Previewing the qualitative, non-financial part of it quarterly and annual financial results, which will be released later this month, Sempra Energy CEO Steve Baum told employees in an internal report that the company set a “new performance standard” in 2003, passing a number of “major milestones” mostly regarding merchant gas and electric activities. Natural gas, he said, remains a key to Sempra’s overall long-term strategy.
“Our ability to run our businesses effectively, efficiently and prudently has enabled us to succeed as a diversified energy company while many others with similar plans have failed,” Baum said.
At the top of his list of major milestones was the company’s forming a 50-50 joint venture with Shell International Gas Ltd to build, own and operate a $600 million liquefied natural gas (LNG) receiving terminal along the Pacific Coast of North Baja California, Mexico. The partners have merged their separate, competing plans for building receiving terminals at Costa Azul to concentrate on just one site in the area about 14 miles north of Ensenada.
Closely aligned in priority, Baum cited the company’s new nonbinding LNG supply deal with BPMiGas and British Petroleum for 500 MMcf/d from Indonesia’s Tangguh LNG liquefaction facility. Supplies would be brought to the joint Shell-Sempra terminal.
With two major California utilities as its core business, Sempra has integrated its five merchant lines — trading, power plant/pipeline facilities, energy services for the large commercial and industrial sector, international, and LNG — to provide customers with complete energy solutions, said Baum, who has headed the company for the last three-and-a-half years.
Calling Sempra a “big user of natural gas,” Baum pointed out that its utilities — Southern California Gas Co. and San Diego Gas and Electric Co. — distribute supplies to five million gas customers daily; most of Sempra’s merchant power plants operate on natural gas, and its trading unit, Sempra Energy Trading, is one of the biggest physical traders of gas (13 Bcf/d).
“With this experience, it was very important for us to understand what was happening in the natural gas markets when we saw price increases a few years ago,” Baum said. “Also, federal energy officials have now acknowledged the coming supply/demand imbalance that we were among the first to recognize almost three years ago. And they see the same solution (LNG) for it now that we saw then.
“Our efforts to understand the underlying fundamentals of the energy industries in which we operate, and our emphasis on risk management and sound financials, have helped us to identify and capitalize on opportunities,” said Baum, who noted that his company has succeeded where others have failed, but will not “sit back on our laurels; we’re looking forward, taking action.”
Along with the favorable LNG developments at the end of the year, Sempra’s two utilities also reached settlement in principle with the California Public Utilities Commission’s independent consumer advocacy branch, the Office of Ratepayer Advocates (ORA), on the two utilities’ cost-of-service rate cases, for which there should be proposed decisions released later this month. These cases will decide how much the utilities can charge in rates this year to recover their operating/maintenance costs.
Baum predicted that the employees and stakeholders can look forward to “even greater success” this year.
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