-- Company Reports $332 Million in Income From Continuing Operations,
Excluding Asset Sales
-- Earnings Guidance Raised for 2006
SAN DIEGO, Nov. 2, 2006 (PRIMEZONE) -- Sempra Energy (NYSE:SRE) today reported earnings of $653 million, or $2.49 per diluted share, in the third quarter 2006, up from $221 million, or $0.86 per diluted share, in the same period last year. Third-quarter 2006 earnings included income of $110 million from discontinued operations, compared with $5 million in the prior-year period.
Income from continuing operations in the third quarter 2006 was $543 million, or $2.07 per diluted share. Continuing operations included a $211 million gain from the sale of several Texas power plants. Excluding the impact of these asset sales, third-quarter 2006 income from continuing operations was $332 million, or $1.27 per diluted share.
Third-quarter 2005 net income benefited from several one-time items totaling $141 million, offset by a $189 million after-tax effect from an increase in litigation reserves.
For the first nine months of 2006, Sempra Energy's earnings were $1.28 billion, or $4.92 per diluted share, compared with $565 million, or $2.26 per diluted share, during the same period in 2005. Excluding the impact of the sale of the Texas power plants, nine-month income from continuing operations in 2006 was $758 million, or $2.91 per diluted share.
"Our strategy is to grow both our natural gas infrastructure businesses and our California utilities, while divesting non-core assets," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "Execution of this plan has been very successful to date. Given our strong results through the first nine months of the year, we are increasing our earnings guidance for 2006."
Felsinger said the company has raised its 2006 earnings guidance to a range of $3.50 per share to $3.70 per share from continuing operations, excluding gains on asset sales, from the previous range of $3.40 per share to $3.60 per share.
Sempra Energy's revenues in the third quarter 2006 were approximately $2.7 billion, unchanged from the year-ago quarter.
OPERATING HIGHLIGHTS
Sempra Utilities
Third-quarter net income for Southern California Gas Co. (SoCalGas) rose to $61 million in 2006 from $36 million last year. In the prior-year's quarter, SoCalGas recorded a $53 million after-tax increase in litigation reserves, partially offset by an $18 million benefit from the resolution of prior-years' tax issues.
San Diego Gas & Electric (SDG&E) had net income of $70 million in the third quarter 2006, compared with $102 million in the same quarter last year. In the third quarter 2006, SDG&E benefited from a favorable regulatory outcome and contributions from its new Palomar Energy Center. In the year-ago quarter, SDG&E recorded a $39 million benefit from the resolution of prior-years' tax issues and a $27 million benefit from an electric-transmission cost settlement, offset by the effect of a $27 million after-tax increase in litigation reserves.
In August 2006, the California Independent System Operator, the agency that manages the state's power grid, endorsed SDG&E's proposal to build Sunrise Powerlink, a major new transmission line. The project, if approved by the California Public Utilities Commission, will be built and placed into service in 2010.
Sempra Commodities
Sempra Commodities' third-quarter net income was $105 million in 2006, compared with $161 million last year. In the third quarter 2005, Sempra Commodities had a $16 million benefit from the resolution of prior-years' tax issues and a $38 million after-tax gain related to asset sales, partially offset by the effect of a $14 million after-tax increase in litigation reserves. During the recent quarter, Sempra Commodities' results in natural gas, power marketing and metals were strong, while margins in its petroleum marketing business were lower.
Sempra Generation
Net income for Sempra Generation in the third quarter 2006 was $265 million, up from $24 million in the third quarter 2005. In the recent quarter, Sempra Generation benefited from a net gain of $211 million from the sale of the company's 50-percent stake in several Texas power plants, as well as lower project-development and operating costs. Third-quarter 2005 earnings were affected by $19 million from temporary mark-to-market losses on forward sales.
Sempra Pipelines & Storage
Third-quarter net income for Sempra Pipelines & Storage was $19 million in 2006, unchanged from the prior-year's quarter.
During the recent quarter, Sempra Pipelines & Storage and ProLiance Transportation and Storage, LLC, announced they acquired three existing salt caverns representing 10 billion cubic feet (Bcf) to 12 Bcf of potential natural gas storage capacity and more than 150 acres of property in Cameron Parish, La. Once developed, the newly acquired property and caverns would become an extension of Liberty Gas Storage -- a nearby natural gas storage facility the two companies currently are constructing.
Sempra LNG
Sempra LNG reported a loss of $13 million in the third quarter 2006, compared with a loss of $5 million in the same quarter last year.
Construction on Sempra LNG's Mexico receipt terminal -- planned to be operational in 2008 -- is now more than 50-percent complete. Sempra LNG's Louisiana receipt terminal also is under construction and on schedule for completion in late 2008.
Internet Broadcast
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EST 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, 9434558.
