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California's policies drive Sempra investments through 2021

Sempra Energy plans to invest roughly $14.2 billion in its utility and energy infrastructure business over the next five years, company officials said April 5. During a conference for financial analysts, Sempra officials said the majority of the spending — approximately $12.3 billion — is planned for its California utilities, San Diego Gas & Electric Co. and Southern California Gas Co. The company also told analysts of a projected long-term compound annual earnings-per-share growth rate of 10% to 11% from 2017 through 2021.

Sempra Chairman, President and CEO Debbie Reed said that growth comes from successfully executing on current projects and expected utility performance.

"We're not putting speculative projects in our plan, we're taking the projects that we have currently under contract and those are the projects that build to this 10% to 11% growth rate," Reed said.

Further, Sempra expects its U.S. businesses to increase in percentage the company's portfolio between now and 2021. The businesses are about 70% of the portfolio today in terms of earnings, she said, growing to about 75% of Sempra's portfolio come 2021.

Reed also said Sempra will have $2.5 billion to $4.5 billion in available debt capacity, which can further enhance long-term results.

California policy driving investments

Steve Davis, corporate group president for Sempra's utilities, said the company's investment platforms in the state are largely driven by California's public policies. A push for more renewables, for instance, will require having a distribution system that can accommodate those resources.

Davis said 80% of investments by California's utilities over the next five years are tied to safety and reliability and modernization.

Among other projects, SDG&E will spend $450 million to $500 million on fire hardening and public safety in the Cleveland National Forest and $300 million to $360 million to provide local and regional transmission reliability in South Orange County. Meanwhile, SoCal Gas will spend $1.2 billion to $1.3 billion to test and replace gas transmission pipelines and another $1 billion to $1.1 billion on programs on gas transmission, distribution and storage integrity.

Sempra sees roughly $1.9 billion to $2.6 billion of potential investments incremental to its five-year plan and beyond, much of that under the umbrella of system modernization.

One project Davis highlighted involves converting a transmission line in the San Diego region from an AC line to DC line. The Southwest Powerlink, projected to cost $900 million to $1 billion, would improve reliability in the region and allow for more renewables, Davis said.

They are in discussions with the California ISO for the idea. The grid operator would have the first approval of that concept, he said.

Another growth area is in battery storage, he said. Davis said there is legislative authority for 300 MW of battery storage. There are about 100 MW of batteries on Sempra's system today, and 45 MW owned by the utility. "We see this as a terrific growth opportunity and a way to really align well with our state's goals on carbon reduction," Davis said.