- Finalizes Joint Venture with ConocoPhillips
- Closes Non-Recourse Project Financing
- Announces Equity Participation by KKR
- Issues Final Notice to Proceed to Bechtel
SAN
DIEGO, March 20, 2023 /PRNewswire/
-- Sempra (NYSE: SRE) (BMV: SRE) today announced that its
70%-owned subsidiary, Sempra Infrastructure Partners, LP (Sempra
Infrastructure), reached a positive final investment decision (FID)
for the development, construction and operation of the Port Arthur
LNG Phase 1 project in Jefferson County,
Texas.
Sempra Infrastructure closed its joint venture with an affiliate
of ConocoPhillips (NYSE: COP), as well as announced an agreement to
sell an indirect, non-controlling interest in the project to an
infrastructure fund managed by KKR. Additionally, Sempra
Infrastructure announced the closing of the project's $6.8 billion non-recourse debt financing and the
issuance of the final notice to proceed under the project's
engineering, procurement and construction agreement.
"At Sempra, we believe bold, forward-looking partnerships will
be central to solving the world's energy security and
decarbonization challenges," said Jeffrey
W. Martin, chairman and chief executive officer of Sempra.
"With strong customers, top-tier equity sponsors in
ConocoPhillips and KKR and a world class contractor in Bechtel,
this project has the potential to become one of America's most
significant energy infrastructure investments over time, while
creating jobs and spurring continued economic growth across
Texas and the Gulf Coast
region."
"Sempra's selection of Port
Arthur as the location for a new natural gas liquefication
and export terminal is a strategic decision that will cement
Texas' position as the energy
capital of the world," said Texas
Gov. Greg Abbott. "With a highly
skilled workforce and business-friendly climate, and as a national
leader in LNG exports, Texas is
the prime location to expand LNG operations to unleash the United States' full economic potential in
such a critical industry. Expanding LNG is imperative to American
energy security, and the State of
Texas looks forward to working alongside Sempra to advance
this mission and bring more jobs and greater opportunities to
hardworking Texans."
The Port Arthur LNG Phase 1 project is fully permitted and is
designed to include two natural gas liquefaction trains, two
liquefied natural gas (LNG) storage tanks and associated facilities
with a nameplate capacity of approximately 13 million tonnes per
annum (Mtpa). Total capital expenditures for the Port Arthur Phase
1 project are estimated at $13
billion.
The long-term contractable capacity of approximately 10.5 Mtpa
is fully subscribed under binding long-term agreements with strong
counterparties —ConocoPhillips, RWE Supply and Trading, PKN ORLEN
S.A., INEOS and ENGIE S.A., all of which became effective upon
reaching FID. Sempra Infrastructure is also actively marketing and
developing the competitively positioned Port Arthur LNG Phase 2
project, which is expected to have similar offtake capacity to
Phase 1.
World-Class Partnerships
Sempra and ConocoPhillips closed their joint venture whereby an
affiliate of ConocoPhillips has acquired a 30% non-controlling
interest in the project, is purchasing 5 Mtpa of LNG offtake from
the project under a 20-year sale and purchase agreement and is
managing the project's overall natural gas supply requirements.
ConocoPhillips will also have certain rights to participate in
future expansion projects in both equity and offtake.
"Our strategic LNG partnership with Sempra will help supply
growing global demand for natural gas, a lower greenhouse gas
emissions-intensity fuel expected to play a critical role in the
energy transition and global energy mix going forward," said
Ryan Lance, ConocoPhillips chairman
and chief executive officer. "ConocoPhillips has more than 60 years
of experience with LNG, and we look forward to continuing to build
our LNG portfolio and expanding our role in delivering a
lower-carbon future that strengthens U.S. and global energy
security."
Sempra Infrastructure announced an agreement whereby KKR will
acquire a 25% to 49% indirect, non-controlling interest in the Port
Arthur LNG Phase 1 project. Pursuant to the agreement with KKR,
Sempra Infrastructure will retain certain economic and other rights
with respect to the interest being transferred while granting KKR
certain minority interest protections. KKR is making the investment
primarily through its Global Infrastructure Investors IV fund.
"We are pleased to invest in this critical energy infrastructure
project and extend our strategic partnership with Sempra and their
world-class team," said James
Cunningham, Partner at KKR. "Phase 1 will create new jobs,
support American economic growth and deliver reliable and cleaner
energy during the global energy transition. Consistent with KKR
Infrastructure's strategy of seeking stable and predictable returns
for investors, our investment in Phase 1 is backed by robust cash
flows through long-term contracts with high-quality
counterparties."
Sempra Infrastructure is targeting 20% to 30% of indirect
ownership interest in the project, subject to the closing of the
KKR sale. For illustrative purposes, if Sempra Infrastructure's
indirect ownership interest is at the midpoint of the referenced
range, or 25%, Sempra Infrastructure would expect its share of
average adjusted EBITDA after full commercial operations to be
approximately $410 million annually
and its equity commitment to be approximately $1.55 billion. Sempra's share of the above
estimates would be equal to 70% of these amounts. The foregoing
estimates exclude other potentially significant economic benefits
associated with, among other items, the development of future
phases and further optimization of the project.
