Gas company to distribute funds

South Alabama Gas to give its member cities surplus; Flomaton to receive $3,229

South Alabama Gas (SAG) District’s board of directors unanimously agreed to allow the company to distribute $450,000 of the surplus revenue it has retained from previous years to its member cities and towns.

During Monday’s board meeting in Monroeville, the board was told that, according to state-mandated calculations, the district didn’t have enough revenue in fiscal year 2018 (FY18) to make any distributions to its member cities and towns.

However, Neal Covington, a partner with the accounting firm of Andreoli, Robertson and Covington in Bay Minette, said SAG’s board could approve the distribution of up to $768,857 from the company’s undistributed revenue that has been retained by the company from previous years.

Mark Burgess, SAG’s chief executive officer (CEO) and chief operating officer (COO), recommended the board limit the distribution to $450,000, which is the amount that the company budgeted for FY18, leaving a balance of $318,857 in SAG’s retained revenue fund. SAG’s board also approved the payment of the annual franchise fees to the member towns and cities.

The distributions, including franchise fees, are as follows: Monroeville, $271,037; Evergreen, $243,321; Butler, $9,788; Castleberry, $7,737; Frisco City, $3,983; Flomaton, $3,229; Excel, $2,289; and, Repton, $1,111.

Distributions and franchise fees are based on total sale of natural gas within each municipality’s city limits and police jurisdiction limits.

In his report, Covington said SAG’s annual audit received an “unqualified opinion,” which means the audit was good and that all data was presented in a “fair” manner.

He said SAG’s net position as of the end of FY18, which was Sept. 30, 2018, was $7.9 million as opposed to $9.9 million in FY17. He noted that the $2-million difference was basically due to the liquidation of SAG’s propane operation. He said that as of Sept. 30, SAG had $.5 million in cash assets, which doesn’t include $1 million that Thompson Gas owes on the propane acquisition. He said that is to be paid during FY19.

Covington noted that the gross value of SAG’s capital assets were $39.6 million at the end of FY18 as opposed to $56.1 million at the end of FY17. He said SAG’s long-term liability was reduced in FY18 from $25.4 million to $7 million, which was mostly due to the liquidation of the propane operation. SAG sold the propane operation to Thompson Gas for $17.5 million in FY18, which allowed SAG to retire almost $18 million in debts.

As for revenue produced from retail sales of natural gas, propane and appliances in FY18, SAG’s total was $33.1 million as opposed to $27.7 million in FY17. In FY18, SAG had a gross profit of $12.4 million as opposed to $11.5 million in FY17.

Covington noted that in FY18 SAG had $203,171 in bad debt that it hasn’t been able to collect. He noted that most of its was associated with the propane operation. Burgess said SAG has turned some of that bad debt over to collections, which is still trying to collect it.

Burgess said he still believes the board members made the right decision when they agreed to liquidate SAG’s propane operation.

“It (propane operation) was going to kill the company if we had kept it,” said Burgess. “I really believe you (board) made the right decision. Now, we can concentrate on our core business (natural gas) and we’re doing that. I may have some exciting projects to talk about soon.”

In his report, Burgess said December’s heating degree days were about average, but January was warmer than average and February is also warmer than average.

“We’re still in much better (financial) shape than we would have been if we still had the propane operation,” said Burgess. “Propane revenue is very much tied to residential and the weather.”

Burgess said SAG is about $74,000 off its budgeted revenue for FY19, but over half of that is due to the interest that SAG had to pay forward to retire the propane debt.

He said the commercial/industrial sales of natural gas have been good and SAG currently has more natural gas residential services on its books than it has had in years. He said SAG is averaging one or two new services each week.

Burgess asked the board members to remind customers that SAG is not in the propane business anymore even though they could see propane delivery trucks with SAG’s logos on them around. He said Thompson has five months to replace the SAG logos with its logos.