- Fourth-Quarter 2005 Net Income Increases to $355 Million - Commodities Unit Drives Earnings Growth - Company Raises 2006 Earnings-Per-Share Guidance to $3.40 to $3.60
SAN DIEGO, Feb. 22, 2006 (PRIMEZONE) -- Based on strong results in its commodities and utility businesses, Sempra Energy (NYSE:SRE) today reported 2005 net income of $920 million, or $3.65 per diluted share, compared with $895 million, or $3.83 per diluted share, in 2004.
Sempra Energy's fourth-quarter 2005 net income was $355 million, or $1.38 per diluted share, compared with $346 million, or $1.46 per diluted share, in 2004.
In 2005, Sempra Energy incurred $311 million after tax in litigation costs related to the Western U.S. energy crisis of 2000-01, compared with $84 million in 2004. In the fourth quarter 2005, the company took an after-tax charge of $116 million for energy-crisis-related litigation costs compared with $74 million in the prior-year quarter.
"We are pleased to report record net income in 2005 and a strong fourth quarter, driven by the outstanding operating results in our commodities and power generation businesses, as well as our California utilities," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We continue to execute our strategy, expanding our competitive businesses in liquefied natural gas (LNG) and natural gas pipelines and storage, while building upon a solid foundation with our utilities, generation and commodities units."
Yesterday, Sempra Energy's board of directors announced an increase in the dividend on common shares on an annualized basis to $1.20 from $1.16.
Revenues for Sempra Energy in 2005 increased to $11.7 billion from $9.4 billion in 2004, due primarily to higher natural gas costs and increased commodities marketing activity. Fourth-quarter 2005 revenues were $4 billion, compared with $2.9 billion in the year-earlier period.
SUBSIDIARY OPERATING RESULTS
Sempra Utilities
Net income for San Diego Gas & Electric (SDG&E) rose to $262 million in 2005 from $208 million in the previous year. SDG&E's fourth-quarter 2005 net income was $72 million, up from $68 million in the fourth quarter 2004, due primarily to regulatory approval of demand-side-management incentives. In the fourth quarter 2004, SDG&E benefited from the settlement of its rate case at the California Public Utilities Commission (CPUC).
Net income for Southern California Gas Co. (SoCalGas) was $211 million in 2005, compared with $232 million in 2004. Fourth-quarter 2005 net income for SoCalGas was $48 million, compared with $58 million earned in the year-earlier period. In the fourth quarter 2005, SoCalGas received regulatory approval of demand-side-management incentives. In the previous-year quarter, SoCalGas benefited from the settlement of its rate case at the CPUC.
Sempra Commodities
Sempra Commodities had record net income of $460 million in 2005, an increase of 44 percent over 2004 net income of $320 million. Fourth-quarter 2005 net income for Sempra Commodities rose to $244 million from $171 million in the same quarter in 2004, due primarily to increased activity in natural gas, power and oil marketing in both Europe and North America.
"Sempra Commodities has built an enviable track record of growth to become an industry leader, achieving 28 consecutive quarters of profitability," Felsinger said.
Sempra Generation
Sempra Generation's 2005 net income was $164 million, up from $137 million the previous year. Fourth-quarter net income for Sempra Generation increased to $61 million in 2005 from $19 million in 2004, due primarily to improved operating results for the company's Western U.S. power-generating fleet.
Sempra Generation announced plans in December 2005 to sell or refinance all of its Texas-based power-generation assets. Last month, the company entered into an agreement to sell one of its Texas power plants, the 305-megawatt coal-fired Twin Oaks Power facility, for $480 million in cash. The sale is expected to close in the second quarter 2006 and result in an after-tax gain of approximately $215 million.
Sempra Pipelines & Storage
Net income for Sempra Pipelines & Storage in 2005 was $64 million, compared with $63 million in 2004. Fourth-quarter 2005 net income for Sempra Pipelines & Storage was $16 million, compared with $28 million in the previous year's quarter. In the fourth quarter 2004, Sempra Pipelines & Storage benefited from the favorable resolution of foreign-tax issues.
