Sempra lines up $10B deal with private equity giant KKR

Sempra, the San Diego-based Fortune 500 energy infrastructure company, plans to sell a $10 billion equity stake in one of its subsidiaries that builds liquefied natural gas projects, as part of a larger corporate strategy to sharpen its focus on Sempra’s utilities in Texas and California.

The company announced Tuesday that it has agreed to sell 45% of Sempra Infrastructure to affiliates of global private investment giant KKR and Canada Pension Plan Investment Board. Pending the necessary regulatory approvals, the deal is expected to close in the second or third quarter of 2026.

The $10 billion from the sale will bolster Sempra’s balance sheet, improve its credit profile, boost its capital spending programs and help the company “transition to a leading U.S. utility growth business,” Sempra Chairman and CEO Jeff Martin said in a news release announcing the deal.

Sempra is the parent company of San Diego Gas & Electric and Los Angeles-based Southern California Gas. Sempra also owns 80% of Oncor, the largest electric transmission and distribution utility in Texas.

Martin said the sale will help support five of the company’s initiatives that are “designed to simplify our business, efficiently fund strong utility growth in Texas and California and improve our financial strength.”

Sempra Infrastructure has become one of the major players in the global natural gas export market.

In the LNG process, facilities take natural gas, cool it to minus 260 degrees Fahrenheit, load it onto cargo tanks on double-hulled ships and then export it to destinations around the world as a source of electricity.

Sempra Infrastructure is the developer and part owner of the Cameron LNG facility in Louisiana that opened in August 2020 and the Port Arthur LNG project on the Gulf Coast of Texas that is under construction.

The company is also adding an export component to an existing LNG terminal near Ensenada, Mexico, called Energía Costa Azul, which is expected to be finished by spring of next year.

Under the proposed $10 billion sale, the Sempra parent company’s ownership share of Cameron LNG will be reduced from 35.1% to 12.6%.

Its share of the first phase of the Port Arthur LNG project will drop from 19.6% to 7% and its ownership of the second phase of Port Arthur will fall from 35.1% to 12.5%.

Sempra’s share of the first phase of Energía Costa Azul will be reduced from 58.4% to 20.9%.

“We have long supported America’s leadership in global energy markets through the export of liquefied natural gas and will remain a meaningful stakeholder in Sempra Infrastructure, even after the closing of this transaction,” Martin said in an email to the Union-Tribune.

KKR has made significant investments in the LNG sector, including a partial stake in the Port Arthur project.

“Over the past four years, we have developed a close relationship with the Sempra Infrastructure Partners team and a deep understanding of their business,” Raj Agrawal, KKR’s Global Head of Real Assets, said in a statement.

Paul Patterson, an analyst who covers utilities for Glenrock Associates, a research firm in New York City, said Sempra’s deal with KKR and its decision to focus more intently on the utility sector makes sense.

“I’ve been following this company for some time and they seem to have a knack for monetizing various assets at opportune times,” Patterson said, adding that Sempra’s significant stake in Dallas-based Oncor can take advantage of the Lone Star State’s explosive population growth.

Texas has experienced unprecedented demand for new transmission and distribution capacity and Oncor recently announced a $36 billion capital plan to support expansion in its service territory over the next five years.

Environmental groups have long opposed LNG projects, saying they extend the world’s use of fossil fuels.

“Sadly, the carbon pollution from these LNG facilities will continue to accelerate climate change,” Masada Disenhouse, executive director of SanDiego350, said of the $10 billion proposed sale.

“Sempra’s new utility focus means we’ll need to be even more aggressive in advocating that more money stays in the pockets of San Diego families rather than going to Sempra’s shareholders,” Disenhouse said in an email, “and that our electricity comes from clean, renewable energy sources like rooftop solar rather than polluting fossil fuels like methane gas.”

Wall Street reacted positively to the news of the transaction, with Sempra stock rising 4.5% to $86.05 a share on Tuesday, when the deal was announced. Its stock closed Thursday at $86.49, down 79 cents.