It should be more of the same this year for San Diego-based Sempra Energy, and that includes expanded energy trading, natural gas infrastructure and California utilities, according to CFO Mark Snell, who spoke early Wednesday at the Credit Suisse Energy Summit in Vail, CO. Snell punctuated his remarks with suggestions Sempra may seek partners for its commodity business and it intends to take full advantage of what he called “a very favorable regulatory climate in California.”

Wall Street increasingly is viewing Sempra’s business profile as changing to a “higher growth, higher multiple” business as it shifts from being a “purchaser of cheap energy assets to a premier developer of energy assets,” AG Edwards said in an analysis completed Thursday in which the firm acknowledged it expects to do some investment banking with part of Sempra this quarter and it did business with an affiliated Sempra unit during the past year.

Saying his company had produced a cumulative total return of more than 100% over the past three years, Snell told analysts at Vail that the natural gas markets are changing, and Sempra has “an execution plan focused on building our leadership position where we see the highest growth.” For its trading unit, Snell said Sempra will seek a partner(s) that can add capital to greatly expand that area of it business while seeking to have it stand alone from a credit standpoint.

As its stock price passed $60/share during the week, AG Edwards raised its price objective to $66/share for Sempra, largely reflecting what it called “recent strength in the utility sector and the impact of higher peer group multiples on our valuation methodology.” AG Edwards Mike Heim said the market seems to be “gaining comfort” that Sempra’s commodities earnings base is higher, the company doesn’t need to issue equity and earnings growth in 2008 will be what he called “strong and the long-term growth rate has increased.”

“Commodities are still a huge and growing asset,” Snell said. If and when a partner(s) is found, it will be a combination of Sempra monetizing some of its trading assets and also expanding the capitalization for the business, Snell said. “We would still keep a significant amount of capital invested in the business, although it may not be the full $2.7 billion we have now. Essentially, what we would be looking for is a partner to grow the business and take it to the next level.

“The key to us is our continued participation in this, and what we would really like to do is free the parent company from the leverage constraints that we have by maintaining a commodities business. If we could get it on a stand-alone basis with its own credit profile, then the rest of the Sempra businesses could take a leverage profile that is more similar to other players in our industry.”

Sempra has had a good track record in commodities, operating one of the more successful energy trading operations in the nation. And the market is valuing its part in Sempra’s strong earnings more than it has in the past, Snell said in response to a question.

“Near-term volatility in the commodities’ markets is probably likely to continue, so we would expect superior performance out of our commodities unit in the next few years until new gas supplies reach the United States,” he said, noting that at year-end 2006 Sempra had $2.7 billion invested in commodities, with $7 billion in unused bank lines-of-credit. “This is a business that we are always going to be in.”

On Sempra’s partnership with Kinder Morgan and ConocoPhillips on the Rockies Express pipeline from Wyoming to the eastern United States, Snell sees as a “huge success story for natural gas infrastructure in the United States.” It is the largest pipeline project in 20 years, and the first phase of it is nearing completion after an accelerated two-year period from conception to approvals from the Federal Energy Regulatory Commission (FERC).

Snell said that in addition to the initial investment in the major new pipeline there will be “lots of opportunities” for follow-on projects of feeder pipelines, gathering pipeline systems and storage operations tied to the Rockies Express.”We’re counting on additional investments as we reach completion,” Snell said.

Last Wednesday, Sempra said that Segment 2 from Wamsutter Hub in Wyoming to the Cheyenne Hub in Colorado is expected to be in service on Tuesday (Feb. 13), and a 713-mile leg from Ceyenne to Missouri is scheduled to be in service in January next year.

Elsewhere, Liberty Gas Storage and Pipeline in Louisiana has completed construction of a 25-mile pipeline connecting the gas cavern storage unit to seven interstate pipelines in the area, AG Edwards reported. The $175 million project is nearing completion of compressor installation and should be in service shortly, according to the financial services firm.

In its California utilities — San Diego Gas and Electric Co. and Southern California Gas Co. — Sempra continues to see growth opportunities and the demand for new investment in infrastructure, said Snell, who called the regulatory climate “quite good.” Currently, Sempra is implementing a $6 billion utility capital investment plan

“All of the parts of our plan are consistent with the California Public Utilities Commission’s agenda, including some new technologies, such as automated meters,” Snell said. SDG&E has put one new power plant — Palomar Energy Center — into service, and it is under construction on a power loop from the California-Mexico border to Otay Mesa, he said.

Snell said SoCalGas plans to build additional natural gas infrastructure as necessary. “We are closely following the various liquefied natural gas (LNG) developments along the West Coast, and if any of those facilities are developed, we will need to build additional pipeline to bring those added gas supplies to market.”

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