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Market Price (11/2/2016): $99.36/share; ST-Target: $150/share; NIV: $195/share
Cameron construction delay big whoop, but Peru Pipeline is promising
Delay in Cameron construction doesn’t faze us one bit nor affect our analysis. We like the Southern Peruvian pipeline project for LT shareholder benefit. SB32 likely to have big impact on SDG&E. SRE’s touting LT growth-profile and excess cash flow generation, which we agree with. We believe at least by 2019, SRE would’ve found ways to utilize $2B in a way that really adds to shareholder value and the Peruvian pipeline would go a long way as well as projects in Mexico. Aliso Canyon looks to return to normalized service in-time for 2017 winter. We like and support acquisition of PEMEX interest in GdC. 2020 AEPS guidance of $7.20-$7.80 seems very low – only some 12% CAGR from mid-point of 2016 AEPS guidance. SRE is expected to grow dividends 8%-9% to match. We expect SRE to sign SPA and simultaneously issue FID for Cameron #4 by yearend with in-service date of at least mid-2021. We also believe #5 will get built and Port Arthur #1 & #2 are likely to be some of the last liquefaction plants built in US. We believe that growth beyond 2020 would be equally strong as MT-growth.