Item 8.01 Other Events
Purchase and Sale Agreement
On December 21, 2021, Sempra Energy (the "Company" or "Sempra") entered into a
purchase and sale agreement (the "Purchase Agreement") with Black River B 2017
Inc. (the "Purchaser"), a wholly owned affiliate of the Abu Dhabi Investment
Authority ("ADIA"), and, solely for purposes of guaranteeing the obligations of
the Purchaser, Infinity Investments S.A. and Azure Vista C 2020 S.à.r.l., each a
wholly owned affiliate of ADIA, pursuant to which the Purchaser will acquire
from the Company, for an aggregate purchase price of $1.785 billion, subject to
certain adjustments described below, 10% of the outstanding Class A Units of
Sempra Infrastructure Partners, LP ("Sempra Infrastructure," and such
transaction, the "Transaction"). Following the closing of the Transaction (the
"Closing"), Sempra, KKR (as defined below) and the Purchaser will directly or
indirectly own 70%, 20%, and 10%, respectively, of the outstanding Class A Units
of Sempra Infrastructure. Sempra Infrastructure has two authorized classes of
limited partnership interests, designated as "Class A Units" (which are common
voting units) and "Sole Risk Interests" (which are only owned by Sempra, are
non-voting and are not considered in the calculation of each limited partner's
respective ownership interests, subject to certain restrictions). Under the
terms of the Purchase Agreement, during the period between signing and Closing,
the Purchaser will have certain customary approval rights with respect to the
Partnership's business similar to those it will have after the Closing under the
Amended LP Agreement (as described below), commensurate with the size of its
investment. As further described below, after Closing the Purchaser will have
certain rights similar to those of KKR but subject to additional limitations and
adjustments to take into account the Purchaser's relative ownership percentage.
Sempra Infrastructure currently indirectly owns 99.9% of the outstanding
ordinary shares of Infraestructura Energetica Nova, S.A.P.I. de C.V. ("IEnova").
Under the terms of the Purchase Agreement, there will be a proportional purchase
price adjustment at the Closing (i) for any remaining ordinary shares of IEnova
that are not indirectly owned by Sempra Infrastructure at the Closing and (ii)
that generally takes into account cash distributions made to, or capital
contributions made by, the partners of Sempra Infrastructure, from and after the
date of the Purchase Agreement to the Closing.
Pursuant to the Purchase Agreement, the parties have made customary
representations and warranties and agreed to various customary covenants that
apply between the date the Purchase Agreement was executed and the Closing,
including, among others, covenants by the Company to conduct the business of
Sempra Infrastructure and its subsidiaries in the ordinary course. The
representations and warranties will not survive the Closing, subject to
exceptions for actual fraud.
The Closing is subject to receipt of certain regulatory approvals, including in
Mexico by the Comisión Federal de Competencia Económica and in the United States
by the Federal Energy Regulatory Commission and the Department of Energy;
certain other third-party approvals; the absence of a material adverse effect on
the assets, businesses, properties, liabilities, financial condition or results
of operations of Sempra Infrastructure taken as a whole, subject to certain
exceptions; and other customary closing conditions. Any party may generally
terminate the Purchase Agreement after September 30, 2022, if the Closing has
not yet occurred by such date, provided that such date will be subject to an
automatic extension through December 21, 2022 if required in order to receive
regulatory approvals.
