Sempra Energy in Louisiana LNG Pact


Sempra Energy (SRE) struck a 20-year deal with GDF SUEZ S.A., Mitsubishi Corporation and Mitsui & Co., Ltd. for the development, financing and construction of a liquefied natural gas ("LNG") facility in the Cameron LNG complex in Hackberry, La. The agreement includes three separate tolling deals worth 4 million-tons-per-annum (Mtpa).

The combined initiative is subject to final investment decisions, permit authorizations, financing obligations and certain other customary conditions. These are expected to take place in early 2014. The entire program will cost in the range of $9 billion to $10 billion. Moreover, additional investments in the band of $6 billion to $7 billion will be directed towards the project.

Under the agreement, associates of Mitsubishi, Mitsui and GDF SUEZ will each acquire a 16.6% stake in the current facilities as well as the LNG complex. Sempra Energy on the other hand will act as the major operator carrying a 50.2% stake.

The large-scale initiative will involve a 13.5 Mtpa complex capable of transporting 12 Mtpa or 1.7 billion cubic feet of per day (Bcf/d) of LNG. It also includes three trains to be used for freight delivery purposes and regasification capability of 1.5 Bcf/d.

The construction activities will commence from 2014 with the first stage of operations anticipated to begin by the latter half of 2017. Following this, the three trains will fully come online by 2018.

Sempra Energy stands to benefit twofold from this LNG project in terms of serving the local La. economy as well as exporting globally, leading to a positive trade balance. This will also contribute to strengthening long-term ties with U.S.’s trading allies. The liquefaction project will turn out to be a key earnings driver in the future for Sempra Energy.

After penetrating the South American markets, the company’s strategic alliance with Japanese and French majors will bode well for Sempra Energy’s growth objectives. Presently, Sempra Energy holds a Zacks Rank #2 (Buy).

Other natural gas distribution operators currently performing well are Atmos Energy Corp. (ATO), Southwest Gas Corp. (SWX) and Chesapeake Utilities Corporation (CPK). All the above are well-positioned and also carry a Zacks Rank #2.

Based in San Diego, Calif., Sempra Energy together with its subsidiaries operates as an energy services company. The company currently has a market capitalization of $20.19 billion.

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