SOURCE: Sempra Energy

August 07, 2008 09:00 ET

Sempra Energy Reports Second-Quarter Results, Raises Earnings Guidance for 2008

Earnings-per-Share Outlook Increased to Range of $3.80 to $4

SAN DIEGO, CA--(Marketwire - August 7, 2008) - Sempra Energy (NYSE: SRE) today reported second-quarter 2008 net income of $244 million, or $0.98 per diluted share, compared with $277 million, or $1.05 per diluted share, in the second quarter 2007. Second-quarter 2008 results reflected Sempra Energy's reduced ownership in its commodities business as the result of the formation on April 1 of RBS Sempra Commodities, the joint venture with The Royal Bank of Scotland (RBS).

For the first six months of 2008, Sempra Energy's net income was $486 million, or $1.90 per diluted share, compared with $505 million, or $1.91 per diluted share during the same period last year.

Sempra Energy today also announced an increase in its earnings guidance for 2008 to a range of $3.80 to $4 per share from the previous range of $3.65 to $3.85 per share.

"Through the first half of the year, we are ahead of plan in meeting our 2008 financial goals and have made significant progress in the expansion of our natural gas business," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "Additionally, our planned acquisition of EnergySouth, Inc. will increase our presence in the fastest-growing U.S. energy markets."

OPERATING HIGHLIGHTS

Sempra Utilities

Net income for Sempra Utilities -- San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) -- increased 11 percent to $117 million in the second quarter 2008 from $105 million in last year's second quarter.

SDG&E's second-quarter 2008 net income rose to $61 million from $51 million in the second quarter 2007, primarily due to performance incentive awards approved during the quarter by the California Public Utilities Commission (CPUC).

SoCalGas' net income in the second quarter 2008 was $56 million, compared with $54 million in the second quarter last year.

On July 31, 2008, the CPUC approved the four-year rate-case filed by SDG&E and SoCalGas. The terms of the approved rate-case allow for recovery of the forecasted operating costs and capital requirements necessary to operate the utilities. The rate adjustment for both utilities was retroactive to Jan. 1, 2008.

Sempra Commodities

Second-quarter net income for Sempra Commodities was $130 million in 2008, compared with net income of $155 million in 2007. Second-quarter 2008 net income included $93 million in equity earnings from the RBS Sempra Commodities joint venture and a $67 million gain on the transaction with RBS, offset by $30 million in charges, primarily for litigation and tax issues.

Results for 2007 and the first quarter 2008 represented 100 percent of the earnings from the commodity-marketing business prior to the formation of RBS Sempra Commodities.

"Our global commodities joint venture with RBS is off to a great start," said Felsinger. "The integration of operations has been seamless and early financial results have exceeded expectations."

Sempra Generation

In the second quarter 2008, Sempra Generation's net income increased to $23 million from $10 million in the same quarter last year, due primarily to higher scheduled maintenance expenses in 2007.

Last month, Sempra Generation announced its first solar power project, a 10-megawatt, thin-film solar facility adjacent to the company's El Dorado Energy natural gas-fueled power plant in Boulder City, Nev. Sempra Generation expects construction to be complete and the plant operational by year-end.

Sempra Pipelines & Storage

Second-quarter net income for Sempra Pipelines & Storage rose to $24 million in 2008 from $17 million in 2007, due primarily to the start-up of western operations of the Rockies Express natural gas pipeline during the recent quarter.

On July 28, Sempra Energy agreed to acquire Mobile, Ala.-based EnergySouth, Inc. for $510 million in cash. The acquisition, which is expected to close by year-end, includes majority ownership in two high-turn, salt-dome storage facilities on the Gulf Coast that, when fully developed, will have capacity of 57 billion cubic feet of natural gas serving the U.S. Southeast. Sempra Pipelines & Storage will be responsible for development and operation of the storage assets, as well as management of EnergySouth's Mobile Gas distribution utility.

Sempra LNG

Sempra LNG reported a net loss of $28 million in the second quarter 2008, compared with a $13 million net loss in the second quarter 2007, due primarily to higher income-tax expense, as well as a higher mark-to-market loss on a marketing agreement with RBS Sempra Commodities.

Parent & Other

During the second quarter 2008, Sempra Energy incurred a $22 million loss in Parent & Other, compared with $6 million in net income in last year's second quarter when the company benefited from an $18 million gain from an interest-rate swap.