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/3Q2006_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 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 Nine months ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
----------------------------------------------- -------------------
(Unaudited)
Operating revenues
Sempra Utilities $ 1,494 $ 1,495 $ 5,190 $ 4,783
Sempra Global and parent 1,200 1,215 3,326 2,797
-------- -------- -------- --------
Total operating revenues 2,694 2,710 8,516 7,580
-------- -------- -------- --------
Operating expenses
Sempra Utilities:
Cost of natural gas 412 547 2,077 2,060
Cost of electric fuel
and purchased power 203 146 566 437
Other cost of sales 716 709 1,936 1,796
Other operating expenses 657 705 1,979 1,758
Litigation expense 12 325 43 341
Depreciation and
amortization 163 152 491 466
Franchise fees and
other taxes 67 59 208 181
Losses (gains) on sale of
assets, net (2) (99) 1 (104)
-------- -------- -------- --------
Total operating expenses 2,228 2,544 7,301 6,935
-------- -------- -------- --------
Operating income 466 166 1,215 645
Other income, net 376 19 375 24
Interest income 34 28 73 50
Interest expense (90) (74) (273) (220)
Preferred dividends of
subsidiaries (2) (2) (7) (7)
-------- -------- -------- --------
Income from continuing
operations before income
taxes and equity in
earnings of certain
unconsolidated subsidiaries 784 137 1,383 492
Income tax expense (benefit) 257 (63) 461 (22)
Equity in earnings of
certain unconsolidated
subsidiaries 16 16 40 42
-------- -------- -------- --------
Income from continuing
operations 543 216 962 556
Discontinued operations,
net of income tax 110 5 319 9
-------- -------- -------- --------
Net income $ 653 $ 221 $ 1,281 $ 565
======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations $ 2.11 $ 0.85 $ 3.76 $ 2.28
Discontinued operations,
net of income tax 0.43 0.02 1.25 0.04
-------- -------- -------- --------
Net income $ 2.54 $ 0.87 $ 5.01 $ 2.32
======== ======== ======== ========
Weighted-average number
of shares outstanding
(thousands) 257,487 252,974 255,834 243,342
======== ======== ======== ========
Diluted earnings per share:
Income from continuing
operations $ 2.07 $ 0.84 $ 3.69 $ 2.22
Discontinued operations,
net of income tax 0.42 0.02 1.23 0.04
-------- -------- -------- --------
Net income $ 2.49 $ 0.86 $ 4.92 $ 2.26
======== ======== ======== ========
Weighted-average number
of shares outstanding
(thousands) 262,102 257,370 260,587 249,874
======== ======== ======== ========
Dividends declared per
share of common stock $ 0.30 $ 0.29 $ 0.90 $ 0.87
======== ======== ======== ========
The statements above reflect 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.
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30, December 31,
2006 2005
---------------------------------------------------------------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 1,501 $ 769
Restricted cash 165 12
Accounts receivable 702 1,145
Deferred income taxes 336 134
Interest receivable 43 29
Trading-related receivables and
deposits, net 2,754 3,370
Derivative trading instruments 4,278 4,502
Commodities owned 2,025 2,498
Regulatory assets 217 255
Inventories 300 205
Other 269 297
------- -------
Current assets of continuing operations 12,590 13,216
Current assets of discontinued operations 145 611
------- -------
Total current assets 12,735 13,827
------- -------
Investments and other assets:
Due from unconsolidated affiliates 21 21
Regulatory assets arising from fixed-price
contracts and other derivatives 364 398
Other regulatory assets 707 713
Nuclear decommissioning trusts 669 638
Investments 1,062 1,091
Sundry 808 802
------- -------
Total investments and other assets 3,631 3,663
------- -------
Property, plant and equipment, net 12,680 11,756
------- -------
Total assets $29,046 $29,246
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 411 $ 1,043
Accounts payable 1,256 1,394
Income taxes payable 132 86
Trading-related payables 3,192 4,127
Derivative trading instruments 2,903 3,246
Commodities sold with agreement
to repurchase 488 634
Dividends and interest payable 153 140
Regulatory balancing accounts, net 349 192
Fixed-price contracts and
other derivatives 100 130
Current portion of long-term debt 842 98
Other 796 1,012
------- -------
Current liabilities of continuing
operations 10,622 12,102
Current liabilities of discontinued
operations 174 151
------- -------
Total current liabilities 10,796 12,253
------- -------
Long-term debt 4,416 4,815
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 162 162
Customer advances for construction 123 110
Postretirement benefits other than pensions 122 121
Deferred income taxes 355 214
Deferred investment tax credits 68 73
Regulatory liabilities arising from
removal obligations 2,388 2,313
Asset retirement obligations 996 958
Other regulatory liabilities 220 200
Fixed-price contracts and other derivatives 368 400
Deferred credits and other 1,377 1,288
------- -------
Total deferred credits and
other liabilities 6,179 5,839
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 7,476 6,160
------- -------
Total liabilities and shareholders' equity $29,046 $29,246
======= =======
The statements above reflect 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.
