Renewables, Wind

Sempra nets $2.5B in exit from U.S. renewables and gas storage biz

While other utilities are ramping up their clean energy businesses, California-based Sempra Energy completed divestment of its U.S. renewables stake this week in a $584 million cash deal with American Electric Power.

The California based company sold its Sempra Renewables unit and non-utility natural gas storage assets as a part of a debt reduction plan and focus on core assets, it reported earlier this year. The transactions generated approximately $2.5 billion in total cash proceeds for Sempra.

The AEP deal included the cash and another $500 million in debt and tax equity proceeds, according to earlier reports.

“We have a long and successful track record of actively managing our portfolio, including exiting businesses that are no longer consistent with our strategy,” said Joseph A. Householder, president and chief operating officer of Sempra Energy. “The proceeds from the asset sales will be used to pay down debt and redeploy capital to support the strategic growth of Sempra Energy in North America.”

Those farms include the Black Oak Getty Wind project in Minnesota and the Apple Blossom Wind project in Michigan, as well as its interests in the following projects jointly owned with BP Wind Energy: Auwahi Wind in Hawaii (wind and battery storage), Flat Ridge 2 Wind in Kansas, Mehoopany Wind in Pennsylvania, Cedar Creek 2 Wind in Colorado, and Fowler Ridge 2 Wind in Indiana.

They all have long-term, power purchase agreements (PPAs) for 100 percent of the energy produced with investment-grade investor-owned utilities, municipal utilities and electric cooperatives. The project PPAs have an average remaining life of 16 years. AEP operating units AEP Ohio, Indiana Michigan Power and Southwestern Electric Power Company have PPAs with two of the wind farms.

In February, Sempra Energy completed the sale of its non-utility U.S. natural gas storage facilities to an affiliate of ArcLight Capital Partners for $328 million in cash, subject to post-closing adjustments.

In December 2018, Sempra Energy completed the sale of its U.S. solar assets and battery storage development projects, as well as its ownership interest in one wind facility, to Consolidated Edison for approximately $1.6 billion. The company also is in the process of selling its equity interests in its South American businesses, including its 83.6 percent stake in Luz del Sur S.A.A. in Peru and 100 percent stake in Chilquinta Energía S.A. in Chile.

Credit Suisse and J.P. Morgan served as Sempra Energy’s lead financial advisors and Latham & Watkins LLP its legal advisor on the sale of the wind portfolio.

With the Sempra deal, AEP’s competive renewable generation portfolio now totals 1,075 MW of capacity in 11 states. The portfolio will grow to 1,302 MW once AEP Renewables’ acquisition of a 75 percent interest in the Santa Rita East Wind Project in Texas is completed.

“The addition of these high-quality renewable assets and the experience of our new employees will support our long-term strategy to diversify our generation fleet. We’ve targeted a total of $2.2 billion in capital investment in competitive, contracted renewables by 2023. The long-term contracts and attractive returns associated with these existing assets will be immediately accretive to earnings and solidify our projected 5 to 7 percent earnings growth rate,” said Nicholas K. Akins, AEP chairman, president and chief executive officer.

Sempra owns San Diego Gas & Electric, Southern California Gas Co. and a controlling stake in transmission firm Oncor Electric Delivery based in Texas.

AEP owns regional providers such as Public Service Co. of Oklahoma, Appalachian Power, Indiana Michigan Power, Southwestern Electric and more.