The principal reason was the resolution of a dispute with an Argentine gas vendor over gas rates, Sempra CEO Stephen Baum said in a conference call. The dispute was based on whether or not it would have to pay US dollars or Argentine pesos for the gas, and "as it turns out, we can pay in pesos, which was very valuable to us because all of our expenses there are peso-denominated," Baum said. "We had anticipated a favorable resolution of that issue and we're not caught in a situation where we have dollar expenses against peso income," he added.
Sempra owns a 43% interest in Argentine natural gas utility holding companies Sodigas Pampeana and Sodigas Sur. The Sodigas companies control Camuzzi Gas Pampeana and Camuzzi Gas del Sur, which serve a combined 1.3 million customers in central and southern Argentina. "As the economy improves modestly in Argentina, we should see improved operations," Baum said.
Sempra is one of about twenty foreign companies seeking some US$3bn in compensation for the impact of the rates freeze and the devaluation of the peso on US dollar-denominated debts. "We are making progress in our claims against the Argentine government and expect a decision in our bilateral investment treaty proceeding in late 2004," Baum said. The companies have presented their claims to the World Bank's International Center for the Settlement of Investment Disputes (ICSID).
As for the rest of South America, "we're doing just fine, particularly in Chile and Peru," Baum said. In Mexico, Sempra received environmental licensing for its Energia Costa Azul LNG project in Baja California state in April this year, and expects to receive municipal land permits and the green light from Mexico's energy regulator CRE in the third quarter, Baum said. In terms of LNG supplies for the plant, "we're in the middle of a number of discussions," Baum said, adding that contracts should be signed by the fourth quarter. "We're in a favorable position, because through our trading company we can offer alternatives for marketing to suppliers that may not have that ability themselves," he added.
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