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Sempra Energy Makes Big Push in Energy Services

Sempra Energy Makes Big Push in Energy Services

It is becoming increasingly obvious that San Diego-based Sempra Energy is going to make a full-court press in its nonutility business units, seeking to get one-third of its earnings from those businesses collectively in less than three years, according to its soon-to-be CEO Steve Baum, the current president and COO. To hit the earnings goal, Sempra's nonutility businesses need to approach $275 million in collective profits, Baum told employees recently.

Up to $70 million of the earnings are expected to come from energy services, an area Sempra is trying to beef up through acquisitions, such as the pending sale of the noncommodity parts of its northern California-based neighbor PG&E Energy Services, which earlier this spring sold its retail commodity contracts to Enron Corp. for $85 million.

"We're going to recruit more sales people and some of these people may come from an acquisition," said Bob Dickerman, Sempra Energy Solutions president, as quoted in an employee report. The Sempra energy services subsidiary will target commercial/industrial customers in 11 states in four different regions (West, Gulf Coast, Upper Midwest and Northeast) with a potential of $80 million in collective revenues. Dickerman's goal is to reach $2 billion in revenues by 2003.

The energy services business is the centerpiece of Sempra's new strategy, according to the company's senior leaders.

Baum's message to both employees and shareholders earlier this month was that Sempra Energy, with a foundation of two major utilities combining to provide service to more than six million customers in the southern half of California, intends to operate "world-class delivery services businesses (Southern California Gas and San Diego Gas and Electric) and will use its basic strengths there "to gain leadership and profit" in five other lines of business.

"At Sempra Energy, we will drive to restructure markets," Baum is quoted as telling employees. He speculated that "high-performing companies in the energy services business" should produce total annual shareholder returns approaching 20%.

Sempra Energy's recently unveiled strategic plan aims at this level of growth, something not achieved so far by most of the major utility-based energy firms that are expanding into various unregulated businesses.

Richard Nemec, Los Angeles

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