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 the passcode 2594824.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2007 revenues of more than $11 billion. The Sempra Energy companies' 13,500 employees serve more than 29 million consumers worldwide.

Income-statement information by business unit is available on Sempra Energy's Web site at http://www.sempra.com/downloads/2Q2008.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. When the company uses words like "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "would," "could," "should," or similar expressions, or when the company discusses its strategy or plans, the company is making forward-looking statements. 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, U.K. Financial Services Authority and other regulatory bodies in the United States and other countries; capital market conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes 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 company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov, and on the company's Web site, www.sempra.com.

Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and Sempra Commodities 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 Sempra Commodities are not regulated by the California Public Utilities Commission.

                              SEMPRA ENERGY
                                 Table A


STATEMENTS OF CONSOLIDATED INCOME

                                      Three months ended  Six months ended
                                            June 30,          June 30,
                                        ----------------  ----------------
(Dollars in millions, except per share
 amounts)                                 2008     2007     2008     2007
                                        -------  -------  -------  -------
                                                    (unaudited)
Revenues
Sempra Utilities                        $ 1,887  $ 1,620  $ 4,177  $ 3,679
Sempra Global and parent                    616    1,041    1,596    1,986
                                        -------  -------  -------  -------
   Total revenues                         2,503    2,661    5,773    5,665
                                        -------  -------  -------  -------

Expenses and Other Income
Sempra Utilities:
   Cost of natural gas                     (784)    (603)  (2,019)  (1,653)
   Cost of electric fuel and purchased
    power                                  (220)    (163)    (383)    (312)
Sempra Global and parent:
   Cost of natural gas, electric fuel
    and purchased power                    (513)    (278)    (922)    (614)
   Other cost of sales                      (17)    (221)    (153)    (540)
Operation and maintenance                  (549)    (747)  (1,252)  (1,382)
Depreciation and amortization              (171)    (171)    (346)    (340)
Franchise fees and other taxes              (71)     (68)    (154)    (149)
Gains on sale of assets                     109        4      114        6
Equity earnings (losses):
   RBS Sempra Commodities LLP               146        -      146        -
   Other                                      9       (6)      15      (12)
Other income, net                            17       51       36       68
Interest income                              10       24       24       50
Interest expense                            (38)     (66)     (98)    (136)
Preferred dividends of subsidiaries          (3)      (3)      (5)      (5)
                                        -------  -------  -------  -------
Income from continuing operations
 before income taxes and equity earnings
 of certain unconsolidated subsidiaries     428      414      776      646
Income tax expense                         (202)    (143)    (329)    (206)
Equity earnings, net of income tax           18        9       39       67
                                        -------  -------  -------  -------
Income from continuing operations           244      280      486      507
Discontinued operations, net of income
 tax                                          -       (3)       -       (2)
                                        -------  -------  -------  -------
Net income                              $   244  $   277  $   486  $   505
                                        =======  =======  =======  =======

Basic earnings per share:
   Income from continuing operations    $  0.99  $  1.08  $  1.93  $  1.95
   Discontinued operations, net of
    income tax                                -    (0.01)       -    (0.01)
                                        -------  -------  -------  -------
   Net income                           $  0.99  $  1.07  $  1.93  $  1.94
                                        =======  =======  =======  =======
Weighted-average number of shares
 outstanding (thousands)                245,576  260,198  252,100  259,830
                                        =======  =======  =======  =======

Diluted earnings per share:
   Income from continuing operations    $  0.98  $  1.06  $  1.90  $  1.92
   Discontinued operations, net of
    income tax                                -    (0.01)       -    (0.01)
                                        -------  -------  -------  -------
   Net income                           $  0.98  $  1.05  $  1.90  $  1.91
                                        =======  =======  =======  =======
Weighted-average number of shares
 outstanding (thousands)                249,677  264,963  256,169  264,518
                                        =======  =======  =======  =======
Dividends declared per share of common
 stock                                  $  0.35  $  0.31  $  0.67  $  0.62
                                        =======  =======  =======  =======





