Over the next five years, San Diego-based Sempra Energy, which envisions itself becoming a major North American LNG importer, plans to sell numerous natural gas distribution assets that it has built and acquired in other states and Latin America, according to senior executives who briefed financial analysts at an all-day conference Wednesday in San Diego. In the same briefings, the company officials also reaffirmed that they are looking hard for “good acquisitions,” saying there are plenty of potential ones available.

Included in the eventual sales are distribution assets in Argentina, Chile, Peru and perhaps even Mexico, and new gas systems built in Maine and North Carolina.

Sempra CEO Steve Baum, asked specifically about these plans, said, “We have said that we would like to exit our South American investments in an orderly fashion. We have set a five-year window for that, and until we get some resolution in the claim against the Argentine government it would be premature to discuss or enter into a sale of those assets. The other two assets (in Chile and Peru) are performing well. We have had good rate case outcomes, but they are tangential to our strategies. As Don [Felsinger, president of the Sempra Global Group] said, they don’t have any synergistic aspects to them.

“We have a couple of greenfield developments in Bangor, ME, and with Frontier, the North Carolina gas utility. Those, I would say…are tangential to our strategies, so we would look to exit those. It may be that as time goes forward that the distribution assets in Mexico would be ones that we would also sell, or potentially create an IPO [initial public offering] for within Mexico.”

Felsinger said Sempra also has a small exploration and production company, and in time, it intends to sell that, too. “When the [North Baja transmission] pipeline became operational in Mexico, it was suggested that we divest ourselves of the one LDC hooked up to it, although there is not a required timetable we would have to follow,” he said.

As part of the analyst briefing, Sempra said it planned to spend $1.3 billion annually over the next five years on capital expenditures, and it is sticking with its earnings target for 2003 in the range of $2.69 to $2.80/share, even though its first quarter results released May 1 fell short of Wall Street’s expectations.

“What really matters in any business is how well you invest your money,” said CFO Neal Schmale. “The financial people cannot fix, by clever borrowing, bad investment decisions. Conversely, really good investment decisions are the foundation of the quality of a company’s balance sheet. I can’t emphasize this enough.

“What really drives everything at the end of the day is how well we invest, and that is why we focus so intently on the investment criteria that others [Baum and Felsinger] talked about earlier. And it is mostly about cash. The people I work with closely will tell you we focus intensely on cash.”

Baum emphasized that Sempra is still “standing and growing” while many of the other firms in the energy sector are floundering. He said a “disciplined financial approach” is one of the main reasons for his company’s success.

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