Elliott Associates, L.P. and Elliott International, L.P. (together, “Elliott”) and Bluescape Resources Company (“Bluescape”) (collectively the “Sempra Shareholder Group”), which together own a $1.3 billion or 4.9% economic interest in Sempra Energy (the “Company,” or “Sempra”), today released a letter and presentation which they said outline, "a $11-$16 billion readily achievable value creation opportunity to Sempra’s Board."
The activist investors said that, "According to the letter and presentation, Sempra owns a collection of excellent regulated and long-term contracted critical infrastructure businesses, but its focus on sheer size has led to the creation of a conglomerate structure in which these disparate businesses are grouped together with no compelling strategic or financial rationale. The resulting complexity and management and Board detachment has introduced numerous risks for all key stakeholders, leading Sempra’s share price to meaningfully underperform and persistently trade at a steep discount to both peers and achievable value."
To unlock this value at Sempra, the Shareholder Group proposed the following:
1) Reset Oversight: "Refresh the Board with six independent, highly qualified directors with diverse experience and expertise to help oversee the transition to a Sustainable Sempra."
2) Strategic Review: "Establish a Strategic Review Committee of the Board that is empowered to conduct full portfolio and operational reviews to identify value-creation opportunities for all shareholders."
A presentation from the investors proposed a “no stone unturned” review to consider all pathways to maximize value – including tax-free spin-offs and tax-optimized business divestitures, such as a LNG and midstream spin and Non-Core Business Divestitures
Per the presentation, asset sales would include Sempra Renewables, IEnova, Luz del Sur, and Chilquinta
"In addition, the letter said the path forward can maximize overall reliability and service for customers, opportunities for employees, transparency and accountability for regulators, and value and certainty for shareholders. This more focused approach will enable Sempra to unlock capital to reinvest locally in critical infrastructure with no net increase in utility customer rates, while eliminating exogenous risks from businesses outside each regulator’s direct purview," the Shareholder Group said