Sempra to sell 2.6 GW renewable portfolio, gas storage assets
Sempra Energy on Thursday said it plans to sell its portfolio of U.S. wind and solar plants totaling 2,600 MW.
The company, parent of San Diego Gas & Electric and Southern California Gas, also plans to sell two natural gas storage facilities — a Mississippi facility with 22 billion cubic feet of storage and its 91% stake in Bay Gas Storage near Mobile, Alabama.
- The divestitures are the first phase of a three-phase effort to "optimize" the company's business portfolio and comes as the company is under pressure from activist investors to divest its international assets and its liquefied natural gas business.
At an analyst day meeting on Thursday, Sempra CEO Jeffrey Martin told investors the company plans to sell its renewable energy portfolio and some gas storage assets, but stopped short of calls from activist investors Elliott Management and Bluescape Resources that had called for the company to sell its Latin American businesses and spin off its U.S. liquefied natural gas business.
During the meeting, Martin emphasized that Sempra's focus is on "the overlooked opportunity around the dividend" and cutting debt. He said he wants Sempra to be the number one company for dividend growth and hopes to reduce debt from about 56% of its capital structure to around 53% or 52% by 2020.
In terms of its portfolio, Martin said Sempra's focus is on North America and particularly the United States, but he also corrected what he said was a misperception that the company is sending money overseas to its businesses in Chile and Peru. Those operations are "self funding," he said.
Dennis Arriola, Sempra's chief strategy officer, said during the meeting South America continues to make sense for Sempra. Chile and Peru have a good regulatory framework and positive economic growth, he said.
Many companies are coming under increased pressure from activist investors to optimize portfolios by selling what they see as under performing assets. Earlier this year, NRG Energy sold off $2.8 billion in assets, including renewable assets as well as some conventional power plants, in response to pressure from Elliott Management and Bluescape.
In January, a group of investors that includes affiliates of Elliott Management, Bluescape, GIC and Zimmer Partners prompted FirstEnergy to agree to shed its merchant generation business.
Regarding the additional divestitures Elliott Management and Bluescape wanted Sempra to make, analyst Paul Patterson with Glenrock Associates told Utility Dive, "Sempra isn't ignoring those investors." He said he doesn't "see this as that big a change in how the company is operating."
Sempra has shown "flexibility, even dexterity, in getting in and out of businesses," Patterson said.
Patterson did not read some larger meaning into Sempra's sale of its renewable portfolio. "It could be more valuable to somebody else and [Sempra] feels they can monetize it and deploy the capital more effectively elsewhere," he said.
Sempra executives left open the possibility of further divestitures in the future. The announcement on Thursday "doesn't seem like it's the final word," Kit Konolige, a utility analyst at Bloomberg Intelligence, said in a Bloomberg article.
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