SOURCE: Sempra Energy

May 02, 2008 09:00 ET

Sempra Energy Reports Higher Net Income in First Quarter 2008

SAN DIEGO, CA--(Marketwire - May 2, 2008) - Sempra Energy (NYSE: SRE)

--  Commodities Joint Venture Launched
--  $1 Billion Share-Repurchase Program Initiated
--  Baja California Terminal Receives First LNG Cargo
    

Sempra Energy (NYSE: SRE) today reported first-quarter 2008 net income of $242 million, or $0.92 per diluted share, up 7 percent per share over first-quarter 2007 net income of $228 million, or $0.86 per diluted share.

"This is a milestone year for Sempra Energy, our 10th anniversary," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "Since Sempra Energy's inception, our average annual total return to shareholders has been 12 percent, more than twice the returns of the major market indices.

"We will continue to produce strong results in the future, based on the significant progress we have made on our key operational initiatives. We have completed our new Baja California liquefied natural gas (LNG) terminal, started flowing gas on the western half of the Rockies Express Pipeline and launched our global commodities joint venture. By year-end, several other projects will be online, including our new Louisiana LNG terminal. We also have begun a major share-repurchase program and are committed to increasing our dividend at an accelerated rate going forward."

On April 1, Sempra Energy and The Royal Bank of Scotland completed the transaction to form a global commodities joint venture, RBS Sempra Commodities. The operations of Sempra Commodities now have been acquired by the joint venture. Last month, Sempra Energy initiated a $1 billion share-repurchase program to be completed in the fourth quarter 2008. The $1 billion program is part of a planned repurchase program expected to total $1.5 billion to $2 billion. Sempra Energy's board of directors also expects to increase the company's dividend by 9 percent, to $1.40 per share on an annualized basis from the current annualized rate of $1.28 per share, beginning with the quarterly payout in July.

SUBSIDIARY OPERATING RESULTS

Sempra Utilities

Net income for Sempra Utilities -- San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) -- rose 12 percent to $131 million in the first quarter 2008 from $117 million in the prior-year's quarter.

SDG&E's first-quarter net income rose to $74 million in 2008 from $62 million in 2007, due primarily to a favorable resolution of prior-years' income-tax issues in 2008.

SoCalGas' first-quarter 2008 net income was $57 million, compared with $55 million in the first quarter 2007.

Sempra Commodities

Sempra Commodities earned $59 million in first quarter 2008, compared with first-quarter 2007 earnings of $71 million. In last year's first quarter, Sempra Commodities benefited from an $18 million net gain on the sale of an equity investment. This year, the company has generated improved operating margins in power trading and natural gas, offset by a $17 million write-down related to a credit issue with a mining counterparty.

Sempra Generation

First-quarter net income for Sempra Generation was $45 million in 2008, compared with $54 million in 2007, due primarily to $6 million in mark-to-market earnings and higher net interest income, both last year.

Sempra Pipelines & Storage

Sempra Pipelines & Storage's net income increased to $26 million in the first quarter 2008 from $16 million in last year's first quarter, due primarily to the start-up of the western half of the Rockies Express Pipeline and the beneficial impact of currency-exchange rates on the company's South American operations.

The first half of the 1,600-mile Rockies Express natural gas pipeline is in service, and Sempra Pipelines & Storage and its project partners expect it to be completed later this month. The eastern half of the pipeline is being permitted and is expected to begin operating by year-end.

Sempra LNG

Sempra LNG recorded a net loss of $9 million, compared with a net loss of $10 million in the first quarter 2007.

Sempra LNG's new Energía Costa Azul LNG receipt terminal in Baja California, Mexico, has received its first LNG cargo and is in the final testing phase before commencing commercial operations in the second quarter.

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 5475510.

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/1Q2008.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 LNG and Sempra Pipelines & Storage are not the same companies as the utilities, SDG&E or SoCalGas, and are not regulated by the California Public Utilities Commission. Sempra Energy Trading, doing business as Sempra Commodities, and Sempra Generation are not the same companies as the utilities, SDG&E or SoCalGas, and the California Public Utilities Commission does not regulate the terms of their products and services.

