Sempra U.S. Gas & Power, a subsidiary of
), has entered into a definitive agreement to sell one
625-megawatt (MW) block of its 1,250 MW Mesquite Power natural
gas-fired power plant to the Salt River Project (SRP)
Agricultural Improvement and Power District for $371 million.
The SRP is the umbrella name for two separate entities: the Salt
River Project Agricultural Improvement and Power District, an
agency of the state of Arizona that serves as an electrical
utility for the Phoenix metropolitan area, and the Salt River
Valley Water Users' Association, a utility cooperative that
serves as the primary water provider for much of central Arizona.
It is one of the primary public utility companies in Arizona.
The SRP Board of Directors approved a management proposal to
acquire 100% ownership of the 625 MW block and a 50% undivided
interest in the infrastructure facilities. The agreement is
subject to approvals from the Federal Energy Regulatory
Commission and other regulatory agencies. The companies
anticipate receiving these approvals in the first quarter of
We note that the Mesquite Power project has two 625 MW power
blocks. Besides the 100% ownership of one block, SRP also intends
to operate the second block. Each block is comprised of two
gas turbines and a steam turbine.
Sempra U.S. Gas & Power develops clean power solutions in
markets throughout the U.S. with a focus on zero and low-emission
fuels. The company operates a number of renewable and natural
gas-fueled power plants, including the largest photovoltaic solar
facility in the U.S. Its natural gas and renewable plants
combined generate power for nearly 1 million homes and
businesses. Sempra U.S. Gas & Power also operates 23 billion
cubic feet of natural gas storage, along with natural gas
pipelines and distribution utilities.
Recently, in October, Sempra Energy was awarded two bids by
Comisión Federal Electricidad ("CFE"), Mexico's state-owned
electric utility, to construct a $1 billion natural gas pipeline
network in northwestern Mexico. The new pipeline will be
comprised of two segments that will interconnect with the U.S.
interstate pipeline system and provide natural gas to existing
CFE power plants. The capacity for each segment is fully
contracted by the CFE for a 25-year term. The first pipeline is
expected to begin operations in late 2014.
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Moreover, the company's diversified basket of businesses
insulates its operations to a significant degree from regulatory
rate risks. However, the above positives are offset by a lack of
near-term positive triggers, along with near-term trepidation in
natural gas prices and pending regulatory cases.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
Sempra Energy is a southern California-based energy services
holding company involved in the sale, distribution, storage, and
transportation of electricity and natural gas. The company's
businesses are broadly divided into Sempra Utilities, Sempra
International and Sempra U.S. Gas & Power.
Some of the company's main competitors are
MDU Resources Group Inc.