Sempra Buys S. American Utilities - Analyst Blog

Sempra Energy (SRE), through its subsidiary Sempra Pipelines & Storage, plans to acquire AEI's stake in two South American utilities, which it has been owning jointly with AEI for the past 12 years. The company will pay roughly $875 million for the two electric distribution utilities – Chilquinta Energia S.A. and Luz del Sur.

Sempra Pipelines & Storage and AEI presently own 50% interest each in Chilquinta Energia S.A. in Chile and about 38% interest each in Luz del Sur in Peru.

Following the acquisition, which is expected to close in second quarter of 2011, Sempra Pipelines & Storage will become the rightful owner of Chilquinta Energia owning a 100% stake and will own nearly 76% of Luz del Sur. Institutional investors and the general public will continue to own the remaining stakes in Luz del Sur. 

Located in central Chile, Chilquinta Energia serves roughly 590,000 customers in the cities of Valparaiso and Vina del Mar. Luz del Sur serves nearly 886,000 customers in the southern zone of metropolitan Lima, Peru, delivering about a third of the power consumed in the country. 

Sempra said both Chilquinta Energia and Luz del Sur have successful track records of earnings growth and offer continuing opportunities to re-invest capital in expanding infrastructure. Sempra Energy expects the acquisition to add about $0.15 and $0.22 to its EPS in 2011 and 2012, respectively. As a result, the company also furnished its 2011 EPS in the range of $4.00 to $4.30.  

In addition to these two utilities Sempra Pipelines & Storage has also agreed to acquire AEI's stakes in two other energy-services companies – Tecnored S.A. and Tecsur S.A. – as a part of this transaction. The deal is subject to AEI shareholder approval and other closing conditions, including regulatory approvals.

Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas. Sempra Pipelines & Storage is an operating subsidiary of the company's Sempra Global and parent business unit. It develops, builds and operates natural gas pipelines and storage facilities in Latin America and the United States, and serves about 2.8 million power and gas customers.

Sempra Energy is scheduled to release its fourth quarter and fiscal 2010 results on February 25, 2011. The Zacks Consensus Estimates for fourth quarter, fiscal year 2010 and fiscal year 2011 are 93 cents per share, $3.65 per share and $4.14 per share, respectively.

Sempra Energy presently has a short term Zacks #3 Rank (Hold). This supports our long term ‘Neutral' rating for the stock. However, we advise investors to focus on the company's Zacks #2 Rank (Short-term Buy Rating) peers like Chesapeake Utilities Corporation (CPK) and South Jersey Industries Inc. (SJI), as we expect the company's stock price to encounter weak trends in the near-term.

 
CHESAPEAKE UTIL (CPK): Free Stock Analysis Report
 
SOUTH JERSEY IN (SJI): Free Stock Analysis Report
 
SEMPRA ENERGY (SRE): Free Stock Analysis Report
 
Zacks Investment Research