Sempra divesting ‘non-core’ assets to focus on US utilities

North America’s energy company Sempra has decided to sell one subsidiary and divest a minority stake in another one to simplify its portfolio and support the growth of its Texas and California utilities.

Both planned divestments are said to be part of a broader set of five value creation initiatives for this year, which aim to increase long-term value for shareholders, employees, customers, and other stakeholders. The sales proceeds of what Sempra says are non-core assets are expected to be recycled into the company’s five-year capital campaign, with a focus on its U.S. utilities.

The company hopes to complete the transactions over the next 12–18 months, subject to reaching an agreement on acceptable pricing and other terms, securing required regulatory and other approvals, finalizing definitive contracts, and other factors.

The first portion of Sempra’s portfolio simplification plan entails the sale of Ecogas México, which holds three utility franchises and provides natural gas distribution service to the northern region of Mexico.

With more than 5,000 kilometers of distribution pipelines serving natural gas to more than 600,000 residential, commercial, and industrial consumers, Ecogas is said to be Mexico’s fifth largest distribution network.

Jeffrey W. Martin, Chairman and CEO of Sempra, noted: “At Sempra, we continually review opportunities to realign our portfolio to support the growth and expansion of our Texas and California utilities, while also maintaining a strong balance sheet. With today’s announcement, we believe we can successfully accomplish both objectives as we continue our work to drive enhanced long-term value for our shareholders.”

According to Sempra’s CEO, these actions are designed to advance the company’s broader effort to simplify the business and minimize reliance on future issuances of common equity to fund the company’s five-year capital plan.

The company also plans to divest a minority interest in its subsidiary, Sempra Infrastructure, which it describes as one of the leading energy infrastructure platforms in North America and a market leader in liquefied natural gas (LNG) assets and related pipeline and storage infrastructure.

Sempra previously divested a 20% non-controlling interest in Sempra Infrastructure to Kohlberg Kravis Roberts & Co. in 2021 and a 10% non-controlling interest to the Abu Dhabi Investment Authority in 2022. The firm says this has allowed its affiliate to increase its market value through the expansion of its LNG franchise, which benefits from access to North America’s Pacific and Gulf Coasts.

“At Sempra Infrastructure, we are pursuing a series of exciting LNG growth opportunities that are expected to further America’s position as a global leader in LNG exports,” said Justin Bird, Chief Executive Officer of Sempra Infrastructure. “By focusing on the critical need for new energy infrastructure in North America, our company’s pipeline of development projects is expected to provide benefits to a broader base of customers and differentiated growth for decades to come.”

One of the projects Sempra Infrastructure is developing is the Energía Costa Azul (ECA) LNG Phase 1. Its location on Mexico’s West Coast, north of Ensenada in Baja California, is believed to provide an opportunity for connecting Asia, the Pacific Basin, and international LNG markets and potential markets on Mexico’s West Coast to North American natural gas supplies directly from the Pacific coast.

ECA LNG Phase 1 is a single-train LNG facility with the capability to export approximately 3.25 million tonnes per annum (mtpa) of LNG. ECA LNG Phase 2 is being developed to expand this by adding around 12 mtpa of LNG export capacity with two trains and one LNG storage tank.

In August 2024, the ECA LNG Phase 1 project was said to be 85% complete, with commercial operations scheduled to start in the spring of 2026.

The construction of Port Arthur LNG Phase 1 in Jefferson County, Texas, is also said to be progressing according to schedule and within budget. With a nameplate capacity of approximately 13 mtpa, the plant’s Trains 1 and 2 are expected to come online in 2027 and 2028, respectively. The groundbreaking ceremony for Port Arthur LNG Phase 1 was held in March 2024.

The U.S. player is targeting a final investment decision for Port Arthur LNG Phase 2 this year, once the necessary permits and funding, among other things, are secured. As part of Phase 2, Sempra proposes to expand the liquefaction-export project with Trains 3 and 4, which could double the total nameplate capacity of the facility.

Active commercial discussions with world-class companies for participation in the Phase 2 development project are said to be underway. Underpinning this are non-binding heads of agreement for LNG offtake and a proposed equity investment with a subsidiary of Saudi Aramco, and a fixed-price engineering, procurement, and construction (EPC) contract with Bechtel for Port Arthur LNG Phase 2.