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Sempra Energy Third-Quarter Earnings Rise

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^{Published in Business and Finance on Monday, November 9th 2009 at 6:16 GMT by Market Wire}  

SAN DIEGO, CA--(Marketwire - November 9, 2009) - [ Sempra Energy ] (NYSE: [ SRE ]) today reported that earnings increased in the third quarter 2009 to $317 million, or $1.27 per diluted share, from $308 million, or $1.24 per diluted share, in the third quarter 2008.

Earnings for the first nine months of 2009 were $831 million, or $3.37 per diluted share, up nearly 5 percent from $794 million, or $3.13 per diluted share, in the first nine months of last year.

"Our results through the first nine months of the year benefited from the solid performance of our California utilities and our commodities business, as well as continued progress in the build-out of our natural gas infrastructure projects," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We remain on track to meet our 2009 financial targets."

OPERATING HIGHLIGHTS

San Diego Gas & Electric

Third-quarter earnings for [ San Diego Gas & Electric ] (SDG&E) were $108 million in 2009, compared with $123 million last year. Third-quarter 2008 results included $33 million in earnings from the retroactive application of SDG&E's rate case, approved in July 2008.

For the first nine months, SDG&E earnings rose to $277 million in 2009 from $258 million last year.

Southern California Gas Co.

Earnings for [ Southern California Gas Co. ] (SoCalGas) in the third quarter 2009 were $74 million, compared with $77 million in the third quarter 2008. Third-quarter 2008 results included $7 million in earnings from the retroactive application of SoCalGas' rate case, approved in July 2008.

For the nine-month period, SoCalGas' earnings increased to $198 million in 2009 from $190 million in 2008.

RBS Sempra Commodities

Earnings for Sempra Energy's commodity operations -- concentrated in the [ RBS Sempra Commodities ] joint venture -- were $75 million in the third quarter 2009, compared with a loss of $8 million in last year's third quarter, due primarily to improved performance in natural gas marketing. Results in last year's third quarter were negatively impacted by losses in power marketing caused by the steep decline in commodity prices during the quarter.

For the nine-month period, earnings from Sempra Energy's commodity operations increased to $274 million in 2009 from $181 million last year.

Last week, as part of its ongoing restructuring plan responding to increased government investment, The Royal Bank of Scotland (RBS) announced its intention to divest several of its assets, including its 51-percent stake in the RBS Sempra Commodities joint venture. RBS has told Sempra Energy that the bank will comply with the joint-venture agreement and execute the sale in an orderly manner to maximize the value of the business. RBS also said it is committed to maintaining the usual liquidity, credit and funding operations for the joint venture.

Sempra Generation

In the third quarter 2009, [ Sempra Generation's ] earnings were $43 million, compared with $94 million in the third quarter 2008. Sempra Generation benefited in last year's third quarter from $28 million of mark-to-market earnings on long-term contracts with RBS Sempra Commodities and other counterparties, as well as $8 million from a solar investment tax credit and more favorable market pricing.

For the first nine months of 2009, Sempra Generation earned $119 million, compared with $162 million in the same period a year ago.

In September, Sempra Generation announced it has become an equal partner with BP Wind Energy in the Fowler Ridge II Wind Farm project in Indiana, scheduled to commence operations in the fourth quarter 2009. The entire output of the 200-megawatt facility already has been sold under four, 20-year contracts.

Sempra Pipelines & Storage

Third-quarter 2009 earnings for [ Sempra Pipelines & Storage ] increased to $54 million from $34 million, due primarily to lower income taxes and increased contributions from the Rockies Express pipeline.

For the nine-month period, earnings for Sempra Pipelines & Storage were $64 million in 2009, compared with $84 million last year. 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.

Sempra LNG

[ Sempra LNG ] had a break-even third quarter 2009, compared with earnings of $4 million in the prior-year's quarter.

For the nine-month period, Sempra LNG had a net loss of $19 million in 2009, compared with a net loss of $33 million last year.

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 9848386.

[ Sempra Energy ], based in San Diego, is a Fortune 500 energy services holding company with 2008 revenues of nearly $11 billion. The Sempra Energy companies' 13,600 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/3Q2009.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, the United Kingdom and other countries; capital market conditions and inflation, interest and exchange rates; energy and trading markets, including the timing and extent of changes and volatility in commodity prices; the availability of electric power, natural gas and liquefied natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the Securities and Exchange Commission. These reports are available through the EDGAR system without charge at the SEC's Web site, [ www.sec.gov ] and on the company's Web site, at [ www.sempra.com ].

Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and RBS 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 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) 2009 2008* 2009 2008* ------- ------- ------- ------- (unaudited) REVENUES Sempra Utilities $ 1,424 $ 2,013 $ 4,382 $ 6,190 Sempra Global and parent 429 679 1,268 2,275 ------- ------- ------- ------- Total revenues 1,853 2,692 5,650 8,465 EXPENSES AND OTHER INCOME Sempra Utilities: Cost of natural gas (208) (689) (997) (2,708) Cost of electric fuel and purchased power (208) (311) (508) (694) Sempra Global and parent: Cost of natural gas, electric fuel and purchased power (220) (431) (675) (1,353) Other cost of sales (19) (15) (52) (168) Operation and maintenance (571) (564) (1,676) (1,816) Depreciation and amortization (196) (162) (568) (508) Franchise fees and other taxes (77) (76) (228) (230) Gains on sale of assets - - 3 114 Write-off of long-lived assets - - (132) - Equity earnings (losses): RBS Sempra Commodities LLP 105 (4) 384 142 Other 18 14 27 29 Other income (expense), net 24 (21) 97 30 Interest income 5 12 16 36 Interest expense (96) (67) (257) (165) ------- ------- ------- ------- Income before income taxes and equity earnings of certain unconsolidated subsidiaries 410 378 1,084 1,174 Income tax expense (128) (94) (327) (423) Equity earnings, net of income tax 20 18 59 57 ------- ------- ------- ------- Net income 302 302 816 808 (Earnings) losses attributable to noncontrolling interests 17 8 22 (7) Preferred dividends of subsidiaries (2) (2) (7) (7) ------- ------- ------- ------- Earnings $ 317 $ 308 $ 831 $ 794 ======= ======= ======= ======= Basic earnings per common share $ 1.30 $ 1.26 $ 3.42 $ 3.18 ======= ======= ======= ======= Weighted-average number of shares outstanding, basic (thousands) 243,925 243,793 242,806 249,311 ======= ======= ======= ======= Diluted earnings per common share $ 1.27 $ 1.24 $ 3.37 $ 3.13 ======= ======= ======= ======= Weighted-average number of shares outstanding, diluted (thousands) 248,461 247,904 246,875 253,407 ======= ======= ======= ======= Dividends declared per share of common stock $ 0.39 $ 0.35 $ 1.17 $ 1.02 ======= ======= ======= ======= * As adjusted for the retrospective adoption of ASC 810 (SFAS 160). SEMPRA ENERGY Table B CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, (Dollars in millions) 2009 2008* ------------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 756 $ 331 Short-term investments - 176 Restricted cash 27 27 Accounts receivable, net 744 981 Due from unconsolidated affiliates 19 4 Income taxes receivable 139 195 Deferred income taxes 117 31 Inventories 296 320 Regulatory assets 48 121 Fixed-price contracts and other derivatives 111 160 Insurance receivable related to wildfire litigation 266 - Other 173 130 ------------- ------------- Total current assets 2,696 2,476 ------------- ------------- Investments and other assets: Regulatory assets arising from fixed-price contracts and other derivatives 232 264 Regulatory assets arising from pension and other postretirement benefit obligations 1,218 1,188 Other regulatory assets 568 534 Nuclear decommissioning trusts 664 577 Investment in RBS Sempra Commodities LLP 2,094 2,082 Other investments 2,019 1,166 Goodwill and other intangible assets 527 539 Sundry 605 709 ------------- ------------- Total investments and other assets 7,927 7,059 ------------- ------------- Property, plant and equipment, net 17,772 16,865 ------------- ------------- Total assets $ 28,395 $ 26,400 ============= ============= Liabilities and Equity Current liabilities: Short-term debt $ 851 $ 503 Accounts payable 581 856 Due to unconsolidated affiliates 16 38 Dividends and interest payable 209 156 Accrued compensation and benefits 221 280 Regulatory balancing accounts, net 605 335 Current portion of long-term debt 622 410 Fixed-price contracts and other derivatives 99 180 Customer deposits 145 170 Reserve for wildfire litigation 289 - Other 672 684 ------------- ------------- Total current liabilities 4,310 3,612 ------------- ------------- Long-term debt 6,845 6,544 ------------- ------------- Deferred credits and other liabilities: Due to unconsolidated affiliate 102 102 Customer advances for construction 144 155 Pension and other postretirement benefit obligations, net of plan assets 1,518 1,487 Deferred income taxes 1,278 946 Deferred investment tax credits 54 57 Regulatory liabilities arising from removal obligations 2,546 2,430 Asset retirement obligations 1,212 1,159 Other regulatory liabilities 202 