With the continuing global shakeup in the banking industry, a highly profitable joint venture commodity trading business between the Royal Bank of Scotland (RBS) and San Diego-based Sempra Energy could eventually unravel, although Sempra moved Monday to put the situation in perspective for U.S. financial markets. Sempra CEO Donald Felsinger issued a statement in response to news reports that RBS may divest its interest in the RBS Sempra Commodities joint venture.

As part of RBS’s ongoing infusion of support from the British government, the bank is currently in negotiations with the UK and European Commission in attempts to restabilize its finances, and part of that could involve unspecified “divestments,” according to a Monday news release by RBS.

RBS indicated that further announcements should be coming later this week — on or before it issues its third quarter financial results this Friday.

In March in the midst of the shakeout in the credit markets and financial sector worldwide, Sempra’s senior executives said the joint venture remained profitable, and at worst Sempra would take back its $1.6 billion investment and look for another partner with global heft if the RBS partnership cratered (see Daily GPI, March 3). At the time Sempra CFO Mark Snell said the joint venture agreement calls for an initial four-year period in which neither side unilaterally can leave the partnership. Sempra has $1.6 billion invested, and RBS was looked to for additional capital in the years ahead. The joint venture marked its first anniversary last April.

On Monday, however, Felsinger did confirm that he had been informed by the RBS leadership that the bank may have to divest its interest in the RBS Sempra Commodities joint venture.

“Our agreement with RBS requires that the bank maintain its ownership of the joint venture through April 2012,” Felsinger said. “We also understand that any forthcoming divestiture order from the European Commission (EC) is expected to allow for an orderly transition, comply with our joint venture agreement and be executed in a manner that would maximize the value of the business.

“Our agreement gives Sempra Energy certain rights with respect to any new owner of RBS’s share of the joint venture and also the right to reacquire RBS’s share. After discussions with RBS, we are confident that RBS is committed to continuing the capital and credit support for the joint venture going forward. Our interests are aligned with RBS in continuing to create value in this business.”

With respect to the EC, RBS said Monday that negotiations between Britain’s Treasury and the EC “are in their final stages and will include some divestments not initially contemplated. It remains RBS’s goal that any required divestments do not threaten its recovery plan, which is already under way.”

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.