Coming off record 2005 profits approaching a billion dollars, San Diego-based Sempra Energy is looking to solidify more of its high-profile natural gas projects in the weeks and months ahead with cash from some of its ongoing merchant electricity sector sales, according to CEO Donald Felsinger.
Speaking Wednesday to financial analysts on a year-end earnings report conference call, Felsinger said Sempra is targeting $2.3 billion in capital expenditures this year, split evenly between its California utilities and its various merchant trading, generation, liquefied natural gas (LNG) and pipeline/storage businesses.
Felsinger said Sempra expects to make key a announcement on its Rockies Express Pipeline joint venture with Kinder Morgan “within the next week” and expects an update on its sales of remaining power plant properties in Texas in “the very near future.” In the meantime, the already announced $480 million sale of the company’s Twin Oaks power plant in Texas will close in the second quarter with an after-tax gain of $215 million, Felsinger said.
Felsinger said the company is working to finalize binding commitments from shippers for more than 1 Bcf/d of firm capacity on the proposed 1,300-mile Rockies Express project. “The total cost of the project, including the cost of [a related pipeline link] and capitalized interest during construction, is expected to be in the $4.0-4.4 billion range,” said Felsinger, adding that Sempra is working closely with Kinder Morgan and “hopes to provide additional information on the status of this project within the next week.”
He said construction is on schedule at both the Energia Costa Azul LNG project on the Pacific Coast of North Baja California and the Cameron, LA, LNG facilities. In addition, Sempra expects final Federal Energy Regulatory Commission approval for a third LNG receiving terminal at Port Arthur, TX, by the middle of this year.
Compared to $1.5 billion in capital investments last year, Sempra expects to increase its investment in new projects by $800 million, with half going to its California utilities, where Felsinger said the investments “will help grow our rate base and strengthen our generation, distribution and transmission systems. We plan to use the proceeds from our asset sales to help fund our expanded capital programs and we’ll continue to effectively manage our balance sheets.”
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