                              SEMPRA ENERGY
                                 Table A


STATEMENTS OF CONSOLIDATED INCOME

                                                            Three months
                                                                ended
                                                              March 31,
                                                          ----------------
(Dollars in millions, except per share amounts)             2008     2007
                                                          -------  -------
                                                            (unaudited)
Operating revenues
Sempra Utilities                                          $ 2,290  $ 2,059
Sempra Global and parent                                      980      945
                                                          -------  -------
  Total operating revenues                                  3,270    3,004
                                                          -------  -------
Operating expenses
Sempra Utilities:
  Cost of natural gas                                       1,235    1,050
  Cost of electric fuel and purchased power                   163      149
Sempra Global and parent:
  Cost of natural gas, electric fuel and purchased power      409      336
  Other cost of sales                                         136      319
Other operating expenses                                      698      633
Depreciation and amortization                                 175      169
Franchise fees and other taxes                                 83       81
                                                          -------  -------
  Total operating expenses                                  2,899    2,737
                                                          -------  -------
Operating income                                              371      267
Other income, net                                              25       11
Interest income                                                14       26
Interest expense                                              (60)     (70)
Preferred dividends of subsidiaries                            (2)      (2)
                                                          -------  -------
Income from continuing operations before income taxes and
 equity in earnings of certain unconsolidated
 subsidiaries                                                 348      232
Income tax expense                                            127       63
Equity in earnings of certain unconsolidated subsidiaries      21       58
                                                          -------  -------
Income from continuing operations                             242      227
Discontinued operations, net of income tax                      -        1
                                                          -------  -------
Net income                                                $   242  $   228
                                                          =======  =======

Basic earnings per share:
  Income from continuing operations                       $  0.94  $  0.88
  Discontinued operations, net of income tax                    -        -
                                                          -------  -------
  Net income                                              $  0.94  $  0.88
                                                          =======  =======
Weighted-average number of shares outstanding (thousands) 258,624  259,459
                                                          =======  =======

Diluted earnings per share:
  Income from continuing operations                       $  0.92  $  0.86
  Discontinued operations, net of income tax                    -        -
                                                          -------  -------
  Net income                                              $  0.92  $  0.86
                                                          =======  =======
Weighted-average number of shares outstanding (thousands) 262,671  263,996
                                                          =======  =======
Dividends declared per share of common stock              $  0.32  $  0.31
                                                          =======  =======




                              SEMPRA ENERGY
                                 Table B

CONSOLIDATED BALANCE SHEETS



                                                    March 31,  December 31,
(Dollars in millions)                                 2008        2007
                                                    ---------- ----------
                                                        (unaudited)
Assets
Current assets:
   Cash and cash equivalents                        $      806 $      668
   Restricted cash                                           -          1
   Short-term investments                                  413          -
   Accounts receivable, net                              1,135      1,074
   Income taxes receivable                                   -         99
   Deferred income taxes                                   301        247
   Trading-related receivables and deposits, net         2,843      2,719*
   Derivative trading instruments                        2,870      2,170*
   Commodities owned                                     1,621      2,231
   Inventories                                             103        224
   Regulatory assets                                        55        106
   Other                                                   323        425*
                                                    ---------- ----------
       Total current assets                             10,470      9,964
                                                    ---------- ----------

Investments and other assets:
   Regulatory assets arising from fixed-price
    contracts and other derivatives                        295        309
   Regulatory assets arising from pension and other
    postretirement benefit obligations                     167        162
   Other regulatory assets                                 474        460
   Nuclear decommissioning trusts                          701        739
   Investments                                           1,494      1,243
   Sundry                                                  965        956
                                                    ---------- ----------
       Total investments and other assets                4,096      3,869
                                                    ---------- ----------
Property, plant and equipment, net                      15,288     14,884
                                                    ---------- ----------
Total assets                                        $   29,854 $   28,717
                                                    ========== ==========

