-- Company Increases 2005 Earnings-Per-Share Guidance
to $3.20 to $3.40
-- Construction to Commence on Louisiana LNG
Receipt Terminal
SAN DIEGO, Aug. 2, 2005 (PRIMEZONE) -- Sempra Energy (NYSE:SRE) today reported unaudited second-quarter 2005 earnings of $121 million, or $0.48 per diluted share, compared with $121 million, or $0.52 per diluted share, in the second quarter 2004.
For the first six months of 2005, Sempra Energy's earnings were $344 million, or $1.40 per diluted share, up approximately 8 percent from $318 million, or $1.37 per diluted share, during the same period last year. Earnings per share in 2005 have been affected by a greater number of shares outstanding.
Sempra Energy today also increased its 2005 earnings-per-share guidance to a range of $3.20 to $3.40 from a range of $3.10 to $3.30. The increase is based on expected earnings improvements primarily at the company's utility and commodities businesses during the second half of the year.
"We are pleased with our second-quarter performance and expect improved results from our California utilities, Sempra Commodities and other businesses over the next two quarters to meet our increased earnings guidance for the year," said Stephen L. Baum, chairman and chief executive officer of Sempra Energy. "In addition to our reported earnings, at the end of the second quarter, our commodities group had approximately $50 million of unrecognized mark-to-market, after-tax profits, most of which will be recognized as GAAP net income by the end of this year. Also, during the second half of the year, our California utilities' net income should benefit from approximately $55 million in expected performance-based-ratemaking incentives and a pending settlement with the California Independent System Operator."
Revenues for Sempra Energy were $2.3 billion in the second quarter 2005, compared with $2 billion in the year-ago quarter, due primarily to higher natural gas commodity prices at the California utilities and increased power and natural gas sales by other Sempra Energy businesses.
OPERATING HIGHLIGHTS
Sempra Utilities
Net income for Southern California Gas Co. rose to $58 million during the second quarter 2005 from $50 million in the year-earlier period, due primarily to lower operating expenses.
Net income for San Diego Gas & Electric (SDG&E) in the second quarter 2005 was $29 million, compared with $30 million in last year's second quarter, as a result of reduced revenues and higher operating costs attributable to the company's share of the San Onofre Nuclear Generating Station.
Baum said that, during the final half of the year, the utilities expect approval by the California Public Utilities Commission of performance-based-ratemaking incentive awards for demand-side-management programs, resulting in approximately $30 million in net income. Also in the second half of the year, SDG&E expects to benefit from the favorable settlement of a dispute with the California Independent System Operator over grid-management charges, resulting in approximately $25 million in net income.
Sempra Commodities
Sempra Commodities recorded $26 million in net income during the second quarter 2005, compared with $46 million during the year-ago period. At the end of the second quarter, Sempra Commodities had significant inventories of natural gas and oil that had been sold for future delivery. The company expects most of the approximately $50 million in after-tax profits from these transactions to be recognized before the end of 2005.
Sempra Generation
Sempra Generation's second-quarter net income increased to $27 million in 2005 from $19 million last year. The company benefited from increased power sales from its Texas generating facilities, including the Coleto Creek power plant, which was acquired in July 2004. Second-quarter 2004 results included a provision for litigation expense.
Last week, Sempra Generation completed its acquisition of Reliant Energy's 50-percent interest in the 480-megawatt El Dorado Energy power plant in Boulder City, Nev. Sempra Generation now owns the entire plant.
Sempra Pipelines & Storage
Net income for Sempra Pipelines & Storage in the second quarter 2005 was $16 million, compared with $17 million in the year-ago quarter. During the quarter, Sempra Pipelines & Storage recorded a $3 million gain from the sale of a 25-percent ownership interest in its Liberty Gas Storage, a natural gas storage facility under development in Louisiana. In last year's second quarter, the company benefited from $5 million in net income from the sale of a portion of the common stock in its jointly owned Peruvian utility, Luz del Sur.
Sempra LNG
Sempra LNG reported a net loss of $5 million in the second quarter 2005, compared with a net loss of $2 million in the second quarter 2004.
Yesterday, Sempra LNG announced that it had executed a 20-year agreement to provide Eni S.p.A. with approximately 40 percent, or 600 million cubic feet a day, of the capacity of Sempra LNG's Cameron liquefied natural gas (LNG) receipt terminal under development near Lake Charles, La. The terminal is expected to begin operations in 2008.
"With the Eni agreement finalized and additional commercial negotiations underway, we will commence construction on the Cameron LNG terminal this quarter," said Baum. "Construction on our Mexico terminal, Energia Costa Azul, is progressing and it will be the first LNG receipt terminal on the West Coast of North America."
