Sempra open to asset swap as part of stake sale in new energy infrastructure unit

Sempra Energy will consider allowing an investor in a new company business unit that will combine some of its natural gas, LNG and renewable infrastructure to contribute assets in lieu of cash, CEO Jeffrey Martin said Feb. 25.

The company reiterated that it expects to secure the investor by the end of March, and it is on target to close in the second quarter that transaction and a related one that involves Sempra acquiring, through a stock-for-stock exchange, all of the outstanding shares of its Mexican IEnova subsidiary that it doesn't already own.

Sempra is talking to traditional and strategic energy infrastructure investors about selling a non-controlling interest in the new unit, Martin said during a conference call with analysts to discuss Sempra's latest financial results. The unit, Sempra Infrastructure Partners, will support Sempra's planned North American LNG export expansion.

" I would focus probably most likely on cash transactions, but we're not ruling out the idea that we could do an asset swap," Martin said, noting that in such a scenario the investor could contribute an asset as part of the overall value proposition .

He later added, " I don't see that as a high probability, but we're open-minded about it."

Sempra, which operates Cameron LNG in Louisiana and is building a liquefaction facility on Mexico's Pacific Coast at the site of its Energia Costa Azul import terminal, envisions having a 45 million mt/year LNG portfolio at full buildout based on currently proposed projects

The Sempra Infrastructure Partners unit that it announced in December will encompass certain natural gas distribution assets and cross-border and in-country pipelines, including those that export US natural gas to Mexico and supply the Energia Costa Azul facility. Final investment decisions have not yet been made for expanding Cameron LNG beyond its current three trains or building Port Arthur LNG in Texas.

Ideally, the new unit will self-fund all of Sempra's LNG growth plans, though Martin said the company is considering funding part of the Port Arthur project by taking on one or more equity investors in the project if needed.

Commercial efforts

Sempra secured a firm 2 million mt/year sales and purchase agreement with Polish Oil & Gas in December 2018 to support Port Arthur LNG, but has yet to finalize a preliminary agreement that Saudi Aramco signed in May 2019 to take a 25% stake in Port Arthur LNG . Sempra has not announced any firm offtake agreements tied to the proposed Cameron LNG expansion. The PGNiG deal at Port Arthur is subject to Sempra reaching FID within a certain timeframe.

Amid a challenging environment for adding new liquefaction capacity, especially in the US where banks or investment partners have traditionally been relied upon for the billions of dollars in startup capital, developers are increasingly looking for creative ways to pay for construction.

Sempra Infrastructure Partners will focus on the development and construction of North American LNG export infrastructure, natural gas infrastructure and renewable energy generation.

"We think this platform can grow and we think it can grow aggressively," Martin said. "And what we're really focused on is what investor out there has a shared view of the franchise value of Mexico and a shared view of the franchise value of LNG, and whatever consideration they bring forward, we're certainly open-minded."