Sempra Infrastructure has contracted with global engineering,
construction and project management firm Bechtel Energy Inc. and
has issued a final notice to proceed for the project. The expected
commercial operation dates for Train 1 and Train 2 are 2027 and
2028, respectively.
"We're proud to partner with Sempra to deliver a world-class LNG
facility. Building from mature, scalable energy technologies helps
safeguard our energy supplies and promote the transition to
lower-carbon energy," said Brendan
Bechtel, Chairman and CEO of Bechtel. "Bechtel has a record
of delivering LNG infrastructure on the U.S. Gulf Coast and
bringing quality jobs and training opportunities to local
communities. The 5,000 construction jobs this project creates will
provide outstanding opportunities for craft professionals — growing
a skilled workforce that will benefit the region for years to
come."
Local Benefits
Sempra Infrastructure believes that building strong
relationships and supporting the communities where its employees
live and work is fundamental to how it does business. Moreover, the
company focuses its community development initiatives on local
priorities including education and leadership development,
environmental stewardship and safety.
Since 2015, Port Arthur LNG has invested more than $40 million to support Jefferson County communities, including
working with local vendors to procure materials and services for
the relocation of a 3.5-mile portion of Highway 87 and on grants to
more than 60 local non-profits, schools and business development
groups.
The Phase 1 project is another significant opportunity to expand
Sempra Infrastructure's economic impact. The project is expected to
create an estimated 5,000 highly skilled jobs during construction
and boost the economies in Port
Arthur and Jefferson
County.
"Sempra has long been an economic driver for Jefferson County here in Southeast Texas, and this new Port Arthur LNG
facility will continue that trend by bringing thousands of jobs,
new markets for natural gas and more energy security for our
nation," Speaker of the Texas
House of Representatives Dade Phelan said. "Texas House District 21
is proud of this latest development that showcases our great
state's leadership in economic development, job creation and energy
production."
The successful completion of the KKR sale is subject to
regulatory approvals and other customary closing conditions, and
the completion of construction of Port Arthur LNG Phase 1 is
subject to a number of risks and uncertainties. Additional details
about these transactions can be found in the current report on Form
8-K Sempra filed with the U.S. Securities and Exchange Commission
on March 20, 2023, as well as in the
informational slides on the Investors section of Sempra's website
at sempra.com/investors.
Adjusted EBITDA (earnings before interest, taxes, depreciation
and amortization) is a non-GAAP financial measure (GAAP is
generally accepted accounting principles).
Citi advised Sempra on various aspects of the transaction and
J.P. Morgan Securities LLC acted as advisor on the project
financing.
About Sempra
Sempra is a leading North American energy infrastructure company
that helps meet the daily energy needs of nearly 40 million
consumers. As the owner of one of the largest energy networks on
the continent, Sempra is helping to electrify and decarbonize some
of the world's most significant economic markets, including
California, Texas, Mexico
and the LNG export market. The company is also consistently
recognized as a leader in sustainable business practices and for
its long-standing commitment to building a high-performance culture
focused on safety and operational excellence, leadership and
workforce development and diversity and inclusion. Investor's
Business Daily named Sempra the top-ranked utility in the U.S. for
environmental, social and governance scores and financial
performance. Sempra was also included on the Dow Jones
Sustainability North America Index for the 12th consecutive year.
More information about Sempra is available
at sempra.com and on Twitter @Sempra.
About Sempra Infrastructure
Sempra Infrastructure delivers energy for a better world.
Through the combined strength of its assets in North America, the company is dedicated to
enabling the delivery of cleaner energy for its customers. With a
continued focus on sustainability, innovation, world-class safety,
championing people, resilient operations and social responsibility,
its more than 2,000 employees develop, build and operate clean
power, energy networks and LNG and net-zero solutions that are
expected to play a crucial role in the energy systems of the
future. For more information about Sempra Infrastructure, please
visit www.SempraInfrastructure.com and Twitter.
This press release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based on assumptions with respect to the future,
involve risks and uncertainties, and are not guarantees. Future
results may differ materially from those expressed or implied in
any forward-looking statement. These forward-looking statements
represent our estimates and assumptions only as of the date of this
press release. We assume no obligation to update or revise any
forward-looking statement as a result of new information, future
events or otherwise.
In this press release, forward-looking statements can be
identified by words such as "believes," "expects," "intends,"
"anticipates," "contemplates," "plans," "estimates," "projects,"
"forecasts," "should," "could," "would," "will," "confident,"
"may," "can," "potential," "possible," "proposed," "in process,"
"construct," "develop," "opportunity," "initiative," "target,"
"outlook," "optimistic," "maintain," "continue," "progress,"
"advance," "goal," "aim," "commit," or similar expressions, or when
we discuss our guidance, priorities, strategy, goals, vision,
mission, opportunities, projections, intentions or
expectations.