Internet Broadcast
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT with key company executives. 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 7177131.
Sempra Energy (NYSE:SRE), based in San Diego, is a Fortune 500 energy services holding company with 2004 revenues of $9.4 billion. The Sempra Energy companies' 13,000 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/2Q2005_Table_F.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 (Unaudited)
(Dollars in millions, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2005 2004 2005 2004
--------------------------------------------------------------------
Operating revenues
California utilities:
Natural gas $ 1,055 $ 947 $ 2,488 $ 2,280
Electric 406 420 800 801
Other 811 629 1,676 1,275
------- ------- ------- -------
Total operating revenues 2,272 1,996 4,964 4,356
------- ------- ------- -------
Operating expenses
California utilities:
Cost of natural gas 600 482 1,513 1,306
Cost of electric fuel and
purchased power 146 155 291 282
Other cost of sales 560 375 1,144 702
Other operating expenses 534 546 1,076 1,067
Depreciation and
amortization 163 165 324 330
Franchise fees and
other taxes 56 53 124 117
------- ------- ------- -------
Total operating expenses 2,059 1,776 4,472 3,804
------- ------- ------- -------
Operating income 213 220 492 552
Other income, net 9 13 26 18
Interest income 12 10 23 33
Interest expense (72) (80) (146) (160)
Preferred dividends
of subsidiaries (3) (3) (5) (5)
------- ------- ------- -------
Income from continuing
operations before
income taxes 159 160 390 438
Income tax expense 36 31 44 88
------- ------- ------- -------
Income from continuing
operations 123 129 346 350
Loss from discontinued
operations, net of tax -- (6) -- (30)
Loss on disposal of
discontinued operations,
net of tax (2) (2) (2) (2)
------- ------- ------- -------
Net income $ 121 $ 121 $ 344 $ 318
======= ======= ======= =======
Basic earnings per share:
Income from continuing
operations $ 0.51 $ 0.56 $ 1.45 $ 1.53
Discontinued operations,
net of tax (0.01) (0.04) (0.01) (0.14)
------- ------- ------- -------
Net income $ 0.50 $ 0.52 $ 1.44 $ 1.39
======= ======= ======= =======
Weighted-average number
of shares outstanding
(thousands) 243,898 230,432 238,448 229,245
======= ======= ======= =======
Diluted earnings per share:
Income from continuing
operations $ 0.49 $ 0.55 $ 1.41 $ 1.51
Discontinued operations,
net of tax (0.01) (0.03) (0.01) (0.14)
------- ------- ------- -------
Net income $ 0.48 $ 0.52 $ 1.40 $ 1.37
======= ======= ======= =======
Weighted-average number
of shares outstanding
(thousands) 250,073 234,312 245,772 232,738
======= ======= ======= =======
Dividends declared per
share of common stock $ 0.29 $ 0.25 $ 0.58 $ 0.50
======= ======= ======= =======
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in millions)
June 30, December 31,
2005 2004
--------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 726 $ 419
Short-term investments 12 15
Accounts receivable 768 1,032
Due from unconsolidated affiliate 4 4
Deferred income taxes 62 15
Interest receivable 22 80
Trading-related receivables and deposits, net 2,327 2,606
Derivative trading instruments 3,126 2,339
Commodities owned 1,531 1,547
Regulatory assets arising from fixed-price
contracts and other derivatives 132 152
Other regulatory assets 108 103
Inventories 101 172
Other 172 222
------- -------
Current assets of continuing operations 9,091 8,706
Current assets of discontinued operations 58 70
------- -------
Total current assets 9,149 8,776
------- -------
Investments and other assets:
Due from unconsolidated affiliates 27 42
Regulatory assets arising from fixed-price
contracts and other derivatives 438 500
Other regulatory assets 577 619
Nuclear decommissioning trusts 617 612
Investments 1,109 1,164
Sundry 854 844
------- -------
Total investments and other assets 3,622 3,781
------- -------
Property, plant and equipment, net 11,434 11,086
------- -------
Total assets $24,205 $23,643
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 251 $ 405
Accounts payable 796 1,126
Due to unconsolidated affiliates
(mandatorily redeemable preferred securities) -- 205
Income taxes payable 97 187
Trading-related payables 2,946 3,182
Derivative trading instruments 2,376 1,484
Commodities sold with agreement to repurchase 181 513
Dividends and interest payable 136 123
Regulatory balancing accounts, net 577 509
Fixed-price contracts and other derivatives 135 157
Current portion of long-term debt 401 398
Other 863 776
------- -------
Current liabilities of continuing operations 8,759 9,065
Current liabilities of discontinued operations 6 17
------- -------
Total current liabilities 8,765 9,082
------- -------
Long-term debt 4,369 4,192
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliates 162 162
Customer advances for construction 95 97
Postretirement benefits other than pensions 125 129
Deferred income taxes 361 420
Deferred investment tax credits 76 78
Regulatory liabilities arising from
cost of removal obligations 2,416 2,359
Regulatory liabilities arising from
