* Commodities Unit Drives Record Earnings
* Company Raises 2007 Earnings-Per-Share Guidance
to Range of $3.75 to $3.95
SAN DIEGO, Feb. 22, 2007 (PRIME NEWSWIRE) -- Sempra Energy (NYSE:SRE) today reported 2006 net income of $1.4 billion, or $5.38 per diluted share, an increase of 53 percent over $920 million, or $3.65 per diluted share, in 2005.
Included in 2006 results was $315 million in after-tax income from discontinued operations related to asset sales. In 2005, Sempra Energy incurred $311 million after-tax in litigation expense related to the Western U.S. energy crisis of 2000-01.
For the full-year 2006, income from continuing operations -- excluding a $204 million gain on the sale of the jointly owned Texas power plants and a $221 million write-down on the company's Argentine investments -- was $1.1 billion, or $4.24 per diluted share, up 21 percent from $913 million, or $3.62 per diluted share in 2005.
Sempra Energy's fourth-quarter net income was $125 million, or $0.47 per diluted share, in 2006, compared with $355 million, or $1.38 per diluted share, in 2005.
Fourth-quarter results included the charge related to the Argentine utilities. In the year-earlier quarter, the company recorded an after-tax charge of $116 million for energy-crisis litigation costs.
"This was our eighth consecutive year of record earnings," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We are benefiting from a focused strategy. Building natural gas infrastructure in North America and expanding our California utilities remain our top priorities."
Sempra Energy's board of directors last week increased the dividend on common shares on an annualized basis to $1.24 per share from $1.20 per share.
Revenues for Sempra Energy in 2006 were $11.8 billion, compared with $11.5 billion in 2005. Fourth-quarter 2006 revenues were $3.2 billion, compared with $3.9 billion in the prior year's quarter, due primarily to reduced commodity prices.
SUBSIDIARY OPERATING RESULTS
Sempra Utilities
Net income for San Diego Gas & Electric (SDG&E) was $237 million in 2006, compared with $262 million in 2005. SDG&E's fourth-quarter 2006 net income was $55 million, compared with net income of $72 million in the fourth quarter 2005. The change in net income for the quarter and full year was due primarily to the positive effect in 2005 of demand-side-management incentives and favorable resolution of prior-years' tax and regulatory issues, offset by higher net income from electric generation in 2006, including the addition of the new Palomar generating facility.
Net income for Southern California Gas Co. (SoCalGas) was $223 million in 2006, compared with $211 million in the prior year. The improvement from the prior year was due primarily to energy-crisis litigation expense in 2005, offset by the favorable resolution of tax and regulatory issues. SoCalGas' fourth-quarter net income was $55 million in 2006, up from $48 million in the previous year.
Sempra Commodities
Sempra Commodities' 2006 net income rose to $504 million from $460 million in 2005, due to improved results in the natural gas and base metals businesses. Fourth-quarter net income for Sempra Commodities was $214 million in 2006, compared with $244 million in the prior-year quarter, due to reduced margins in petroleum and power marketing.
"Energy markets remain volatile and we do not see this volatility moderating in the near future," said Felsinger. "Sempra Commodities continues to excel in this environment, offering customers help in managing their commodity risks."
Sempra Generation
Sempra Generation's net income in 2006 was $375 million, compared with 2005 net income of $149 million. The company's 2006 net income included $204 million from the sale of its jointly owned Texas power plants. Fourth-quarter 2006 net income for Sempra Generation was $53 million, compared with $58 million in 2005.
In 2006, Sempra Generation completed the sale of several assets that were recorded as discontinued operations, including the Twin Oaks power plant, its oil and gas production unit, and its energy-services and facilities-management operations.
Sempra Pipelines & Storage
Sempra Pipelines & Storage recorded a net loss of $165 million in 2006, compared with net income of $64 million in 2005. In the fourth quarter 2006, Sempra Pipelines & Storage recorded a net loss of $223 million, compared with $16 million in net income during the same quarter in 2005. Both the quarter and full-year results for Sempra Pipelines & Storage were impacted by the company's write-down on its Argentine investments.
Sempra LNG
Sempra LNG recorded a net loss of $42 million in 2006, compared with a net loss of $25 million in the prior year, due to a $13 million mark-to-market loss related to a natural gas marketing agreement with Sempra Commodities and higher development costs. For the fourth quarter, Sempra LNG's 2006 net loss was $7 million, compared with a net loss of $10 million in 2005.
