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Credit Rating Agencies Divided On Sempra Energy

Audio

Aired 2/19/10

Sempra Energy's planned sale of a portion of its commodities trading unit to JP Morgan Chase for nearly $1 billion is receiving mixed reviews from national credit rating agencies. Sempra is the parent company of San Diego Gas & Electric.

— Sempra Energy's planned sale of a portion of its commodities trading unit to JP Morgan Chase for nearly $1 billion is receiving mixed reviews from national credit rating agencies. Sempra is the parent company of San Diego Gas & Electric.

The rating agency Fitch says it placed Sempra Energy and its subsidiaries including SDG&E on a negative rating watch earlier this month because of the company's debt uncertainty and over ownership of its commodities trading unit.

Philip Smyth of Fitch says for now, it will not improve that rating despite the announcement about the sale of part of Sempra's commodities trading operation.

"What we don't know right now is what they will do with the proceeds," Smyth said. "And one way they could avoid a downgrade would be to use the proceeds from that to reduce debt."

A Sempra representative says even if Fitch were to downgrade the company, Sempra would continue to maintain a "solid, investment-grade credit rating with the agency." Meanwhile, both Standard & Poor's and Moody's affirmed Sempra's outlook as stable following the announcement of the partial sale of its commodities trading unit. But David Lundberg of S&P emphasized the importance of how the company uses the money from that sale.

"Certainly our affirmation of the ratings with a stable outlook has an expectation," Lundberg said. "And that expectation is that those proceeds will be reinvested into the business in a reasonable manner. Reasonable meaning some level of debt paydown."

Sempra's debt is in large measure due to its investment in natural gas infrastructure.

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