While the new CEO reiterated Tuesday that San Diego-based Sempra Energy’s focus would remain fixed primarily on utility operations, the energy holding company will continue to look for other opportunities in what was called “contracted energy infrastructure” investments.
Noting that the company is going through a revision of its five-year strategic plan with one of the objectives being to look for new opportunities that could come from the changing energy landscape, Sempra CEO Debra Reed said new opportunities for natural gas-fired electric generation are likely to come from the combination of the new federal environmental standards forcing closure of more U.S. coal-fired plants and the nuclear plant fallout from the Japanese earthquake-tsunami in March.
Reed did not discount more investment in Latin America where Sempra has been expanding its footprint in Mexico, Peru and Chile, nor is a liquefied natural gas (LNG) export project in the United States off the table. She indicated that Sempra is currently exploring possibilities in all of those areas.
In response to questions about the development of future partnerships to expand Sempra’s ongoing involvement in interstate gas pipelines, storage and LNG projects, Reed said these were exactly the types of issues Sempra’s senior management team is looking at as part of its five-year strategies. “We’re looking at every asset we have, and what is the best structure for that asset,” she said. “We’re looking at which assets we can add assets to and increase the value, and what is the best way to maximize the value of our existing investment.”
This prompted the obvious question about Sempra joining others in the industry in pursuing the development of LNG liquefaction facilities at its existing Cameron, LA, import terminal.
“That is a possibility,” said Reed, but only if it includes long-term contracts from a creditworthy counterparty. “Don [Felsinger, former CEO] has said we are not going to do this without long-term contracts, and I concur. But it is certainly something we are currently looking at with other parties.”
In a similar vein, Reed said as an outgrowth of existing joint projects Sempra has with the Mexican national oil/gas company, Pemex, Sempra is exploring some future growth projects. “There has been no additional movement in terms of them ending the partnership, and as long as we remain in the partnership, we believe there could be a number of projects that we could do jointly.”
In terms of Latin America, where Sempra earlier this year expanded its ownership interest in the major electricity providers in Peru and Chile, Reed envisions lots of growth opportunities. She recently met with the newly elected president of Peru, its prime minister and energy minister, and found they were “very interested” in seeing that a lot of new generation gets built.
“In Peru we’re working on our first hydroelectric project, about 100 MW that will be completed over the next couple of years. That project, in turn, will give us the opportunity to do more. But I want to stress that there is basic growth in our Chile and Peru distribution utility businesses. Customer growth is about 2.5% annually, and sales growth is 5.5% to 7% annually.
“So we are interested in other distribution companies, if they could be consolidated in a way that they would make a wise investment for us. These areas have high growth and stable regulatory environments.”
In response to other analyst questions, Sempra indicated it has looked at being part of the now-delayed Brass LNG project from Nigeria. Outgoing COO Neal Schmale, who indicated that he will retire before the end of this year, said the company has had an interest in acquiring a small stake in the $12 billion project. “I emphasize the word ‘small,’ and this project like all of the others takes a long time to get going, but I think the general idea is that acquiring molecules of LNG internationally would allow us to improve our LNG business.”
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