th

34、e Gill Ranch storage, which is not a surprise as mgmt. noted Gill Ranch is no longer a strategic asset to NWN and we will listen for an update onclosingtiming.NWNwilllikelyalsoprovideanupdateonitsbuybackprogram.ONE Gas, Inc. (OGS)UBS Estimates vs Consensus: UBSe of $0.86 roughly in-line with Consens

35、us of$0.85, as OGS narrowed its 2018 EPS guidance in mid-January.FocusfortheCall:Inmid-January,OGSprovided2019EPSguidanceand5-year outlook. During the call, we will listen for more colour on the revised higher EPS outlook (up to 6-8% from 5-7%) which is above rate base growth target of 6-7% (revised

36、 higher from 6-6.5%). OGS increased growth capex and we will listen for colour on the key growth drivers by state. We will look for an update on the KS generalratecaseandrequestedanincreaseinnetbaseratesof$42.7MMbased on 10% ROE and 62.2% equity to debt ratio.Southwest Gas Corporation (SWX)UBS Estim

37、ates vs Consensus: UBSe 4Q18 EPS of $1.47 below Consensus of$1.54 and down YOY. We expect that Gas Operations net income will be slightly down YoY, due to the impact of the Tax Reform as well as higher pension costs. 4Q18InfrastructureServicesoperatingincomeisexpectedtobeupYoYdrivenby earnings from

38、Neuco and Linetec acquisitions. NIs emergency action in MA involved 200 crews and we will look for a potential upside to the Infrastructure Services segment from that incrementalwork.Focus for the Call: During SWXs October Analyst Day, SWX announced it will provideits2019EPSguidanceinFebruary2019.To

39、incorporatetheimpactofthe lower than expected revenue increase in NV, we currently expect 2019 EPS of$3.99, which is roughly in-line with Consensus of $4.01. We expect the NV rate casetobeamainfocusonthecall.InlateDecember,NVPUCpublisheditsorder onSWXNVratecaseandauthorizedROEof9.25%,EquitytoCapital

40、Structureof 49.66%,andapproveda$7.5MMrevenueincrease(vsrequested$29.7MM).The approvedROEof9.25%iswellbelowUSgasutilitiesaverageof9.62%(basedon 1-3Q18 approved cases per SNL) or the requested 10.3%, which was disappointing.OnJanuary8th,SWXfiledaresponsetotheCommissionandasked for a reconsideration of

41、 five items, including 1) “the findings as to the rebuttable presumption of prudence”, 2) the disallowance of the costs related to the Challenged Work Orders, 3) ROE of 9.25%, 4) calculation of SWXs pension expense,and5)thefindingsrelatedtothecertainnegotiatedratecustomersthat SWXisinviolationofappl

42、icablelaws.Duringthe4Qearnings,SWXwilllikelyalso updateits3-yearcapexandratebasegrowthtarget.Weseeanupsidetocurrent 12%duetothehigherspendinginArizona(VSP).However,lowROEinNVcould discourage accelerating spending in this state. Further, we expect an update on rate case filings in 2019 (Arizona, Cali

43、fornia and Pauite pipeline) as well as if2019 EPS Guidance: $3.27-$3.57 UBSe: $3.43Consensus: $3.432019 EPS Guidance: NA UBSe: $3.99Consensus: $4.01managementplantofileforaratecaseinNVmoreoftentoreducetheregulatory lag.UGI Corporation (UGI)UBS Estimates vs Consensus: UBSe EPS of $1.08 is roughly in-

44、line with Consensusof$1.09andupfrom$0.92inFY1Q18(excl.$0.09/sharenetimpactof thetaxreformintheU.S.andFrance).APUEBITDAisexpectedtoincrease8.5% YOY as we see a 6% YOY increase in propane volumes for the quarter, largely driven by a colder start to the heating season in October/November compared to la

45、st year HYPERLINK /shared/d20XftC3YjzW (click here for MLP Playbook APU preview on page 43). UGI International op. income is expected to increase 4% YOY driven by organic growth. We expect Marketing and Midstream operating income to increase YOY due to colder weather and new projects completed last

46、year (the Steelton vaporization).UGIutilitiesnetincomewilllikelybemodestlyupYOY,excludingthe benefit of the tax reform in 1Q18, driven by colderweather.Focus for the Call: On January 28th, UGI filed a rate case in PA and requested a$71.1mm revenue increase, ROE of 11.25% and equity/capital structure

47、 of 54.80%. We assume UGI will receive 50% of the requested hike and new rates areexpectedtobeeffectiveinOctober2019.Duringthecolourweexpecttohear details about the filing. While questions may arise about UGIs dividend policy, management targeted an announcement for its dividend program in April fol

