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Connecticut Energy Corp.
855 Main Street, Bridgeport 06604
(800-760-7776, http://206.243.32.14/
scg/connenergy.html)
Chairman, president and CEO:
J. R. Crespo
Market capitalization: $305.1 million
Revenues (fiscal year ending 9/30/97): $252 million
Earnings (fiscal year ending 9/30/97): $16.4 million
Employees: 501
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Business New Haven
1/12/1998
By: BNH
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Consumers know Connecticut Energy best through its wholly-owned subsidiary, the Southern Connecticut Gas Co. That perception is not inaccurate; retail distribution of natural gas is the core of the company's business. Still, Connecticut Energy does have other divisions.
CNE Energy Services sells gas, oil and maintenance and distribution services to commercial customers throughout New England. CNE Development Corp. combines with other gas utilities to purchase and store natural gas in bulk, and has also begun exploring natural-gas-powered fleet vehicles. Finally, CNE Venture-Tech invests in cutting-edge technology and information systems for utilities.
Despite its other subsidiaries, Connecticut Energy is basically about purchasing natural gas and selling it to consumers, a simple and predictable business. This predictability has meant that Connecicut Energy and its corporate ancestors have paid cash dividends since 1850, longer than any other non-financial company on the New York Stock Exchange. September 1997 marked the firm's 351st consecutive quarterly dividend.
That predictability also means that earnings growth has been remarkably consistent. Net income grew 13 percent in 1992, eight percent in 1993, 15 percent in 1994, ten percent in 1995, eight percent in 1996, and eight percent in 1997. Even fluctuations in sales have little substantive impact on the bottom line.
Gas sales quite naturally rise and decline with the snowfall, so a comparatively mild winter in 1996-97 cut revenues three percent from 1996's $261 million to 1997's $252 million. By comparison, the crueler winters of 1993-94 and 1995-96 provided big boosts in gas sales. Even with last winter's lower sales, reduced maintenance expenses and taxes still managed to increase profits by eight percent.
A clue to the stability of the gas business comes not just from steady demand - winter always arrivees - but from its economics. The cost of the gas Connecticut Energy provides adds up to, on average, about half its sales revenues. Half of what's left, or a quarter of revenues, goes to operations and maintenance. What's left gets split up among depreciation, taxes, debt service, investment and, finally, shareholder
dividends.
In a mature business like gas distribution, with little need for large injections of capital and an expensive debt burden, investment spending can be kept modest: Connecticut Energy averages just over $25 million each year in investment.
That adds up to consistent shareholder dividends. Utilities will never double or triple their shareholders' money like high-flying tech stocks. Instead, investors get what they pay for with Connecticut Energy: reliable and slowly growing dividends backed by predictable and steady earnings growth.
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