asset retirement obligations 330 333
Other regulatory liabilities 63 67
Fixed-price contracts and other derivatives 438 500
Asset retirement obligations 332 326
Deferred credits and other 847 854
------- -------
Total deferred credits and other liabilities 5,245 5,325
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 5,647 4,865
------- -------
Total liabilities and shareholders' equity $24,205 $23,643
======= =======
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
Six months ended
June 30,
---------------------
(Dollars in millions) 2005 2004
--------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 344 $ 318
Adjustments to reconcile net income to
net cash provided by operating
activities:
Loss from discontinued operations,
net of tax -- 30
Loss on disposal of discontinued
operations, net of tax 2 2
Depreciation and amortization 324 330
Deferred income taxes and investment
tax credits (59) (12)
Other 21 49
Net changes in other working
capital components (65) 34
Changes in other assets (1) (61)
Changes in other liabilities (1) 8
------- -------
Net cash provided by continuing operations 565 698
Net cash used in discontinued operations -- (30)
------- -------
Net cash provided by operating activities 565 668
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (585) (498)
Proceeds from sale of assets 8 363(a)
Proceeds from disposal of discontinued
operations -- 112
Investments in subsidiaries (6) (13)
Dividends received from affiliates 43 47
Other 6 9
------- -------
Net cash provided by (used in)
investing activities (534) 20
------- -------
Cash Flows from Financing Activities:
Common dividends paid (119) (96)
Issuances of common stock 666 60
Repurchases of common stock (95) (5)
Issuances of long-term debt 250 896
Redemption of mandatorily redeemable
preferred securities (200) --
Payments on long-term debt (69) (877)
Increase (decrease) in short-term debt, net (154) 63
Other (3) (3)
------- -------
Net cash provided by financing activities 276 38
------- -------
Increase in cash and cash equivalents 307 726
Cash and cash equivalents, January 1 419 409
------- -------
Cash and cash equivalents, June 30 $ 726 $ 1,135
======= =======
(a) Proceeds from the sale of U.S. Treasury obligations which
previously securitized the Mesquite synthetic lease.
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES
& INVESTMENTS (Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------- --------------
(Dollars in millions) 2005 2004 2005 2004
------------------------------------------------ --------------
Net Income
California Utilities:
San Diego Gas & Electric $ 29 $ 30 $ 88 $ 80
Southern California Gas 58 50 127 106
----- ----- ----- -----
Total California Utilities 87 80 215 186
Sempra Global:
Sempra Commodities 26 46 55 103
Sempra Generation 27 19 73 54
Sempra Pipelines & Storage 16 17 29 28
Sempra LNG (5) (2) (10) 4
----- ----- ----- -----
Total Sempra Global 64 80 147 189
Sempra Financial 7 6 11 16
Parent & Other (35) (37) (27) (41)
----- ----- ----- -----
Continuing Operations 123 129 346 350
Discontinued Operations (a) (2) (8) (2) (32)
----- ----- ----- -----
Consolidated Net Income $ 121 $ 121 $ 344 $ 318
===== ===== ===== =====
(a) Reflects Atlantic Electric & Gas.
Three months ended Six months ended
June 30, June 30,
-------------- --------------
(Dollars in millions) 2005 2004 2005 2004
------------------------------------------------ --------------
Capital Expenditures and Investments
California Utilities:
San Diego Gas & Electric $ 102 $ 112 $ 196 $ 181
Southern California Gas 83 82 146 144
----- ----- ----- -----
Total California Utilities 185 194 342 325
----- ----- ----- -----
Sempra Global:
Sempra Generation 45 34 94 48
Sempra Commodities 16 36 29 82
Sempra Pipelines & Storage 3 11 7 16
Sempra LNG 68 -- 113 22
----- ----- ----- -----
Total Sempra Global 132 81 243 168
----- ----- ----- -----
Parent & Other 4 10 6 18
----- ----- ----- -----
Consolidated Capital Expenditures
and Investments $ 321 $ 285 $ 591 $ 511
===== ===== ===== =====
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------------
CALIFORNIA UTILITIES 2005 2004 2005 2004
----------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes intercompany
sales) $ 535 $ 529 $1,151 $1,104
SoCalGas (excludes intercompany
sales) $ 926 $ 838 $2,137 $1,977
Gas Sales (Bcf) 86 81 223 221
Transportation and Exchange (Bcf) 117 128 239 249
------ ------ ------ ------
Total Deliveries (Bcf) 203 209 462 470
------ ------ ------ ------
Total Gas Customers (Thousands) 6,335 6,251
Electric Sales (Millions of kWhs) 3,782 3,747 7,688 7,559
Direct Access (Millions of kWhs) 808 929 1,628 1,658
------ ------ ------ ------
Total Deliveries (Millions of kWhs) 4,590 4,676 9,316 9,217
------ ------ ------ ------
Total Electric Customers
(Thousands) 1,327 1,306
SEMPRA GENERATION
---------------------------------------------------- ---------------
Power Sold (Millions of kWhs) 5,010 3,884 10,649 8,361
SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries,
although only the Mexican subsidiaries
are 100% owned by Sempra Energy).
