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MDU Resources (MDU) Increases 5 Year Capex Plan by 8.6%

Zacks Equity Research

MDU Resources Group, Inc. MDU recently made announcements to provide capital expenditure forecast for 2020 through 2024.

Capex Plan

The company expects to invest $2.9 billion during the 2020-2024 period. The latest capex plan includes a 8.6% hike from the previous plan of $2.6 billion for 2019-2023 period.

Per the plan, the company expects to spend $702 million in construction materials and contracting as well as $103 million in construction services.

In the Regulated Energy delivery segment, the company intends to spend $561 million, $940 million and $564 million in electric, natural gas & pipeline and midstream operations, respectively.

These investments enable MDU Resources to improve safety and reliability of its systems as well as undertake expansions, upgrades and replacements. The company’s capex plan for utility includes the construction of an 88-megawatt simple-cycle, natural gas-fired combustion turbine near Mandan, ND.

The capital investment plan in pipeline and midstream business includes the Demicks Lake Expansion project, designed to increase capacity by 175 million cubic feet per day.  The project is expected to be in service in the first quarter of 2020. Moreover, The North Bakken Expansion project, with a capacity of 350 million cubic feet per day, is expected to be in service in late 2021.

The capital investment in construction materials and services businesses will be intended for organic expansion opportunities, normal equipment as well as plant replacements and upgrades. This includes the development of Knife River's Honey Creek Quarry in Burnet County, Texas, which includes the construction of a rock-crushing plant and the purchase of aggregate railcars.

Reasons for Investment

MDU Resources expects customer base to expand annually by 1-2%. The company projects base rate of electric and natural gas utility business to rise approximately 5% annually on a compound basis over the next five years. It is focused on improvement of existing operations through organic projects and acquisitions in areas of its operation. This long-term investment enables the company to serve a rising customer base effectively. The results of these spending are likely to be reflected in the upcoming quarterly earnings as well.

Utilities’ Investments in Infrastructure

Other companies from the same sector are also investing on a long-term basis. Sempra Energy SRE expects to make investments of approximately $18.2 billion during the 2019-2023 period. NextEra Energy NEE has plans to invest nearly $36.6 billion in different projects from 2019 through 2023. Xcel Energy XEL is planning to invest $22 billion from 2020 to 2024.

Price Movement

Shares of MDU Resources have gained 11.5% compared with the industry’s growth of 10.9% in the past 12 months.

Zacks Rank

MDU Resources currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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