Sempra, New Jersey Firm to Buy Chilean Utility

Sempra Energy, the San Diego-based parent of Southern California Gas Co. and San Diego Gas & Electric, said Tuesday that it will join with a New Jersey utility to buy Chile’s third-largest electricity company.

Sempra and Public Service Enterprise Group of Ridgewood, N.J., said their international subsidiaries will jointly buy 90% of Chilquinta Energia for $830 million--$510 million in equity and $320 million in debt. The two companies expect to then make a tender offer for the other 10% held by shareholders.

The purchase of Chilquinta would double Sempra’s investment in the region and add substantial electric utility assets to the company’s sizable portfolio of gas distribution properties, said Stephen Baum, Sempra’s vice chairman and chief operating officer.

Many U.S. utilities are looking abroad for new sources of income as they lose monopolies over gas and power sales at home. Latin American countries are eager to lure foreign investors to improve their electric and gas systems.

Baum said Sempra plans to establish a base for future development in Santiago, the capital of Chile, where demand for electricity is growing by about 8% a year, compared with a rate of less than 2% in the United States.

“This will provide us with a sound vehicle for scale and expansion and to integrate our other operations” in Latin America, Baum said. He noted that the partnership with Public Service enabled the company to accomplish those goals at a lower capital investment.

Because Chilquinta has little debt, “it’s going to be a cash cow,” said Andrew Campbell, a Latin American utilities analyst at SG Cowen & Co.

Sempra and Public Service expect the purchase to boost earnings this year.

Sempra shares slipped 6 cents to close at $19, and Public Service fell 56 cents to $38.31, both on the New York Stock Exchange.

Sempra sells gas and electricity to 6 million customers in Southern California. Public Service sells power to 2.2 million customers through its Public Service Electric & Gas unit. The companies are borrowing $320 million to help finance the transaction.

Sempra’s international unit has stakes in gas projects in Uruguay, Mexico and Argentina. Public Service invests in Brazil and Venezuela through its PSEG Global unit.

The first stage of the transaction is expected to close in June.