On Monday, U.S. utilities giant Sempra Energy, the San Diego-based owner of $66 billion in assets across one of the biggest energy networks in North America, announced that it is selling a 20 percent, non-controlling interest in its new business platform, Sempra Infrastructure Partners, to global private equity investor KKR for $3.37 billion in cash. The transaction values Sempra Infrastructure Partners at approximately $25.2 billion, including expected asset-related debt at closing of $8.37 billion.
Proceeds from the sale will be used to help fund growth across Sempra Energy’s $32 billion capital program, which is centered on its U.S. utilities, and to further strengthen its balance sheet. The sale is expected to be accretive to earnings. This deal is part of a series of integrated, planned transactions originally announced in December 2020 intended to simplify Sempra Energy’s non-utility infrastructure investments under a single, self-funding platform.
These combined assets include Sempra LNG, a leading developer of liquefied natural gas (LNG) export infrastructure, and IEnova (Infraestructura Energética Nova, S.A.B de C.V.), one of the largest private energy companies in Mexico and a leading developer and operator of renewables and natural gas infrastructure in that country. Sempra said the combination was expected to create scale, unlock portfolio synergies, highlight value and better position the business for growth.
“Over the next decade, we expect the energy markets in North America to continue to grow and become increasingly integrated,” said Sempra Energy CEO and Chairman Jeffrey W. Martin, in an official statement on the sale. “Combining our resources with KKR improves our ability to capture new investment opportunities in cleaner forms of energy and the critical infrastructure that stores and transports it. This transaction also sends a clear signal about the value and expected growth of our infrastructure portfolio.”
KKR’s investment is being made through its Global Infrastructure Investors Funds. This strategy was first launched at KKR in 2008, and has since grown to encompass $27 billion in infrastructure assets under management, in 40 separate investments across a range of global sub-sectors and geographies.
“Investing in critical new energy infrastructure creates jobs, delivers reliable energy with fewer emissions and supports North America’s economic recovery,” said Raj Agrawal, KKR Partner and Global Head of Infrastructure. “Backed by strong, contractually-supported, long-term cash flows, our investment is also consistent with KKR Infrastructure’s strategy to seek stable and predictable returns for our investors.”
Fine print
Sempra Energy will receive cash proceeds from KKR at the closing of the transaction, subject to certain customary purchase price adjustments, including changes to account for any IEnova shares not tendered in Sempra Energy’s previously announced stock-for-stock exchange offer for the publicly-traded shares of IEnova.
KKR will acquire its indirect interest in IEnova at $4.13 per share, the price calculated using the proposed exchange ratio announced by Sempra Energy on December 2, 2020 and the closing price of Sempra Energy common stock on April 1, 2021, the last trading day immediately preceding the date of the agreement. KKR will have certain minority rights with respect to Sempra Infrastructure Partners commensurate with the size of its investment.
Per Sempra, the new platform will also provide an improved platform for innovation, along with potential new investments in renewables, hydrogen, ammonia, energy storage and carbon sequestration.
Sempra Infrastructure Partners owns (among other assets), an LNG portfolio of up to 45 million tons per annum (Mtpa) of LNG export capacity in development, construction or operation on the North American Pacific and Gulf Coasts; a renewable energy portfolio of up to 4 GW of renewable energy generation in development, construction or operation in Mexico (along with related electric transmission infrastructure); a natural gas infrastructure portfolio of distribution companies, along with some cross-border and in-country pipelines, including those that export U.S. natural gas to Mexico and supply the Energía Costa Azul LNG facility.
