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Sempra Preparing MLP to Own LNG, Renewables Assets

Following months of analysis, San Diego-based Sempra Energy's board on Tuesday authorized forming a publicly traded master limited partnership (MLP), Sempra Partners LP, to own some of the company’s non-utility natural gas assets, including liquefied natural gas (LNG) properties.

Sempra Partners expects to file a registration statement with the U.S. Securities and Exchange Commission in the second half of this year, and subject to market conditions and board approval, an initial public offering (IPO) of common units representing limited partner interests would follow.

CEO Debra Reed noted that the company has received a private letter ruling from the Internal Revenue Service related to the MLP, which would own assets and interest-producing MLP-qualifying income, including dividends from a corporate subsidiary.

Initially, the MLP is expected to own, among other things, an interest in a U.S. entity with contracts related to deliveries of LNG at Sempra's Energia Costa Azul regasification facility in Baja California, Mexico; and interests in certain contracted renewable energy projects.

During a conference call with analysts last month, Sempra CFO Joe Householder said that the company was considering a "total return vehicle” around some assets, such as renewables, LNG operations and projects in Mexico (see Daily GPIMay 6).

"Sempra Partners is designed to support continued growth within Sempra Energy's existing strategy of long-term, contracted infrastructure development," said Reed. Sempra Partners is expected to be granted a right of first offer on certain LNG-related infrastructure projects, including Sempra’s:

  • 50% interest in the first three trains of the Cameron, LA, liquefaction terminal;
  • 100% interest the connecting Cameron Interstate Pipeline; and
  • Interest in some contracted wind and solar projects.

Eventually, Sempra Energy expects to own the general partnership in the MLP, all of its incentive distribution rights, a portion of the common units and all of its subordinated units, following the completion of the IPO, a Sempra spokesperson said.

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