Characterizing his energy trading unit as having "tremendous liquidity and highly ample capital," the head of Sempra Energy Commodities said he sees the environment for trading remaining mostly unchanged through 2009 with annual profits in the $350-450 million range. David Messer spoke at a financial analysts meeting hosted by Sempra in San Diego Thursday.

While analysts and some of the other Sempra executives speaking at the conference pointed toward increased volatility -- a good thing in the trading business -- Messer was more cautious in his projections, noting that it is "very difficult to look into our crystal ball and tell what volatility is going to be." An economic downturn in North America could dampen it significantly, Messer said.

As for carbon emissions credit trading, a Sempra executive said the company is among the major traders in the European market, and it would expect to be heavily involved in the market in the United States when it is developed.

Sempra officials described the commodities unit as being a "reasonably large player" in the European carbon trading market. "There is a very good nexus there because the carbon market is closely related to the coal and the power markets in Europe," one of Messer's colleagues said.

In response to a question on Sempra's preparedness to take advantage of growth opportunities if volatility in the wholesale energy sector does, in fact, increase, Messer said his unit "could scale our business up significantly and not have any problems." Messer evaded the question of whether Sempra would take on a partner in the trading business.

Analysts grilled Messer about his flat projections for future trading profits with the outset of new natural gas supplies coming from Sempra's liquefied natural gas (LNG) and Rockies Express Pipeline projects, starting next year. He was adamant about not over-hyping their potential for helping create greater volatility, and thus, greater trading profits.

Messer said that for the first quarter of 2007 the industry has not seen the same level of volatility as last year, and in response to questions of projecting the added profits from LNG and the new Rockies pipeline, he would not break out the numbers. "We just don't segment them like that," he said.

As an aside, Messer said he found it "ironic" that when he joined Sempra eight years ago, at the first few analyst conferences he attended he was hit with questions about making Sempra too risky an enterprise with the growing trading business. "And now I am being castigated for saying that our earnings won't be much higher than they were last year," he said. "I guess that's progress."

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