Summary
Sempra Energy (SRE) filed an 8-K on April 20, 2011, detailing a material definitive agreement entered into on April 15, 2011. This agreement, a "Letter Agreement," further amends the partnership agreement for RBS Sempra Commodities LLP. The core of this filing concerns the wind-down of this commodity-marketing joint venture, initially formed with The Royal Bank of Scotland plc (RBS). Significant distributions have occurred, and the agreement outlines the framework for future distributions and capital calls during the wind-down process. Investors should note the financial implications of these distributions and the revised profit/loss sharing arrangements. The Letter Agreement formalizes the distribution of substantial proceeds, with RBS receiving approximately $433.3 million and Sempra (on behalf of its members) receiving approximately $328.7 million as of April 15, 2011. It also establishes a 51%/49% distribution split between RBS and Sempra Members for future excess capital, subject to adjustments as each party's adjusted contribution nears zero. The agreement also addresses capital calls and sets a "Loss Cap" for Sempra Members concerning potential liabilities from the partnership's business dispositions, providing a degree of financial certainty for Sempra shareholders.
Key Highlights
- 1Sempra Energy and RBS finalized terms for the wind-down of their joint venture, RBS Sempra Commodities LLP, through a Letter Agreement dated April 15, 2011.
- 2An initial distribution of approximately $433.3 million to RBS and $328.7 million to Sempra Members occurred on April 15, 2011.
- 3Future distributions of excess capital from the partnership will be split 51% to RBS and 49% to Sempra Members, with adjustments based on capital contributions.
- 4The agreement allows for capital calls from Sempra Members up to a cap of approximately $271.5 million (subject to adjustments) to support the partnership's remaining liabilities or dispositions.
- 5A "Loss Cap" is established for Sempra Members regarding certain liabilities, capped at approximately $821.5 million (subject to adjustments), providing a limit on potential future financial exposure.
- 6The filing also includes a Fourth Amendment to an Indemnity Agreement, releasing RBS from certain indemnification obligations related to a prior sale of partnership assets to J.P. Morgan Ventures Energy Corporation.
- 7The overall effect of these agreements is to move towards the complete dissolution and settlement of the RBS Sempra Commodities LLP joint venture.