SOURCE: Sempra Energy

Sempra Energy

November 09, 2010 09:00 ET

Sempra Energy Reports Third-Quarter 2010 Earnings

Non-Commodity Earnings Rise 10 Percent

SAN DIEGO, CA--(Marketwire - November 9, 2010) - Sempra Energy (NYSE: SRE) today reported third-quarter 2010 earnings of $131 million, or $0.53 per diluted share, compared with earnings of $317 million, or $1.27 per diluted share, in the third quarter 2009.

Third-quarter 2010 results included a previously announced $139 million after-tax charge from the write-down of Sempra Energy's investment in the RBS Sempra Commodities joint venture.

Excluding Sempra Commodities, which is being sold, Sempra Energy had earnings of $265 million in the third quarter 2010, up approximately 10 percent from earnings of $242 million in last year's third quarter.

Sempra Energy's earnings for the first nine months of 2010 were $459 million, or $1.84 per diluted share, compared with $831 million, or $3.37 per diluted share, in the same period last year.

"The solid results from our core businesses in the third quarter keep us on track to meet our 2010 earnings guidance," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "Additionally, with our recent sale announcements, we essentially have exited the commodities trading business -- a key goal this year."

OPERATING HIGHLIGHTS

San Diego Gas & Electric

Third-quarter earnings for San Diego Gas & Electric (SDG&E) were $106 million in 2010, compared with $108 million in 2009.

For the first nine months, SDG&E's earnings were $264 million in 2010, compared with $277 million in 2009.

Southern California Gas Co.

Earnings for Southern California Gas Co. (SoCalGas) in the third quarter 2010 were $78 million, compared with $74 million in last year's third quarter.

For the nine-month period, SoCalGas' earnings increased to $212 million in 2010 from $198 million in 2009.

Sempra Generation

In the third quarter 2010, Sempra Generation's earnings rose to $56 million from $43 million in the third quarter 2009, due primarily to renewable energy tax credits from investment in Copper Mountain Solar, the company's new solar energy project in Nevada.

For the first nine months of 2010, Sempra Generation's earnings were $51 million, compared with $119 million in the same period last year. In the first quarter 2010, Sempra Generation took a charge of $84 million related to a proposed energy-crisis litigation settlement.

Last week, Sempra Generation announced it has become an equal partner with BP Wind Energy in the development of the Cedar Creek Wind Farm in Colorado, which is expected to be operational in mid-2011. The project's entire 250-megawatt (MW) output already has been sold under a 25-year power-purchase agreement to Public Service Co. of Colorado.

On Oct. 12, Sempra Generation announced a 20-year power-purchase agreement with Pacific Gas & Electric to sell solar power produced at Sempra Generation's 150-MW Mesquite Solar project under construction outside Phoenix. Sempra Generation controls sufficient land to develop an additional 450 MW of solar power at the site.

Sempra Pipelines & Storage

Third-quarter 2010 earnings for Sempra Pipelines & Storage were $43 million, compared with earnings of $54 million in last year's third quarter. The reduction in quarterly earnings was due primarily to higher income tax in 2010 and a write-down of the company's investment in Argentina, offset by a favorable legal settlement.

For the nine-month period, earnings for Sempra Pipelines & Storage increased to $120 million in 2010 from $64 million in 2009. In the second quarter 2009, Sempra Pipelines & Storage recorded an after-tax charge of $64 million for the write-off of some of its Louisiana natural gas storage assets.

During the third quarter, Sempra Pipelines & Storage commenced operations of the first of two storage caverns under development at its Mississippi Hub natural gas storage facility in Simpson County, Miss. Last month, Sempra Pipelines & Storage also announced it has commenced operations of Cavern 4 at Bay Gas Storage in Alabama. Through the two new caverns, Sempra Pipelines & Storage has added approximately 12 billion cubic feet of new natural gas storage capacity.

Sempra LNG

Sempra LNG earned $5 million in the third quarter 2010, compared with a break-even third quarter a year ago. The improvement was due to a full quarter of earnings contribution from Sempra LNG's Louisiana receipt terminal, which started operations in late July 2009, as well as from a major supply contract activated in September 2009. The increased earnings in the most recent quarter were offset by the impact of lower natural gas prices, including a reduction in the carrying value of inventory, and higher taxes.

For the nine-month period, Sempra LNG had earnings of $50 million in 2010, compared with a loss of $19 million last year.

