Sempra Unit Obtains Funding For Wind Project - Analyst Blog

Sempra Energy SRE announced that its Mexican unit Infraestructura Energetica Nova SAB (“IEnova”) has received a loan worth $270 million. The company will utilize the fund for the completion of the first phase of its wind energy generation project called Energia Sierra Juarez (ESJ). In addition, the company received $35 million for taxes. The loan has to be repaid over 18 years.

IEnova is engaged in the construction and operation of energy infrastructure in Mexico. It is the only energy company in the country, which is publicly traded. The company has two segments – Gas and Electricity. In 2013, IEnova invested $2.4 billion in natural gas distribution, transportation and storage and electricity generation projects. Currently, the company is spending around $1.8 billion in new energy infrastructure ventures.

The 155-megawatts MW ESJ wind project is located in the Municipality of Tecate, Baja California, Mexico. The $300 million project is jointly owned by IEnova and InterGen. It is the first cross-border wind generation project between the U.S. and Mexico. The company has used 47 units of 3.3-MW Vestas turbines in the project, which is expected to start commercial operations in the first half of 2015.

The output from the ESJ project will be purchased by Sempra Energy's subsidiary San Diego Gas and Electric Company under a 20-year power purchase agreement. Inking long-term contracts will ensure IEnova a steady cash inflow, which will support it to repay its loan on time.

Sempra Energy continues to expand its renewable portfolio though disciplined capital investment program. The company has completed several projects or is under construction phase, including 75-MW Broken Bow 2 wind farm, 150-MW Copper Mountain Solar 2 plant and 150-MW Mesquite Solar 1 plant. Sempra Energy has inked a deal with Consolidated Edison, Inc. ED to sale 50% of Copper Mountain Solar 3 facility.

Sempra Energy's peers including DTE Energy Company DTE and NRG Energy, Inc. NRG are also investing considerably to extend their renewable generation mix through organic and inorganic growth projects.

Recently, the Obama administration rolled out its plan to curb carbon emissions from power plants by 30% by 2030 from 2005 levels. The rule will probably come into effect next year.

We believe that Sempra Energy's focus on strengthening its power generation capacity through renewable sources will enable it to comply with stringent regulations.

Sempra Energy currently has a Zacks Rank #3 (Hold).

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