Liabilities and Shareholders' Equity
Current liabilities:
   Short-term debt                                  $    1,630 $    1,064
   Accounts payable                                      1,241      1,563
   Due to unconsolidated affiliate                          60         60
   Income taxes payable                                     78          -
   Trading-related payables                              1,977      2,265*
   Derivative trading instruments                        2,189      1,672*
   Commodities sold with agreement to repurchase           502        500
   Dividends and interest payable                          155        145
   Regulatory balancing accounts, net                      585        481
   Current portion of long-term debt                        23          7
   Other                                                 1,484      1,263*
                                                    ---------- ----------
       Total current liabilities                         9,924      9,020
                                                    ---------- ----------
Long-term debt                                           4,589      4,553
                                                    ---------- ----------

Deferred credits and other liabilities:
   Due to unconsolidated affiliate                         102        102
   Customer advances for construction                      154        153
   Pension and other postretirement benefit
    obligations, net of plan assets                        439        434
   Deferred income taxes                                   510        531
   Deferred investment tax credits                          60         61
   Regulatory liabilities arising from removal
    obligations                                          2,519      2,522
   Asset retirement obligations                          1,134      1,129
   Other regulatory liabilities                            261        265
   Fixed-price contracts and other derivatives             345        332
   Deferred credits and other                              910        949
                                                    ---------- ----------
       Total deferred credits and other liabilities      6,434      6,478
                                                    ---------- ----------
Preferred stock of subsidiaries                            179        179
                                                    ---------- ----------
Minority interests                                         151        148
                                                    ---------- ----------
Shareholders' equity                                     8,577      8,339
                                                    ---------- ----------
Total liabilities and shareholders' equity          $   29,854 $   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

                                                            Three months
                                                                ended
                                                              March 31,
                                                          ----------------
(Dollars in millions)                                       2008     2007
                                                          -------  -------
                                                            (unaudited)
Cash Flows from Operating Activities:
Net income                                                $   242  $   228
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Discontinued operations                                       -       (1)
  Depreciation and amortization                               175      169
  Deferred income taxes and investment tax credits            (58)    (104)
  Equity in income of unconsolidated subsidiaries             (27)     (52)
  Other                                                        32       20
Net changes in other working capital components               390    1,115
Changes in other assets                                        (3)      16
Changes in other liabilities                                  (22)      (7)
                                                          -------  -------
  Net cash provided by continuing operations                  729    1,384
  Net cash used in discontinued operations                      -       (1)
                                                          -------  -------
  Net cash provided by operating activities                   729    1,383
                                                          -------  -------

Cash Flows from Investing Activities:
Expenditures for property, plant and equipment               (544)    (423)
Proceeds from sale of assets                                   10       32
Expenditures for investments                                 (579)      (5)
Distributions from investments                                  4        -
Purchases of nuclear decommissioning and other trust
 assets                                                      (134)    (211)
Proceeds from sales by nuclear decommissioning and other
 trusts                                                       135      213
Other                                                          (1)      (6)
                                                          -------  -------
  Net cash used in investing activities                    (1,109)    (400)
                                                          -------  -------

Cash Flows from Financing Activities:
Common dividends paid                                         (82)     (79)
Issuances of common stock                                       4       16
Repurchases of common stock                                    (2)       -
Increase (decrease) in short-term debt, net                   566     (151)
Issuance of long-term debt                                     52        2
Payments on long-term debt                                    (10)     (35)
Other                                                         (10)       2
                                                          -------  -------
  Net cash provided by (used in) financing activities         518     (245)
                                                          -------  -------

Increase in cash and cash equivalents                         138      738
Cash and cash equivalents, January 1                          668      920
                                                          -------  -------
Cash and cash equivalents, March 31                       $   806  $ 1,658
                                                          =======  =======




                              SEMPRA ENERGY
                                 Table D


BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)



