Sempra Energy (SRE) announced that it will dispose the remaining assets of its joint venture with Royal Bank of Scotland Group PLC (RBS) – RBS Sempra Commodities. The remaining assets consisting of Sempra Energy Solutions unit would be sold to Hong Kong commodities firm Noble Group for $317 million in cash, plus assumption of $265 million in debt. Sempra Energy Solutions unit is the U.S. retail commodity marketing arm of RBS Sempra Commodities. With approximately 200 employees, Sempra Energy Solutions sells energy to commercial and industrial customers in 16 states.
Sempra Energy's divestment of the retail commodity marketing arm is the beginning of the second phase of RBS Sempra Commodities' asset sales. Earlier, in July 2010, the JV's global metals and oil businesses along with European natural gas and power businesses were sold to JPMorgan Chase & Company (JPM). The Sempra Energy - Royal Bank of Scotland JV got richer by $1.6 billion from the deal.
Sale of Sempra Energy Solutions unit would however require regulatory approvals from the Federal Energy Regulatory Commission and under the Hart-Scott-Rodino Act. The company expects to close the transaction in the fourth quarter 2010. Sempra Energy expects its share of the proceeds from the sale of the above two deals to be around $1.8 billion–$1.9 billion.
Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of natural gas. Its subsidiary, Sempra LNG, develops, owns and operates liquefied natural gas receipt terminals serving North American markets. Sempra competes with other companies for construction and operation of liquefied natural gas receiving terminals and purchase of the same.
We are positive about Sempra Energy's stable base of utility earnings along with expansion in liquefied natural gas terminals and renewable power projects in the Pacific Southwest.
However, on account of pending regulatory issues, tepid pace of assets sale of its Commodities JV, we reiterate our Neutral recommendation on the Zacks #3 Rank Sempra Energy stock. In the near term we would advise investors to focus on its Zacks #1 Rank (Strong Buy) peers like Chesapeake Utilities Corporation (CPK).
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