SOURCE: Sempra Energy

Sempra Energy

May 04, 2010 09:00 ET

Sempra Energy Reports First-Quarter 2010 Earnings

SAN DIEGO, CA--(Marketwire - May 4, 2010) - Sempra Energy (NYSE: SRE) today reported first-quarter 2010 earnings of $106 million, or $0.42 per diluted share, compared with $316 million, or $1.29 per diluted share, in the first quarter 2009.

First-quarter 2010 earnings included a charge of $96 million after tax, or $0.38 per diluted share, related to the energy-crisis litigation settlement announced last week. The reduction in first-quarter earnings also reflected poor performance at the company's commodities joint venture. In February, Sempra Energy announced it intends to exit the joint venture. Excluding the $96 million energy-crisis litigation charge, Sempra Energy had earnings of $202 million, or $0.81 per diluted share, in the first quarter 2010.

"While the quarterly results at our commodities joint venture were disappointing, our core businesses continue to perform in-line with expectations," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We have an active sales process under way for the commodities joint venture and expect to exit the business completely in the latter half of this year."

SEGMENT RESULTS

San Diego Gas & Electric

First-quarter earnings for San Diego Gas & Electric (SDG&E) were $83 million in 2010, compared with $99 million in 2009, due primarily to higher liability insurance premiums for wildfire coverage and a tax charge resulting from the recently enacted federal health care legislation. In the first quarter last year, SDG&E also benefited from the favorable resolution of a litigation matter.

Southern California Gas Co.

Earnings for Southern California Gas Co. (SoCalGas) in the first quarter 2010 increased to $65 million from $59 million in last year's first quarter, due to higher authorized margins and regulatory awards, as well as lower bad debt expense. The improvement in the quarter was partially offset by higher taxes resulting from the recently enacted federal health care legislation.

Last month, SoCalGas received approval from the California Public Utilities Commission for the utility's $1.05 billion advanced metering program. In 2012, SoCalGas will begin replacing its customers' six million meters with digital devices that allow two-way communications.

Sempra Generation

Sempra Generation recorded a first-quarter loss of $53 million in 2010, compared with earnings of $43 million in 2009, primarily due to an $84 million after-tax charge related to the energy-crisis litigation settlement, as well as scheduled major maintenance costs and associated downtime.

Sempra Pipelines & Storage

First-quarter earnings for Sempra Pipelines & Storage were $38 million in 2010, up from $37 million last year.

Yesterday, Sempra Pipelines & Storage announced that it had completed its acquisition of the Mexican pipeline and gas infrastructure assets of El Paso Corp. The acquisition involves a natural gas pipeline and compression assets in the Mexican state of Sonora and a 50-percent interest in a joint venture with PEMEX, the Mexican state-owned oil company. The joint venture operates two natural gas pipelines and a propane system in northern Mexico.

Sempra LNG

Sempra LNG earned $32 million in the first quarter 2010, compared with a loss of $7 million in the first quarter 2009, due primarily to the start-up of marketing and terminal operations.

On April 22, Sempra LNG announced an agreement with Gazprom Global LNG Ltd. that will allow Gazprom to sell and deliver up to two liquefied natural gas cargoes per month to Sempra LNG's Cameron LNG terminal near Lake Charles, La., beginning next month.

Sempra Commodities

Sempra Energy's commodity operations lost $5 million in the first quarter 2010, compared with earnings of $114 million last year. The loss was due primarily to reduced margins in oil and European natural gas marketing, as well as higher costs for employee retention, and a $12 million after-tax charge related to the energy-crisis litigation settlement. Sempra Energy said the performance at Sempra Commodities is not expected to show significant improvement prior to the completion of the sales process, because of low commodity prices and the disruptions caused by the sale.

On Feb. 16, Sempra Energy and The Royal Bank of Scotland (RBS) announced a definitive agreement to sell the international oil, metals and European businesses of the RBS Sempra Commodities joint venture to J.P. Morgan Chase & Co. for an expected $1.7 billion. An active sales process is under way for the remaining North American natural gas and power businesses. Sempra Energy expects the sale of both parts of the joint venture to be completed in the latter half of 2010.