                              SEMPRA ENERGY
                                 Table B


CONSOLIDATED BALANCE SHEETS

                                                  June 30,   December 31,
(Dollars in millions)                               2008         2007
                                                ------------ ------------
                                                      (unaudited)
Assets
Current assets:
   Cash and cash equivalents                    $        230 $        668
   Short-term investments                                413            -
   Restricted cash                                         -            1
   Accounts receivable, net                              997        1,074
   Income taxes receivable                               180           99
   Deferred income taxes                                 147          247
   Trading-related receivables and deposits,
    net                                                    -        2,719
   Derivative trading instruments                          -        2,170 *
   Commodities owned                                       -        2,231 *
   Inventories                                           125          224
   Regulatory assets                                      39          106
   Fixed-price contracts and other derivatives           285           28
   Other                                                  94          397 *
                                                ------------ ------------
      Total current assets                             2,510        9,964
                                                ------------ ------------

Investments and other assets:
   Regulatory assets arising from fixed-price
    contracts and other derivatives                      274          309
   Regulatory assets arising from pension and
    other postretirement benefit obligations             166          162
   Other regulatory assets                               497          460
   Nuclear decommissioning trusts                        685          739
   Investment in RBS Sempra Commodities LLP            1,985            -
   Other investments                                   1,261        1,243
   Sundry                                                806          956
                                                ------------ ------------
      Total investments and other assets               5,674        3,869
                                                ------------ ------------
Property, plant and equipment, net                    15,571       14,884
                                                ------------ ------------
Total assets                                    $     23,755 $     28,717
                                                ============ ============

Liabilities and Shareholders' Equity
Current liabilities:
   Short-term debt                              $        829 $      1,064
   Accounts payable                                      879        1,563
   Due to unconsolidated affiliates                       54           60
   Trading-related payables                                -        2,265 *
   Derivative trading instruments                          -        1,672 *
   Commodities sold with agreement to
    repurchase                                             -          500
   Dividends and interest payable                        145          145
   Regulatory balancing accounts, net                    604          481
   Current portion of long-term debt                     302            7
   Fixed-price contracts and other derivatives           317           53
   Other                                               1,146        1,210 *
                                                ------------ ------------
      Total current liabilities                        4,276        9,020
                                                ------------ ------------
Long-term debt                                         4,809        4,553
                                                ------------ ------------

Deferred credits and other liabilities:
   Due to unconsolidated affiliate                       102          102
   Customer advances for construction                    153          153
   Pension and other postretirement benefit
    obligations, net of plan assets                      433          434
   Deferred income taxes                                 668          531
   Deferred investment tax credits                        59           61
   Regulatory liabilities arising from removal
    obligations                                        2,516        2,522
   Asset retirement obligations                        1,148        1,129
   Other regulatory liabilities                          250          265
   Fixed-price contracts and other derivatives           312          332
   Deferred credits and other                            958          949
                                                ------------ ------------
      Total deferred credits and other
       liabilities                                     6,599        6,478
                                                ------------ ------------
Preferred stock of subsidiaries                          179          179
                                                ------------ ------------
Minority interests                                       209          148
                                                ------------ ------------
Shareholders' equity                                   7,683        8,339
                                                ------------ ------------
Total liabilities and shareholders' equity      $     23,755 $     28,717
                                                ============ ============

* December 31, 2007 amounts have been reclassified due to the adoption of
  FASB Staff Position FIN 39-1.





                              SEMPRA ENERGY
                                 Table C


CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

                                                      Six months ended
                                                          June 30,
                                                  ------------------------
(Dollars in millions)                                 2008         2007
                                                  -----------  -----------
                                                        (unaudited)
Cash Flows from Operating Activities:
Net income                                        $       486  $       505
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Discontinued operations                                  -            2
   Depreciation and amortization                          346          340
   Deferred income taxes and investment tax
    credits                                                51          (39)
   Equity earnings                                       (200)         (55)
   Gains on sale of assets                               (114)          (6)
   Fixed-price contracts and other derivatives             62          (28)
   Other                                                   40           18
Net changes in other working capital components           226          918
Changes in other assets                                   (10)          33
Changes in other liabilities                              (27)         (10)
                                                  -----------  -----------
   Net cash provided by continuing operations             860        1,678
   Net cash used in discontinued operations                 -           (3)
                                                  -----------  -----------
   Net cash provided by operating activities              860        1,675
                                                  -----------  -----------

