Noting that they are very close to an announcement for selling their joint venture North American trading assets, San Diego-based Sempra Energy and the Royal Bank of Scotland (RBS) announced Monday that Noble Group Ltd. has agreed to acquire Sempra Energy Solutions, a retail unit of the RBS Sempra Commodities joint venture. The sale was for $317 million in cash, along with assumption of $265 million in debt.
The sale needs approvals from the Federal Energy Regulatory Commission and the U.S. Justice Department. It is expected to close in the fourth quarter this year, a Sempra spokesperson said. Hong Kong-based Noble Group is billed as Asia's largest diversified trading group.
Standard & Poor's Ratings Services (S&P) said the sale will have no effect on Sempra's corporate credit rating ("BBB+"/Stable Outlook). S&P also noted that the potential full sale of the joint venture is "generally neutral to credit quality."
The announcement marks the start of the second part of the joint trading partners' sale of their entire business. Earlier this year they sold global metals and oil businesses, along with European natural gas and power businesses, for about $1.6 billion to JP Morgan Chase & Co. (see Daily GPI, Feb. 17). Along with the retail sale to Noble, Sempra and RBS said they are in "advanced negotiations" to sell the last of their joint assets -- the North American wholesale power and natural gas business based in Connecticut.
Sempra CFO Mark Snell previewed the announcement when he told financial analysts at Barclays Capital Energy Power Conference in New York City last Thursday that he had hoped to be able to announce the completion of the full second-phase sale, but that the announcement on the North American assets was probably still "weeks away."
Having predicted on a second quarter earnings conference call a third quarter completion of the commodities business sale (see Daily GPI, Aug. 4), Sempra CEO Donald Felsinger said Monday the joint venture partners are "on track" to exit the commodities business, given the Sempra Energy Solutions sale and the advanced talks for selling the rest of the business.
"Our development of the commodities business has been a very successful enterprise," Felsinger said. "After more than a decade of consistent growth, we expect to exit the business with approximately $3.5 billion in cash on an initial investment of $260 million."
Operating in 16 states, Sempra Energy Solutions is the U.S. retail commodity marketing arm of RBS Sempra Commodities. It has approximately 200 employees selling energy to commercial and industrial customers.
Sempra Energy said it expected its share of the proceeds from the sale of all the joint venture assets to total $1.8-1.9 billion. "These distributions are net of expected transactional transition costs and are not expected to fully recover the goodwill included in the carrying value of Sempra Energy's investment in the joint venture," the Sempra spokesperson said.
"Accordingly, Sempra Energy also expected in the third quarter to reduce its investment in RBS Sempra Commodities, resulting in an after-tax charge ranging from $50 million to $150 million."
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