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UGI Arm Inks Deal With GCE to Produce More RNG in New York

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The joint venture (JV) of UGI Energy Services, LLC, a subsidiary of UGI Corporation (UGI - Free Report) , and Global Common Energy, LLC called Cayuga RNG Holdings, LLC inked a deal to develop its second renewable natural gas (RNG) project in upstate New York. Per the agreement, the endeavor will include construction of an anaerobic digester and a combined heat and power project.

The project is likely to get completed in the second half of 2022. Upon conclusion, it will produce 85 million cubic feet of environmentally-friendly RNG each year. This project will be located at Allen Farms, nearly five miles from the place where Cayuga RNG’s first project Spruce Haven is being developed. Allen Farms signed a contract with Cayuga RNG to provide dairy waste that will serve as the feedstock for RNG.

The previously-announced project includes an existing anaerobic digester that generates biogas, which is used in producing renewable electricity. Following this deal, the company's investment in RNG projects will be more than $100 million.

UGI Corp.’s current investment is in sync with its objective of providing renewable and sustainable energy to customers, thereby reducing greenhouse gas (GHG) emissions in the process. It will also expand the utility’s business in the Finger Lakes region of New York.

Environmentally-Friendly Efforts

The company’s buyout of GHI Energy, LLC, an RNG company operating in California, is helping it expand its renewable product offerings and supporting its eco-friendly initiatives. In August, it announced the JV (Hamilton RNG) between UGI Energy Services' unit and Synthica Energy, LLC to develop innovative food waste digester projects for producing RNG in Ohio and Kentucky. Also, in May, it entered into a JV to develop dairy farm digester projects for producing RNG in upstate New York.

Moreover, it disposed of its 5.97% ownership interest in the Conemaugh coal-fired generating station during fiscal 2020 to curb the total Scope I direct emissions by more than 30%. In May 2021, it announced plans to trim Scope I GHG Emissions by 55% within 2025.

Steady Investments in Infrastructure

It continues making systematic capital investments to address the infrastructural need for various capital projects, carry out strategic acquisitions to expand operations and increase the reliability of natural gas production and storage facilities. The company is also replacing its aging infrastructure for modernizing the overall system. After spending $665 million in fiscal 2020, it spent $438 million in the first three quarters of fiscal 2021, marginally down from $444 million in the same period of the last fiscal year. These investments will assist it to achieve the long-term annual earnings per share growth target of 6-10%.

Other gas distribution utilities also have investment plans in place to increase its reliability of services and serve an increasing customer base effectively. MDU Resources (MDU - Free Report) plans to invest $3,027 million during the 2021-2025 forecast period while Atmos Energy (ATO - Free Report) is planning to spend in the range of $11-$12 billion from fiscal 2021 to fiscal 2025. Also, ONEOK (OKE - Free Report) expects to spend in the band of $525-$675 million for 2021.

Price Performance

Shares of the company have gained 15%, outperforming the industry’s increase of 5.5% in the past six months.

Six Months' Price Performance

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Zacks Rank

The utility carries a Zacks Rank#3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.