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Saturday, Dec 9, 2023

Sempra, KKR Strike Deal

Sempra Energy has agreed to sell a minority stake in a new business entity, Sempra Infrastructure Partners, to investment firm KKR for $3.37 billion cash. The San Diego corporation announced the move on April 5.

Sempra said it plans to use the proceeds to fund the growth of its U.S. utilities and strengthen its balance sheet.

The transaction still needs regulatory approval and is expected to close in the middle of 2021. The Sempra Infrastructure Partners business unit will include Sempra’s liquefied natural gas (LNG) business as well as its Mexico operations. Sempra operates gas pipelines, petroleum storage, power plants and other energy infrastructure in Mexico under the name IEnova.

Sempra said it expects the sale to be accretive to earnings.

“Over the next decade, we expect the energy markets in North America to continue to grow and become increasingly integrated. Combining our resources with KKR improves our ability to capture new investment opportunities in cleaner forms of energy and the critical infrastructure that stores and transports it,” said Jeffrey Martin, chairman and CEO of Sempra Energy. “This transaction also sends a clear signal about the value and expected growth of our infrastructure portfolio.”

The deal calls for KKR Global Infrastructure to acquire 20% of Sempra Infrastructure Partners.

The transaction values Sempra Infrastructure Partners at approximately $25.2 billion. This includes expected asset-related debt at closing of $8.37 billion.

“This transaction clearly highlights the value in SRE’s North American infrastructure franchise,” wrote Jeremy Tonet, an analyst with J.P. Morgan.

Mexico Market, Worldwide Exports

Sempra describes IEnova (short for Infraestructura Energética Nova, S.A.B. de C.V.) as a diverse portfolio of energy infrastructure projects and assets serving Mexico’s growing energy needs. In December, Sempra said it would launch a stock-for-stock exchange offer for the publicly traded shares of IEnova, with Sempra Energy’s common shares to be listed on the Mexican stock exchange.

Over the last several years, Sempra has been getting into the liquefied natural gas (LNG) trade in a big way, developing three projects. On the West Coast, it operates the Energía Costa Azul facility near Ensenada, Mexico. The plant, also called ECA, was built to import LNG. Sempra is now converting it to supercool natural gas from North American pipelines and export it to other countries. Sempra notes its plant is well positioned to export to countries on the Pacific Rim.

So far, Sempra’s biggest export project is the Cameron LNG plant in Hackberry, Louisiana, on the Gulf Coast near the Texas border. The Cameron plant began operating commercially in August 2019 and now has three trains (or production lines) with the capacity to export 12 million metric tons of LNG per year. Sempra and its partners are evaluating an expansion. Sempra owns approximately half of the Cameron plant.

In addition, Sempra plans to develop a second LNG export plant in Port Arthur, Texas.

Approvals Needed

The Federal Energy Regulatory Commission must approve Sempra’s decision to sell 20% of Sempra Infrastructure Partners to KKR. The deal also needs approval from the Mexican antitrust authorities.

Either Sempra or KKR may terminate the deal if it is not closed by Oct. 5. If KKR fails to receive financing proceeds by the closing, the deal calls for KKR to pay Sempra a reverse termination fee of $134.8 million.

As of Dec. 31, Sempra’s share in the debt related to Cameron LNG Holdings LLC was approximately $4.05 billion, Sempra told regulators in an April 4 securities filing.

Goldman Sachs & Co. LLC is serving as financial adviser and White & Case LLP is serving as legal adviser to Sempra Energy on the transactions. Credit Suisse Securities (USA) LLC and Mizuho Securities USA LLC are serving as financial advisers and Simpson Thacher & Bartlett LLP and Creel, García-Cuéllar, Aiza y Enríquez, S.C. are serving as legal advisers to KKR.

Sempra is also parent company to San Diego Gas & Electric Co. and Southern California Gas Co. The downtown-based corporation has stakes in the Texas utility system through Oncor Holdings and Sharyland Holdings.


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