Cash Flows from Investing Activities:
Expenditures for property, plant and equipment         (1,114)        (889)
Proceeds from sale of assets, net of cash sold          2,071           61
Expenditures for investments                           (2,180)          (5)
Distributions from investments                             16            -
Purchases of nuclear decommissioning and other
 trust assets                                            (173)        (341)
Proceeds from sales by nuclear decommissioning
 and other trusts                                         177          300
Decrease in notes receivable from unconsolidated
 affiliates                                                60            -
Dividends received from unconsolidated affiliates           -            4
Other                                                     (15)          (9)
                                                  -----------  -----------
   Net cash used in investing activities               (1,158)        (879)
                                                  -----------  -----------

Cash Flows from Financing Activities:
Common dividends paid                                    (166)        (152)
Issuances of common stock                                  11           28
Repurchases of common stock                            (1,002)           -
Increase in short-term debt, net                          496          374
Issuance of long-term debt                                593            4
Payments on long-term debt                                (73)        (654)
Other                                                       1            7
                                                  -----------  -----------
   Net cash used in financing activities                 (140)        (393)
                                                  -----------  -----------

Increase (decrease) in cash and cash equivalents         (438)         403
Cash and cash equivalents, January 1                      668          920
Cash assumed in connection with FIN(R)
 consolidation                                              -           29
                                                  -----------  -----------
Cash and cash equivalents, June 30                $       230  $     1,352
                                                  ===========  ===========





                              SEMPRA ENERGY
                                 Table D


BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)

                                     Three months ended  Six months ended
                                          June 30,           June 30,
                                      ----------------  ------------------
(Dollars in millions)                   2008     2007     2008       2007
                                      -------  -------  -------    -------
Net Income
Sempra Utilities:
   San Diego Gas & Electric           $    61  $    51  $   135    $   113
   Southern California Gas                 56       54      113        109
                                      -------  -------  -------    -------
      Total Sempra Utilities              117      105      248        222
Sempra Global:
   Sempra Commodities                     130      155      189        226
   Sempra Generation                       23       10       68         64
   Sempra Pipelines & Storage              24       17       50         33
   Sempra LNG                             (28)     (13)     (37)       (23)
                                      -------  -------  -------    -------
      Total Sempra Global                 149      169      270        300
Parent & Other                            (22)       6      (32)       (15)
                                      -------  -------  -------    -------
Continuing Operations                     244      280      486        507
Discontinued Operations, Net of Income
 Tax                                        -       (3)       -         (2)
Consolidated Net Income               $   244  $   277  $   486    $   505
                                      =======  =======  =======    =======


                                     Three months ended  Six months ended
                                          June 30,           June 30,
                                      ----------------  ------------------
(Dollars in millions)                   2008     2007     2008       2007
                                      -------  -------  -------    -------
Capital Expenditures and Investments*
Sempra Utilities:
   San Diego Gas & Electric           $   194  $   148  $   665 ** $   305
   Southern California Gas                126      105      242        191
                                      -------  -------  -------    -------
      Total Sempra Utilities              320      253      907        496
                                      -------  -------  -------    -------

Sempra Global:
   Sempra Commodities                       -       12       37         25
   Sempra Generation                        2        3       13          4
   Sempra Pipelines & Storage              93       58      302        137
   Sempra LNG                             152      138      249        224
                                      -------  -------  -------    -------
      Total Sempra Global                 247      211      601        390
                                      -------  -------  -------    -------

Parent & Other                              4        2      186 **       8

                                      -------  -------  -------    -------
Consolidated Capital Expenditures and
 Investments                          $   571  $   466  $ 1,694    $   894
                                      =======  =======  =======    =======

* Investments do not include the $1.6 billion contribution to RBS Sempra
  Commodities in the second quarter of 2008.

** Amounts for SDG&E and Parent & Other include the purchase of $236 and
   $177, respectively, of industrial development bonds purchased in the
   first quarter of 2008. In the second quarter of 2008, Parent & Other
   purchased $75 of these bonds from SDG&E.