48、lowing the heating season and resolution to APU structure and balance sheet. We currently model a 10% DPS step up in 2Q and expect it would bring UGIs payout ratio back to the middle of its 35%-45% range. Other topics of interest we will be looking out for include updates on APUs IDR structure, pote

49、ntial growth opportunitiesintheLPGbusinesswithinInternational,marginmanagementgoing forward.Figure 3: CY4Q18 EPS UBSe vs ConsensusTickerReporting DateTimeUBSe EPSConsensus EPSDifferenceATO2/5/2019AMC$1.37$1.33$0.04NI2/20/2019BMO$0.38$0.36$0.02CNP2/28/2019BMO$0.36$0.34$0.02UGI2/5/20019AMC$1.10$1.09$0

50、.01OGS2/21/2019BMO$0.86$0.85$0.01NWN3/1/2019*NA$1.19$1.19$0.00SWX3/4/2019*NA$1.47$1.54($0.07)Source: UBSe, FactSet, Company Reports; Note* Factset estimate2019 EPS Guidance: $2.75-$2.95 UBSe: $2.85Consensus: 2.88Top News of theMonthOhio PUC approves CNPs acquisition of VVC. (Source: Bloomberg)UGI fi

51、les $71.MM rate base increase in PA. UGI looks to raise base rates on residential, commercial, and industrial customers in Pennsylvania by $71.MM to recover spending on system improvements and reliability. (SNL)NWN files rate case in WA. NWN filed rate cases in Washington for $8.3MM rate increase wi

52、th a 10.3% ROE on an equity to capital structure of 49.5%. (Source: Company Release)CNP and VVC receive final order from Indiana Utility Regulatory Commission on pending merger. CenterPoint Energy and Vectren Corporation announcedtheyreceivedfinalorderfromIURConpendingmergerandnowawait oneremainingc

53、onditionfromtheissuanceofanorderbythePUCOinresponseto the companies joint informational filing with respect to the merger. (Company Release)KY attorney general asks for rate reduction for ATO. KY attorney general madethecasethatATOshouldreducegasdistributionratesby$8MMbasedona 9.7%ROEwhichislessthan

54、therequested10.4%.(Source:SNL)NV PUC quantifies authorized rate changes for SWX. The Publics Utility CommissionofNevadaformallyadoptedcompliancefollowingssubmittedbySWX authorizinga$7.5MMratebaseincreaseon9.25%ROE.(SNL)OGS ordered to return $22.7MM in tax cut savings to customers in OK. ONE Gas is r

55、equired to pass on its $22.7MM in savings this year to customers after a Jan 8 vote by the OK corporation commission. (SNL)Industry / MacroWeather UpdatesLooking at the 6-10 day outlook, the east coast is expected to have colder than normal weather, while the southwest portion of the country is expe

56、cted to have warmer than normal weather.Degree Day DataHeating Degree Days measure how cold the weather is based on the extent to which the daily mean temperature falls below a reference temperature. For example,whenthemeanoutdoortemperatureis35F,therewouldbe30degree days experienced if the referenc

57、e temperature is65F.Utilitycompaniesthatdonothaveweathernormalizationmechanismsinplaceare at the greatest risk of weather effect on gross margin. However, companies with these mechanisms can still have tail risk related to weather volatility. While most companies have regulatory mechanisms in place,

58、 UGI, NWN, and CNP havethe greatest exposure to weather volatility.Figure 5: Weekly Heating Degree Days for the 2018-2019 SeasonFigure 4: 6-10 Day ForecastSource: NOAARegionCompanies ImpactedCurrentLast YearY/YChangeColder/ WarmerNormalChange v NormalColder/ WarmerNew EnglandNI28222326%Colder2753%Co

59、lderMid AtlanticNI, UGI27420335%Colder2634%ColderE N CentralNI34519973%Colder29517%ColderW N CentralATO, CNP, OGS35221266%Colder31312%ColderS AtlanticATO, NI, UGI18713242%Colder1813%ColderE S CentralATO, CNP, NI20713652%Colder18711%ColderW S CentralATO, CNP, OGS1449158%Colder1366%ColderMountainATO,

60、SWX2182151%Colder229-5%WarmerPacificNWN, SWX102126-19%Warmer117-13%WarmerUSAll1309734%Colder1245%ColderSource: AGA, NOAA, Company Reports, UBS; Note: AGA Weekly data as of 1/26/2019Figure 6: Cumulative Heating Degree Days for the 2018-2019 SeasonRegionCompanies ImpactedCurrentLast YearY/YChangeColde