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Sempra Energy Third-Quarter Earnings per Share Increase 8 Percent Utility, Generation, Pipeline Operations Pace Strong Results SAN DIEGO, CA--(MARKET WIRE)--Nov 10, 2008 -- Sempra Energy (NYSE:SRE - News) today reported
third-quarter 2008 net income of $308 million, or $1.24
per diluted share,
up 8 percent per share over third-quarter 2007 net income
of $305 million,
or $1.15 per diluted share.
Net income for the first nine months of 2008 was $794 million, or $3.13 per diluted share, compared with $810 million, or $3.06 per diluted share, during the same period last year. Shares outstanding have been reduced in 2008 through the recently completed $1 billion share-repurchase program the company initiated in April. "Given the turmoil and dislocation in the financial markets, we are pleased with our third-quarter results," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We have assembled a diversified group of energy businesses that help us continue to meet our financial targets, even during down cycles in specific market segments." OPERATING HIGHLIGHTS Southern California Gas Co. Net income for Southern California Gas Co. (SoCalGas) in the third quarter 2008 rose to $77 million from $63 million in the third quarter 2007, due primarily to $11 million from the favorable resolution of regulatory and income-tax issues in 2008. SoCalGas' third-quarter 2008 results also included $7 million of net income from the retroactive application of its rate case, approved in July. San Diego Gas & Electric Third-quarter net income for San Diego Gas & Electric (SDG&E) was $123 million in 2008, unchanged from 2007. Third-quarter 2008 results included $33 million from the retroactive application of SDG&E's rate case, approved in July, and $12 million from the favorable resolution of income-tax issues, offset by $17 million in litigation expense. Last year's third-quarter results included $46 million from the favorable resolution of regulatory and income-tax issues. SDG&E also benefited from improved operating margins in the third quarter 2008, compared with the same quarter in 2007. On Oct. 31, the California Public Utilities Commission's assigned commissioner and administrative law judge reviewing SDG&E's application for the Sunrise Powerlink transmission-line project issued draft decisions in the case. The assigned commissioner recommended conditional approval of the project, while the administrative judge recommended denial of the project. The full commission is expected to issue a final decision on the Sunrise Powerlink next month. RBS Sempra Commodities Sempra Energy recorded a net loss of $3 million from its equity share of the RBS Sempra Commodities joint venture. In last year's third quarter, Sempra Commodities earned $87 million in net income. Results for 2007 represented 100 percent of the earnings from the commodity-marketing business prior to the formation of RBS Sempra Commodities. In the most recent quarter, results were negatively impacted by losses in power marketing caused by the steep decline in commodity prices during the early part of the quarter and reduced market liquidity associated with fewer market participants. "Notwithstanding the third-quarter results in our joint venture, its outlook continues to be strong and we expect to meet our previously provided range for this segment of $250 million to $350 million in 2008," Felsinger said. Sempra Generation Sempra Generation's third-quarter net income rose sharply to $94 million in 2008 from $58 million in 2007, primarily due to an increase in mark-to-market earnings on long-term contracts with RBS Sempra Commodities and other counterparties. Sempra Pipelines & Storage Third-quarter 2008 net income for Sempra Pipelines & Storage doubled to $34 million from $17 million in last year's third quarter, due primarily to start-up of the Rockies Express-West pipeline and the natural gas pipelines supporting Sempra LNG's new liquefied natural gas receipt terminal in Mexico. Last month, Sempra Energy completed its acquisition of EnergySouth, Inc., whose operations have been absorbed into Sempra Pipelines & Storage. The transaction gives Sempra Energy a majority ownership in two large, high-cycle underground natural gas storage facilities that, when fully developed, will have capacity of 57 billion cubic feet of natural gas serving the nation's fastest-growing natural gas markets. The transaction also included acquisition of Mobile Gas Service Corp., an Alabama natural gas distribution utility. Sempra LNG Sempra LNG had net income of $4 million in the third quarter 2008, compared with a net loss of $4 million in the third quarter 2007. The improved results were due primarily to a mark-to-market gain related to a natural gas marketing agreement with RBS Sempra Commodities. The third quarter of 2008 was the first full quarter of operation of Energía Costa Azul, Sempra LNG's Mexican receipt terminal. 