Morningstar | Sempra Management Impressively Moves LNG Expansion Efforts Forward. See Updated Analyst Note from 07 Nov 2018
We are increasing our fair value estimate to $123 per share, up from $114, after management made material progress developing its LNG growth portfolio. We have greater confidence that these projects will drive growth after our five-year forecast.Sempra reported third-quarter 2018 ongoing earnings per share of $1.23 compared with $1.04 in the same year-ago period. Management reaffirmed 2018 ongoing EPS guidance of $5.30 to $5.80, consistent with our expectations. Our stable trend and narrow moat ratings are unchanged.
Management has impressively moved forward developing its LNG expansion plans. Sempra announced a Memorandum of Understanding with Total, which would contract up to 9 Mtpa of LNG from future Sempra LNG projects, including ECA phases 1 and 2 and Cameron phase 2. Opportunities for expansion at Port Arthur remain as well. This sets up Sempra's LNG business to be a significant growth contributor in middle of the next decade. Additionally, Sempra initiated the commissioning process for liquefaction of Train 1 of Cameron, putting Sempra on track to have all trains producing LNG in 2019.
In mid-October, Oncor entered into an agreement to acquire InfraREIT for $1.275 billion. Oncor also increased its capital expenditure forecast to $10.5 billion, up from $8.4 billion and supporting our long-held belief that there were significant additional capital investment opportunities following Sempra's acquisition.
Sempra is also progressing on its previously announced asset sales. Sempra agreed to sell all of its operating solar assets, one wind generation facility, and its solar and battery storage development to Consolidated Edison for $1.54 billion. The process to sell the remainder of its wind business and some nonutility natural gas storage assets is ongoing. We like that management is selling no-moat assets and focusing more on its regulated transmission and distribution business units.
Sempra Energy is an energy-services holding company. The company's segments are: San Diego Gas & Electric Company, which provides electric services and natural gas services in Southern California; Southern California Gas Company, which owns and operates a natural gas distribution, transmission and storage system that supplies natural gas in Southern California and portions of central California; Sempra Texas Utilities, which includes Oncor Electric Delivery Company LLC that provides electricity to consumers; Sempra Mexico, which develops, owns and operates, or holds interests in, energy infrastructure in Mexico; and Sempra LNG, which develops projects for the export of liquefied natural gas.
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