Sempra Commodities

Sempra Energy's commodity operations recorded a loss of $134 million in the third quarter 2010, compared with earnings of $75 million in the third quarter 2009. Third-quarter 2010 results included the $139 million charge for the write-down of Sempra Energy's investment in the RBS Sempra Commodities joint venture.

For the first nine months of 2010, Sempra Energy's commodity operations had a loss of $139 million, compared with earnings of $274 million in the same period last year.

The equity earnings from the joint venture in both the quarter and nine-month periods were adversely impacted by the sale of the international commodity businesses, as well as reduced volatility in U.S. natural gas and power markets.

On Sept. 20 and Oct. 7, Sempra Energy and The Royal Bank of Scotland (RBS) announced two separate agreements to sell the principal North American assets of the RBS Sempra Commodities joint venture to Noble Group Ltd. and JP Morgan Ventures Energy. The transaction with Noble Group was completed last week and the transaction with JP Morgan is expected to close next month. In July, Sempra Energy and RBS completed the sale of the joint venture's global metals and oil businesses, and European natural gas and power businesses to JP Morgan Chase & Co.

As previously reported, Sempra Energy expects its share of the proceeds from the sale of all of the joint venture's businesses and related cash distributions to total $1.8 billion to $1.9 billion.

Earnings Outlook

Sempra Energy today reaffirmed its prior earnings-per-share guidance for 2010 of $3.15 to $3.40, excluding Sempra Commodities.

Internet Broadcast

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EST 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 4415915.

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 25 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/3Q2010.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 free-of-charge on the SEC's website, www.sec.gov, and on the company's website 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      Nine months ended
                                 September 30,           September 30,
(Dollars in millions,       ----------------------  ----------------------
 except per share amounts)     2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
                                              (unaudited)
REVENUES
Sempra Utilities            $    1,575  $    1,424  $    4,999  $    4,382
Sempra Global and parent           541         429       1,659       1,268
                            ----------  ----------  ----------  ----------
    Total revenues               2,116       1,853       6,658       5,650
EXPENSES AND OTHER INCOME
Sempra Utilities:
    Cost of natural gas           (285)       (208)     (1,402)       (997)
    Cost of electric fuel
     and purchased power          (203)       (208)       (480)       (508)
Sempra Global and parent:
    Cost of natural gas,
     electric fuel and
     purchased power              (292)       (220)       (887)       (675)
    Other cost of sales            (23)        (19)        (68)        (52)
Litigation expense                 (17)         (3)       (184)          -
Other operation and
 maintenance                      (590)       (568)     (1,782)     (1,673)
Depreciation and
 amortization                     (218)       (196)       (643)       (568)
Franchise fees and other
 taxes                             (76)        (77)       (243)       (228)
Write-off of long-lived
 assets                              -           -           -        (132)
Equity earnings (losses):
    RBS Sempra Commodities
     LLP                          (281)        105        (290)        384
    Other                            8          18          24          27
Other income, net                   66          24          82          97
Interest income                      5           5          13          16
Interest expense                  (111)        (96)       (323)       (257)
                            ----------  ----------  ----------  ----------
Income before income taxes
 and equity earnings of
 certain unconsolidated
 subsidiaries                       99         410         475       1,084
Income tax benefit
 (expense)                          32        (128)        (85)       (327)
Equity earnings (losses),
 net of income tax                  (4)         20          42          59
                            ----------  ----------  ----------  ----------
Net income                         127         302         432         816
Losses attributable to
 noncontrolling interests            6          17          34          22
Preferred dividends of
 subsidiaries                       (2)         (2)         (7)         (7)
                            ----------  ----------  ----------  ----------
Earnings                    $      131  $      317  $      459  $      831
                            ==========  ==========  ==========  ==========

Basic earnings per common
 share                      $     0.53  $     1.30  $     1.86  $     3.42
                            ==========  ==========  ==========  ==========
Weighted-average number of
 shares outstanding, basic
 (thousands)                   246,668     243,925     246,513     242,806
                            ==========  ==========  ==========  ==========

Diluted earnings per common
 share                      $     0.53  $     1.27  $     1.84  $     3.37
                            ==========  ==========  ==========  ==========
Weighted-average number of
 shares outstanding, diluted
 (thousands)                   249,811     248,461     249,773     246,875
                            ==========  ==========  ==========  ==========
Dividends declared per
 share of common stock      $     0.39  $     0.39  $     1.17  $     1.17
                            ==========  ==========  ==========  ==========




