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Sempra Generation, a subsidiary of Sempra Energy (SRE - Analyst Report), began operating the 42-megawatt (“MW”) section of its 150-MW photovoltaic Mesquite Solar 1 project. The three blocks of solar panels totaling 42MW have now started delivering renewable electricity. Under a 20-year long-term agreement, the power generated from the facility will be sold to Pacific Gas and Electric Company, a subsidiary of PG&E Corporation (PCG - Analyst Report).
The company began construction of the facility in June 2011 with completion slated for early 2013. The project, at a 900-acre facility, is located in Arlington, Arizona, approximately 40 miles west of Phoenix. The company believes that the venture has enough land in order to increase its power generating capacity from 150 MW to 700 MW.
The project will install more than 800,000 panels bought from Suntech Power Holdings Co. Ltd. to generate enough electricity for about 50,000 homes at full build-out. Currently, 450 workers are employed on-site and are in the process of installing an average of 4,500 photovoltaic solar panels each day.
In early 2011, the company indicated that it aims at adding 1,000 MW of renewables to its power generation portfolio by 2015. Since then, the company has installed, intiated construction or secured long-term utility contracts for more than 500 MW of additional solar and wind capacity. The current endeavor is a step toward that direction. Three months back, the company had received a U.S. Energy Department loan guarantee of $337 million for the 150-MW project. The company is also constructing another 150-MW solar project known as Copper Mountain Solar 2 in Boulder City, Nevada, furthering its renewable pipeline.
Sempra Energy’s diversified basket of businesses insulates its operations to a significant degree from regulatory rate risks. The company’s investment thesis is supported by stable utility earnings, steady progress at its LNG terminals, ongoing installations of smart meter and renewable power projects in the Pacific Southwest. Sempra Energy recently revised its earnings outlook for fiscal 2011. The company expects pro forma earnings per share to meet or exceed the higher end of its guidance range of $4 to $4.30 for 2011.
However, we are concerned about the lack of any near-term positive triggers, along with near-term trepidation in natural gas prices, and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas. The company’s businesses are broadly divided into Sempra Utilities, and Sempra Global and parent.