* Company on Track to Meet 2007 Earnings-per-Share Guidance of $3.75 to $3.95 * Sempra Utilities' Quarterly Net Income Increases 22 Percent
SAN DIEGO, May 2, 2007 (PRIME NEWSWIRE) -- Sempra Energy (NYSE:SRE) today reported first-quarter 2007 net income of $228 million, or $0.86 per diluted share, compared with $255 million, or $0.98 per diluted share, in the first quarter 2006. From continuing operations, Sempra Energy earned $227 million, or $0.86 per diluted share, in the first quarter 2007, compared with $234 million, or $0.90 per diluted share, in the year-ago period.
First-quarter 2007 results at Sempra Commodities do not reflect $86 million of natural gas storage and transportation mark-to-market profits, which are deferred under current accounting rules. First-quarter 2006 results did not reflect $44 million for similar items.
"We are pleased with our operating results in the first quarter, led by the solid performance of Sempra Utilities," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "At Sempra Commodities, we expect the strong economic benefits from our natural gas storage and transportation contracts to be largely recognized in reported results by year-end. Overall, we remain on track to meet our 2007 earnings-per-share guidance of $3.75 to $3.95."
SUBSIDIARY OPERATING RESULTS
Sempra Utilities
Net income for Sempra Utilities -- San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) -- increased 22 percent to $117 million in the first quarter 2007 from $96 million in the first quarter 2006.
SDG&E's first-quarter net income rose to $62 million in 2007 from $47 million in 2006, due primarily to higher earnings from the Palomar Energy Center and the San Onofre Nuclear Generating Station.
Net income for SoCalGas rose to $55 million in the first quarter 2007 from $49 million in the prior-year's quarter, due to improved operations.
"The majority of our $11 billion, five-year capital plan is being dedicated to investments in new infrastructure and technology for Sempra Utilities," Felsinger said. "These investments will enhance energy reliability, provide access to renewable resources, reduce customer costs and promote conservation."
On April 12, 2007, the California Public Utilities Commission approved SDG&E's "smart meter" project, which will dramatically change how SDG&E delivers services and will help customers manage their energy usage efficiently. SDG&E plans to spend $572 million through 2011 to replace an estimated 1.4 million electric meters with smart meters and to retrofit approximately 900,000 gas meters throughout its service territory.
Sempra Commodities
Sempra Commodities earned $71 million in the first quarter 2007, compared with $116 million in the first quarter 2006. Contributing factors included the effect of accounting rules that defer mark-to-market profits on natural gas storage and transportation contracts used in forward-sale transactions and reduced margins in natural gas and power marketing, offset by higher margins in metals.
Sempra Generation
First-quarter net income for Sempra Generation rose to $54 million in 2007 from $41 million in 2006, due primarily to a favorable change in mark-to-market earnings on long-term contracts with Sempra Commodities and higher interest income.
Sempra Pipelines & Storage
Net income for Sempra Pipelines & Storage in the first quarter 2007 was $16 million, compared with $11 million in the first quarter 2006, due to lower income-tax expense and improved results in its Mexican and South American operations.
On April 19, 2007, Sempra Pipelines & Storage and its partners in the Rockies Express Pipeline project received approval from the Federal Energy Regulatory Commission (FERC) to begin construction on the Rockies Express-West project, which extends the pipeline from Colorado to Missouri. This 713-mile leg of the 1,678-mile natural gas pipeline is expected to be in service in early 2008. Earlier this week, the project partners filed with the FERC for authorization to construct the 638-mile Rockies Express-East pipeline, covering the final leg of the project from Missouri to Ohio. The entire Rockies Express Pipeline project is scheduled for completion in 2009.
Sempra LNG
Sempra LNG recorded a net loss of $10 million in the first quarter 2007, compared with a net loss of $5 million in the first quarter 2006.
Discontinued Operations
Sempra Energy's 2007 first-quarter net income included $1 million in discontinued operations, compared with $21 million, primarily from asset sales, in the year-ago quarter.
INTERNET BROADCAST
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT 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 passcode 2247326.
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 worldwide.