2007 Earnings Outlook
Sempra Energy today updated its 2007 earnings-per-share guidance to a range of $3.75 to $3.95 from previous guidance of $3.50 to $3.70.
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, 8288064.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2006 revenues of nearly $12 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/4Q2006.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 environmental and 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 and liquefied natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov and on the company's Web site, www.sempra.com.
Sempra LNG and Sempra Pipelines & Storage are not the same companies as the utilities, SDG&E or SoCalGas, and are not regulated by the California Public Utilities Commission. Sempra Energy Trading, doing business as Sempra Commodities, and Sempra Generation are not the same companies as the utilities, SDG&E or SoCalGas, and the California Public Utilities Commission does not regulate the terms of their products and services.
SEMPRA ENERGY
Table A
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in millions, except per share amounts)
Three months ended Years ended
December 31, December 31,
----------------- -----------------
2006 2005 2006 2005
------------------------------------------------- -----------------
(Unaudited)
Operating revenues
Sempra Utilities $ 1,709 $ 2,259 $ 6,899 $ 7,042
Sempra Global and parent 1,536 1,673 4,862 4,470
------- ------- ------- -------
Total operating revenues 3,245 3,932 11,761 11,512
------- ------- ------- -------
Operating expenses
Sempra Utilities:
Cost of natural gas 679 1,172 2,756 3,232
Cost of electric fuel
and purchased power 155 187 721 624
Other cost of sales 753 792 2,689 2,588
Litigation expense 13 210 56 551
Other operating expenses 838 839 2,814 2,583
Depreciation and amortization 166 160 657 626
Franchise fees and other taxes 67 65 275 246
Gains on sale of assets, net (2) (8) (1) (112)
Impairment losses 6 71 9 85
------- ------- ------- -------
Total operating expenses 2,675 3,488 9,976 10,423
------- ------- ------- -------
Operating income 570 444 1,785 1,089
Other income, net 6 27 381 51
Interest income 36 22 109 72
Interest expense (78) (90) (351) (310)
Preferred dividends
of subsidiaries (3) (3) (10) (10)
------- ------- ------- -------
Income from continuing
operations before income
taxes and equity in earnings
(losses) of certain
unconsolidated subsidiaries 531 400 1,914 892
Income tax expense 180 56 641 34
Equity in earnings (losses)
of certain unconsolidated
subsidiaries (222) 13 (182) 55
------- ------- ------- -------
Income from continuing
operations 129 357 1,091 913
Discontinued operations,
net of income tax (4) (2) 315 7
------- ------- ------- -------
Net income $ 125 $ 355 $ 1,406 $ 920
======= ======= ======= =======
Basic earnings per share:
Income from continuing
operations $ 0.50 $ 1.41 $ 4.25 $ 3.71
Discontinued operations,
net of income tax (0.02) (0.01) 1.23 0.03
------- ------- ------- -------
Net income $ 0.48 $ 1.40 $ 5.48 $ 3.74
======= ======= ======= =======
Weighted-average number of
shares outstanding (thousands) 258,385 253,516 256,477 245,906
======= ======= ======= =======
Diluted earnings per share:
Income from continuing
operations $ 0.49 $ 1.39 $ 4.17 $ 3.62
Discontinued operations,
net of income tax (0.02) (0.01) 1.21 0.03
------- ------- ------- -------
Net income $ 0.47 $ 1.38 $ 5.38 $ 3.65
======= ======= ======= =======
Weighted-average number of
shares outstanding (thousands) 263,429 257,845 261,368 252,088
======= ======= ======= =======
Dividends declared per share
of common stock $ 0.30 $ 0.29 $ 1.20 $ 1.16
======= ======= ======= =======
As a result of the decisions in 2006 to dispose of the Twin Oaks
power plant, Sempra Energy Production Company, and the Energy
Services and Facilities Management businesses, all within Sempra
Generation, and Bangor Gas and Frontier Energy, both within Sempra
Pipelines & Storage, these operations have been reflected above as
discontinued operations in all periods presented.
