San Diego-based Sempra Energy executives seemed unconcerned about cost increases and delays in some of the company’s key projects so far this year when they spoke with financial analysts Tuesday in a conference call.

While still considered relatively short, delays nevertheless have cropped up for the start of commercial operations at Sempra’s Costa Azul liquefied natural gas (LNG) receiving terminal along the Pacific Coast of North Baja California in Mexico, delays in the close of its joint venture trading operation with the Royal Bank of Scotland (RBS) and its higher buy-in capital cost, the continued delay of its San Diego Gas and Electric Co. (SDG&E) proposed Sunrise PowerLink 500-kV electric transmission line from the Imperial Valley, and a longer than planned outage spanning three months at its merchant El Dorado generation plant in southern Nevada in the fourth quarter.

Any income impacts from the LNG project delays from the first to the second quarter this year are “negligible,” according to Sempra CEO Donald Felsinger, who emphasized the excitement in the prospect of opening the West’s first LNG receiving terminal. Even the move by California to impose what Felsinger characterized as “some of the most stringent gas quality specifications in the world” does not phase Sempra, and the company last year quickly added a $125 million nitrogen injection facility at Costa Azul to meet these quality specifications because the added equipment will allow Sempra to process supplies from more varied sources around the world.

Felsinger quoted Federal Energy Regulatory Commission Chairman Joseph Kelliher’s recent prediction that the United States would become the world’s largest LNG importer by 2011, and he said the opening of the West Coast terminal by Sempra makes it the only nation with Atlantic and Pacific Ocean-based receipt capability.

Even though delayed, Felsinger assured questioning financial analysts that all of the expected major milestones are going to be accomplished this year, headed by the LNG terminal opening and the closing of the RBS trading joint venture.

While finishing the RBS trading deal “has taken a little longer than anticipated, I don’t think anyone anticipated the type of financial turmoil that has resulted from the subprime mortgage situation,” CFO Mark Snell said. This has made it “understandably difficult” for federal regulators to give the Sempra-RBS transaction the attention it needed. “We’re getting there, and we expect to get the Federal Reserve final buy off soon and close shortly thereafter — perhaps before April 1,” he said.

“RBS is meeting with us daily, they are ready to integrate the two businesses [into RBS Sempra Commodities] and from the get-go we’ll be ready to move forward.”

In response to other questions about merchant generation projects and possible asset acquisitions, both Snell and Felsinger indicated that once the RBS trading transformation is done, Sempra will be in a stronger position to take on new ventures. Market considerations, however, are still holding up the development of a 500-600 MW gas-fired combined-cycle generation plant in Maryland. New, higher PJM Interconnection pricing is one of the incentives to build there, the Sempra officials said, but they have to wait for the market to be just right.

“We’ve had a site for this project for a number of years and we haven’t developed it because the market has not given us the right pricing,” Felsinger said. “As we look at what is taking place right now in PJM, which has proposed for capacity payments in 2011, and if these payments, in fact, get approved by FERC, which we think they will, and if the local issues on taxes and construction costs can get to a level at which they make sense to us, this is a project we’ll move forward with. Now, there are still a few open items, but it looks pretty positive from the perspective of today.”

Construction costs now ($900 to $1,000/kW of capacity) cannot support new generation without capacity pricing by PJM, Felsinger said. “When we look at what is happening with PJM, we see they need capacity, and we think their proposed prices will support new generation getting built. We also think we have one of the few sites [in PJM] that is ready to be built upon.”

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