EARNINGS OUTLOOK

Assuming break-even performance at RBS Sempra Commodities and the $96 million after-tax litigation charge, Sempra Energy now expects earnings per share of $3.15 to $3.40 in 2010, compared with previous per-share guidance of $4.25 to $4.50.

INTERNET BROADCAST

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT with senior management of the company. Access is available by logging onto the Web site at www.sempra.com. For those unable to log onto the live webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (888) 203-1112 and entering passcode 3541735.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2009 revenues of more than $8 billion. The Sempra Energy companies' 13,800 employees serve about 29 million consumers worldwide.

Complete financial tables, including earnings information by business unit, are available on Sempra Energy's Web site at http://www.sempra.com/downloads/1Q2010.pdf.

This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by words like "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "would," "could," "should," or similar expressions, or discussions of strategies, plans or intentions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, California State Legislature, California Department of Water Resources, Federal Energy Regulatory Commission, Federal Reserve Board, and other regulatory and governmental bodies in the United States and other countries where the company does business; capital market conditions and inflation, interest and exchange rates; energy and trading markets, including the timing and extent of changes and volatility in commodity prices; the availability of electric power, natural gas and liquefied natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the Securities and Exchange Commission. These reports are available through the EDGAR system without charge at the SEC's Web site, www.sec.gov and on the company's Web site, at www.sempra.com.

Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and RBS Sempra Commodities dba Sempra Energy Solutions and Sempra Energy Trading are not the same companies as the utility, San Diego Gas & Electric (SDG&E) or Southern California Gas Company (SoCalGas), and Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and RBS Sempra Commodities dba Sempra Energy Solutions and Sempra Energy Trading are not regulated by the California Public Utilities Commission.

                              SEMPRA ENERGY
                                  Table A

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                      Three months ended
                                                          March 31,
                                                    ----------------------
(Dollars in millions, except per share amounts)        2010        2009
                                                    ----------  ----------
                                                          (unaudited)
REVENUES
Sempra Utilities                                    $    1,912  $    1,642
Sempra Global and parent                                   622         466
                                                    ----------  ----------
  Total revenues                                         2,534       2,108
EXPENSES AND OTHER INCOME
Sempra Utilities:
  Cost of natural gas                                     (758)       (540)
  Cost of electric fuel and purchased power               (148)       (171)
Sempra Global and parent:
  Cost of natural gas, electric fuel and
   purchased power                                        (338)       (268)
  Other cost of sales                                      (25)        (17)
Litigation expense                                        (168)          7
Other operation and maintenance                           (576)       (523)
Depreciation and amortization                             (210)       (183)
Franchise fees and other taxes                             (90)        (82)
Equity earnings:
  RBS Sempra Commodities LLP                                 7         153
  Other                                                      8           7
Other income, net                                            8           3
Interest income                                              4           6
Interest expense                                          (109)        (82)
                                                    ----------  ----------
Income before income taxes and equity earnings of
 certain unconsolidated subsidiaries                       139         418
Income tax expense                                         (58)       (109)
Equity earnings, net of income tax                          19          16
                                                    ----------  ----------
Net income                                                 100         325
Losses (earnings) attributable to noncontrolling
 interests                                                   8          (7)
Preferred dividends of subsidiaries                         (2)         (2)
                                                    ----------  ----------
Earnings                                            $      106  $      316
                                                    ==========  ==========

Basic earnings per common share                     $     0.43  $     1.31
                                                    ==========  ==========
Weighted-average number of shares outstanding,
 basic (thousands)                                     246,083     241,766
                                                    ==========  ==========

Diluted earnings per common share                   $     0.42  $     1.29
                                                    ==========  ==========
Weighted-average number of shares outstanding,
 diluted (thousands)                                   250,373     245,017
                                                    ==========  ==========
Dividends declared per share of common stock        $     0.39  $     0.39
                                                    ==========  ==========