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
Nine months ended
September 30,
-------------------
2006 2005
---------------------------------------------------------------------
(Unaudited)
Cash Flows from Operating Activities:
Income from continuing operations $ 962 $ 556
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 491 466
Losses (gains) on sale of assets 1 (104)
Impairment losses 3 12
Deferred income taxes and investment tax credits (56) (169)
Equity in income of unconsolidated subsidiaries (380) (46)
Tax benefits from share-based awards (18) --
Other 73 45
Quasi-reorganization resolution 12 --
Net changes in other working capital components 263 (328)
Changes in other assets 41 (2)
Changes in other liabilities 12 335
------- -------
Net cash provided by continuing operations 1,404 765
Net cash used in discontinued operations (13) (70)
------- -------
Net cash provided by operating activities 1,391 695
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant
and equipment (1,341) (940)
Proceeds from sale of assets from
continuing operations 36 275
Expenditures for investments (126) (80)
Distribution from investment 104 --
Purchases of nuclear decommissioning
and other trust assets (500) (200)
Proceeds from sales by nuclear
decommissioning and other trusts 476 168
Increase in restricted cash balance (153) 3
Dividends received from unconsolidated affiliates 410 49
Other (27) (12)
------- -------
Net cash used in continuing operations (1,121) (737)
Net cash provided by (used in)
discontinued operations 778 (18)
------- -------
Net cash used in investing activities (343) (755)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (203) (193)
Issuances of common stock 89 692
Repurchases of common stock (12) (95)
Issuances of long-term debt 422 255
Redemption of mandatorily redeemable preferred
securities -- (200)
Payments on long-term debt (81) (207)
Decrease in short-term debt, net (632) (97)
Financing transaction related to Sempra Financial 83 --
Tax benefits from share-based awards 18 --
Other (2) (3)
------- -------
Net cash provided by (used in)
continuing operations (318) 152
Net cash provided by (used in)
discontinued operations 2 (7)
------- -------
Net cash provided by (used in)
financing activities (316) 145
------- -------
Increase in cash and cash equivalents 732 85
Cash and cash equivalents, January 1 769 415
------- -------
Cash and cash equivalents, September 30 $ 1,501 $ 500
======= =======
The statements above reflect 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.
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND
CAPITAL EXPENDITURES & INVESTMENTS
(Unaudited)
(Dollars in millions)
Three months ended Nine months ended
September 30, September 30,
---------------- ----------------
2006 2005 2006 2005
------------------------------------------------ ----------------
Net Income
Sempra Utilities:
San Diego Gas & Electric $ 70 $ 102 $ 182 $ 190
Southern California Gas 61 36 168 163
------ ------ ------ ------
Total Sempra Utilities 131 138 350 353
Sempra Global:
Sempra Commodities 105 161 290 216
Sempra Generation(a) 265 24 322 91
Sempra Pipelines & Storage(a) 19 19 58 48
Sempra LNG (13) (5) (35) (15)
------ ------ ------ ------
Total Sempra Global 376 199 635 340
Parent & Other 36 (121) (23) (137)
------ ------ ------ ------
Continuing Operations 543 216 962 556
Discontinued Operations,
Net of Income Tax 110 5 319 9
------ ------ ------ ------
Consolidated Net Income $ 653 $ 221 $1,281 $ 565
====== ====== ====== ======
(a) Excludes amounts now classified as discontinued operations.
CAPITAL EXPENDITURES & INVESTMENTS
(Unaudited)
(Dollars in millions)
Three months ended Nine months ended
September 30, September 30,
--------------- ---------------
2006 2005 2006 2005
--------------------------------------------------------------------
Capital Expenditures and
Investments
Sempra Utilities:
San Diego Gas & Electric $ 157 $ 146 $ 880 $ 342
Southern California Gas 91 99 284 245
------ ------ ------ ------
Total Sempra Utilities 248 245 1,164 587
------ ------ ------ ------
Sempra Global:
Sempra Generation 2 110 37 193
Sempra Commodities 13 32 43 61
Sempra Pipelines & Storage 66 3 212 10
Sempra LNG 121 43 466 156
------ ------ ------ ------
Total Sempra Global 202 188 758 420
------ ------ ------ ------
Parent & Other 4 7 (455) 13
------ ------ ------ ------
Consolidated Capital
Expenditures and Investments $ 454 $ 440 $1,467 $1,020
====== ====== ====== ======
The statements above reflect 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.