                                                        Three months ended
                                                            March 31,
                                                        ------------------
(Dollars in millions)                                     2008      2007
                                                        --------  --------
Net Income
Sempra Utilities:
   San Diego Gas & Electric                             $     74  $     62
   Southern California Gas                                    57        55
                                                        --------  --------
     Total Sempra Utilities                                  131       117
                                                        --------  --------
Sempra Global:
   Sempra Commodities                                         59        71
   Sempra Generation                                          45        54
   Sempra Pipelines & Storage                                 26        16
   Sempra LNG                                                 (9)      (10)
                                                        --------  --------
     Total Sempra Global                                     121       131
                                                        --------  --------

Parent & Other                                               (10)      (21)
                                                        --------  --------
Continuing Operations                                        242       227
Discontinued Operations, Net of Income Tax                     -         1
                                                        --------  --------
Consolidated Net Income                                 $    242  $    228
                                                        ========  ========



                                                        Three months ended
                                                            March 31,
                                                        ------------------
(Dollars in millions)                                     2008      2007
                                                        --------  --------
Capital Expenditures and Investments
Sempra Utilities:
   San Diego Gas & Electric                             $    471* $    157
   Southern California Gas                                   116        86
                                                        --------  --------
      Total Sempra Utilities                                 587       243
                                                        --------  --------

Sempra Global:
   Sempra Commodities                                         37        13
   Sempra Generation                                          11         1
   Sempra Pipelines & Storage                                209        79
   Sempra LNG                                                 97        86
                                                        --------  --------
      Total Sempra Global                                    354       179
                                                        --------  --------

Parent & Other                                               182*        6

                                                        --------  --------
Consolidated Capital Expenditures and Investments       $  1,123  $    428
                                                        ========  ========


* Amounts for SDG&E and Parent & Other include the purchase of $236 and
$177, respectively, of industrial development bonds.




                              SEMPRA ENERGY
                                 Table E


OTHER OPERATING STATISTICS (Unaudited)




                                                        Three months ended
                                                            March 31,
                                                        -------------------
SEMPRA UTILITIES                                          2008      2007
                                                        --------- ---------
Revenues (Dollars in millions)
   SDG&E (excludes intercompany sales)                  $     742 $     705
   SoCalGas (excludes intercompany sales)               $   1,548 $   1,354

Gas Sales (bcf)                                               144       141
Transportation and Exchange (bcf)                             138       120
                                                        --------- ---------
Total Deliveries (bcf)                                        282       261
                                                        --------- ---------

Total Gas Customers (Thousands)                             6,543     6,487

Electric Sales (Millions of kWhs)                           4,275     4,190
Direct Access (Millions of kWhs)                              765       778
                                                        --------- ---------
Total Deliveries (Millions of kWhs)                         5,040     4,968
                                                        --------- ---------

Total Electric Customers (Thousands)                        1,366     1,357


SEMPRA GENERATION
                                                        --------- ---------
Power Sold (Millions of kWhs)                               5,612     5,377


SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
 subsidiaries are 100% owned by Sempra Energy).
                                                        --------- ---------
Natural Gas Sales (bcf)
   Argentina                                                   71        63
   Mexico                                                      12        11
   Chile                                                        -         -
Natural Gas Customers (Thousands)
   Argentina                                                1,613     1,552
   Mexico                                                      95       101
   Chile                                                       39        39
Electric Sales (Millions of kWhs)
   Peru                                                     1,362     1,269
   Chile                                                      664       665
Electric Customers (Thousands)
   Peru                                                       815       793
   Chile                                                      553       538




                              SEMPRA ENERGY
                           Table E (Continued)

SEMPRA COMMODITIES


                                                       Three months ended
                                                            March 31,
                                                       ------------------
Margin* (Dollars in
 millions)                                               2008      2007
                                                       --------  --------
Geographical:
  North America                                        $    241  $    104
  Europe/Asia                                                48        63
                                                       --------  --------
    Total                                              $    289  $    167
                                                       --------  --------

