EUR 850.00 For Business Accounts Only

Morningstar | Activist shareholders could distract management from attaining its strategic objectives.

Sempra Energy's investment opportunities at its regulated California and Texas utilities will remain the primary growth driver. We expect those utilities will receive 80% of the company's three-year, $15.2 billion capital plan. Both utilities could see an opportunity for combined $1.5 billion-$2.45 billion in additional investment opportunities.We consider California's regulatory environment less constructive than its peers, but its emphasis on distribution-related safety and reliability infrastructure upgrades provides an attractive growth opportunity. We view the regulatory environment in Texas as more constructive, which bodes well for the company's investment in the region. On a consolidated basis, we forecast 9% earnings growth through 2022, and 9% dividend increases through 2019, then 11% beginning in 2021. Sempra's investors have exposure to fast-growing natural gas infrastructure businesses that capitalize on the increasing incorporation of natural gas into the U.S. and Mexican economies as well as on the burgeoning integration of global natural gas markets. Sempra's diversity across the energy supply chain gives management flexibility to pursue opportunities as markets shift.Sempra's growing Latin American businesses are largely regulated or fee-based assets. These provide consistent cash flows in regions with favorable demographic and growth profiles, especially as natural gas makes inroads into the region's energy-starved economies. Sempra's business model brings more upside and risk than a pure-play regulated utility and exposure to growing Latin American economies.Amid activist shareholder pressure, Sempra recently announced the sale of its U.S. renewable energy business, Mississippi Hub salt dome, and 90% Bay Gas Storage Company facility, focusing Sempra on its North American business. Sempra's portfolio review continues. We expect a decision on its strategic review of its Chilean and Peruvian regulated utilities in early 2019. While the utilities have experienced a history of constructive regulatory environment and growing earnings contributions, we think it's likely Sempra will divest the businesses.