Sempra Expands in Renewables

Sempra Generation, a subsidiary of Sempra Energy (SRE - Analyst Report), has entered into a 20-year contract to sell 21 megawatts (MW) of wind energy generated from the Auwahi Wind project on the Ulupalakua Ranch in the southeastern region of Maui to Maui Electric Company.

The Auwahi Wind project is expected to begin in early 2012. When fully operational, in late 2012, it is expected to generate clean electricity for 10,000 typical Maui homes. The project will create approximately 150 local construction jobs to operate the facility. Additionally, this project will help Hawaii to reach its clean energy goal of 40% of electricity from renewable sources by 2030.

An important component of the project is a battery storage unit that can store as much as 12 megawatt-hours of wind energy generated by the project’s windmills.  This stored power will help to regulate intermittent wind power, providing a valuable source of grid stability for Maui Electric.

The project is currently undergoing an environmental review by Maui County, and state and federal agencies. The contract between Maui Electric Company and Sempra Generation is subject to approval by the Hawaii Public Utilities Commission.

Sempra Generation is expanding its alternative energy portfolio throughout the U.S. It is an equal partner on the 200-MW Fowler Ridge II wind farm in Indiana and the 250-MW Cedar Creek II project in Colorado which is expected to be completed in 2011. The company is also developing a multi-phase wind farm in Baja California, Mexico that could generate up to 1,200 MW of wind energy.

Sempra Energy’s diversified basket of businesses protects its operations from regulatory rate risks. This bullish outlook is supported by stable utility earnings, steady progress at its LNG terminals, the Sunrise Powerlink transmission line, ongoing installations of smart meter and renewable power projects in the Pacific Southwest.

However, a lack of near-term positive catalysts, along with the current trepidation in natural gas prices, an ongoing land dispute regarding its LNG terminal in Mexico and pending regulatory cases, compels us to maintain our long-term Neutral recommendation on the stock. The company presently retains its short-term Zacks #3 Rank (Hold). Currently, we would advise investors to hold its peer Chesapeake Utilities Corporation (CPK - Snapshot Report) that has a Zacks #1 Rank (Strong Buy).

Based in California, Sempra Energy is an energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas. MauiCounty is a county located in the U.S. state of Hawaii.

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