                              SEMPRA ENERGY
                                 Table B


CONDENSED CONSOLIDATED BALANCE SHEETS


                                               September 30,  December 31,
(Dollars in millions)                              2010           2009
                                               -------------  -------------
                                                 (unaudited)
Assets
Current assets:
   Cash and cash equivalents                   $         547  $         110
   Restricted cash                                         4             35
   Accounts receivable                                   776          1,130
   Due from unconsolidated affiliates                     30             41
   Income taxes receivable                               312            221
   Deferred income taxes                                   -             10
   Inventories                                           296            197
   Regulatory assets                                      97             54
   Fixed-price contracts and other derivatives            84             77
   Insurance receivable related to wildfire
    litigation                                           150            273
   Other                                                 199            147
                                               -------------  -------------
       Total current assets                            2,495          2,295
                                               -------------  -------------

Investments and other assets:
   Restricted cash                                        27              -
   Regulatory assets arising from fixed-price
    contracts and other derivatives                      241            241
   Regulatory assets arising from pension and
    other postretirement benefit obligations             950            959
   Other regulatory assets                               973            603
   Nuclear decommissioning trusts                        737            678
   Investment in RBS Sempra Commodities LLP              825          2,172
   Other investments                                   2,317          2,151
   Goodwill and other intangible assets                  542            524
   Sundry                                                621            608
                                               -------------  -------------
       Total investments and other assets              7,233          7,936
                                               -------------  -------------
Property, plant and equipment, net                    19,221         18,281
                                               -------------  -------------
Total assets                                   $      28,949  $      28,512
                                               =============  =============

Liabilities and Equity
Current liabilities:
   Short-term debt                             $         574  $         618
   Accounts payable                                      702            693
   Due to unconsolidated affiliates                       12             29
   Deferred income taxes                                  16              -
   Dividends and interest payable                        232            190
   Accrued compensation and benefits                     247            264
   Regulatory balancing accounts, net                    242            382
   Current portion of long-term debt                     313            573
   Fixed-price contracts and other derivatives           107             95
   Customer deposits                                     133            145
   Reserve for wildfire litigation                       344            270
   Other                                                 855            629
                                               -------------  -------------
       Total current liabilities                       3,777          3,888
                                               -------------  -------------
Long-term debt                                         8,032          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                    1,225          1,252
   Deferred income taxes                               1,516          1,318
   Deferred investment tax credits                        52             54
   Regulatory liabilities arising from removal
    obligations                                        2,635          2,557
   Asset retirement obligations                        1,327          1,277
   Other regulatory liabilities                          144            181
   Fixed-price contracts and other derivatives           336            312
   Deferred credits and other                            672            735
                                               -------------  -------------
       Total deferred credits and other
        liabilities                                    8,054          7,834
                                               -------------  -------------
Contingently redeemable preferred stock of
 subsidiary                                               79             79
                                               -------------  -------------
Equity:
   Total Sempra Energy shareholders' equity            8,802          9,007
   Preferred stock of subsidiaries                       100            100
   Other noncontrolling interests                        105            144
                                               -------------  -------------
       Total equity                                    9,007          9,251
                                               -------------  -------------
Total liabilities and equity                   $      28,949  $      28,512
                                               =============  =============




                              SEMPRA ENERGY
                                 Table C


CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS


                                                     Nine months ended
                                                       September 30,
                                                --------------------------
(Dollars in millions)                               2010          2009
                                                ------------  ------------
                                                        (unaudited)
Cash Flows from Operating Activities:
Net income                                      $        432  $        816
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                          643           568
  Deferred income taxes and investment tax
   credits                                               133           181
  Equity losses (earnings)                               224          (470)
  Write-off of long-lived assets                           -           132
  Fixed-price contracts and other derivatives             19           (27)
  Other                                                  (24)           42
Net change in other working capital components           (77)          220
Distributions from RBS Sempra Commodities LLP            198           407
Changes in other assets                                   76            81
Changes in other liabilities                             (22)          (66)
                                                ------------  ------------
  Net cash provided by operating activities            1,602         1,884
                                                ------------  ------------

Cash Flows from Investing Activities:
Expenditures for property, plant and equipment        (1,354)       (1,371)
Proceeds from sale of assets                               -           179
Expenditures for investments and acquisition of
 businesses, net of cash acquired                       (385)         (762)
Distributions from RBS Sempra Commodities LLP            849             -
Distributions from other investments                     259            16
Purchases of nuclear decommissioning and other
 trust assets                                           (261)         (167)
Proceeds from sales by nuclear decommissioning
 and other trusts                                        261           155
Other                                                     (2)          (20)
                                                ------------  ------------
  Net cash used in investing activities                 (633)       (1,970)
                                                ------------  ------------

