Last month, however, Sempra Energy (NYSE:SRE) locked in a 25-year contract to sell 150 megawatts of solar power to PG&E (PCG). And by early 2013 it will harness 300 megawatts, all under lucrative long-term contracts.
California requires that regulated utilities double renewable energy use by the end of 2020, and 37 other states have similar laws.
That’s a huge opportunity for Sempra, particularly with rivals falling by the wayside.
All of the company’s operations beat guidance for 2011. These include regulated California electricity and natural gas distribution operations serving a combined 24 million customers; an Alabama gas utility; 2,300-plus miles of pipelines and related energy storage facilities; liquefied natural gas terminals; and utilities in Chile, Mexico and Peru serving 1.5 million users.
The hallmark of each is reliable cash flow with room to grow in coming years. Management lifted the dividend 23 percent in 2011 and a nearly 10 percent boost is expected this year.
Full-year 2011 profit covers the payout by better than 2.2-to-1, while cash in the bank covers 2012 debt maturities by nearly 2.4-to-1.
Sempra’s California utilities (45 percent of earnings) could see a cut in return on equity this year.
But even a worst-case would be more than offset by $12 billion in capital spending on smart meters, pipeline upgrades and other programs popular with regulators and the public. That means few risks and robust potential growth for Sempra Energy.