                              SEMPRA ENERGY
                                  Table B

CONDENSED CONSOLIDATED BALANCE SHEETS



                                                    March 31,  December 31,
(Dollars in millions)                                  2010        2009
                                                    ----------- -----------
                                                    (unaudited)
Assets
Current assets:
   Cash and cash equivalents                        $       222 $       110
   Restricted cash                                           44          35
   Accounts receivable, net                                 978       1,130
   Due from unconsolidated affiliates                        29          41
   Income taxes receivable                                  156         221
   Deferred income taxes                                      5          10
   Inventories                                              160         197
   Regulatory assets                                         90          54
   Fixed-price contracts and other derivatives               85          77
   Insurance receivable related to wildfire
    litigation                                              194         273
   Other                                                    144         147
                                                    ----------- -----------
       Total current assets                               2,107       2,295
                                                    ----------- -----------

Investments and other assets:
   Regulatory assets arising from fixed-price
    contracts and other derivatives                         251         241
   Regulatory assets arising from pension and other
    postretirement benefit obligations                      978         959
   Other regulatory assets                                  739         603
   Nuclear decommissioning trusts                           706         678
   Investment in RBS Sempra Commodities LLP               2,178       2,172
   Other investments                                      2,202       2,151
   Goodwill and other intangible assets                     523         524
   Sundry                                                   598         608
                                                    ----------- -----------
       Total investments and other assets                 8,175       7,936
                                                    ----------- -----------
Property, plant and equipment, net                       18,490      18,281
                                                    ----------- -----------
Total assets                                        $    28,772 $    28,512
                                                    =========== ===========

Liabilities and Equity
Current liabilities:
   Short-term debt                                  $       912 $       618
   Accounts payable                                         669         693
   Due to unconsolidated affiliates                           6          29
   Dividends and interest payable                           223         190
   Accrued compensation and benefits                        162         264
   Regulatory balancing accounts, net                       517         382
   Current portion of long-term debt                        327         573
   Fixed-price contracts and other derivatives              108          95
   Customer deposits                                        144         145
   Reserve for wildfire litigation                          300         270
   Other                                                    870         629
                                                    ----------- -----------
       Total current liabilities                          4,238       3,888
                                                    ----------- -----------
Long-term debt                                            7,198       7,460
                                                    ----------- -----------

Deferred credits and other liabilities:
   Due to unconsolidated affiliate                            -           2
   Customer advances for construction                       147         146
   Pension and other postretirement benefit
    obligations, net of plan assets                       1,268       1,252
   Deferred income taxes                                  1,419       1,318
   Deferred investment tax credits                           53          54
   Regulatory liabilities arising from removal
    obligations                                           2,598       2,557
   Asset retirement obligations                           1,298       1,277
   Other regulatory liabilities                             172         181
   Fixed-price contracts and other derivatives              309         312
   Deferred credits and other                               698         735
                                                    ----------- -----------
       Total deferred credits and other liabilities       7,962       7,834
                                                    ----------- -----------
Contingently redeemable preferred stock of
 subsidiary                                                  79          79
                                                    ----------- -----------
Equity:
   Total Sempra Energy shareholders' equity               9,060       9,007
   Preferred stock of subsidiaries                          100         100
   Other noncontrolling interests                           135         144
                                                    ----------- -----------
       Total equity                                       9,295       9,251
                                                    ----------- -----------
Total liabilities and equity                        $    28,772 $    28,512
                                                    =========== ===========




                              SEMPRA ENERGY
                                  Table C

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS


                                                      Three months ended
                                                          March 31,
                                                    ----------------------
(Dollars in millions)                                  2010        2009
                                                    ----------  ----------
                                                          (unaudited)
Cash Flows from Operating Activities:
Net income                                          $      100  $      325
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                            210         183
  Deferred income taxes and investment tax credits          61         (29)
  Equity earnings                                          (34)       (176)
  Other                                                      7          49
Net change in other working capital components             534         491
Distribution from RBS Sempra Commodities LLP                 -         305
Changes in other assets                                     18          10
Changes in other liabilities                                (8)        (19)
                                                    ----------  ----------
  Net cash provided by operating activities                888       1,139
                                                    ----------  ----------

