With its natural gas and power unit showing red ink in the face of historically low wholesale gas and electricity prices, Sempra Energy is in the process of exiting the merchant power sector where it has been selling off nonrenewable assets, CEO Debra Reed said Tuesday during a quarterly earnings conference call with financial analysts.
“We are on track to exit merchant generation,” said Reed, who cited ongoing sales of assets, including the pending half-interest in the Mesquite, AZ, gas-fired plant to Phoenix-based Salt River Project. “We will continue to reduce our exposure to the merchant generation sector.”
Sempra will keep its growing interest in renewable-based generation (wind and solar), which has long-term power supply contracts and are not technically “merchant” generation, a spokesperson said. The baseload gas-fired plants have operated in the competitive purchase power markets without contracts for more than 10 years.
Despite the expiration of its 10-year power purchase agreement with the California Department of Water Resources, Reed said the company is finding some great growth opportunities elsewhere, including gas transmission pipeline projects in Mexico (see Daily GPI, Oct. 24).
Reed was asked by an analyst if she is comfortable with what the company has still “out there” in the independent power sector.
“We don’t see merchant power as part of our long-term strategy,” Reed reiterated. “Our desire is to exit merchant power at this time. We have been moving in that direction for some time.”
She noted that in addition to the Mesquite facility, Sempra has sold its 50% interest in the Elk Hills plant near Bakersfield, CA, to Occidental Petroleum Corp. (see Power Market Today, Jan. 4, 2011).
“We have about 1,450 MW still in the fleet and we are on a path to end our merchant generation involvement, but we’re not in a big rush to sell the remaining assets. We want to take our time and find the deals that will bring the most value to our shareholders.”
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