219 Fixed-price contracts and other derivatives 348 392 Deferred credits and other 774 909 ------------- ------------- Total deferred credits and other liabilities 8,178 7,856 ------------- ------------- Preferred stock of subsidiary 79 79 ------------- ------------- Equity: Total Sempra Energy shareholders' equity 8,745 7,969 Preferred stock of subsidiaries 100 100 Other noncontrolling interests 138 240 ------------- ------------- Total equity 8,983 8,309 ------------- ------------- Total liabilities and equity $ 28,395 $ 26,400 ============= ============= * As adjusted for the retrospective adoption of ASC 810 (SFAS 160). SEMPRA ENERGY Table C CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS Nine months ended September 30, -------------------------- (Dollars in millions) 2009 2008* ------------ ------------ (unaudited) Cash Flows from Operating Activities: Net income $ 816 $ 808 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 568 508 Deferred income taxes and investment tax credits 181 165 Equity earnings (470) (228) Gains on sale of assets (3) (114) Write-off of long-lived assets 132 - Fixed-price contacts and other derivatives (27) - Other 45 76 Net change in other working capital components 220 (408) Distributions from RBS Sempra Commodities LLP 407 56 Changes in other assets 81 (3) Changes in other liabilities (66) (55) ------------ ------------ Net cash provided by operating activities 1,884 805 ------------ ------------ Cash Flows from Investing Activities: Expenditures for property, plant and equipment (1,371) (1,541) Proceeds from sale of assets, net of cash sold 179 2,071 Expenditures for investments (762) (2,180) Distributions from investments 16 23 Purchases of nuclear decommissioning and other trust assets (167) (361) Proceeds from sales by nuclear decommissioning and other trusts 155 350 Decrease in notes receivable from unconsolidated affiliate - 60 Other (20) (18) ------------ ------------ Net cash used in investing activities (1,970) (1,596) ------------ ------------ Cash Flows from Financing Activities: Common dividends paid (255) (252) Preferred dividends paid by subsidiaries (7) (7) Issuances of common stock 52 17 Repurchases of common stock - (1,002) (Decrease) increase in short-term debt, net (52) 985 Issuances of long-term debt 1,181 650 Payments on long-term debt (325) (75) Purchase of noncontrolling interest (94) - Other 11 5 ------------ ------------ Net cash provided by financing activities 511 321 ------------ ------------ Increase (decrease) in cash and cash equivalents 425 (470) Cash and cash equivalents, January 1 331 668 ------------ ------------ Cash and cash equivalents, September 30 $ 756 $ 198 ============ ============ * As adjusted for the retrospective adoption of ASC 810 (SFAS 160). 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) 2009 2008 2009 2008 ------ ------ ------ ------ Earnings (Losses) San Diego Gas & Electric $ 108 $ 123 $ 277 $ 258 Southern California Gas 74 77 198 190 Sempra Commodities(1) 75 (8) 274 181 Sempra Generation 43 94 119 162 Sempra Pipelines & Storage 54 34 64 84 Sempra LNG - 4 (19) (33) Parent & Other (37) (16) (82) (48) ------ ------ ------ ------ Earnings $ 317 $ 308 $ 831 $ 794 ====== ====== ====== ====== (1) Results for 2009 and the second and third quarters of 2008 include the company's portion of RBS Sempra Commodities' joint venture earnings and interest, income taxes, cost allocations and other items associated with the joint venture. Results for the first quarter of 2008 include 100% of the commodities-marketing businesses. Both 2009 and 2008 include the results of Sempra Rockies Marketing. Three months ended Nine months ended September 30, September 30, ---------------- ------------------ (Dollars in millions) 2009 2008 2009 2008 ------ ------ ------ ------ Capital Expenditures and Investments(1) San Diego Gas & Electric $ 190 $ 277 (2) $ 785 (2) $ 942 (2) Southern California Gas 109 108 336 350 Sempra Commodities - - - 37 Sempra Generation 194 2 207 15 Sempra Pipelines & Storage 395 43 723 345 Sempra LNG 88 61 230 310 Parent & Other 2 165 (2) 4 426 (2) Eliminations(2) - (229) (152) (304) ------ ------ ------ ------ Consolidated Capital Expenditures and Investments $ 978 $ 427 $2,133 $2,121 ====== ====== ====== ====== (1) Investments do not include the $1.6 billion contribution to RBS Sempra Commodities in the second quarter of 2008. (2) During the nine months ended September 30, 2008, SDG&E and Parent & Other purchased $304 and $413, respectively, of SDG&E's industrial development