SRE 2Q2017 Earnings: Cameron delay: Big Whoop; IEnova continues to impress; more upside

Cameron delay: Big Whoop; IEnova continues to impress; more upside || SRE raised AEPS guidance to $5-$5.30/share from $4.85-$5.25/share on strong 2Q17 results. 2020 AEPS guidance of $7.20-$7.80 seems low – only some 12% CAGR from 2016A AEPS. SRE is expected to grow dividends 8%-9% to match. Cameron delay was not only forewarned but also immaterial to valuation, investment thesis and stock performance. We look for outperformance with regards to SRE’s guidance in ST, MT and LT. Within next 12-months we look for Cameron 4&5 to get FID and begin construction. We believe SRE will use excess $2B in capital for Cameron 4&5. Even Port Arthur seems likely, given MOU with KoGas. We feel global supply/demand picture is tipping towards favoring supply again. We support projects in Mexico; IEnova’s has billions in potential opportunities in energy infrastructure, renewable generation, transmission and more. We feel SRE growth beyond 2020 would be equally strong as MT-growth. We support SDG&E’s move towards energy storage and more renewables, and SCG’s continuing emphasis on pipeline safety and reliability. SCG also is returning Aliso Canyon to full operations. Potential for LNG-to-power projects in oil- and coal-fired dominant regions like Central and South America and even Hawaii could be another future growth source. Chile seems most likely in the MT. ST-Target raised to $165/share, up $5, while NIV/share moves up to $210/share from $207/share.

Continue Reading →