Sempra U.S. Gas & Power, LLC, a subsidiary of Sempra Energy (SRE), has received approval for the placement of second underground natural gas storage cavern at its Mississippi Hub Storage facility from the Federal Energy Regulatory Commission (FERC).
Located in Simpson County, Mississippi, this additional 7.5 billion cubic feet (Bcf) cavern will expand the facility’s total working gas storage capacity to 15 Bcf. The Mississippi Hub Storage is located in the midst of the rapidly growing Southeast natural gas market. It has operational interconnections in three major interstate gas pipelines: SONAT, Transco, and Southeast Supply Header (SESH) that provide bi-directional access to diverse major markets throughout the Southeast and mid-Atlantic regions.
The facility has injection capability of 450 million cubic feet per day (MMcfd) and a withdrawal capability of 1,200 MMcfd. Currently, all the injection capacity of Mississippi Hub Storage is under contract. The additional injection capacity will become available to customers as the dewatering process at the new cavern is complete.
In August 2010, first cavern was placed into service at its Mississippi Hub natural gas storage facility. Cavern 1 was designed to provide 10-cycle service on 7.5 Bcf of working gas capacity. The interconnections for the cavern were Southern Natural Gas, Southeast Supply Header and Transcontinental Gas Pipeline.
The company expects to complete the construction of a third cavern in 2013. It would add 7.5 Bcf to the facility resulting in an expansion of the site’s storage capacity to 22.5 Bcf.
Besides, operating 15.5 Bcf of underground natural gas storage at Bay Gas Storage near Mobile, Alabama, Sempra U.S. Gas & Power operates two natural gas distribution utilities and long-distance gas pipelines.
Sempra U.S. Gas & Power is also involved in wind power generation. Recently, BP Wind Energy, a unit of BP p.l.c. (BP) and Sempra U.S. Gas & Power announced that they have moved into full construction of Mehoopany Wind Farm, Pennsylvania. Once completed, the wind farm will have the capacity to produce 141 MW of electricity that will be sufficient to power over 40,000 homes.
This diversified basket of businesses insulates the company from regulatory rate risks to a great extent. We believe the company presents a lower risk profile relative to its peers. This bullish outlook is supported by stable utility earnings, steady progress at its LNG terminals, renewable power projects in the Pacific Southwest, the Sunrise Powerlink transmission line and ongoing installations of smart meter.
However, the above positives are offset due to a 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, Sempra International and Sempra U.S. Gas & Power.
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