Tuesday, July 29, 2008

Sempra's Big Bet Gets Mixed Reviews

Any time you close a deal valued at three quarters of a billion dollars you're probably hoping to make a big splash in the industry. No such luck for Sempra, which just inked the deal to acquire Alabama natural gas storage and distribution company, Energy South, Inc.

Sempra will be forking over $510 million in cash and assuming $224 million in Energy South debt. Sempra shares closed down after the announcement.

According to the write-up in the Union Tribune:

"Moody's analyst A.J. Sabatelle said EnergySouth's storage facilities offered “strategic complementary benefits” to Sempra's growing natural gas operations.

On the other hand, Standard & Poor's analyst William Ferrara said EnergySouth “has a notably weaker business profile than Sempra's. Its growth strategy is almost entirely related to gas storage expansion."

EnergySouth is the majority owner of two major underground salt-dome storage facilities for natural gas near the Gulf Coast: Bay Storage Gas Co., which has an 11 billion-cubic-foot storage facility about 40 miles north of Mobile, Ala., and Mississippi Hub, which is developing a 30 billion-cubic-foot facility in Simpson County, Miss.

Sempra adding gas storage sites [San Diego Union Tribune]