Houston—Sempra Energy has agreed to sell a 20% stake in a new infrastructure unit that includes its North American LNG portfolio to private equity firm KKR for $3.37 billion in cash, the company said April 5.
The transaction is expected to be completed by mid-2021. KKR will have certain minority rights with respect to the Sempra unit equivalent to the size of its investment, Sempra said in a statement.Amid a challenging environment for adding new liquefaction capacity in North America, especially in the US where banks or investment partners have traditionally been relied upon for the billions of dollars in startup capital, developers are increasingly looking for creative ways to pay for construction.
When it announced the creation of Sempra Infrastructure Partners in December, Sempra said the new unit would encompass its LNG portfolio, which at full buildout would consist of approximately 45 million mt/year of capacity, and about 4 GW of renewable energy generation in development, construction or operation in Mexico and related electric transmission infrastructure. It said the unit would also include certain natural gas distribution assets and cross-border and in-country pipelines, including those that export US natural gas to Mexico and supply Sempra's Energia Costa Azul liquefaction facility.
The initial announcement said it planned to sell a non-controlling stake in Sempra Infrastructure Partners " to fund growth and highlight the value of the overall portfolio ," suggesting that some of the proceeds would go toward expanding the LNG-inclusive portfolio.
In the statement about the sale of the stake to KKR, Sempra said the proceeds would be used to fund growth projects across the company, centered on Sempra's core US utilities businesses, and to strengthen its balance sheet–a catchall that often refers to boosting cash reserves or reducing debt.
In an e-mail responding to questions, a spokeswoman said the proceeds would also be used for growth projects tied to Sempra's infrastructure businesses. A final investment decision on Sempra's Port Arthur LNG export project in Texas has not yet been made, though the spokeswoman said a decision remains targeted for this year. Sempra also has proposed an expansion at Cameron LNG in Louisiana and a second phase of the export project at Energia Costa Azul.
In a related move, Sempra said in December it wanted to acquire, through a stock for stock exchange, all of the outstanding shares of its Mexican IEnova subsidiary that it did not already own. IEnova is the operator of Energia Costa Azul. On Feb. 25, CEO Jeffrey Martin said Sempra was on track to complete the IEnova stock transaction in the second quarter.
In its statement about the KKR deal, Sempra said only that it intends to commence the exchange offer "following approval by the US and Mexican regulatory authorities."
The KKR deal values Sempra Infrastructure Partners at approximately $25.2 billion, including expected asset-related debt at closing of $8.37 billion.
KKR has been a major investor in recent years in infrastructure in a variety of sectors, including energy.