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 the passcode 6032084. 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. Complete financial tables, including income-statement information by business unit, are available on Sempra Energy's Web site at http://www.sempra.com/downloads/3Q2008.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 or plans. 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 environmental and 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 reports that Sempra Energy has filed with the Securities and Exchange Commission. These reports are available through the EDGAR system without charge at the SEC's Web site, www.sec.gov and on the company's Web site, at www.sempra.com. Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and 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 Nine months
ended ended
September 30, September 30,
---------------- ----------------
(Dollars in millions, except per share
amounts) 2008 2007 2008 2007
------- ------- ------- -------
(unaudited)
Revenues
Sempra Utilities $ 2,013 $ 1,515 $ 6,190 $ 5,194
Sempra Global and parent 679 1,148 2,275 3,134
------- ------- ------- -------
Total revenues 2,692 2,663 8,465 8,328
------- ------- ------- -------
Expenses and Other Income
Sempra Utilities:
Cost of natural gas (689) (389) (2,708) (2,042)
Cost of electric fuel and purchased
power (311) (184) (694) (496)
Sempra Global and parent:
Cost of natural gas, electric fuel
and purchased power (431) (331) (1,353) (945)
Other cost of sales (15) (256) (168) (796)
Operation and maintenance (564) (758) (1,816) (2,140)
Depreciation and amortization (162) (174) (508) (514)
Franchise fees and other taxes (76) (72) (230) (221)
Gains on sale of assets - - 114 6
Equity earnings (losses):
RBS Sempra Commodities LLP (4) - 142 -
Other 14 1 29 (11)
Other income (expense), net (13) 4 23 72
Interest income 12 12 36 62
Interest expense (67) (68) (165) (204)
Preferred dividends of subsidiaries (2) (2) (7) (7)
------- ------- ------- -------
Income from continuing operations
before income taxes and equity earnings
of certain unconsolidated subsidiaries 384 446 1,160 1,092
Income tax expense (94) (135) (423) (341)
Equity earnings, net of income tax 18 19 57 86
------- ------- ------- -------
Income from continuing operations 308 330 794 837
Discontinued operations, net of income
tax - (25) - (27)
------- ------- ------- -------
Net income $ 308 $ 305 $ 794 $ 810
======= ======= ======= =======
Basic earnings per share:
Income from continuing operations $ 1.26 $ 1.27 $ 3.18 $ 3.23
Discontinued operations, net of
income tax - (0.10) - (0.11)
------- ------- ------- -------
Net income $ 1.26 $ 1.17 $ 3.18 $ 3.12
======= ======= ======= =======
Weighted-average number of shares
outstanding (thousands) 243,793 259,563 249,311 259,742
======= ======= ======= =======
Diluted earnings per share:
Income from continuing operations $ 1.24 $ 1.24 $ 3.13 $ 3.16
Discontinued operations, net of
income tax - (0.09) - (0.10)
------- ------- ------- -------
Net income $ 1.24 $ 1.15 $ 3.13 $ 3.06
======= ======= ======= =======
Weighted-average number of shares
outstanding (thousands) 247,904 264,279 253,407 264,416
======= ======= ======= =======
Dividends declared per share of common
stock $ 0.35 $ 0.31 $ 1.02 $ 0.93
======= ======= ======= =======
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Dollars in millions) 2008 2007
------------- -------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 198 $ 668
Short-term investments 413 -
Accounts receivable, net 796 1,074
Income taxes receivable 189 99
Deferred income taxes 150 247
Trading-related receivables and deposits,
net - 2,719 *
Derivative trading instruments - 2,170 *
Commodities owned - 2,231
Inventories 461 224
Regulatory assets 119 106
Fixed-price contracts and other
derivatives 91 28 *
Other 153 398
------------- -------------
Total current assets 2,570 9,964
------------- -------------
Investments and other assets:
Regulatory assets arising from fixed-price
contracts and other derivatives 281 309
Regulatory assets arising from pension and
other postretirement benefit obligations 144 162
Other regulatory assets 499 460
Nuclear decommissioning trusts 636 739
Investment in RBS Sempra Commodities LLP 1,912 -
Other investments 1,247 1,243
Sundry 746 956
------------- -------------
Total investments and other assets 5,465 3,869
------------- -------------
Property, plant and equipment, net 15,814 14,884
------------- -------------
Total assets $ 23,849 $ 28,717
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 319 $ 1,064
Accounts payable 743 1,563
Due to unconsolidated affiliates 37 60
Trading-related payables - 2,265 *
Derivative trading instruments - 1,672 *
Commodities sold with agreement to
repurchase - 500
Dividends and interest payable 164 145
