We have updated our research report on Integrys Energy Group, Inc. (TEG) on Jan 23, 2015. The company’s strong regulated utility mix provides it with a stable earnings base. Integrys’ participation in multiple organic ventures will help it to expand operations and its increasing number of public CNG fueling stations holds promise. However, increasing regulatory mandates on curbing carbon emissions will put pressure on the company’s financials, as coal still forms a major share of its generation mix.
Chicago, IL-based Integrys Energy’s six regulated utilities offer ample investment opportunities. The company is shifting its focus to growing and managing its traditional utility operations. The emphasis on the regulated business will lend stability to its earnings.
This utility plans to invest roughly $3.0 billion in capital expenditure from 2014 through 2016 with more than half directed towards strengthening its natural gas infrastructure. Integrys Energy’s System Modernization and Reliability project involving the relocation of electric distribution lines under the surface and the addition of automation is moving at a rapid pace.
Apart from focusing on traditional utility operations, Integrys Energy is playing a vital role in the development of compressed natural gas (“CNG”) infrastructure across the country.
The company has allocated $44 million for opening more CNG fueling stations in 2015.
On the flip side, increasing pressure on the utilities to cut coal-fired production might add to Integrys’ cost burden. Moreover, seasonality in weather patterns results in fluctuating customer demand for electricity and natural gas that in turn leads to unstable earnings.
Integrys Energy’s merger with Milwaukee, WI-based Wisconsin Energy Corp. (WEC) is expected to close in the summer of 2015 creating a large utility in the Midwest.
An inorganic growth strategy seems to be quite widespread in the utility sector. Exelon Corporation (EXC) also has plans to acquire Pepco Holdings Inc. (POM), one of the largest energy delivery companies in the Mid-Atlantic region.
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