Sempra LNG
Sempra LNG recorded a loss of $25 million in 2005, compared with a loss of $8 million in 2004. For the fourth quarter, Sempra LNG's loss was $10 million in 2005, compared with a loss of $8 million in 2004.
"Construction of our Mexico and Louisiana LNG receipt facilities is on schedule and we expect to receive final regulatory approvals of our Texas receipt facility by the middle of this year," said Felsinger.
2006 Earnings Outlook
Sempra Energy today updated its 2006 earnings-per-share guidance to $3.40 to $3.60 from previous guidance of $3.20 to $3.40. The updated guidance for 2006 excludes any gains from asset sales.
Internet Broadcast
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. Eastern Time 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 (706) 645-9291 and entering the passcode, 5624328.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2005 revenues of $11.7 billion. The Sempra Energy companies' 14,000 employees serve more than 29 million consumers in the United States, Europe, Canada, Mexico, South America and Asia.
Income-statement information by business unit is available on Sempra Energy's Web site at http://www.sempra.com/downloads/4Q2005_Table_All.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," "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, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital markets 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 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
(Dollars in millions, except per share amounts)
Three months ended Years ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
(Unaudited)
Operating revenues
California utilities $ 2,259 $ 1,760 $ 7,042 $ 6,195
Sempra Global and parent 1,735 1,146 4,695 3,239
-------- -------- -------- --------
Total operating revenues 3,994 2,906 11,737 9,434
-------- -------- -------- --------
Operating expenses
California utilities:
Cost of natural gas 1,172 849 3,232 2,593
Cost of electric fuel and
purchased power 187 151 624 576
Other cost of sales 828 555 2,715 1,741
Litigation expense 210 126 551 150
Other operating expenses 854 663 2,634 2,243
Depreciation and amortization 165 120 646 621
Franchise fees and other taxes 66 65 251 236
Gains on sale of assets, net (8) (1) (112) (15)
Impairment losses 71 1 85 8
-------- -------- -------- --------
Total operating expenses 3,545 2,529 10,626 8,153
-------- -------- -------- --------
Operating income 449 377 1,111 1,281
Other income, net 27 31 51 33
Interest income 23 11 75 69
Interest expense (90) (88) (311) (322)
Preferred dividends of
subsidiaries (3) (3) (10) (10)
-------- -------- -------- --------
Income from continuing
operations before income
taxes and equity in earnings
of certain unconsolidated
subsidiaries 406 328 916 1,051
Income tax expense 58 2 42 193
Equity in income of certain
unconsolidated subsidiaries 13 13 55 62
-------- -------- -------- --------
Income from continuing
operations 361 339 929 920
Discontinued operations,
net of tax (6) 7 (9) (25)
-------- -------- -------- --------
Net income $ 355 $ 346 $ 920 $ 895
======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations $ 1.42 $ 1.47 $ 3.78 $ 4.03
Discontinued operations,
net of tax (0.02) 0.03 (0.04) (0.11)
-------- -------- -------- --------
Net income $ 1.40 $ 1.50 $ 3.74 $ 3.92
======== ======== ======== ========
Weighted-average number of
shares outstanding
(thousands) 253,516 230,832 245,906 228,271
======== ======== ======== ========
Diluted earnings per share:
Income from continuing
operations $ 1.40 $ 1.43 $ 3.69 $ 3.93
Discontinued operations,
net of tax (0.02) 0.03 (0.04) (0.10)
-------- -------- -------- --------
Net income $ 1.38 $ 1.46 $ 3.65 $ 3.83
======== ======== ======== ========
Weighted-average number of
shares outstanding
(thousands) 257,845 237,500 252,088 233,852
======== ======== ======== ========
Dividends declared per share
of common stock $ 0.29 $ 0.25 $ 1.16 $ 1.00
======== ======== ======== ========
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in millions) 2005 2004
--------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 772 $ 419
Short-term investments 12 15
Accounts receivable 1,192 1,032
Due from unconsolidated affiliates 3 4
Deferred income taxes 132 15
