“Vulture Capitalist” Pushes for Sale of Sempra Assets

Will Sempra Energy suffer a fate similar to NRG?

The same two private investment firms bought up a substantial number of shares of the parent company of San Diego Gas & Electric and SoCal Gas and are trying to force a sale of assets to generate cash, like they successfully did with NRG.

The equivalent of yesterday’s corporate raiders, Elliot Management and Bluescape Resources, together own nearly 5 percent of Sempra stock valued at $1.3 billion. They claim the stock is largely undervalued, by as much as $16 billion.

In a June 11 presentation to Sempra’s Board of Directors, the two hedge funds claimed they want “to maximize overall reliability and service for customers, opportunities for employees, transparency and accountability for regulators, and value and certainty for shareholders.” They added, “If executed, we believe this can lead to $11-16 billion line-of-sight value creation ($139-$158/share) representing a 38-57 percent uplift.”

Sempra responded that it “is committed to an open dialogue with all shareholders and considers investor perspectives in the context of the company’s existing strategy and opportunities to deliver long-term shareholder value.” It added June 11 that its board and management will consider the presentation “in detail.”

Last year, Sempra beat out Elliot Management when Texas-based Oncor was on the auction block. Paul Singer, Elliot Management owner, has been dubbed a “vulture capitalist”

Singer bought bad debt in nations like The Republic of the Congo and then seized assets. In Congo, BBC reported that he purchased bad debt for $10 million and then seized $400 million worth of public assets. Last year, he teamed up with Charles John Wilder and his company Bluescape to gain control of NRG.

Elliot Management representatives were some of the last of the financial industry firms to meet with members of the California Public Utilities Commission last November on an ex parte basis about investor-owned utility financial viability in light of the substantial wildfire liability. The meeting took place before legislation setting stricter disclosure on ex parte meetings went into effect.

The two private investment firms bought 9.2 percent of NRG. The duo then forced a change in the merchant generator’s board and a sale of many of its generating assets. NRG agreed to sell $3.2 billion in assets, including gas projects in California .

Elliot and Bluescape are using a similar strategy with Sempra. That includes seeking to add six directors to the company’s board “to help oversee the transition to a Sustainable Sempra.” They also want to form a “Strategic Review Committee of the Board” with the authority to “conduct full portfolio and operational reviews to identify value-creation opportunities for all shareholders.”

Sempra, however, is unlike NRG, which suffered a series of poor quarterly earnings. Sempra’s utilities, which are insulated by guaranteed rates of returns, produce the bulk of its income. — Elizabeth McCarthy

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“Vulture Capitalist” Pushes for Sale of Sempra Assets

William J. Kelly

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