EUR 850.00 For Business Accounts Only

Morningstar | Important 2019 California Regulatory Schedule for Sempra

Sempra Energy's investment opportunities at its regulated California and Texas utilities will remain the primary growth driver. We expect those utilities will receive over 80% of the company's capital investment during the next three years totaling $15 billion.While we view California's regulatory environment less constructively than in other states, Sempra's emphasis on distribution-related safety and reliability infrastructure upgrades provides an attractive growth opportunity. Its investments are squarely in line with the regulators' goals under California's RAMP program. This program focuses on risk mitigation across the utilities' footprint.Sempra's Texas subsidiaries' transmission assets should continue to benefit from Texas' aggressive wind generation build out. In ERCOT, there are roughly 87 GW of proposed renewable energy new-build projects (37 GW of wind, 47 GW of solar, and 3 GW of energy storage) in the interconnection queue, highlighting the continued appetite for renewable energy in the state. Rate base growth should drive earnings growth as Oncor invests in electric transmission and distribution to support renewable energy and population growth in Texas.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. Management has impressively moved forward on developing its LNG portfolio.Sempra recently announced a final decision to sell its South American utilities, a move we suspected management would make as part of its continued transition. While the assets operated in countries that provided sound returns for Sempra, the utilities don't fit into management's revised strategy. We like management's divesting of noncore assets and investing proceeds to pay down debt and invest in its regulated California and Texas utilities and long-term LNG opportunities.