Interest receivable 29 80
Trading-related receivables and deposits, net 3,370 2,606
Derivative trading instruments 4,502 2,339
Commodities owned 2,498 1,547
Regulatory assets 255 255
Inventories 212 172
Other 291 222
------- -------
Current assets of continuing operations 13,268 8,706
Current assets of discontinued operations 50 70
------- -------
Total current assets 13,318 8,776
------- -------
Investments and other assets:
Due from unconsolidated affiliates 21 42
Regulatory assets arising from fixed-price
contracts and other derivatives 398 500
Other regulatory assets 713 751
Nuclear decommissioning trusts 638 612
Investments 1,104 1,164
Sundry 920 844
------- -------
Total investments and other assets 3,794 3,913
------- -------
Property, plant and equipment, net 12,101 11,086
------- -------
Total assets $29,213 $23,775
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 1,062 $ 405
Accounts payable 1,412 1,126
Income taxes payable 68 187
Trading-related payables 4,127 3,182
Derivative trading instruments 3,246 1,484
Commodities sold with agreement to repurchase 634 513
Dividends and interest payable 140 123
Regulatory balancing accounts, net 192 509
Fixed-price contracts and other derivatives 130 157
Current portion of long-term debt 101 398
Due to unconsolidated affiliates
(mandatorily redeemable preferred securities) -- 205
Other 1,035 776
------- -------
Current liabilities of continuing operations 12,147 9,065
Current liabilities of discontinued operations 10 17
------- -------
Total current liabilities 12,157 9,082
------- -------
Long-term debt 4,823 4,192
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 162 162
Customer advances for construction 110 97
Postretirement benefits other than pensions 121 129
Deferred income taxes 245 420
Deferred investment tax credits 73 78
Regulatory liabilities arising from
removal obligations 2,313 2,692
Asset retirement obligations 958 326
Other regulatory liabilities 200 199
Fixed-price contracts and other derivatives 400 500
Deferred credits and other 1,312 854
------- -------
Total deferred credits and other liabilities 5,894 5,457
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 6,160 4,865
------- -------
Total liabilities and shareholders' equity $29,213 $23,775
======= =======
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Years ended
December 31,
--------------------
(Dollars in millions) 2005 2004
-----------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 920 $ 895
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss from discontinued operations,
net of tax 9 25
Depreciation and amortization 646 621
Gains on sale of assets, net (112) (15)
Impairment losses 85 8
Deferred income taxes and
investment tax credits (283) 13
Other (48) 33
Net changes in other working
capital components (1,169) (395)
Changes in other assets 27 (127)
Changes in other liabilities 451 (27)
------- -------
Net cash provided by continuing
operations 526 1,031
Net cash used in discontinued
operations (5) (30)
------- -------
Net cash provided by operating
activities 521 1,001
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant
and equipment (1,404) (1,083)
Proceeds from sale of assets 277 377
Proceeds from disposal of
discontinued operations 5 157
Investments in and acquisitions of
subsidiaries, net of cash acquired (86) (74)
Purchases of nuclear decommissioning
and other trust assets (299) (319)
Proceeds from sales by nuclear
decommissioning and other trusts 262 262
Dividends received from unconsolidated
affiliates 72 59
Other (12) 10
------- -------
Net cash used in investing activities (1,185) (611)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (268) (195)
Issuances of common stock 694 110
Repurchases of common stock (95) (5)
Issuances of long-term debt 762 997
Payments on long-term debt (532) (1,670)
Redemption of mandatorily redeemable
preferred securities (200) --
Increase in short-term debt, net 662 397
Other (6) (14)
------- -------
Net cash provided by (used in)
financing activities 1,017 (380)
------- -------
Increase in cash and cash equivalents 353 10
Cash and cash equivalents, January 1 419 409
------- -------
Cash and cash equivalents, December 31 $ 772 $ 419
======= =======
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS
Three months ended Years ended
December 31, December 31,
-----------------------------------
(Dollars in millions) 2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited)
Net Income
California Utilities:
San Diego Gas & Electric $ 72 $ 68 $ 262 $ 208
Southern California Gas 48 58 211 232
----- ----- ----- -----
Total California Utilities 120 126 473 440
----- ----- ----- -----
Sempra Global:
Sempra Commodities 244 171 460 320
Sempra Generation 61 19 164 137
Sempra Pipelines & Storage 16 28 64 63
Sempra LNG (10) (8) (25) (8)
----- ----- ----- -----
Total Sempra Global 311 210 663 512
----- ----- ----- -----
Sempra Financial 4 10 23 36
Parent & Other(a) (74) (7) (230) (68)
----- ----- ----- -----
Continuing Operations 361 339 929 920
Discontinued Operations
(Atlantic Electric & Gas) (6) 7 (9) (25)
----- ----- ----- -----
Consolidated Net Income $ 355 $ 346 $ 920 $ 895
===== ===== ===== =====
(a) Reflects after-tax litigation costs of $103 million and $193
million recorded in the three months and the year ended December
31, 2005, respectively.
Three months ended Years ended
December 31, December 31,
--------------- ---------------
(Dollars in millions) 2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited)
Capital Expenditures
and Investments:
California Utilities:
San Diego Gas & Electric $ 122 $ 131 $ 464 $ 414
Southern California Gas 116 77 361 311
----- ----- ----- -----
Total California Utilities 238 208 825 725
----- ----- ----- -----
Sempra Global:
Sempra Generation 46 40 255 194
Sempra Commodities 11 28 72 131
Sempra Pipelines & Storage 8 4 19 22
Sempra LNG 137 20 293 55
----- ----- ----- -----
Total Sempra Global 202 92 639 402
----- ----- ----- -----
Parent & Other 13 5 26 30
----- ----- ----- -----
Consolidated Capital
Expenditures and Investments $ 453 $ 305 $1,490 $1,157
===== ===== ====== ======
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Years ended
December 31, December 31,
-------------------------------------
CALIFORNIA UTILITIES 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes inter-
company sales) $ 746 $ 599 $ 2,493 $ 2,248
SoCalGas (excludes inter-
company sales) $ 1,513 $ 1,161 $ 4,549 $ 3,947
Gas Sales 105 125 395 413
Transportation and Exchange 113 139 494 550
------- ------- ------- -------
Total Deliveries (Bcf) 218 264 889 963
------- ------- ------- -------
Total Gas Customers (Thousands) 6,383 6,297
Electric Sales 4,002 3,993 15,990 15,799
Direct Access 720 881 3,213 3,441
------- ------- ------- -------
Total Deliveries
(Millions of kWhs) 4,722 4,874 19,203 19,240
------- ------- ------- -------
Total Electric Customers
(Thousands) 1,338 1,319
SEMPRA GENERATION
---------------------------------------------------------------------
Power Sold (Millions of kWhs) 6,418 5,943 23,384 20,739
SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
subsidiaries are 100% owned by Sempra Energy)
---------------------------------------------------------------------
Natural Gas Sales (Bcf)
Argentina 62 60 272 251
Mexico 9 9 42 42
Chile 1 1 3 3
Natural Gas Customers (Thousands)
Argentina 1,495 1,449
Mexico 98 97
Chile 38 37
Electric Sales (Millions of kWhs)
Peru 1,113 1,024 4,298 4,044
Chile 537 475 2,289 1,959
Electric Customers (Thousands)
Peru 767 748
Chile 521 508
SEMPRA ENERGY
Table E (Continued)
SEMPRA COMMODITIES
---------------------------------------------------------------------
Three months ended Years ended
December 31, December 31,
Margin(a) -------------- ------------------
(Dollars in millions) 2005 2004 2005 2004
-------------------------------------------- ------------------
Geographical:
North America $ 543 $ 293 $ 1,091 $ 689
Europe/Asia 142 165 255 338
-------------- ------------------
Total $ 685 $ 458 $ 1,346 $ 1,027
-------------- ------------------
Product Line:
Gas $ 317 $ 235 $ 439 $ 318
Power 209 79 443 170
Oil - Crude & Products 132 70 292 268
Metals 12 55 54 180
Other 15 19 118 91
-------------- ------------------
Total $ 685 $ 458 $ 1,346 $ 1,027
-------------- ------------------
(a) Margin consists of net revenues less related costs (primarily
brokerage, transportation and storage) plus or minus net interest
expense/income, and is used by management in evaluating its
geographical and product line performance.