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
December 31,
2006 2005
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 920 $ 769
Restricted cash 4 12
Accounts receivable 1,035 1,145
Deferred income taxes 270 134
Interest receivable 40 29
Trading-related receivables and deposits, net 3,047 3,370
Derivative trading instruments 4,068 4,502
Commodities owned 1,845 2,498
Inventories 215 205
Regulatory assets 193 255
Other 317 297
------- -------
Current assets of continuing operations 11,954 13,216
Current assets of discontinued operations 62 611
------- -------
Total current assets 12,016 13,827
------- -------
Investments and other assets:
Due from unconsolidated affiliates -- 21
Regulatory assets arising from fixed-price
contracts and other derivatives 353 398
Regulatory assets arising from pension and
other postretirement benefit obligations 356 213
Other regulatory assets 472 500
Nuclear decommissioning trusts 702 638
Investments 1,086 1,091
Sundry 789 802
------- -------
Total investments and other assets 3,758 3,663
------- -------
Property, plant and equipment, net 13,175 11,756
------- -------
Total assets $28,949 $29,246
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 252 $ 1,043
Accounts payable 1,587 1,394
Income taxes payable 9 86
Trading-related payables 3,211 4,127
Derivative trading instruments 2,304 3,246
Commodities sold with agreement to repurchase 537 634
Dividends and interest payable 145 140
Regulatory balancing accounts, net 332 192
Fixed-price contracts and other derivatives 87 130
Current portion of long-term debt 681 98
Other 1,197 1,012
------- -------
Current liabilities of continuing operations 10,342 12,102
Current liabilities of discontinued operations 7 151
------- -------
Total current liabilities 10,349 12,253
------- -------
Long-term debt 4,525 4,815
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 162 162
Customer advances for construction 126 110
Pension and other postretirement benefit
obligations, net of plan assets 609 391
Deferred income taxes 412 214
Deferred investment tax credits 67 73
Regulatory liabilities arising from
removal obligations 2,330 2,313
Asset retirement obligations 1,128 958
Other regulatory liabilities 221 200
Fixed-price contracts and other derivatives 358 400
Deferred credits and other 972 1,018
------- -------
Total deferred credits and other liabilities 6,385 5,839
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 7,511 6,160
------- -------
Total liabilities and shareholders' equity $28,949 $29,246
======= =======
As a result of the decisions in 2006 to dispose of the Twin Oaks
power plant, Sempra Energy Production Company, and the Energy
Services and Facilities Management businesses, all within Sempra
Generation, and Bangor Gas and Frontier Energy, both within Sempra
Pipelines & Storage, these operations have been reflected above as
discontinued operations in all periods presented.
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
Years ended
December 31,
----------------------
2006 2005
--------------------------------------------------------------------
Cash Flows from Operating Activities:
Income from continuing operations $ 1,091 $ 913
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 657 626
Gains on sale of assets, net (1) (112)
Impairment losses 9 85
Deferred income taxes and investment
tax credits 77 (298)
Non-cash rate reduction bond expense 60 68
Equity in income of unconsolidated
subsidiaries (156) (66)
Other 38 (6)
Quasi-reorganization resolution 12 --
Net changes in other working capital
components (183) (1,196)
Changes in other assets 20 21
Changes in other liabilities 42 458
------- -------
Net cash provided by continuing
operations 1,666 493
Net cash provided by (used in)
discontinued operations (37) 31
------- -------
Net cash provided by operating
activities 1,629 524
------- -------
Cash Flows from Investing Activities:
Expenditures for property,
plant and equipment (1,907) (1,377)
Proceeds from sale of assets from
continuing operations 40 277
Expenditures for investments and
acquisition of subsidiaries,
net of cash acquired (257) (86)
Distribution from investment 104 --
Purchases of nuclear decommissioning
and other trust assets (546) (299)
Proceeds from sales by nuclear
decommissioning and other trusts 503 262
Dividends received from
unconsolidated affiliates 431 73
Other (27) (12)
------- -------
Net cash used in continuing operations (1,659) (1,162)
Net cash provided by (used in)
discontinued operations 793 (25)
------- -------
Net cash used in investing activities (866) (1,187)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (283) (268)
Issuances of common stock 97 694
Repurchases of common stock (37) (95)
Issuances of long-term debt 552 762
Payments on long-term debt (263) (529)
Redemption of mandatorily redeemable
preferred securities -- (200)
Increase (decrease) in short-term
debt, net (791) 659
Financing transaction related to
Sempra Financial 83 --
Other 28 (6)
------- -------
Net cash provided by (used in)
continuing operations (614) 1,017
Net cash provided by discontinued
operations 2 --
------- -------
Net cash provided by (used in)
financing activities (612) 1,017
------- -------
Increase in cash and cash equivalents 151 354
Cash and cash equivalents, January 1 769 415
------- -------
Cash and cash equivalents, December 31 $ 920 $ 769
======= =======
As a result of the decisions in 2006 to dispose of the Twin Oaks
power plant, Sempra Energy Production Company, and the Energy
Services and Facilities Management businesses, all within Sempra
Generation, and Bangor Gas and Frontier Energy, both within Sempra
Pipelines & Storage, these operations have been reflected above as
discontinued operations in all periods presented.
