Sempra Won't Form Master-Limited Partnership Amid Market Rout

  • CEO says conditions for going public are ``not ideal"
  • Company had planned to offer shares by the end of this year

Sempra Energy backtracked on plans to form a master-limited partnership that would own stakes in its natural gas and renewable energy assets amid a sell-off in the investment vehicles.

"Current market conditions are not ideal and we will not go forward at this time," Chief Executive Officer Debra Reed said on Tuesday during a conference call with investors. The company will re-evaluate the prospects for creating a tax-advantaged partnership in the "middle of next year," she added.

Sempra’s about-face comes as an index of master-limited partnerships has lost about 25 percent of its value so far this year as investors have shied away from energy stocks due to low commodity prices. Sempra had previously planned to join other utilities in carving off assets into the publicly traded investment vehicles in search of steady, long-term revenue streams and dividends, with tax advantages.

MLPs don’t pay federal income taxes and distribute most of their cash to owners of their units, which trade like shares in a corporation. Sempra had wanted to form an MLP to create a source of competitively priced capital to support the company’s growth, Reed said. With the market selloff, the investment vehicles no longer present that advantage.

Sell Stock

In June, Sempra said it planned to sell stock in a newly-formed unit called Sempra Partners LP by the end of this year. The partnership would have included an interest in the company’s Energia Costa Azul LNG facility in Baja California, Mexico, and renewable power plants, the company said at the time.

It could also include Sempra’s 50 percent stake in the Cameron LNG export terminal under construction in Louisiana, its 100 percent stake in the Cameron pipeline, as well as wind and solar projects.

Reed said Tuesday that the company doesn’t need to form an MLP to reach its growth targets. The company is on target to meet or exceed its 11 percent annual adjusted earnings per share growth rate for 2015 through 2019, according to the CEO.

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