bonds, including purchases and sales between the entities. As their cash flow needs changed, SDG&E purchased $68 of the bonds from Parent & Other during the three months ended September 30, 2008 and Parent & Other purchased $161 of the bonds from SDG&E in the same period. In the second quarter of 2009, SDG&E purchased $152 of the bonds from Parent & Other to facilitate their remarketing. SEMPRA ENERGY Table E OTHER OPERATING STATISTICS (Unaudited) Three months Nine months ended ended September 30, September 30, --------------- --------------- SEMPRA UTILITIES 2009 2008 2009 2008 ------- ------- ------- ------- Revenues (Dollars in millions) SDG&E (excludes intercompany sales) $ 771 $ 945 $ 2,130 $ 2,439 SoCalGas (excludes intercompany sales) $ 653 $ 1,068 $ 2,252 $ 3,751 Gas Sales (Bcf) 61 63 272 288 Transportation and Exchange (Bcf) 170 171 421 445 ------- ------- ------- ------- Total Deliveries (Bcf) 231 234 693 733 ------- ------- ------- ------- Total Gas Customers (Thousands) 6,599 6,565 Electric Sales (Millions of kWhs) 4,636 4,716 12,768 13,012 Direct Access (Millions of kWhs) 800 781 2,290 2,296 ------- ------- ------- ------- Total Deliveries (Millions of kWhs) 5,436 5,497 15,058 15,308 ------- ------- ------- ------- Total Electric Customers (Thousands) 1,377 1,370 SEMPRA GENERATION ======= ======= ======= ======= Power Sold (Millions of kWhs) 5,317 5,707 16,526 16,825 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 101 102 249 254 Mexico 5 4 14 14 Mobile Gas 8 - * 24 - * Natural Gas Customers (Thousands) Argentina 1,702 1,658 Mexico 91 95 Mobile Gas 92 - * Electric Sales (Millions of kWhs) Peru 1,378 1,347 4,151 4,063 Chile 567 565 1,837 1,797 Electric Customers (Thousands) Peru 856 829 Chile 574 559 * Mobile Gas was acquired in October 2008. 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 nine months ended September 30, 2009, the Sempra Commodities segment is composed primarily of the company's equity interest in RBS Sempra Commodities LLP, but also includes the results of Sempra Rockies Marketing. The margin and financial data below represent the total results of RBS Sempra Commodities LLP as calculated under International Financial Reporting Standards (IFRS). RBS Sempra Commodities LLP Operating Statistics (in millions of US dollars) Three Three Nine months months months RBS Sempra ended ended ended Commodities LLP - September September September Joint Venture level 30, 30, 30, margin* 2009 2008 2009 ------- ------- ------- Geographical: North America $ 100 $ (79) $ 572 Europe/Asia 112 139 317 ------- ------- ------- Total $ 212 $ 60 $ 889 ======= ======= ======= Product Line: Oil - Crude & Products $ 24 $ 22 $ 217 Power 8 (81) 195 Natural Gas 103 57 248 Metals 86 62 221 Other (9) - 8 ------- ------- ------- Total $ 212 $ 60 $ 889 ======= ======= ======= Financial Information (in millions of US dollars) RBS Sempra Three months Three months Nine months Commodities LLP ended ended ended September 30, September 30, September 30, 2009 2008 2009 ---------------- ----------------- ------------------ Joint Joint Joint Venture Sempra Venture Sempra Venture Sempra Total Share** Total Share** Total Share** Fee income and trading revenue, net of selling costs $ 212 $ 60 $ 889 Operating and other expenses (129) (93) (510) ------- ------- ------- Joint Venture distributable income $ 83 $ (33) $ 379 ======= ======= ======= Preferred return on capital $ 85 $ 61 $ 131 $ 60 $ 246 $ 180 1st allocation - 70% Sempra / 30% RBS*** (2) (1) (103) (71) 133 96 2nd allocation - 30% Sempra / 70% RBS - - (61) (18) - - ------- ------- ------- ------- ------- ------- Distributable income $ 83 $ 60 $ (33) $ (29) $ 379 $ 276 ======= ======= ======= ======= ======= ======= Sempra Commodities Earnings Three Three Nine months months months ended ended ended September September September (in millions of US dollars) 30, 30, 30, 2009 2008 2009 ------- ------- ------- Sempra share of distributable income - IFRS basis $ 60 $ (29) $ 276 U.S. GAAP conversion impact 45 25 108 ------- ------- ------- Sempra equity earnings before income taxes - U.S. GAAP basis 105 (4) 384 Income tax expense (30) 1 (106) ------- ------- ------- Sempra equity earnings from RBS Sempra Commodities LLP 75 (3) 278 Other segment activity - (5) (4) ------- ------- ------- Sempra Commodities earnings $ 75 $ (8) $ 274 ======= ======= ======= * 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. ** 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. *** Includes certain transition costs specifically allocated to Sempra and RBS.