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS
(Dollars in millions)
Three months ended Years ended
December 31, December 31,
----------------- -----------------
2006 2005 2006 2005
------------------------------------------------- -----------------
Net Income (unaudited)
Sempra Utilities:
San Diego Gas & Electric $ 55 $ 72 $ 237 $ 262
Southern California Gas 55 48 223 211
------- ------- ------- -------
Total Sempra Utilities 110 120 460 473
Sempra Global:
Sempra Commodities 214 244 504 460
Sempra Generation* 53 58 375 149
Sempra Pipelines & Storage* (223) 16 (165) 64
Sempra LNG (7) (10) (42) (25)
------- ------- ------- -------
Total Sempra Global 37 308 672 648
Parent & Other (18) (71) (41) (208)
------- ------- ------- -------
Continuing Operations 129 357 1,091 913
Discontinued Operations,
Net of Income Tax (4) (2) 315 7
------- ------- ------- -------
Consolidated Net Income $ 125 $ 355 $ 1,406 $ 920
======= ======= ======= =======
* Excludes amounts now classified as discontinued operations.
Three months ended Years ended
December 31, December 31,
--------------- -----------------
(Dollars in millions) 2006 2005 2006 2005
---------------------------------------------------------------------
Capital Expenditures
and Investments (unaudited)
Sempra Utilities:
San Diego Gas & Electric $ 190 $ 122 $ 1,070 $ 464
Southern California Gas 129 116 413 361
------- ------- ------- -------
Total Sempra Utilities 319 238 1,483 825
------- ------- ------- -------
Sempra Global:
Sempra Commodities 10 11 53 72
Sempra Generation 3 36 40 229
Sempra Pipelines & Storage 202 8 414 18
Sempra LNG 153 137 619 293
------- ------- ------- -------
Total Sempra Global 368 192 1,126 612
------- ------- ------- -------
Parent & Other (includes
transfer of Palomar) 10 13 (445) 26
------- ------- ------- -------
Consolidated Capital
Expenditures and Investments $ 697 $ 443 $ 2,164 $ 1,463
======= ======= ======= =======
As a result of the decisions in 2006 to dispose of the Twin Oaks
power plant, Sempra Energy Production Company, and the Energy
Services and Facilities Management businesses, all within Sempra
Generation, and Bangor Gas and Frontier Energy, both within Sempra
Pipelines & Storage, these operations have been reflected above as
discontinued operations in all periods presented.
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Years ended
December 31, December 31,
-------------------------------------
SEMPRA UTILITIES 2006 2005 2006 2005
---------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes
intercompany sales) $ 692 $ 746 $ 2,770 $ 2,493
SoCalGas (excludes
intercompany sales) $ 1,017 $ 1,513 $ 4,129 $ 4,549
Gas Sales (bcf) 110 105 402 395
Transportation and Exchange (bcf) 127 113 546 494
------- ------- ------- -------
Total Deliveries (bcf) 237 218 948 889
------- ------- ------- -------
Total Gas Customers (Thousands) -- -- 6,468 6,383
Electric Sales (Millions
of kWhs) 3,939 4,002 16,836 15,990
Direct Access (Millions of kWhs) 821 720 3,390 3,213
------- ------- ------- -------
Total Deliveries (Millions
of kWhs) 4,760 4,722 20,226 19,203
------- ------- ------- -------
Total Electric Customers
(Thousands) -- -- 1,355 1,338
SEMPRA GENERATION
------------------------------------------------- -----------------
Power Sold (Millions of kWhs) 5,706 4,932(a) 19,760 17,063(a)
(a) Revised to exclude the Twin Oaks, Coleto Creek and Topaz power
plants.
SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
subsidiaries are 100% owned by Sempra Energy.)
---------------------------------------------------------------------
Natural Gas Sales (bcf)
Argentina 70 62 278 272
Mexico 10 9 44 42
Chile -- 1 2 3
Natural Gas Customers (Thousands)
Argentina -- -- 1,542 1,495
Mexico -- -- 101 98
Chile -- -- 39 38
Electric Sales (Millions of kWhs)
Peru 1,620 1,113 5,108 4,298
Chile 762 537 2,324 2,289
Electric Customers (Thousands)
Peru -- -- 788 767
Chile -- -- 534 521
SEMPRA COMMODITIES
--------------------------------------------------------------------
Three months ended Years ended
December 31, December 31,
Margin* ----------------- -----------------
(Dollars in millions) 2006 2005 2006 2005
---------------------------------------------- -----------------
Geographical:
North America $ 474 $ 543 $1,313 $1,091
Europe/Asia 173 142 325 255
----------------- -----------------
Total $ 647 $ 685 $1,638 $1,346
----------------- -----------------
Product Line:
Gas $ 362 $ 317 $ 792 $ 439
Power 104 209 431 443
Oil - Crude
& Products 85 132 198 292
Metals 60 12 138 54
Other 36 15 79 118
----------------- -----------------
Total $ 647 $ 685 $1,638 $1,346
----------------- -----------------
* 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) 2006 2005 2006 2005
---------------------------------------------- -----------------
Mark-to-Market Earnings** $ 158 $ 209 $ 487 $ 491
Effect of EITF 02-03*** 56 35 17 (31)
----------------- -----------------
GAAP Net Income $ 214 $ 244 $ 504 $ 460
----------------- -----------------
** Represents earnings from the fair market value of all
commodities transactions. This metric is a useful measurement of
profitability because it simultaneously recognizes changes in the
various components of transactions and reflects how the business
is managed.
*** Consists of the income statement effect of not recognizing
changes in the fair market value of certain physical inventories,
capacity contracts for transportation and storage and derivative
hedging activities related to Section 29 tax credits.
Fair Scheduled Maturity
Net Unrealized Market Value (in months)
Revenue December 31, -----------------------------
(Dollars in millions) 2006 0-12 13-24 25-36 gt. 36
---------------------------------------------------------------------
Sources of Over-the-Counter
(OTC) Fair Value:
Prices actively quoted $1,746 $959 $575 $ 47 $165
Prices provided by other
external sources 28 (6) -- 2 32
Prices based on models
and other valuation
methods (16) -- -- -- (16)
----------------------------------------
Total OTC Fair
Value(a) 1,758 953 575 49 181
-----------------------------
Maturity of OTC Fair Value
- Cumulative Percentages 54.2% 86.9% 89.7% 100.0%
-----------------------------
---------------------------------------------------------------------
Exchange Contracts (b) 155 412 (188) 55 (124)
----------------------------------------
Total Net Unrealized Revenue
at December 31, 2006 $1,913 $1,365 $387 $104 $ 57
----------------------------------------
-------------------------------
Net Unrealized Revenue
- Cumulative Percentages 71.4% 91.6% 97.0% 100.0%
-------------------------------
(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) 2006 2005
---------------------------------------------------------------------
Commodity Exchanges 13% 2%
Investment Grade 57% 75%
Below Investment Grade 30% 23%
Three months ended Years ended
Risk Adjusted Performance December 31, December 31,
Indicators --------------- ---------------
(Mark-to-Market Basis) 2006 2005 2006 2005
------------------------------------------------- ---------------
VaR at 95% (Dollars
in millions)(a) $17.3 $14.2 $16.2 $11.3
VaR at 99% (Dollars
in millions)(b) $24.3 $20.0 $22.8 $15.9
Risk Adjusted Return
on Capital (RAROC)(c) 37% 61% 34% 44%
(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) 12.2 12.1 12.0 11.7
Electric (Billions of kWhs) 125.5 112.4 475.5 413.2
Oil & Liquid Products
(Millions Bbls/Day) 0.7 1.4 0.7 1.0