Regulatory balancing accounts, net 264 481
Current portion of long-term debt 302 7
Fixed-price contracts and other
derivatives 175 53 *
Other 1,131 1,210
------------- -------------
Total current liabilities 3,135 9,020
------------- -------------
Long-term debt 5,864 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 412 434
Deferred income taxes 799 531
Deferred investment tax credits 58 61
Regulatory liabilities arising from
removal obligations 2,420 2,522
Asset retirement obligations 1,165 1,129
Other regulatory liabilities 234 265
Fixed-price contracts and other
derivatives 315 332
Deferred credits and other 911 949
------------- -------------
Total deferred credits and other
liabilities 6,569 6,478
------------- -------------
Preferred stock of subsidiaries 179 179
------------- -------------
Minority interests 204 148
------------- -------------
Shareholders' equity 7,898 8,339
------------- -------------
Total liabilities and shareholders' equity $ 23,849 $ 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
Nine months ended
September 30,
--------------------
(Dollars in millions) 2008 2007
--------- ---------
(unaudited)
Cash Flows from Operating Activities:
Net income $ 794 $ 810
Adjustments to reconcile net income to net cash
provided by operating activities:
Discontinued operations - 27
Depreciation and amortization 508 514
Deferred income taxes and investment tax credits 165 42
Equity earnings (228) (75)
Gains on sale of assets (114) (6)
Fixed-price contracts and other derivatives 7 8
Tax benefits from share-based awards (7) (12)
Other 83 37
Net changes in other working capital components (408) 131
Distribution from RBS Sempra Commodities LLP 56 -
Changes in other assets (3) 35
Changes in other liabilities (55) 63
--------- ---------
Net cash provided by continuing operations 798 1,574
Net cash used in discontinued operations - (3)
--------- ---------
Net cash provided by operating activities 798 1,571
--------- ---------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (1,541) (1,357)
Proceeds from sale of assets, net of cash sold 2,071 77
Expenditures for investments (2,180) (17)
Distributions from investments 23 13
Purchases of nuclear decommissioning and other trust
assets (361) (498)
Proceeds from sales by nuclear decommissioning and
other trusts 350 458
Decrease in notes receivable from unconsolidated
affiliates 60 -
Other (18) (19)
--------- ---------
Net cash used for investing activities (1,596) (1,343)
--------- ---------
Cash Flows from Financing Activities:
Common dividends paid (252) (234)
Issuances of common stock 17 36
Repurchases of common stock (1,002) (161)
Increase in short-term debt, net 985 954
Issuance of long-term debt 650 359
Payments on long-term debt (75) (1,069)
Tax benefits from share-based awards 7 12
Other (2) (2)
--------- ---------
Net cash provided by (used in) financing
activities 328 (105)
--------- ---------
Increase (decrease) in cash and cash equivalents (470) 123
Cash and cash equivalents, January 1 668 920
Cash assumed in connection with FIN 46(R) initial
consolidation - 29
--------- ---------
Cash and cash equivalents, September 30 $ 198 $ 1,072
========= =========
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
(Dollars in millions) 2008 2007 2008 2007
------- ------- ------- -------
Net Income
San Diego Gas & Electric $ 123 $ 123 $ 258 $ 236
Southern California Gas 77 63 190 172
Sempra Commodities* (8) 87 181 313
Sempra Generation 94 58 162 122
Sempra Pipelines & Storage 34 17 84 50
Sempra LNG 4 (4) (33) (27)
Parent & Other (16) (14) (48) (29)
------- ------- ------- -------
Continuing Operations 308 330 794 837
Discontinued Operations, Net of
Income Tax - (25) - (27)
------- ------- ------- -------
Consolidated Net Income $ 308 $ 305 $ 794 $ 810
======= ======= ======= =======
* Includes the company's portion of RBS Sempra Commodities' joint venture
earnings since the formation of the joint venture on April 1, 2008, and
100% of the commodities' marketing businesses prior to April 1, 2008.
Also includes the operating results of Sempra Rockies Marketing, as well
as interest, income taxes, cost allocations and other items associated
with the joint venture.
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
(Dollars in millions) 2008 2007 2008 2007
------- ------- ------- -------
Capital Expenditures and
Investments*
San Diego Gas & Electric $ 277 ** $ 174 $ 942 ** $ 479
Southern California Gas 108 109 350 300
Sempra Commodities - 24 37 49
Sempra Generation 2 4 15 8
Sempra Pipelines & Storage 43 43 345 180
Sempra LNG 61 122 310 346
Parent & Other 165 ** 4 426 ** 12
Eliminations (229)*** - (304)*** -
------- ------- ------- -------
Consolidated Capital Expenditures
and Investments $ 427 $ 480 $ 2,121 $ 1,374
======= ======= ======= =======
* Investments do not include the $1.6 billion contribution to RBS Sempra
Commodities in the second quarter of 2008.
