Sempra Energy executives expect their proposed $10 billion liquefied natural gas (LNG) facility in Cameron Parish, LA, to be fully operational by the end of 2018.
Sempra CEO Debra Reed called 2013 a “foundation for our future growth” while saying she was “extremely happy” about the Feb. 11 conditional permit from the U.S. Department of Energy (DOE) to export LNG to non-free trade agreement countries from the proposed Cameron facilities at the company’s existing LNG receiving terminal site in Louisiana (see Daily GPI, Feb. 11).
In response to numerous analyst questions about Sempra’s previously stated aim of creating a master limited partnership (MLP) at Cameron (see Daily GPI, March 30, 2012), Reed said that it is still a strategic goal for Sempra, but the timing and opportunities are not right yet to pursue an MLP.
“Cameron is a really strong anchor for an MLP, but its cash flows don’t start for several years,” Reed said. We continue to explore ways to jump-start an MLP using our own storage and pipeline assets, or by developing or buying other assets, but after much analysis, we have determined that currently our existing assets don’t provide the certainty of cash flows to support the formation of an MLP. We will continue to assess this.”
Reed acknowledged that Sempra’s assets are “well positioned” to generate contracts for gas supplies out of both the Utica and Marcellus shales that could eventually help jump-start an MLP involving Cameron. She said Sempra has many growth prospects tied to LNG and gas infrastructure.
Both Reed and Sempra President Mark Snell expressed confidence that the Cameron project will obtain a Federal Energy Regulatory Commission construction permit, financing for the $6-7 billion construction, and an engineering procurement construction (EPC) contract in the next few months, allowing construction to start before the end of this year.
“We had a very robust response to our financing efforts,” said Snell, adding that he is now “highly confident” of being able to complete and finance the Cameron LNG project “without any problems.”
On the EPC contract discussions, Snell said Sempra is in “the final weeks of negotiating the contract, and we will come out of this with a contract that is as lump-sum, turn-key contract that shifts the construction risk to the EPC contractor. The market has been good [for this type of contract], and we have a very nice contract with a very experienced builder.”
Reed said Sempra feels very confident regarding the estimates on the costs and timetable for the Cameron project. Snell added that the LNG business can be characterized as a “midstream” business that lends itself to an MLP eventually.
“We are starting construction on Cameron with the mindset that this isn’t just a single-asset business,” Snell said. “It is a business that we believe we can grow and continue to, so we are very happy to have an LNG business and not just an LNG asset.”
During 2013 Sempra earned $1 billion ($4.01/share), compared with $859 million ($3.48/share) in 2012. In 4Q2013 Sempra earned $282 million ($1.13/share) compared to $293 million ($1.18/share) in 4Q2012.
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