While trading and natural gas infrastructure projects have fueled record earnings growth in recent years, San Diego-based Sempra Energy’s two major California utilities remain the foundation for the $11 billion energy holding company, according to Standard & Poor’s Ratings Services (S&P).

S&P affirmed the company’s corporate and utility credit ratings. Sempra keeps its “BBB+” corporate rating, and Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E) remain with “A” ratings. As of last March 31, S&P noted that Sempra overall is carrying debt of about $6.2 billion, to which these ratings are applied.

S&P characterized California’s regulatory climate as “exceptionally supportive of credit quality,” and that fact allows the rating agency to offer the higher ratings on the two utilities, compared to the parent company and its unregulated subsidiaries.

“We could lower the ratings or revise the outlook to negative if large capital projects [liquefied natural gas (LNG) terminals, interstate gas pipelines and storage facilities, and independent power generation plants] run over budget and behind schedule and management does not protect credit quality by adjusting its planned share repurchase program,” said S&P analyst William Ferara.

Sempra’s corporate credit rating reflects both the utilities’ and the other subsidiaries credit profiles, S&P said. There are investments in Mexico and South America, in addition to LNG, pipeline, storage and power plant projects in the United States.

S&P sees Sempra’s upside potential as “limited by management’s financial policies,” which it characterized as being designed to protect credit quality at current levels. However, it noted that the approach does not anticipate future debt reduction or risk reduction to improve credit quality in the medium term.

The two Sempra utilities represented more than half of the company’s overall first-quarter profits ($131 million of $242 million) as Sempra senior officers marked the 10th anniversary of the firms creation from a merger of the respective holding companies for SoCalGas (Pacific Enterprises) and SDG&E (Enova).

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