Income-statement information by business unit is available on Sempra Energy's Web site at http://www.sempra.com/downloads/1Q2007.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 market 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
Three months ended
March 31,
(Dollars in millions, ----------------------
except per share amounts) 2007 2006
---------------------------------------------------------------------
(Unaudited)
Operating revenues
Sempra Utilities $ 2,059 $ 2,128
Sempra Global and parent 945 1,208
--------- ---------
Total operating revenues 3,004 3,336
--------- ---------
Operating expenses
Sempra Utilities:
Cost of natural gas 1,050 1,130
Cost of electric fuel and purchased power 149 210
Sempra Global and parent:
Cost of natural gas, electric fuel and
purchased power 336 298
Other cost of sales 319 376
Other operating expenses 633 676
Depreciation and amortization 169 157
Franchise fees and other taxes 81 77
--------- ---------
Total operating expenses 2,737 2,924
--------- ---------
Operating income 267 412
Other income, net 11 4
Interest income 26 14
Interest expense (70) (96)
Preferred dividends of subsidiaries (2) (2)
--------- ---------
Income from continuing operations before
income taxes and equity in earnings of
certain unconsolidated subsidiaries 232 332
Income tax expense 63 108
Equity in earnings of certain
unconsolidated subsidiaries 58 10
--------- ---------
Income from continuing operations 227 234
Discontinued operations, net of income tax 1 21
--------- ---------
Net income $ 228 $ 255
========= =========
Basic earnings per share:
Income from continuing operations $ 0.88 $ 0.92
Discontinued operations, net of income tax -- 0.08
--------- ---------
Net income $ 0.88 $ 1.00
========= =========
Weighted-average number of shares
outstanding (thousands) 259,459 254,257
========= =========
Diluted earnings per share:
Income from continuing operations $ 0.86 $ 0.90
Discontinued operations, net of income tax -- 0.08
--------- ---------
Net income $ 0.86 $ 0.98
========= =========
Weighted-average number of shares
outstanding (thousands) 263,996 259,251
========= =========
Dividends declared per share of common stock $ 0.31 $ 0.30
========= =========
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
March 31, December 31,
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 1,658 $ 920
Restricted cash 1 4
Accounts receivable 917 1,035
Deferred income taxes 376 270
Interest receivable 7 40
Trading-related receivables and
deposits, net 2,452 3,047
Derivative trading instruments 3,332 4,068
Commodities owned 1,399 1,845
Inventories 111 215
Regulatory assets 143 193
Other 275 317
------- -------
Current assets of continuing operations 10,671 11,954
Current assets of discontinued operations 60 62
------- -------
Total current assets 10,731 12,016
------- -------
Investments and other assets:
Regulatory assets arising from fixed-price
contracts and other derivatives 339 353
Regulatory assets arising from pension and
other postretirement benefit obligations 367 356
Other regulatory assets 462 472
Nuclear decommissioning trusts 710 702
Investments 1,138 1,086
Sundry 791 789
------- -------
Total investments and other assets 3,807 3,758
------- -------
Property, plant and equipment, net 13,486 13,175
------- -------
Total assets $28,024 $28,949
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 101 $ 252
Accounts payable 1,013 1,587
Income taxes payable 114 9
Trading-related payables 2,769 3,211
Derivative trading instruments 2,450 2,304
Commodities sold with agreement
to repurchase 144 537
Dividends and interest payable 153 145
Regulatory balancing accounts, net 457 332
Fixed-price contracts and other derivatives 55 87
Current portion of long-term debt 656 681
Other 1,283 1,197
------- -------
Current liabilities of continuing
operations 9,195 10,342
Current liabilities of discontinued
operations 5 7
------- -------
Total current liabilities 9,200 10,349
------- -------
Long-term debt 4,520 4,525
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 162 162
Customer advances for construction 124 126
Pension and other postretirement benefit
obligations, net of plan assets 622 609
Deferred income taxes 378 412
Deferred investment tax credits 66 67
Regulatory liabilities arising from removal
obligations 2,353 2,330
Asset retirement obligations 1,187 1,128
Other regulatory liabilities 224 221
Fixed-price contracts and other derivatives 346 358
Deferred credits and other 954 972
------- -------
Total deferred credits and
other liabilities 6,416 6,385
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 7,709 7,511
------- -------
Total liabilities and shareholders'
equity $28,024 $28,949
======= =======
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
Three months ended
March 31,
------------------
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
(Unaudited)
Cash Flows from Operating Activities:
Income from continuing operations $ 227 $ 234
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 169 157
Deferred income taxes and investment
tax credits (104) (44)
Equity in income of unconsolidated
subsidiaries (52) (6)
Other 20 32
Net changes in other working capital components 1,115 399
Changes in other assets 16 (18)
Changes in other liabilities (7) 6
------- -------
Net cash provided by continuing operations 1,384 760
Net cash provided by (used in)
discontinued operations (1) 95
------- -------
Net cash provided by operating activities 1,383 855
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (423) (415)
Proceeds from sale of assets from continuing
operations 32 22
Expenditures for investments (5) (103)
Purchases of nuclear decommissioning and other
trust assets (211) (122)
Proceeds from sales by nuclear decommissioning
and other trusts 213 116
Other (6) (1)
------- -------
Net cash used in continuing operations (400) (503)
Net cash used in discontinued operations -- (2)
------- -------
Net cash used in investing activities (400) (505)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (79) (65)
Issuances of common stock 16 17
Repurchases of common stock -- (12)
Decrease in short-term debt, net (151) (369)
Payments on long-term debt (35) (44)
Issuance of long-term debt 2 --
Other 2 2
------- -------
Net cash used in continuing operations (245) (471)
Net cash provided by discontinued operations -- 2
------- -------
Net cash used in financing activities (245) (469)
------- -------
Increase (decrease) in cash and cash equivalents 738 (119)
Cash and cash equivalents, January 1 920 769
------- -------
Cash and cash equivalents, March 31 $ 1,658 $ 650
======= =======
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
(Unaudited)
Three months ended
March 31,
----------------------
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
Net Income
Sempra Utilities:
San Diego Gas & Electric $ 62 $ 47
Southern California Gas 55 49
----- -----
Total Sempra Utilities 117 96
----- -----
Sempra Global:
Sempra Commodities 71 116
Sempra Generation* 54 41
Sempra Pipelines & Storage* 16 11
Sempra LNG (10) (5)
----- -----
Total Sempra Global 131 163
----- -----
Parent & Other (21) (25)
----- -----
Continuing Operations 227 234
Discontinued Operations, Net of Income Tax 1 21
----- -----
Consolidated Net Income $ 228 $ 255
===== =====
* Excludes amounts now classified as discontinued operations.
