Sempra hires BAML for asset sale, receives pre-emptive offers 

12 February 2019 - 12:00 am UTC

San Diego-based energy infrastructure company Sempra engaged Bank of America Merrill Lynch (BAML) to sell its South American assets, the company confirmed. 

Sempra owns 100% of Chilquinta, 83.6% of Luz del Sur and participations in energy services companies Tecnored and Tecsur, according to Sempra’s 2017 annual report. 

Two sources familiar also said that Sempra has received pre-emptive offers for the assets from Singaporean sovereign wealth fund GIC and Chinese developer and Peruvian investor China Three Gorges. 

Sempra declined comment on the rumored bids.

It said in a statement to Inframation that the “planned sale allows us more focused capital investment in the U.S. and Mexico to support additional growth opportunities, with a view toward creating greater shareholder value and a stronger balance sheet. Luz del Sur and Chilquinta Energía have made significant contributions to Sempra Energy over the past two decades and offer exciting future growth opportunities.”

An investment banker following the process questioned why Sempra would entertain bilateral deals unless a bidder could offer something attractive to Sempra beyond cash.

GIC, along with Canadian investor Borealis, acquired in November 2008 a 19.75% stake in Oncor Electric Delivery Company, giving GIC a 9.75% stake in the asset. 

Sempra acquired an 80% stake in the company in August 2017. 

A second investment banker speculated that the assets would prove attractive to Chinese, European and North American investors. 

BAML, GIC and China Three Gorges did not return calls seeking comment.  

Sempra Energy made its original acquisitions of approximately 50% of Chilquinta Energía and approximately 42% of Luz del Sur in 1999 alongside PSEG Global.

Sempra and PSEG acquired 99.98% of Chilquinta Energía for USD 840m and 47.5% of Luz del Sur for USD 108m. 

Ashmore Energy International (AEI) paid PSEG Global USD 885m in October 2007 for a 38% stake in Luz del Sur and a 50% stake in Chilquinta. 

In 2011, Sempra Energy acquired Ashmore Energy International’s stakes for USD 480m, resulting in Sempra’s 100% ownership of Chilquinta Energía and majority ownership of Luz del Sur.

According to Sempra’s 3Q18 report, the two South American utilities contributed USD 369m of TTM EBITDA for the twelve months ended 30 September 2018 to Sempra’s overall USD 4.1bn TTM EBITDA for the same period.

Chilquinta recorded a TTM EBITDA of CLP 41.34bn (USD 62.81m), slightly down from TTM EBITDA of CLP 45.83bn for the twelve months ended 30 September 2017, according to the company’s earnings. 

According to a 20 July 2018 ratings commentary, Fitch classes Chilquinta Energía as AA(cl), saying the company has a low risk profile due to its monopolistic operation in its concession area in the V region of Chile (Valparaíso) and its “conservative” debt load of 2.2X EBITDA.  

Luz del Sur reported TTM EBITDA of PEN 664.15m (USD 201.09m), up from PEN 624.96m TTM EBITDA, year-over-year.  

Pacific Credit Rating (PCR) gave Luz del Sur’s shares its top Level One credit rating in July 2018, a rating they have maintained since June 2016. 

Luz del Sur distributes energy to over 4.9m customers in the southern region of Lima and is Peru’s largest electricity company. The company also owns the 91MW Santa Teresa hydroelectric plant.

Luz del Sur won the contract for the Majes Siguas II hydroelectric project in December 2017 but has yet to finance the USD 970m project, according to Inframation Deals.

Chilquinta Energía is Chile’s third-largest electricity distributor with more than 2m customers around the cities of Valparaiso and Viña del Mar in central Chile.

Chilquinta operates transmission lines in the country and owns 50% of the Cardones–Diego de Almagro (CADA) and Ciruelos–Pichirropuli (CIPI) transmission lines. In December 2018, it acquired the Compañía Transmisora del Norte Grande transmission lines from AES Gener for USD 225.5m.

China Three Gorges was in a consortium that acquired a 456MW Chaglla hyrdroelectric plant in Peru for USD 1.39bn from Odebrecht Latinvest.

 

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