Sempra sees transmission investment opportunities in Mexico, California

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Sempra Energy officials highlighted transmission investment opportunities in Mexico starting in 2016, including some cross-border transmission lines in a plan from the Ministry of Energy in Mexico, during the company’s Nov. 3 conference call on 3Q15 earnings.

Debra Reed, chairman and CEO, also mentioned that the new 50 percent renewable portfolio standard in California would require both natural gas and power infrastructure investments to meet the needs of a changing generation landscape. “We will have to make investments to integrate additional renewables” under the revised RPS, Reed said during the call.

The new RPS law calls for California to increase its use of renewable resources from the current 33 percent level to 50 percent by the end of 2030. On Oct. 28, Tony Earley, chairman, president and CEO of PG&E Corp. asserted that the higher RPS in California should create transmission investment opportunities in the state.

South of the border, Reed said “we see a wealth of opportunities in Mexico” that Sempra’s Mexican unit IEnova and other businesses will seek to develop. Those include liquids pipelines in association with Pemex and power transmission and generation plans from the Comision Federal de Electricidad.

Market rules for transmission investment are being finalized and are expected to be open for competing proposals within the first half of 2016, Reed said, adding “we’re very interested in participating in that market.”

The Ministry of Energy’s long-term plan for the development of a national electric system includes where power plants and transmission lines are being planned for different regions of Mexico, Sempra said in its slide presentations accompanying its 3Q15 earnings report.

The plan lists nine transmission line projects, including three along the U.S.-Mexico border, an interconnection of the Baja grid to the Mexican National grid in the state of Sonora in 2019 and a high-voltage, direct-current line of 600 km that would connect renewable energy projects in Oaxaca to central Mexico, according to the presentation.

Addressing questions on Sempra and IEnova competing with other firms to build such projects, Reed said “we have some outstanding experience building major transmission projects in difficult areas.” She also mentioned that Sempra has worked with CFE on other projects, and it may be able to use some shared rights-of-way on pipeline or infrastructure projects it already owns.

“We should be in very good standing to be competitive in that market,” added Sempra President Mark Snell, who noted that the company has experience developing transmission projects in Chile and Peru, so working outside the U.S. is not as daunting compared with other companies lacking such experience.

Sempra officials and the 3Q15 earnings materials did not include any dollar figures for the transmission investment projects in Mexico.

The Ministry of Energy plan also schedules the decommissioning of old diesel and fuel oil generation facilities in Mexicali, Ensenada and Rosarito – with 649 MW in total from 2015 to 2025, according to the presentation.

In its Nov. 3 statement on earnings, Sempra reported earnings of $248 million, or 99 cents per share, in 3Q15, compared with $348 million, or $1.39 per share, in the same period last year.

For the first nine months of 2015, Sempra’s earnings were $980 million, or $3.91 per share, compared with $864 million, or $3.45 per share, in the first nine months of 2014.

Sempra mentioned that in September, utilities Southern California Gas and San Diego Gas & Electric filed multi-party settlements in their general rate cases for 2016 to 2018 with the California Public Utilities Commission. The company expects the CPUC to issue a draft decision in the first three months of 2016.

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