                              SEMPRA ENERGY
                                 Table E


OTHER OPERATING STATISTICS (Unaudited)

                                       Three months ended  Six months ended
                                            June 30,          June 30,
                                        ----------------- -----------------
SEMPRA UTILITIES                          2008     2007     2008     2007
                                        -------- -------- -------- --------

Revenues (Dollars in millions)
   SDG&E (excludes intercompany sales)  $    752 $    655 $  1,494 $  1,360
   SoCalGas (excludes intercompany
    sales)                              $  1,135 $    965 $  2,683 $  2,319

Gas Sales (Bcf)                               81       84      225      225
Transportation and Exchange (Bcf)            136      123      274      243
                                        -------- -------- -------- --------
Total Deliveries (Bcf)                       217      207      499      468
                                        -------- -------- -------- --------

Total Gas Customers (Thousands)                              6,553    6,501

Electric Sales (Millions of kWhs)          4,021    3,869    8,296    8,059
Direct Access (Millions of kWhs)             750      716    1,515    1,494
                                        -------- -------- -------- --------
Total Deliveries (Millions of kWhs)        4,771    4,585    9,811    9,553
                                        -------- -------- -------- --------

Total Electric Customers (Thousands)                         1,367    1,360


SEMPRA GENERATION
                                        -------- -------- -------- --------
Power Sold (Millions of kWhs)              5,506    4,148   11,118    9,525


SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
subsidiaries are 100% owned by Sempra Energy.)
                                        -------- -------- -------- --------
Natural Gas Sales (Bcf)
   Argentina                                  81       78      152      141
   Mexico                                     12       11       24       22
   Chile                                       -        -        -        -
Natural Gas Customers (Thousands)
   Argentina                                                 1,637    1,568
   Mexico                                                       95       98
   Chile                                                        39       39
Electric Sales (Millions of kWhs)
   Peru                                    1,354    1,258    2,716    2,527
   Chile                                     568      621    1,232    1,286
Electric Customers (Thousands)
   Peru                                                        822      799
   Chile                                                       557      541





                              SEMPRA ENERGY
                            Table E (Continued)


SEMPRA COMMODITIES

The following information for the Sempra Commodities segment includes
information related to RBS Sempra Commodities LLP.  RBS Sempra Commodities
LLP acquired the commodity-marketing businesses of Sempra Energy on
April 1, 2008.  For the three months ended June 30, 2008, 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
Marketing.  The margin and financial data below represents 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
                                                         months
                                                         ended
RBS Sempra Commodities LLP -                            June 30,
Joint Venture level margin*                               2008
                                                        --------
Geographical:
  North America                                         $    522
  Europe/Asia                                                124
                                                        --------
    Total                                               $    646
                                                        ========

Product Line:
  Natural Gas                                           $    306
  Power                                                      174
  Oil - Crude & Products                                      92
  Metals                                                      42
  Other                                                       32
                                                        --------
    Total                                               $    646
                                                        ========

* 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.


Financial Information
(in millions of US dollars)

                                                        Three months ended
RBS Sempra Commodities LLP                                June 30, 2008
                                                        ------------------
                                                         Joint
                                                        Venture    Sempra
                                                         Total     Share*
  Fee income and trading revenue, net of selling costs  $    646
  Operating and other expenses                              (312)
                                                        --------
   Joint Venture distributable income                   $    334
                                                        ========


  Preferred return on capital                           $    148  $     60
  1st allocation - 70% Sempra / 30% RBS                      125        87
  2nd allocation - 30% Sempra / 70% RBS                       61        18
                                                        --------  --------
   Distributable income                                 $    334  $    165
                                                        ========  ========


Sempra Earnings from RBS Sempra Commodities LLP

                                                                   Three
                                                                   months
                                                                   ended
(in millions of US dollars)                                       June 30,
                                                                    2008
                                                                  --------
  Sempra share of distributable income - IFRS basis               $    165
  U.S. GAAP conversion impact                                          (19)
                                                                  --------
  Sempra equity earnings - U.S. GAAP basis                             146
  Income tax expense                                                   (53)
                                                                  --------
   Sempra equity earnings from RBS Sempra Commodities
    LLP                                                           $     93
                                                                  ========

* After payment of the preferred return, Sempra receives 70% of the first
  $500 million and 30% of any remaining income.  The preferred return and
  the $500 million tranche are prorated over the year.

Contact Information

  • Media Contact:
    Doug Kline
    Sempra Energy
    (877) 866-2066
    www.sempra.com

    Financial Contact:
    Glen Donovan
    Sempra Energy
    (877) 736-7727
    Email Contact