Southern California Gas Co., a regulated subsidiary of Sempra Energy (SRE), has made an equity investment of $500,000 in Tecogen Inc. This is a strategic addition to the utility company's growing clean energy portfolio. Tecogen Inc. is a developer and manufacturer of innovative, ultra-clean natural gas-driven combined heat and power products for commercial and industrial facilities.
Natural gas plays a vital role in Sempra Energy’s objective of maintaining a sustainable and low-emission energy future. Ongoing research projects and equity investments in Tecogen will be a helping hand to the company. The Tecogen connection will help the company bring new choices in ultra-low emissions technologies like natural gas-driven cogeneration and air-conditioning systems to the market. Tecogen systems go a long way to benefit customers and the market at large by reducing their energy costs and carbon footprint.
Recently, Tecogen has made significant advances in emission reduction technology. This has a strategic importance in regions like Southern California that are particularly sensitive to toxic air-borne pollution. This technology comes to the rescue in states where emission requirement yardsticks have been reduced to unprecedented levels, so much so that conventionally powered combined power and heat products fail to meet the now-in-place emission norms.
The Tecogen system, to its credit, has established compliance well below the emission levels required by the new regulations. Tecogen expects commercial product availability of its advanced system in the third quarter of fiscal 2011.
Sempra Energy on its part presents a lower risk profile relative to its peers. Its diversified exposure protects it from regulatory rate risks. This bullish outlook is supported by stable utility earnings, the Sunrise Powerlink transmission line, ongoing installations of smart meter and renewable power projects in the Pacific Southwest.
However, we are concerned about 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 expected to release its second quarter 2011 earnings results on August 1, 2011. Going forward, the Zacks Consensus Estimates for second quarter 2011 and fiscal year 2011 are currently at $1.00 per share and $4.22 per share, respectively.
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, and Sempra Global and parent. One of its direct competitors is EQT Corporation (EQT).
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