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------------------
SEMPRA UTILITIES 2006 2005 2006 2005
---------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E
(excludes intercompany sales) $ 700 $ 596 $ 2,078 $ 1,747
SoCalGas
(excludes intercompany sales) $ 794 $ 899 $ 3,112 $ 3,036
Gas Sales (Bcf) 62 67 292 290
Transportation and
Exchange (Bcf) 165 142 419 381
------- ------- ------- -------
Total Deliveries (Bcf) 227 209 711 671
------- ------- ------- -------
Total Gas Customers (Thousands) 6,446 6,358
Electric Sales
(Millions of kWhs) 5,022 4,300 12,897 11,988
Direct Access
(Millions of kWhs) 915 865 2,569 2,493
------- ------- ------- -------
Total Deliveries
(Millions of kWhs) 5,937 5,165 15,466 14,481
------- ------- ------- -------
Total Electric Customers
(Thousands) 1,350 1,333
SEMPRA GENERATION
------------------------------------------------- -----------------
Power Sold
(Millions of kWhs) 5,470 4,557(a) 14,054 12,131(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 89 88 208 210
Mexico 13 12 34 33
Chile 1 1 2 2
Natural Gas Customers (Thousands)
Argentina 1,527 1,488
Mexico 100 98
Chile 39 37
Electric Sales (Millions of kWhs)
Peru 1,166 1,058 3,488 3,185
Chile 385 511 1,562 1,752
Electric Customers (Thousands)
Peru 780 762
Chile 532 518
SEMPRA COMMODITIES
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
Margin (a) ------------------ -----------------
(Dollars in millions) 2006 2005 2006 2005
------------------------------------------------- -----------------
Geographical:
North America $ 233 $ 254 $ 839 $ 548
Europe/Asia 128 119 152 113
------------------ -----------------
Total $ 361 $ 373 $ 991 $ 661
------------------ -----------------
Product Line:
Gas $ 146 $ 121 $ 430 $ 122
Power 116 110 327 234
Oil - Crude & Products 27 89 113 160
Metals 53 3 78 42
Other 19 50 43 103
------------------ -----------------
Total $ 361 $ 373 $ 991 $ 661
------------------ -----------------
(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 Nine months ended
September 30, September 30,
Effect of EITF 02-03 ------------------ -----------------
(Dollars in millions) 2006 2005 2006 2005
------------------------------------------------- -----------------
Mark-to-Market Earnings (b) $ 86 $ 153 $ 329 $ 282
Effect of EITF 02-03 (c) 19 8 (39) (66)
------------------ -----------------
GAAP Net Income $ 105 $ 161 $ 290 $ 216
------------------ -----------------
(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
Market
Net Unrealized Value Scheduled Maturity (in months)
Revenue Sept. 30, -----------------------------------
(Dollars in millions) 2006 0 - 12 13 - 24 25 - 36 gt. 36
------------------------------- ------ ------- ------- -------
Sources of Over-the-
Counter (OTC) Fair Value:
Prices actively
quoted $1,309 $ 480 $ 546 $ 159 $ 124
Prices provided by
other external sources 70 (4) 2 -- 72
Prices based on
models and other
valuation methods (13) -- -- -- (13)
--------------------------------------------
Total OTC Fair
Value (d) 1,366 476 548 159 183
--------------------------------------------
Maturity of OTC Fair
Value - Cumulative -----------------------------------
Percentages 34.8% 75.0% 86.6% 100.0%
-----------------------------------
---------------------------------------------------------------------
gt = greater than
-----------------
Exchange Contracts (e) (45) 156 (71) (11) (119)
--------------------------------------------
Total Net Unrealized
Revenue at September
30, 2006 $ 1,321 $ 632 $ 477 $ 148 $ 64
Net Unrealized Revenue -----------------------------------
- Cumulative Percentages 47.8% 84.0% 95.2% 100.0%
-----------------------------------
(d) The present value of unrealized revenue to be received or
(paid) from outstanding OTC contracts
(e) Cash received or (paid) associated with open Exchange
Contracts
Credit Quality
of Unrealized
Trading Assets September 30, December 31,
(net of margin) 2006 2005
--------------------------------------------------
Commodity Exchanges 14% 2%
Investment Grade 60% 75%
Below Investment Grade 26% 23%
---------------------------------------------------------------------
Three months ended Nine months ended
Risk Adjusted Performance September 30, September 30,
Indicators ----------------- -----------------
(Mark-to-Market Basis) 2006 2005 2006 2005
----------------------------------------------- -----------------
VaR at 95% (Dollars
in millions) (a) $11.1 $12.8 $15.8 $10.3
VaR at 99% (Dollars
in millions) (b) $15.6 $18.0 $22.3 $14.6
Risk Adjusted Return
on Capital (RAROC) (c) 36% 38% 33% 36%
(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) 11.8 11.7 12.0 11.5
Electric (Billions of kWhs) 126.1 107.0 350.0 300.8
Oil & Liquid Products
(Millions Bbls/Day) 0.6 0.7 0.7 0.9