Three months ended
March 31,
----------------------
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
Capital Expenditures and Investments
Sempra Utilities:
San Diego Gas & Electric $ 157 $ 583(a)
Southern California Gas 86 97
----- -----
Total Sempra Utilities 243 680
----- -----
Sempra Global:
Sempra Commodities 13 20
Sempra Generation 1 29
Sempra Pipelines & Storage 79 105
Sempra LNG 86 152
----- -----
Total Sempra Global 179 306
----- -----
Parent & Other 6 (468)(a)
----- -----
Consolidated Capital Expenditures and Investments $ 428 $ 518
===== =====
(a) Includes the transfer of the Palomar plant.
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
March 31,
------------------
SEMPRA UTILITIES 2007 2006
------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes intercompany sales) $ 705 $ 718
SoCalGas (excludes intercompany sales) $1,354 $1,410
Gas Sales (bcf) 141 141
Transportation and Exchange (bcf) 120 122
------ ------
Total Deliveries (bcf) 261 263
------ ------
Total Gas Customers (Thousands) 6,487 6,406
Electric Sales (Millions of kWhs) 4,190 4,043
Direct Access (Millions of kWhs) 778 898
------ ------
Total Deliveries (Millions of kWhs) 4,968 4,941
------ ------
Total Electric Customers (Thousands) 1,357 1,342
SEMPRA GENERATION
------------------------------------------------------------------
Power Sold (Millions of kWhs) 5,377 4,910(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 63 52
Mexico 11 10
Chile -- 1
Natural Gas Customers (Thousands)
Argentina 1,552 1,511
Mexico 101 99
Chile 39 38
Electric Sales (Millions of kWhs)
Peru 1,269 1,165
Chile 665 614
Electric Customers (Thousands)
Peru 793 772
Chile 538 525
SEMPRA COMMODITIES
---------------------------------------------------------------------
Three Months Ended
March 31,
------------------
Margin * (Dollars in millions) 2007 2006
---------------------------------------------------------------------
Geographical:
North America $ 104 $ 359
Europe/Asia 63 6
------------------
Total $ 167 $ 365
------------------
Product Line:
Gas $ (56) $ 179
Power 82 101
Oil - Crude & Products 57 53
Metals 60 27
Other 24 5
------------------
Total $ 167 $ 365
------------------
* 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
March 31,
Effect of EITF 02-03 ------------------
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
Mark-to-Market Earnings * $ 157 $ 160
Effect of EITF 02-03 ** (86) (44)
------------------
GAAP Net Income $ 71 $ 116
------------------
* 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 synthetic fuels tax credits.
Fair
Net Unrealized Market Value Scheduled Maturity (in months)
Revenue March 31, ----------------------------------
(Dollars in millions) 2007 0 - 12 13 - 24 25 - 36 gt. 36
---------------------------------------------------------------------
OTC Fair Value
of forwards, swaps
and options(a) $ 854 369 340 2 143
----------------------------------------------
----------------------------------
Maturity of OTC Fair
Value - Cumulative
Percentages 43.2% 83.0% 83.3% 100.0%
----------------------------------
---------------------------------------------------------------------
Exchange Contracts (b) 49 203 (134) 75 (95)
----------------------------------------------
Total Net Unrealized
Revenue at March 31,
2007 $ 903 $ 572 $ 206 $ 77 $ 48
----------------------------------------------
----------------------------------
Net Unrealized
Revenue - Cumulative
Percentages 63.3% 86.2% 94.7% 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
Credit Quality of Unrealized March 31, December 31,
Trading Assets (net of margin) 2007 2006
---------------------------------------------------------------------
Commodity Exchanges 8% 13%
Investment Grade 62% 57%
Below Investment Grade 30% 30%
Three months ended
March 31,
Risk Adjusted Performance ------------------
Indicators (Mark-to-Market Basis) 2007 2006
---------------------------------------------------------------------
VaR at 95% (Dollars in millions)(a) $ 10.3 $ 22.0
VaR at 99% (Dollars in millions)(b) $ 14.5 $ 31.1
(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
Physical Statistics
---------------------------------------------------------------------
Natural Gas (bcf/Day) 12.4 12.6
Electric (Billions of kWhs) 122.9 114.9
Oil & Liquid Products (Millions Bbls/Day) 0.6 0.7