Cash Flows from Investing Activities:
Expenditures for property, plant and equipment            (446)       (492)
Expenditures for investments                               (74)        (25)
Distributions from investments                              24           5
Purchases of nuclear decommissioning and other
 trust assets                                              (44)        (45)
Proceeds from sales by nuclear decommissioning and
 other trusts                                               46          42
Other                                                       (2)         (7)
                                                    ----------  ----------
  Net cash used in investing activities                   (496)       (522)
                                                    ----------  ----------

Cash Flows from Financing Activities:
Common dividends paid                                      (86)        (86)
Preferred dividends paid by subsidiaries                    (2)         (2)
Issuances of common stock                                   14          10
Repurchases of common stock                                 (2)          -
Increase (decrease) in short-term debt, net                294         (77)
Issuances of debt (maturities greater than 90 days)         12          22
Payments on debt (maturities greater than 90 days)        (507)         (6)
Purchase of noncontrolling interest                          -         (94)
Other                                                       (3)          5
                                                    ----------  ----------
  Net cash used in financing activities                   (280)       (228)
                                                    ----------  ----------

Increase in cash and cash equivalents                      112         389
Cash and cash equivalents, January 1                       110         331
                                                    ----------  ----------
Cash and cash equivalents, March 31                 $      222  $      720
                                                    ==========  ==========




                            SEMPRA ENERGY
                               Table D

BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS


                                                      Three months ended
                                                          March 31,
                                                    ----------------------
(Dollars in millions)                                  2010        2009
                                                    ----------  ----------
                                                          (unaudited)
Earnings (Losses)
San Diego Gas & Electric                            $       83  $       99
Southern California Gas                                     65          59
Sempra Commodities                                          (5)        114
Sempra Generation                                          (53)         43
Sempra Pipelines & Storage                                  38          37
Sempra LNG                                                  32          (7)
Parent & Other                                             (54)        (29)
                                                    ----------  ----------
Earnings                                            $      106  $      316
                                                    ==========  ==========

                                                      Three months ended
                                                           March 31,
                                                    ----------------------
(Dollars in millions)                                  2010        2009
                                                    ----------  ----------
                                                          (unaudited)
Capital Expenditures and Investments
San Diego Gas & Electric                            $      290  $      229
Southern California Gas                                    114         112
Sempra Generation                                            4           3
Sempra Pipelines & Storage                                 110         101
Sempra LNG                                                   2          71
Parent & Other                                               -           1
                                                    ----------  ----------
Consolidated Capital Expenditures and Investments   $      520  $      517
                                                    ==========  ==========




                              SEMPRA ENERGY
                                  Table E

OTHER OPERATING STATISTICS (Unaudited)


                                                      Three months ended
                                                          March 31,
                                                    -----------------------
SEMPRA UTILITIES                                       2010        2009
                                                    ----------- -----------
Revenues (Dollars in millions)
   SDG&E (excludes intercompany sales)              $       741 $       730
   SoCalGas (excludes intercompany sales)           $     1,171 $       912

Gas Sales (bcf)                                             132         131
Transportation (bcf)                                        117         128
                                                    ----------- -----------
Total Deliveries (bcf)                                      249         259
                                                    ----------- -----------
Total Gas Customers (Thousands)                           6,614       6,582

Electric Sales (Millions of kWhs)                         4,055       4,164
Direct Access (Millions of kWhs)                            720         740
                                                    ----------- -----------
Total Deliveries (Millions of kWhs)                       4,775       4,904
                                                    ----------- -----------
Total Electric Customers (Thousands)                      1,380       1,373


SEMPRA GENERATION
                                                    =========== ===========
Power Sold (Millions of kWhs)                             4,952       5,727


SEMPRA PIPELINES & STORAGE
(Represents 100% of the distribution operations of these subsidiaries,
although subsidiaries in Argentina, Chile and Peru are not 100% owned by
Sempra Energy. These subsidiaries are not consolidated within Sempra Energy
and the related investments are accounted for under the equity method).

