Showing quarter-over-quarter profits in its independent energy businesses, San Diego-based Sempra Energy has a lot of upside from its liquefied natural gas (LNG) and pipeline/storage businesses, Sempra CEO Donald Felsinger said Tuesday.

During a second quarter conference call Tuesday Felsinger downplayed a legal fight over the company's LNG terminal in North Baja California, Mexico, whose operations he predicted would not be interrupted by the dispute.

With a hearing scheduled for Thursday in a Mexican district court (see Daily GPI, July 27), Felsinger said he didn't expect to lose the court fight with a would-be adjacent landowner, but if the company received an ultimate adverse ruling, it would be prepared to buy whatever additional adjacent lands it needed. None of the adjacent land is necessary now to satisfy Sempra LNG's operating permits at the LNG receiving terminal, he said.

"I think longer term we still expect LNG will have the pricing opportunity to compete with domestic supplies," Felsinger said. "Long term we feel good about our position, and are looking for opportunities to bring in additional cargoes [at Baja and the Cameron facility in Louisiana]."

As for the Baja lawsuit involving a disgruntled former landowner, Ramon Eugenio Sanchez Ritchie, who has filed lawsuits first in Mexico and more recently in the U.S. District Court in San Diego, Felsinger said the issue is "not one of much importance," seeking to put the ongoing legal dispute in perspective in responding to an analyst's question.

The lawsuit arose after Sempra had received all of its permits for the North Baja Energia Costa Azul terminal site, located along the Pacific Coast about 60 miles south of the U.S.-Mexico border. At the time Sempra had acquired additional land immediately north of the facility site, although the purchase was not required for any of the Mexican government operating permits, Felsinger said.

"There are some enterprising individuals who are trying to exhort money from us, claiming they are entitled to that land. That will be resolved separately, and I do not expect any court action or decision will jeopardize the operation of the plant," said Felsinger, noting there are upcoming hearings Thursday and stretching out into the next few months. "The issue will resolve itself on its own and will not have any impact on the plant operations."

For its pipeline/storage operations, Felsinger and CFO Mark Snell cautioned that there will not be a lot of storage profits until the market settles and more building of added capacity at the Mississippi Hub storage facility is possible. Longer term, though, Felsinger said he saw storage as providing $200 million annually in earnings before interest, taxes, depreciation and amortization earned on a $1.6 billion investment. Some analyst questions suggested that this part of Sempra's operations was underperforming.

For the first half of this year, however, the combined Sempra pipeline and storage businesses showed increased profits ($39 million for the second quarter, compared with $27 million for the same period in 2009; $77 million for the first half of 2010, compared with $10 million for that same six-month period last year).

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