Limited Partnership Agreement
At the Closing, the Company and the other partners of Sempra Infrastructure (the
"Minority Partners") will enter into a second amended and restated agreement of
limited partnership of Sempra Infrastructure (the "Amended LP Agreement"), which
will govern their respective rights and obligations in respect of their
ownership of Sempra Infrastructure. Under the Amended LP Agreement, the
Purchaser will have the right at the Closing to designate one manager to the
Sempra Infrastructure board of managers. Matters are decided generally by
majority vote and the managers designated by the Company and the managers
designated by each Minority Partner will each, as a group, have voting power
equivalent to the ownership percentage of their respective designating limited
partner. The Company will generally maintain control of Sempra Infrastructure as
its 70% owner on terms similar to those currently applicable to Sempra
Infrastructure. However, Sempra Infrastructure and its controlled subsidiaries
will be prohibited from taking certain limited actions without the prior written
approval of the Minority Partners (subject to the Minority Partners maintaining
certain ownership thresholds in Sempra Infrastructure). The minority protections
granted to KKR Pinnacle Investor L.P. ("KKR"), which became a Minority Partner
of Sempra Infrastructure on October 1, 2021, are described in the Form 8-K filed
by the Company with the U.S. Securities and Exchange Commission ("SEC") on April
4, 2021 (the "Prior Form 8-K"). The minority protections held by the Purchaser
(subject to maintaining certain ownership thresholds in Sempra Infrastructure)
constitute a sub-set of the minority protections granted to KKR and include,
among other things and in each case subject to certain exceptions and
limitations, an advance approval right with respect to any of the following
actions by Sempra Infrastructure: (i) redeeming units or making distributions to
its limited partners other than on a pro rata basis and as expressly permitted
under the Amended LP Agreement, (ii) transferring, disposing of or issuing
equity securities in any subsidiary of Sempra Infrastructure that is undertaking
or is the owner of any project that has received a final investment decision if,
following such transfer, disposition or issuance, Sempra Infrastructure will no
longer directly or indirectly hold at least 50% of the
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outstanding equity securities of such subsidiary or such transfer, disposition
or issuance will result in a material reduction in Sempra Infrastructure's
direct or indirect governance rights with respect to such subsidiary, (iii)
generally incurring indebtedness over a certain threshold, (iv) making a final
investment decision for, or entering into a contract to acquire, certain
material projects, assets or properties (subject to higher dollar thresholds for
such decisions or acquisitions and additional limitations in excess of those
applicable to KKR as the 20% limited partner), and (v) approving certain
affiliate arrangements with the Company.
The terms of the Amended LP Agreement applicable to the Purchaser in relation to
capital contributions and distributions are generally consistent with those
granted to the KKR Minority Partner as described in the Prior Form 8-K, with
adjustments and limitations to take into account the Purchaser's relative
ownership percentage, including limiting the Purchaser's priority distribution
rights to the failure of certain proposed projects to receive a positive final
investment decision by a date certain or to achieve specified thresholds of
projected internal rates of return or leverage. The transfer rights and
restrictions and registration rights in the Amended LP Agreement applicable to
the Purchaser are also generally consistent with those granted to the KKR
Minority Partner as described in the Prior Form 8-K, with adjustments and
limitations to take into account the Purchaser's relative ownership percentage,
including a general restriction on the Purchaser from transferring its interests
in Sempra Infrastructure to third parties (other than pursuant to certain
specified permitted transfers) for a specified period following its entry into
the Amended LP Agreement.
Forward-Looking Statements
This report contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on assumptions with respect to the future,
involve risks and uncertainties, and are not guarantees. Future results may
differ materially from those expressed in any forward-looking statements. These
forward-looking statements represent our estimates and assumptions only as of
the date of this report. We assume no obligation to update or revise any
forward-looking statement as a result of new information, future events or other
factors.
Forward-looking statements in this report include any statements regarding the
ability to complete the proposed Transaction on the anticipated timeline or at
all, the anticipated benefits of this Transaction if completed, the projected
impact of this Transaction on Sempra's performance or opportunities, and any
other statements regarding Sempra's expectations, beliefs, plans, objectives or
prospects or future performance or financial condition as a result of or in
connection with this Transaction. In this report, forward-looking statements can
be identified by words such as "believes," "expects," "anticipates," "plans,"
"estimates," "projects," "forecasts," "should," "could," "would," "will,"
"confident," "may," "can," "potential," "possible," "proposed," "in process,"
"under construction," "in development," "target," "outlook," "maintain,"
"continue," "goal," "aim," "commit," or similar expressions, or when we discuss
our guidance, priorities, strategy, goals, vision, mission, opportunities,
projections, intentions or expectations.
