Sempra Energy announced that, following a comprehensive strategic review of its businesses and asset portfolio over the past year, the company intends to sell several energy infrastructure assets, including its entire portfolio of U.S. wind and U.S. solar assets, as well as certain U.S. midstream assets. The board of directors approved the asset sales on June 25.
The planned asset dispositions represent the first phase of a multi-phase portfolio optimization initiative designed to sharpen the company’s strategic focus and create value for all shareholders.
“Our strategy is to continue building a leading energy company operating best-in-class utilities and developing contracted energy infrastructure in some of the largest economies in the Americas, with a focus centered on North America,” said Jeffrey W. Martin, CEO of Sempra Energy. “Our executive team and board of directors, along with our outside financial and legal advisors, have been engaged in a comprehensive strategic review of our asset portfolio over the past year, consistent with this strategy to drive shareholder value. The review was guided by several important considerations and factors, including: deployment of additional capital to improve critical utility infrastructure, changes in the U.S. tax code, California regulatory developments and strategic growth opportunities.
“This is just the first phase of our portfolio optimization, which we expect to continue in the coming months. We intend to continue evaluating our portfolio, looking for additional opportunities to create long-term value for all shareholders. We will pursue additional initiatives using a disciplined, phased approach, taking into consideration timing and market conditions.”
Midstream assets included in the planned sales are Mississippi Hub, an underground salt dome with 22 billion cubic feet (Bcf) of working natural gas storage capacity located near Jackson, Miss. along with related compression and pipeline facilities, and the company’s 90.9% ownership interest in Bay Gas Storage Company, Ltd., a 20 Bcf natural gas storage facility near Mobile, Ala. Both storage facilities are part of Sempra LNG & Midstream.
Also part of the planned sales are all of Sempra Renewables’ solar and wind assets and investments, including wholly owned facilities, and joint-venture and tax-equity investments with a total generating capacity of approximately 2,600 megawatts, as well as projects in development.
Sempra Renewables has ownership interests and investments in nine solar projects in Nevada, Arizona and California and wind projects in eight states stretching from Hawaii to Pennsylvania.
“Renewable energy is a vital part of the energy landscape and we have developed a great platform, but we have determined that our U.S. solar and wind generation businesses would be more valuable to another owner,” Martin said. “We will continue to be a leader in sourcing renewable energy for our utility customers, which is critical to the future of an expanding clean energy grid.
“Natural gas storage plays an important role in energy markets, but these Gulf Coast storage assets are no longer core to our business strategy. Monetizing these assets will support growth opportunities in our other U.S. businesses and strengthen our balance sheet.”
Sempra Energy expects to record impairment charges related to certain of these assets totaling approximately $1.47 billion to $1.55 billion, or approximately $870 million to $925 million after tax and noncontrolling interests, in the second quarter 2018. These impairment charges will result primarily from adjusting the related assets’ recorded values to the lesser of carrying value or estimated fair value, less costs to sell, as applicable. The company does not expect that any of the impairment charges will result in future cash expenditures, other than costs to sell. Gains, if any, from the sale of the wind and solar assets and investments would be recorded at the time of sale.
Sempra Energy’s executive management team will provide an overview of the company’s strategic plans, including portfolio optimization, at the company’s 2018 Analyst Conference today in New York.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2017 revenues of more than $11 billion. Sempra Energy is the utility holding company with the largest U.S. customer base. The Sempra Energy companies’ approximately 20,000 employees serve more than 40 million consumers worldwide.
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