Having shed a lucrative commodities joint venture, San Diego-based Sempra Energy senior executives Thursday outlined a new focus on utility and natural gas infrastructure as the energy holding company's strategic targets this year and beyond. This was the thrust of their remarks on a conference call with financial analysts to report decreased earnings year over year due to the exit from energy trading.

For all of 2010 Sempra earned $739 million, or $2.98/share, compared with $1.12 billion, or $4.52/share, in 2009. Excluding results from the commodities business, which recorded a $155 million loss last year, earnings were up by 14%, CEO Donald Felsinger said.

Felsinger and other Sempra executives said the company expected growth in its utilities in California and South America with major rate base additions such as the San Diego Gas and Electric Co. (SDG&E) $1.9 billion Sunrise Powerlink high-voltage transmission line now under construction in the far southern end of the state; increased pipeline infrastructure investments as an offshoot of the San Bruno, CA, pipeline explosion last year; and more utility-owned renewable projects. There are also gas infrastructure projects that may develop from the ongoing shale gas boom in the Marcellus and other plays.

Felsinger said SDG&E is "still struggling" to get independent developers to build renewable energy projects to allow the utility to meet California's goal of 33% renewables in the power generation mix by 2020. "We are going to have to have the utility step in to do some of that development work," he said. "And with the events surrounding the San Bruno explosion and others that happened recently in the United States there will be a push to do more in terms of pipeline integrity upgrades in the state."

In regard to renewables, Felsinger said the utilities have found that they are "good at a signing contracts with developers, but the developers are not very good at being able to raise the money and make the projects happen, so we see ourselves as the developer of last resort. If California stays on this path of 33% renewables [which he thinks the state will], we will very much have to step in."

In response to two other issues -- renewable energy project costs and potential liquefied natural gas (LNG) exports from the United States -- Felsinger and others from Sempra stressed that they see the cost of solar and wind continuing to come down, albeit not as fast as some would like, and the prospect of U.S. LNG exports as premature and not likely to happen any time soon.

"From the time we began investing in solar and wind we have seen the prices go down each year, and they will probably come down more as we see the world economy soften," Felsinger said. "I think there is a certain amount of frustration that prices have not come down as fast as some consumer advocates would like."

In regard to the four existing LNG receiving terminals in North America seeking approvals to develop export capabilities, which would include liquefaction facilities, Felsinger said, "we have not made that leap yet, but we're looking at it. What we have done is to ask FERC [Federal Energy Regulatory Commission] for the ability to export existing LNG supplies, and we recently did some exporting out of our [North Baja California Cost Azul] Mexican facility."

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