Phillips 66 (PSX)

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Sempra Energy Unit Agrees To Sell Stake In Rockies Express Pipeline (3/29/16)

SAN DIEGO, March 29, 2016 /PRNewswire/ -- Sempra U.S. Gas & Power, a unit of Sempra Energy (NYSE: SRE), today announced that it has entered into a purchase-and-sale agreement with a subsidiary of Tallgrass Development, LP to sell Sempra U.S. Gas & Power's 25-percent interest in the Rockies Express Pipeline (REX) for approximately $440 million in cash.

The transaction is subject to customary closing conditions and a right of first refusal. Sempra Energy expects the transaction to close in the second quarter and result in an after-tax loss of approximately $27 million.

Additionally, Sempra U.S. Gas & Power intends to permanently release the remaining uncontracted capacity that it holds on REX that it had been releasing on an interim basis. The effect of the permanent capacity release is expected to result in a charge to earnings of between $100 million and $120 million during the second quarter 2016, representing an acceleration of losses that would otherwise be realized over the contract term, which extends through November 2019. It is expected that the approximately $27 million after-tax loss from the sale, as well as the loss resulting from the permanent release of capacity, will be excluded from Sempra Energy's adjusted 2016 earnings guidance.

"After careful evaluation of our natural gas portfolio, we determined that our minority stake in REX is not consistent with our long-term growth strategy," said Patti Wagner, president and chief executive officer of Sempra U.S. Gas & Power. "While REX is an important part of the country's natural gas pipeline system, we believe that given the changing market conditions, we can more productively redeploy the proceeds from the REX sale into long-term growth opportunities that better meet our strategy and risk profile."

"While Sempra Energy's earnings from REX for March through December 2016 will be reduced by approximately $60 million, forecasted earnings from REX were expected to be immaterial to Sempra Energy beginning in 2020," said Joseph A. Householder, executive vice president and chief financial officer of Sempra Energy. "We expect to redeploy the sale proceeds to mitigate the loss of REX earnings in the near term and increase our long-term earnings profile."

Sempra Energy plans to provide updated adjusted earnings guidance for 2016 by the company's annual financial analyst conference on May 24, 2016.

Rockies Express Pipeline LLC is a Delaware limited liability company engaged in the ownership and operation of the Rockies Express Pipeline, a 1,712-mile natural gas transmission pipeline that extends from Opal, Wyoming, and Meeker, Colorado, to Clarington, Ohio, and is one of the largest natural gas pipelines ever constructed in North America. Rockies Express Pipeline LLC is a joint venture of: a subsidiary of Tallgrass Development, LP (50-percent share); Sempra U.S. Gas & Power (25-percent share); and a subsidiary of Phillips 66 (25-percent share). A wholly owned subsidiary of Tallgrass Development, LP operates the pipeline. Tallgrass Development, LP is a member of the Tallgrass Energy family of companies, which includes Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP).

Sempra U.S. Gas & Power, LLC is a leading developer of renewable energy and natural gas projects. For more information, visit www.SempraUSGP.com. Sempra U.S. Gas & Power is a subsidiary of Sempra Energy (NYSE: SRE), a Fortune 500 energy services holding company with 2015 revenues of more than $10 billion. The Sempra Energy companies' 17,000 employees serve more than 32 million consumers worldwide.

http://www.prnewswire.com/news-releases/sempra-energy-unit-agrees-to-sell-stake-in-rockies-express-pipeline-300243178.html