** Purchases of industrial development bonds for SDG&E and Parent & Other
were $68 and $161, respectively, in the three months ended September
30, 2008 and $304 and $413, respectively, for the nine months ended
September 30, 2008.
*** Represents purchases and sales of industrial development bonds between
SDG&E and Parent & Other.
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------- -----------------
SEMPRA UTILITIES 2008 2007 2008 2007
-------- -------- -------- --------
Revenues (Dollars in millions)
SDG&E (excludes intercompany sales) $ 945 $ 714 $ 2,439 $ 2,074
SoCalGas (excludes intercompany
sales) $ 1,068 $ 801 $ 3,751 $ 3,120
Gas Sales (Bcf) 63 65 288 290
Transportation and Exchange (Bcf) 171 178 445 421
-------- -------- -------- --------
Total Deliveries (Bcf) 234 243 733 711
-------- -------- -------- --------
Total Gas Customers (Thousands) 6,565 6,517
Electric Sales (Millions of kWhs) 4,716 4,788 13,012 12,847
Direct Access (Millions of kWhs) 781 907 2,296 2,401
-------- -------- -------- --------
Total Deliveries (Millions of kWhs) 5,497 5,695 15,308 15,248
-------- -------- -------- --------
Total Electric Customers (Thousands) 1,370 1,363
SEMPRA GENERATION
======== ======== ======== ========
Power Sold (Millions of kWhs) 5,707 5,718 16,825 15,243
SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
subsidiaries are 100% owned by Sempra Energy.)
======== ======== ======== ========
Natural Gas Sales (Bcf)
Argentina 102 100 254 241
Mexico 12 13 36 35
Chile - 1 - 1
Natural Gas Customers (Thousands)
Argentina 1,658 1,589
Mexico 95 95
Chile 39 39
Electric Sales (Millions of kWhs)
Peru 1,347 1,273 4,063 3,800
Chile 565 582 1,797 1,868
Electric Customers (Thousands)
Peru 829 803
Chile 559 545
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 and six months ended September 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
Rockies 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 Six
months ended months ended
RBS Sempra Commodities LLP - Joint Venture September 30, September 30,
level margin* 2008 2008
------------ ------------
Geographical:
North America $ (79) $ 443
Europe/Asia 139 263
------------ ------------
Total $ 60 $ 706
============ ============
Product Line:
Natural Gas $ 57 $ 363
Oil - Crude & Products 22 114
Metals 62 104
Power (81) 93
Other - 32
------------ ------------
Total $ 60 $ 706
============ ============
* 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)
RBS Sempra Commodities LLP Three months ended
September 30, 2008
--------------------------
Joint Venture Sempra
Total Share**
Fee income and trading revenue, net of
selling costs $ 60
Operating and other expenses (93)
------------
Joint Venture distributable income $ (33)
============
Preferred return on capital $ 131 $ 60
1st allocation - 70% Sempra / 30% RBS (103) (71)
2nd allocation - 30% Sempra / 70% RBS (61) (18)
------------ ------------
Distributable income $ (33) $ (29)
============ ============
Six months ended
September 30, 2008
--------------------------
Joint Venture Sempra
Total Share**
Fee income and trading revenue, net of
selling costs $ 706
Operating and other expenses (405)
------------
Joint Venture distributable income $ 301
============
Preferred return on capital $ 279 $ 120
1st allocation - 70% Sempra / 30% RBS 22 16
2nd allocation - 30% Sempra / 70% RBS - -
------------ ------------
Distributable income $ 301 $ 136
============ ============
Sempra Earnings from RBS Sempra Commodities LLP
Three Six
months ended months ended
September 30, September 30,
(in millions of US dollars) 2008 2008
------------ ------------
Sempra share of distributable income - IFRS
basis $ (29) $ 136
U.S. GAAP conversion impact 25 6
------------ ------------
Sempra equity earnings - U.S. GAAP basis (4) 142
Income tax expense 1 (52)
------------ ------------
Sempra equity earnings from RBS Sempra
Commodities LLP $ (3) $ 90
============ ============
** After a 15% preferred return to Sempra and then a 15% return to RBS,
Sempra receives 70% of the next $500 million and 30% of any remaining
income on an annual basis. The preferred returns and the 1st allocation
(the $500 million tranche) are prorated over the year. Negative amounts
in the three-month period represent reductions required to reflect the
YTD calculations of the 1st and 2nd allocations.Contact: Media Contact:
Doug Kline
Sempra Energy
(877) 866-2066
http://www.sempra.com
Financial Contact:
Glen Donovan
Sempra Energy
(877) 736-7727
Email Contact
Source: Sempra Energy
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