Sempra has announced an agreement to sell 45% of Sempra Infrastructure Partners for US$10 billion in cash; and has reached a Final Investment Decision for Port Arthur LNG Phase 2.
Sempra has announced today several strategic actions that advance its corporate strategy. The company is executing on five value creation initiatives designed to simplify Sempra's business model, improve financial performance and reduce risk. The company expects these initiatives to strengthen its ability to deliver improved earnings growth while driving enhanced benefits for customers and communities across its service territories.
"The transactions announced today further Sempra's corporate strategy by advancing the company's capital recycling program and transition to a leading US utility growth business," said Jeffrey W. Martin, Chairman and CEO of Sempra.
Sale of equity stake in Sempra Infrastructure Partners
Sempra announced that it has agreed to sell a 45% equity interest in Sempra Infrastructure Partners, one of North America's leading energy infrastructure platforms, to affiliates of KKR, a leading global investment firm, with Canada Pension Plan Investment Board (CPP Investments). Subject to adjustments, the transaction proceeds of US$10 billion implies an equity value of US$22.2 billion and an enterprise value of US$31.7 billion for Sempra Infrastructure Partners.
Before adjustments, Sempra is expected to receive 47% of the cash at close, 41% by year-end 2027 and the balance approximately seven years after closing. This schedule helps Sempra generate attractive post-closing interest income as it efficiently reinvests proceeds over time in capital expenditures at its US utilities.
The transaction is expected to close in Q2 - Q3 2026, subject to necessary regulatory and other approvals and closing conditions.
Upon closing, a KKR-led consortium will become the majority owner of Sempra Infrastructure Partners, holding a 65% equity stake, while Sempra will retain a 25% interest alongside Abu Dhabi Investment Authority's (ADIA) existing 10% stake. Under the terms of the agreement, Sempra and ADIA will have certain minority rights in Sempra Infrastructure Partners.
"The transaction announced today underscores our commitment to extend our strategic partnership with KKR, with whom we have a shared vision of improving America's position as a global leader in LNG exports," said Martin. "It also directly supports our five value creation initiatives designed to simplify our business, efficiently fund strong utility growth in Texas and California and improve our financial strength."
"Over the past four years, we have developed a close relationship with the Sempra Infrastructure Partners team and a deep understanding of their business," said Raj Agrawal, Global Head of Real Assets at KKR. "We are excited to grow this strategic partnership and are pleased to welcome CPP Investments alongside us as we work to expand Sempra Infrastructure Partners' assets to help meet growing global demand for energy."
The transaction also helps strengthen Sempra's credit profile, deconsolidates Sempra Infrastructure Partners, improves Sempra's business mix with a goal of approximately 95% earnings from regulated US utilities and eliminates the need for equity issuances in the previously announced 2025 - 2029 capital plan.
Key expected benefits from the transaction announced today:
- Sharpens focus on building a leading US utility growth business.
- Reduces business risk by lowering exposure to non-utility investments.
- Strengthens balance sheet.
- Improves credit profile and FFO-to-debt.
- Adds five-year average annual accretion of US$0.20 of earnings per common share (EPS) starting in 2027.
- Highlights value of LNG franchise.
- Eliminates planned common equity needs in previously announced 2025 – 2029 capital plan.
Port Arthur Phase 2 Final Investment Decision
Sempra also announced today that Sempra Infrastructure Partners has reached a final investment decision to advance the development, construction and operation of Port Arthur LNG Phase 2. This new phase will include two natural gas liquefaction trains, one LNG storage tank and associated facilities with a nameplate capacity of approximately 13 million tpa) of US-produced LNG. Incremental project capital expenditures at Phase 2 are estimated at US$12 billion, plus an approximate US$2 billion payment for shared common facilities, with commercial operations expected in 2030 and 2031 for Trains 3 and 4, respectively.
Funding for Phase 2 is supported by an equity investment led by Blackstone Credit & Insurance, together with an investor consortium including KKR, Apollo-managed funds and Private Credit at Goldman Sachs Alternatives. Together these investors have acquired a 49.9% minority equity interest for US$7 billion. Sempra Infrastructure Partners has retained a 50.1% majority stake in the project.
In addition to securing 100% equity financing, Sempra Infrastructure Partners has contracted with global engineering, construction and project management firm Bechtel Energy Inc., which has received full notice to proceed for the project. Bechtel's continued involvement from Phase 1 into Phase 2 is expected to drive favourable economics and help mitigate execution risk by leveraging efficiencies and learnings across phases.
Phase 2 is subscribed with long-term offtake under 20 year sales and purchase agreements with strategic partner ConocoPhillips as anchor, and high-quality counterparties EQT, JERA Co. Inc. and Sempra Infrastructure Partners. Consistent with industry practice, Sempra Infrastructure Partners expects to enter into additional offtake agreements from time to time to enhance the overall economic value of the project.
BofA Securities is serving as financial advisor to Sempra on the referenced Sempra Infrastructure Partners equity sale transaction, while Sullivan & Cromwell LLP is serving as legal advisor to Sempra on both transactions described herein.
Citi is serving as financial advisor and Simpson Thacher is serving as legal advisor to KKR. Kirkland & Ellis LLP is serving as legal advisor to CPP Investments.
For the Port Arthur Phase 2 project, Goldman Sachs & Co. LLC acted as exclusive Structuring Agent for Sempra Infrastructure Partners. Sullivan & Cromwell LLP and Baker Botts LLP served as legal counsel to Sempra Infrastructure Partners.
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