----------------------------------------------------------------------
Natural Gas Sales (Bcf)
Argentina 71 62 122 113
Mexico 11 10 21 20
Chile -- -- 1 1
Natural Gas Customers (Thousands)
Argentina 1,473 1,429
Mexico 98 103
Chile 38 37
Electric Sales (Millions of kWhs)
Peru 1,075 1,016 2,127 2,023
Chile 508 502 1,241 1,010
Electric Customers (Thousands)
Peru 757 740
Chile 516 502
SEMPRA ENERGY
Table E (Continued)
SEMPRA COMMODITIES
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
--------------- ---------------
Margin(a) (Dollars in millions) 2005 2004 2005 2004
------------------------------------------------ ---------------
Geographical:
North America $ 169 $ 147 $ 294 $ 267
Europe/Asia (35) 36 (6) 120
--------------- ---------------
Total $ 134 $ 183 $ 288 $ 387
--------------- ---------------
Product Line:
Gas $ 16 $ 52 $ 1 $ 94
Power 82 9 124 54
Oil - Crude & Products (9) 49 71 91
Metals 25 51 39 109
Other 20 22 53 39
--------------- ---------------
Total $ 134 $ 183 $ 288 $ 387
--------------- ---------------
(a) Margin consists of net revenues less related costs (primarily
brokerage, transportation and storage) plus or minus net interest
expense/income.
Three months ended Six months ended
June 30, June 30,
----------------- ---------------
Effect of EITF 02-03
(Dollars in millions) 2005 2004 2005 2004
-------------------------------------------------- ---------------
Mark-to-Market Earnings(b) $ 77 $ 44 $ 129 $ 99
Effect of EITF 02-03(c) (51) 2 (74) 4
--------------- ---------------
GAAP Net Income $ 26 $ 46 $ 55 $ 103
--------------- ---------------
(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.
Fair Scheduled
Market Value Maturity (in months)
Net Unrealized Revenue June 30, --------------------------
(Dollars in millions) 2005 0-12 13-24 25-36 over 36
---------------------------------------------------------------------
Sources of Over-the-Counter
(OTC) Fair Value:
Prices actively quoted $718 $659 $ (89) $ 61 $ 87
Prices provided by other
external sources 25 (5) 1 -- 29
Prices based on models and
other valuation methods (7) 5 -- -- (12)
-----------------------------------
Total OTC Fair Value (i) $736 $659 $ (88) $ 61 $ 104
Maturity of OTC Fair Value -----------------------------------
Percentage 100.0% 89.6% (12.0%) 8.3% 14.1%
Cumulative Percentages 89.6% 77.6% 85.9% 100.0%
-----------------------------------
---------------------------------------------------------------------
Exchange Contracts (ii) $166 $258 $ 25 $ (70) $ (47)
-----------------------------------
Total Net Unrealized Revenue
at June 30, 2005 $902
----
(i) The present value of unrealized revenue to be received or
(paid) from outstanding OTC contracts
(ii) Cash received or (paid) associated with open Exchange
Contracts
Credit Quality of Unrealized June 30, December 31,
Trading Assets (net of margin) 2005 2004
-------------------------------------------------------
Commodity Exchanges 15% 10%
Investment Grade 70% 66%
Below Investment Grade 15% 24%
Three months ended Six months ended
Risk Adjusted Performance June 30, June 30,
Indicators (Mark-to-Market ---------------- ---------------
Basis) 2005 2004 2005 2004
------------------------------------------------ ---------------
VaR at 95% (Dollars in
millions) (a) $9.6 $6.4 $9.1 $6.1
VaR at 99% (Dollars in
millions) (b) $13.6 $9.0 $12.8 $8.5
Risk Adjusted Return on
Capital (RAROC) (c) 35% 33% 36% 37%
(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) 10.6 12.8 11.4 13.3
Electric (Billions of kWhs) 57.3 79.2 165.1 175.8
Oil & Liquid Products
(Millions Bbls/Day) 2.0 1.7 2.0 1.9