Natural Gas Sales (bcf)
   Argentina                                                 64          65
   Mexico                                                     6           5
   Mobile Gas                                                10           9
Natural Gas Customers (Thousands)
   Argentina                                              1,717       1,680
   Mexico                                                    91          94
   Mobile Gas                                                92          94
Electric Sales (Millions of kWhs)
   Peru                                                   1,479       1,393
   Chile                                                    600         677
Electric Customers (Thousands)
   Peru                                                     870         845
   Chile                                                    582         566




                              SEMPRA ENERGY
                            Table E (Continued)


SEMPRA COMMODITIES
The following information for the Sempra Commodities segment includes
information related to RBS Sempra Commodities LLP. The Sempra Commodities
segment is composed primarily of the company's equity interest in RBS
Sempra Commodities LLP, but also includes the results of Sempra Rockies
Marketing. The margin and financial data below represent the total results
of RBS Sempra Commodities LLP as calculated under International Financial
Reporting Standards (IFRS).

RBS Sempra Commodities LLP

Operating Statistics
(in millions of US dollars)
                                         Three             Three
                                         months            months
                                         ended             ended
RBS Sempra Commodities LLP - Joint      March 31,         March 31,
 Venture level margin(1)                  2010              2009
                                        -------           -------
Geographical:
   North America                        $   112           $   252
   Europe/Asia                               95               102
                                        -------           -------
     Total                              $   207           $   354
                                        =======           =======

Product Line:
   Oil - Crude & Products               $   (13)          $   123
   Power                                    105                93
   Natural Gas                               33                78
   Metals                                    61                54
   Other                                     21                 6
                                        -------           -------
     Total                              $   207           $   354
                                        =======           =======

Financial Information
(in millions of US dollars)

RBS Sempra Commodities LLP           Three months ended  Three months ended
                                        March 31, 2010     March 31, 2009
                                     ------------------  ------------------

                                         Joint             Joint
                                        Venture   Sempra  Venture  Sempra
                                         Total   Share(2)  Total   Share(2)

   Fee income and trading revenue, net
    of selling costs                    $   207           $   354
   Operating and other expenses            (208)             (200)
                                        -------           -------
    Joint Venture (losses)
     distributable income               $    (1)          $   154
                                        =======           =======


   Preferred return on capital          $     -  $     -  $    77  $    59
   Loss allocation - 50% Sempra /
    50% RBS(3)                               (1)      (1)       -        -
   1st allocation - 70% Sempra / 30%
    RBS(3)                                    -        -       77       55
   2nd allocation - 30% Sempra / 70%
    RBS                                       -        -        -        -
                                        -------  -------  -------  -------
    (Losses) distributable income       $    (1) $    (1) $   154  $   114
                                        =======  =======  =======  =======

Sempra Commodities Earnings
                                                  Three             Three
                                                  months            months
                                                  ended             ended
                                                March 31,         March 31,
(in millions of US dollars)                        2010              2009
                                                 -------           -------
   Sempra share of (losses)
    distributable income - IFRS basis            $    (1)          $   114
   U.S. GAAP conversion impact                         8                39
                                                 -------           -------
   Sempra equity earnings before income
    taxes - U.S. GAAP basis                            7               153
   Income tax (expense) benefit                        1               (37)
                                                 -------           -------
   Sempra equity earnings from RBS
    Sempra Commodities LLP                             8               116
   Other segment activity                            (13)               (2)
                                                 -------           -------
    Sempra Commodities earnings
     (losses)                                    $    (5)          $   114
                                                 =======           =======

(1)Margin consists of operating revenues less cost of sales (primarily
   transportation and storage costs) reduced by certain transaction-related
   execution costs(primarily brokerage and other fees) and net interest
   income/expense.
(2)After a 15% preferred return to Sempra and then a 15% return to RBS,
   Sempra receives 70% of the next $500 million and 30% of any remaining
   income on an annual basis. Losses are shared equally between Sempra and
   RBS.
(3)Includes certain transition costs specifically allocated to Sempra and
   RBS.

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