Factors, among others, that could cause actual results and
events to differ materially from those expressed or implied in any
forward-looking statement include risks and uncertainties relating
to: California wildfires,
including that we may be found liable for damages regardless of
fault and that we may not be able to recover all or a substantial
portion of costs from insurance, the wildfire fund established by
California Assembly Bill 1054, rates from customers or a
combination thereof; decisions, investigations, inquiries,
regulations, issuances or revocations of permits or other
authorizations, renewals of franchises, and other actions by (i)
the California Public Utilities Commission (CPUC), Comisión
Reguladora de Energía, U.S. Department of Energy, U.S. Federal
Energy Regulatory Commission, Public Utility Commission of
Texas, and other governmental and
regulatory bodies and (ii) the U.S., Mexico and states, counties, cities and other
jurisdictions therein and in other countries in which we do
business; the success of business development efforts, construction
projects and acquisitions and divestitures, including risks in (i)
being able to make a final investment decision, (ii) completing
construction projects or other transactions on schedule and budget,
(iii) realizing anticipated benefits from any of these efforts if
completed, and (iv) obtaining the consent or approval of partners
or other third parties, including governmental and regulatory
bodies; litigation, arbitrations, property disputes and other
proceedings, and changes to laws and regulations, including those
related to the energy industry in Mexico; cybersecurity threats, including by
state and state-sponsored actors, of ransomware or other attacks on
our systems or the systems of third-parties with which we conduct
business, including the energy grid or other energy infrastructure,
all of which have become more pronounced due to recent geopolitical
events, such as the war in Ukraine; our ability to borrow money on
favorable terms and meet our debt service obligations, including
due to (i) actions by credit rating agencies to downgrade our
credit ratings or to place those ratings on negative outlook or
(ii) rising interest rates and inflation; failure of foreign
governments, state-owned entities and our counterparties to honor
their contracts and commitments; the impact on affordability of San
Diego Gas & Electric Company's (SDG&E) and Southern
California Gas Company's (SoCalGas) customer rates and their cost
of capital and on SDG&E's, SoCalGas' and Sempra
Infrastructure's ability to pass through higher costs to current
and future customers due to (i) volatility in inflation, interest
rates and commodity prices, (ii) with respect to SDG&E's and
SoCalGas' businesses, the cost of the clean energy transition in
California, (iii) with respect to
SDG&E's business, departing retail load resulting from
additional customers transferring to Community Choice Aggregation
and Direct Access, and (iv) with respect to Sempra Infrastructure's
business, volatility in foreign currency exchange rates; the impact
of climate and sustainability policies, laws, rules, disclosures,
and trends, including actions to reduce or eliminate reliance on
natural gas, increased uncertainty in the political or regulatory
environment for California natural
gas distribution companies and the risk of nonrecovery for stranded
assets; our ability to incorporate new technologies into our
businesses, including those designed to support governmental and
private party energy and climate goals; weather, natural disasters,
pandemics, accidents, equipment failures, explosions, terrorism,
information system outages or other events that disrupt our
operations, damage our facilities or systems, cause the release of
harmful materials, cause fires or subject us to liability for
damages, fines and penalties, some of which may not be recoverable
through regulatory mechanisms, may be disputed or not covered by
insurers, or may impact our ability to obtain satisfactory levels
of affordable insurance; the availability of electric power,
natural gas and natural gas storage capacity, including disruptions
caused by failures in the transmission grid, pipeline system or
limitations on the withdrawal of natural gas from storage
facilities; Oncor Electric Delivery Company LLC's (Oncor) ability
to eliminate or reduce its quarterly dividends due to regulatory
and governance requirements and commitments, including by actions
of Oncor's independent directors or a minority member director;
changes in tax and trade policies, laws and regulations, including
tariffs, revisions to international trade agreements and sanctions,
such as those that have been imposed and that may be imposed in the
future in connection with the war in Ukraine, which may increase our costs, reduce
our competitiveness, impact our ability to do business with certain
counterparties, or impair our ability to resolve trade disputes;
and other uncertainties, some of which are difficult to predict and
beyond our control.
These risks and uncertainties are further discussed in the
reports that Sempra has filed with the U.S. Securities and Exchange
Commission (SEC). These reports are available through the EDGAR
system free-of-charge on the SEC's website, www.sec.gov, and on
Sempra's website, www.sempra.com. Investors should not rely unduly
on any forward-looking statements.
Sempra Infrastructure, Sempra Infrastructure Partners, Sempra
Texas, Sempra Texas Utilities, Oncor and Infraestructura Energética
Nova, S.A.P.I. de C.V. (IEnova) are not the same companies as the
California utilities, SDG&E or
SoCalGas, nor regulated by the CPUC.
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SOURCE Sempra