Product Line:
  Natural Gas                                          $     (2) $    (56)
  Power                                                     163        82
  Oil - Crude & Products                                     50        57
  Metals                                                     48        60
  Other                                                      30        24
                                                       --------  --------
    Total                                              $    289  $    167
                                                       --------  --------
* Margin is a non-GAAP financial measure, consisting of operating revenues
  less cost of sales (primarily transportation and storage costs), both
  GAAP financial measures, reduced by certain transaction-related execution
  costs (primarily brokerage and other fees) and net interest
  income/expense, as follows:

                                                       Three months ended
                                                            March 31,
                                                       ------------------
(Dollars in millions)                                    2008      2007
                                                       --------  --------
  Revenues                                             $    457  $    512
  Cost of sales                                            (136)     (319)
                                                       --------  --------
                                                            321       193
  Other related costs                                       (32)      (26)
                                                       --------  --------
  Margin                                               $    289  $    167
                                                       --------  --------
                                                       Three months ended
                                                            March 31,
                                                       ------------------
Effect of EITF 02-3
 (Dollars in millions)                                   2008      2007
                                                       --------  --------
  Mark-to-Market Earnings*                             $     86  $    157
  Effect of EITF 02-3 **                                    (27)      (86)
                                                       --------  --------
  GAAP Net Income                                      $     59  $     71
                                                       --------  --------

*  Represents earnings from the fair market value of all commodities
   transactions.  This metric is a useful measurement of profitability
   because it simultaneously recognizes changes in the various components
   of transactions and reflects how the business is managed.
** Consists of the income statement effect of not recognizing changes in
   the fair market value of certain physical inventories, capacity
   contracts for transportation and storage, and derivative hedging
   activities related to synthetic fuels tax credits.

                            Fair
                        Market Value     Scheduled Maturity (in months)
Net Unrealized Revenue    March 31, --------------------------------------
 (Dollars in millions)      2008     0 - 12   13 - 24   25 - 36     > 36
                          --------  --------  --------  --------  --------
OTC Fair Value of
 forwards, swaps and
 options (1)              $  1,218  $    958  $     57  $     60  $    143
                          --------  --------  --------  --------  --------
  Maturity of OTC Fair
   Value - Cumulative
   Percentages                          78.7%     83.3%     88.3%    100.0%
                                    --------  --------  --------  --------
Exchange Contracts (2)         (79)     (191)      146       (20)      (14)
                          --------  --------  --------  --------  --------
  Total Net Unrealized
   Revenue at March 31,
   2008                   $  1,139  $    767  $    203  $     40  $    129
                          --------  --------  --------  --------  --------
  Net Unrealized Revenue
   - Cumulative
   Percentages                          67.3%     85.2%     88.7%    100.0%
                                    --------  --------  --------  --------

(1) The present value of unrealized revenue to be received or (paid) from
    outstanding OTC contracts. Under FSP FIN 39-1, this net unrealized
    revenue is offset on the balance sheet by collateral of $515 pursuant
    to master netting arrangements.
(2) Cash received or (paid) associated with open Exchange Contracts.




Credit Quality of          March   December
 Unrealized Trading          31,       31,
 Assets (net of margin)     2008      2007
                          --------  --------
Commodity Exchanges             17%        9%
Investment Grade                56%       54%
Below Investment Grade          27%       37%


                          Three months ended
                               March 31,
                          ------------------
Risk Adjusted Performance
 Indicators
 (Mark-to-Market Basis)     2008      2007
                          --------  --------
VaR at 95% (Dollars in
 millions) (1)            $   16.2  $   10.3
VaR at 99% (Dollars in
 millions) (2)            $   22.8  $   14.5

(1) Average Daily Value-at-Risk for the period using a 95% confidence level
(2) Average Daily Value-at-Risk for the period using a 99% confidence level


                          Three months ended
                               March 31,
                          ------------------
Physical Statistics           2008      2007
                          --------  --------
Natural Gas (Bcf/Day)         14.2      12.4
Electric (Billions of
 kWhs)                       150.1     122.9
Oil & Liquid Products
 (Millions Bbls/Day)           0.6       0.6

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