Factors, among others, that could cause actual results and events to differ
materially from those described in any forward-looking statements include risks
and uncertainties relating to: the timing of the proposed Transaction; the
ability to satisfy the conditions to closing such Transaction; the ability to
obtain regulatory approvals necessary to complete such Transaction; the ability
to achieve the anticipated benefits of such Transaction; the effect of this
communication on Sempra's stock price; transaction costs; the diversion of
management time on transaction-related issues; the effects on such Transaction
of industry, market, economic, political or regulatory conditions outside of
Sempra's control; the effects on such Transaction of disruptions to Sempra's
businesses; California wildfires, including the risks that we may be found
liable for damages regardless of fault and that we may not be able to recover
costs from insurance, the wildfire fund established by California Assembly Bill
1054 or in rates from customers; decisions, investigations, regulations,
issuances or revocations of permits and other authorizations, renewals of
franchises, and other actions by (i) the California Public Utilities Commission
(CPUC), Comisión Reguladora de Energía, U.S. Department of Energy, U.S. Federal
Energy Regulatory Commission, Public Utility Commission of Texas, and other
regulatory and governmental bodies and (ii) states, counties, cities and other
jurisdictions in the U.S., Mexico and other countries in which we do business;
the success of business development efforts, construction projects and
acquisitions and divestitures, including risks in (i) the ability to make a
final investment decision, (ii) completing construction projects or other
transactions on schedule and budget, (iii) the ability to realize anticipated
benefits from any of these efforts if completed, and (iv) obtaining the consent
or approval of partners or other third parties, including governmental entities;
the resolution of civil and criminal litigation, regulatory inquiries,
investigations and proceedings, and arbitrations, including those related to the
natural gas leak at Southern California Gas Company's (SoCalGas) Aliso Canyon
natural gas storage facility; changes to laws, including proposed changes to the
Mexican constitution that could materially limit access to the electric
generation market and changes to Mexico's trade rules that could materially
limit our ability to import and export hydrocarbons; failure of foreign
governments and state-owned entities to honor their contracts and commitments
and property disputes; actions by credit rating agencies to downgrade our credit
ratings or to place those ratings on negative outlook and our ability to borrow
on favorable terms and meet our substantial debt service obligations; the impact
of energy and climate goals, policies, legislation and rulemaking, including
actions to reduce or eliminate reliance on natural gas generally and any
deterioration of or increased uncertainty in the political or regulatory
environment for California natural gas distribution companies; the pace of the
development and adoption of new technologies in the energy sector, including
those designed to support governmental and private party energy and climate
goals, and our ability to timely and economically incorporate them into our
business; weather, natural disasters, pandemics, accidents, equipment failures,
explosions, acts of terrorism, information system outages or other events that
disrupt our operations, damage our facilities and systems, cause the release of
harmful materials, cause fires or subject us to liability for property damage or
personal injuries, fines and penalties, some of which may not be covered by
insurance, may be disputed by insurers or may otherwise not be recoverable
through regulatory mechanisms or may impact our ability to obtain satisfactory
levels of affordable insurance; the availability of electric power and natural
gas and natural gas storage capacity, including disruptions caused by failures
in the transmission grid or limitations on the withdrawal of natural gas from
storage facilities; the impact of the COVID-19 pandemic,
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including potential vaccination mandates, on capital projects, regulatory
approvals and the execution of our operations; cybersecurity threats to the
energy grid, storage and pipeline infrastructure, information and systems used
to operate our businesses, and confidentiality of our proprietary information
and personal information of our customers and employees, including ransomware
attacks on our systems and the systems of third-party vendors and other parties
with which we conduct business; the impact at San Diego Gas & Electric Company
(SDG&E) on competitive customer rates and reliability due to the growth in
distributed and local power generation, including from departing retail load
resulting from customers transferring to Direct Access and Community Choice
Aggregation, and the risk of nonrecovery for stranded assets and contractual
obligations; Oncor Electric Delivery Company LLC's (Oncor) ability to eliminate
or reduce its quarterly dividends due to regulatory and governance requirements
and commitments, including by actions of Oncor's independent directors or a
minority member director; volatility in foreign currency exchange, inflation and
interest rates and commodity prices and our ability to effectively hedge these
risks and with respect to interest rates, the impact on SDG&E's and SoCalGas'
cost of capital; changes in tax and trade policies, laws and regulations,
including tariffs and revisions to international trade agreements that may
increase our costs, reduce our competitiveness, or impair our ability to resolve
trade disputes; and other uncertainties, some of which may be difficult to
predict and are beyond our control.
These risks and uncertainties are further discussed in the reports that Sempra
has filed with the SEC. These reports are available through the EDGAR system
free-of-charge on the SEC's website, www.sec.gov, and on Sempra's website,
www.sempra.com. Investors should not rely unduly on any forward-looking
statements.
Sempra Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor
and IEnova are not the same companies as the California utilities, SDG&E or
SoCalGas, and Sempra Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas
Utilities, Oncor and IEnova are not regulated by the CPUC.
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