Cash Flows from Financing Activities:
Common dividends paid                                   (269)         (255)
Preferred dividends paid by subsidiaries                  (7)           (7)
Issuances of common stock                                 29            52
Repurchases of common stock                             (502)            -
Increase (decrease) in short-term debt, net              184           (52)
Issuances of debt (maturities greater than
 90 days)                                                771         1,181
Payments on debt (maturities greater than
 90 days)                                               (727)         (325)
Purchase of noncontrolling interest                        -           (94)
Other                                                    (11)           11
                                                ------------  ------------
  Net cash (used in) provided by financing
   activities                                           (532)          511
                                                ------------  ------------

Increase in cash and cash equivalents                    437           425
Cash and cash equivalents, January 1                     110           331
                                                ------------  ------------
Cash and cash equivalents, September 30         $        547  $        756
                                                ============  ============



                              SEMPRA ENERGY
                                 Table D


BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS


                              Three months ended      Nine months ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
(Dollars in millions)          2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
                                              (unaudited)
Earnings (Losses)
San Diego Gas & Electric    $      106  $      108  $      264  $      277
Southern California Gas             78          74         212         198
Sempra Generation                   56          43          51         119
Sempra Pipelines & Storage          43          54         120          64
Sempra LNG                           5           -          50         (19)
Parent & Other                     (23)        (37)        (99)        (82)
                            ----------  ----------  ----------  ----------
Earnings before Sempra
 Commodities                       265         242         598         557
Sempra Commodities                (134)         75        (139)        274
                            ----------  ----------  ----------  ----------
Earnings                    $      131  $      317  $      459  $      831
                            ==========  ==========  ==========  ==========



                              Three months ended       Nine months ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
(Dollars in millions)          2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
                                              (unaudited)
Capital Expenditures and
 Investments
San Diego Gas & Electric    $      300  $      190  $      822  $      785
Southern California Gas            121         109         337         336
Sempra Generation                   27         194          32         207
Sempra Pipelines & Storage          75         395         535         723
Sempra LNG                           5          88           9         230
Parent & Other                       2           2           4           4
Eliminations(1)                      -           -           -        (152)
                            ----------  ----------  ----------  ----------
Consolidated Capital
 Expenditures and
 Investments                $      530  $      978  $    1,739  $    2,133
                            ==========  ==========  ==========  ==========

(1) In the second quarter of 2009, SDG&E purchased $152 of industrial
    development bonds from Parent and Other.




                              SEMPRA ENERGY
                                 Table E


OTHER OPERATING STATISTICS (Unaudited)


                               Three months ended      Nine months ended
                                  September 30,           September 30,
                            ----------------------- -----------------------
SEMPRA UTILITIES                2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
Revenues (Dollars in
 millions)
   SDG&E (excludes
    intercompany sales)     $       810 $       771 $     2,239 $     2,130
   SoCalGas (excludes
    intercompany sales)     $       765 $       653 $     2,760 $     2,252
Gas Sales (bcf)                      64          61         281         272
Transportation (bcf)                144         170         374         421
                            ----------- ----------- ----------- -----------
Total Deliveries (bcf)              208         231         655         693
                            ----------- ----------- ----------- -----------
Total Gas Customers
 (Thousands)                                              6,629       6,599

Electric Sales (Millions of
 kWhs)                            4,279       4,636      12,097      12,768
Direct Access (Millions of
 kWhs)                              881         800       2,365       2,290
                            ----------- ----------- ----------- -----------
Total Deliveries (Millions
 of kWhs)                         5,160       5,436      14,462      15,058
                            ----------- ----------- ----------- -----------
Total Electric Customers
 (Thousands)                                              1,385       1,377


SEMPRA GENERATION
                            ----------- ----------- ----------- -----------
Power Sold (Millions of
 kWhs)                            5,350       5,317      15,272      16,526


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                        104         101         251         249
   Mexico                             5           5          16          14
   Mobile Gas                         9           8          27          24
Natural Gas Customers
 (Thousands)
   Argentina                                              1,747       1,702
   Mexico                                                    89          91
   Mobile Gas                                                90          92
Electric Sales (Millions of
 kWhs)
   Peru                           1,483       1,378       4,445       4,151
   Chile                            566         567       1,736       1,837
Electric Customers
 (Thousands)
   Peru                                                     884         856
   Chile                                                    589         574

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