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Sempra Looking for New Utility & Non-utility Deals

Sempra Looking for New Utility & Non-utility Deals

In launching the newly created $6.2 billion Sempra Energy, a merger of the holding companies for Southern California Gas and San Diego Gas and Electric, its leaders have indicated there will be several natural gas and electricity deals unfolding in the next few weeks and months that will mark its quest to become "one of the top five energy services companies in North America."

Making it clear that nonutility ventures promise the most growth (in the 5-6% range annually), Sempra's new CEO, Dick Farman, said that nevertheless his $10-billion-in-assets holding company also will be expanding its utility operations outside of California through the purchase of small and medium-sized companies around the U.S., with or without repeal of the Public Utility Holding Company Act (PUHCA). (He expects Congress to repeal PUHCA next year.)

Farman said Sempra will take more "high profile" actions in the second half of this year to establish a new national branding campaign this fall, divest SoCalGas' rights to buy the California part of two interstate gas pipelines, sell SDG&ampE's power plants, and expand into other regions by acquisition, alliance or through extending its existing operations.

Headquartered in San Diego, Sempra will have the base of 6 million utility meters serving a population of 21 million in the southern half of California through SoCalGas and SDG&ampE, which will remain separate utility operations. It also includes five nonutility subsidiaries covering energy services, trading, power plant development, international gas and electric projects and financing affordable housing projects. A sixth subsidiary will own regulated energy operations outside of California, such as gas utility operations it currently is developing in North Carolina and Maine.

"We intend to be a major player in the quickly developing energy marketplace nationally," said Farman, CEO who will head the holding company two years before retiring in mid-year 2000. "There are going to be opportunities throughout the United States as the smaller and medium-size utilities become part of the consolidation that is taking place as part of the restructuring of the utility industry.

"We'll be in the energy utility business-whether electric or gas-wherever it makes sense for our shareholders and our customers.

"However, over the next three- to five-year period, unregulated, energy-related businesses will be very, very important to Sempra Energy's future. We're going to nurture those energy-related activities that increasingly will play an important role for Sempra."

Sempra is currently building a $55 million gas distribution system to serve about 150,000 customers in North Carolina, and it is about to start a similar project in Maine to serve about 100,000 customers.

Overall, Farman said that the new holding company is "designed to thrive and grow as electric industry deregulation spreads from the Pacific shore eastward to the Atlantic coastline." Electric restructuring is still in its "infant stage," Farman said and Sempra and many others are "betting competition will intensify over time" to the ultimate benefit of American consumers.

Richard Nemec, Los Angeles

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