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The recently acquired Twin Oaks power plant provides Sempra Energy Resources with fuel diversity and entry into the Texas power market. |
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Sempra Energy Resources has three state-of-the-art gas-fired power plants under construction — near Bakersfield, Calif., Phoenix, Ariz., and Mexicali, Mexico — that will begin operating by the summer of 2003. These will be among the cleanest power plants in North America, meeting some of the most stringent environmental standards. More than 80 percent of the peak-generating capacity of Sempra Energy Resources' fleet of power plants is hedged or under contract. This strategy to build or acquire power plants only when we have a predictable market for their output is designed to mitigate our risks.
Underlying the development of the three power plants in the Pacific Southwest is a long-term energy-supply agreement Sempra Energy Resources signed with the California Department of Water Resources in May 2001. California agencies have challenged our and other suppliers' agreements at the Federal Energy Regulatory Commission (FERC) and in state court, even though these contracts have brought stability to California's energy market. We expect the validity of our contract to be upheld in all venues.
In a tough market, Sempra Energy Trading recorded another profitable year, operating a low-risk business with products and services to mitigate large wholesale energy customers' exposure to market volatility. Our trading business differs from others because we manage our price and credit risk carefully, while keeping our transactions relatively short in term. More than half our unrealized marked-to-market earnings become cash within
12 months and, more than 85 percent, within three years.
In April 2002, Sempra Energy Trading enhanced its earnings and their consistency through the acquisition of Enron's base metals trading and warehousing businesses.
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