San Diego-based Sempra Energy, which two years ago appeared to have a profitable niche selling energy services to large commercial/industrial customers, is looking to sell off that part of its nonutility businesses unless there is turnaround by the end of this year, Sempra CEO Steve Baum told the Deutsche Bank Electric Power Conference in New York City Tuesday.

“Unless it gets to about $30 million a year in earnings, in the relatively near term we will disaggregate that business (Sempra Energy Solutions); sell portions of it, and roll up the marketing part of it into our trading business,” said Baum, who noted that Solutions and Sempra’s energy operations are the only drags on its projected increased earnings estimates through 2008. (Sempra already has announced its longer term intention to sell all of its South American investments in Argentina and Chile.)

Although he said there is no precise time frame for selling the Solutions unit, Baum said in response to a specific question that the unit needs to “show this year that they can get their earnings up,” as the unit did two years ago when it had earnings of about $23 million. “They did very well with the commodity business in California, but they signed up a lot of the major players and then the [California] PUC put in the ‘exit fees,’ which made it much more difficult to get new customers.”

Baum said the time for making a determination is “not too far out.”

On the plus side in response to an analyst’s question, Baum said Sempra doesn’t have “a lot of capital” tied up in the energy services business. “They don’t have a lot of stranded capital, nor do they have a big capital program,” he said. “I’m pretty comfortable that we’re not ‘hanging out there’ for the future. I also think that we’ll probably get back the invested capital we have in some of the existing infrastructure.”

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