Occidental Says Sempra Breached Contract

Occidental Petroleum Corp. said that Sempra Energy, its partner on a power plant under construction in Kern County, cut it out of a $6.6-billion contract to sell power to California.

The Elk Hills power plant is the subject of a separate dispute between Sempra and the California Department of Water Resources that surfaced after Occidental filed its complaint. The state agency said Sempra lied about plans to complete the power plant by this year so it would win the 10-year electricity contract.

Occidental said Sempra breached a contract to develop and manage the plant for the benefit of both partners.

The suit seeks a court order to give Occidental part of the multibillion-dollar contract as well as more than $100 million in compensatory damages and unspecified punitive damages.

Sempra, among other things, breached its duties by “representing its own interest rather than those of the project in negotiations with CDWR,” according to the amended complaint filed March 29 in Kern County Superior Court.

In early April, California’s dispute with Sempra became public. The state threatened to cancel the Sempra contract, saying the company failed to complete on schedule a generating unit at Elk Hills.

Sempra on Tuesday filed suit in San Diego Superior Court seeking to block possible termination of the deal.

Sempra declined to comment on the suit, said spokesman Tom Murnane.

Sempra has said it is fulfilling the contract.

In January 1999, Los Angeles-based Occidental and San Diego-based Sempra agreed to split the costs of building the Elk Hills power plant and share ownership of the project, according to the suit. Sempra, an owner and marketer of utilities, agreed to market the plant’s power supply.

Occidental also said that Sempra thwarted its attempt to sell its interest in the Elk Hills project.

Occidental said it ended talks with Aquila Inc. after Sempra made an offer to pay $51 million for Occidental’s stake. Sempra then allegedly offered a “vastly lower revised price,” according to the suit.

Shares of Sempra fell 52 cents to $24.95, and Occidental shares fell 5 cents to $30.16, both on the New York Stock Exchange.