Three months ended Years ended
December 31, December 31,
Effect of EITF 02-03 -------------- ------------------
(Dollars in millions) 2005 2004 2005(d) 2004
-------------------------------------------- ------------------
Mark-to-Market Earnings(b) $ 209 $ 105 $ 491 $ 288
Effect of EITF 02-03(c) 35 66 (31) 32
-------------- ------------------
GAAP Net Income $ 244 $ 171 $ 460 $ 320
-------------- ------------------
(b) Represents 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.
(c) Consists of the income statement effect of not recognizing
changes in the fair market value of certain physical inventories
and capacity contracts for transportation and storage.
(d) Includes after-tax gain of $41 million related to the sale of
certain storage assets.
Fair Scheduled Maturity (in months)
Market Value --------------------------------
Net Unrealized Revenue Dec. 31, more
(Dollars in millions) 2005 0-12 13-24 25-36 than 36
---------------------------------------------------------------------
Sources of Over-the-Counter
(OTC) Fair Value:
Prices actively quoted $1,188 $ 725 $ 92 $ 297 $ 74
Prices provided by other
external sources 52 3 2 -- 47
Prices based on models
and other valuation
methods (12) -- -- -- (12)
------------------------------------------
Total OTC Fair
Value(a) $1,228 $ 728 $ 94 $ 297 $ 109
Maturity of OTC
Fair Value
------------------------------------------
Percentage 100.0% 59.3% 7.6% 24.2% 8.9%
Cumulative Percentages 59.3% 66.9% 91.1% 100.0%
------------------------------------------
---------------------------------------------------------------------
Exchange Contracts(b) $ 260 $ 464 $ 71 $ (272) $ (3)
------------------------------------------
Total Net Unrealized
Revenue at
December 31, 2005 $ 1,488
-------
(a) The present value of unrealized revenue to be received or
(paid) from outstanding OTC contracts
(b) Cash received or (paid) associated with open Exchange
Contracts
December 31,
Credit Quality of Unrealized --------------------------
Trading Assets (net of margin) 2005 2004
---------------------------------------------------------------------
Commodity Exchanges 2% 10%
Investment Grade 75% 66%
Below Investment Grade 23% 24%
Three months ended Years ended
Risk Adjusted Performance December 31, December 31,
Indicators --------------- ----------------
(Mark-to-Market Basis) 2005 2004 2005 2004
---------------------------------------------------------------------
VaR at 95% (Dollars in
millions) (a) $ 14.2 $ 11.2 $ 11.3 $ 7.9
VaR at 99% (Dollars in
millions) (b) $ 20.0 $ 15.7 $ 15.9 $ 11.2
Risk Adjusted Return on
Capital (RAROC) (c) 63% 34% 46% 38%
(a) Average Daily Value-at-Risk for the period using a 95%
confidence level
(b) Average Daily Value-at-Risk for the period using a 99%
confidence level
(c) Average Daily Trading Margin/Average Daily VaR at 95%
confidence level
Physical Statistics
---------------------------------------------------------------------
Natural Gas (Bcf/Day) 12.1 11.9 11.7 13.0
Electric (Billions of kWhs) 112.4 108.1 413.2 373.7
Oil & Liquid Products
(Millions Bbls/Day) 2.0 2.1 2.0 2.1