San Diego-based Sempra Energy held debt-equity initial public offerings (IPO) in Mexico during the first quarter, raising nearly $1 billion for its expanding operations south of the border, and in the process creating what CEO Debra Reed said is Mexico’s second largest energy company, IEnova.

During an earnings conference call last Thursday, however, Reed reported that earnings fell below expectations in 1Q2013, mainly due to a series of one-time charges and a continuing delay in a rate case decision in California for Sempra’s two major utilities, San Diego Gas and Electric Co. and Southern California Gas Co. Sempra reported 1Q2013 earnings of $178 million (72 cents/share) compared with $236 million (97 cents) for the same period last year, driven by one-time charges and utility profits that were off year/year by $34 million.

Reed was bullish about the Mexican developments, and noted that since the IPO launch IEnova share’s have increased in value by 22% as the first energy company on Mexico’s stock exchange. The March stock IPO, in which Sempra sold 19% of its interest, was preceded by two debt sales in February that garnered $400 million.

“This is consistent with our strategy to create capital structures in our international businesses that allow them to grow with local debt and equity,” said Reed. The project in Mexico is similar to one Sempra did earlier in Peru.

IEnova attracted a broad group of international investors, with the majority of the investment coming from Mexico. And, it has prospered. “Our 81% holding in IEnova is worth nearly double today what our book value in those assets was at the end of 2012,” Reed said.

Last October, Mexican state-owned electric utility Comision Federal de Electricidad chose a unit of Sempra International to construct, own and operate a 500-mile, $1 billion pipeline network to deliver gas to power plants in the northwestern Mexico states of Sonora and Sinaloa (see Daily GPI, Oct. 24, 2012). Sempra also has a major wind project and other upcoming gas infrastructure projects south of the border. Growth in Mexico will be through gas infrastructure extensions to supply a growing switch from oil to more gas-fired electric generation and expected new chemical plants. There also will be an uptick in renewable development.

In the United States, Sempra officials pointed to increased value for the company’s natural gas storage infrastructure in the Gulf of Mexico (GOM) when the liquefied natural gas (LNG) export facilities start operating. Sempra’s U.S. Gas & Power unit has 30.5 Bcf of gas storage working capacity in two facilities in Mississippi and Alabama, and it is developing 24 Bcf in Louisiana near its Cameron LNG terminal, for which it is seeking federal approvals to build a multi-billion-dollar joint venture liquefaction facility for exporting LNG supplies starting in 2017.

“We have done our engineering on turning the flow around at Cameron [the existing LNG import facility]; we are looking at other pipeline developments in the region to allow us to more easily move gas around; and our [developing] Louisiana storage is the closest developable storage to our facility and the [proposed] Cheniere and Freeport export facilities,” said Sempra President Mark Snell. “That storage will become increasingly more important as these plants start operating.

In terms of Sempra’s applications with the Federal Energy Regulatory Commission to build an export facility and with the Department of Energy (DOE) for approval to export to countries that are not parties to free trade agreements with the United States, Reed and Snell are optimistic that they will have one of the approved projects.

“All of the feedback we’re getting out of Washington makes us believe that our project and the other brownfield ones are likely to be approved,” Snell said. “There is nothing on the record at DOE that indicates they shouldn’t approve these projects, and I think that is an important point to remember. I would suspect they are going to get approved.”

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