SAN DIEGO, Aug. 2, 2007 (PRIME NEWSWIRE) -- Sempra Energy (NYSE:SRE) today reported income from continuing operations of $280 million, or $1.06 per diluted share, in the second quarter 2007, up 51 percent from $185 million, or $0.71 per diluted share, in the year-ago period. Second-quarter 2007 net income was $277 million, or $1.05 per diluted share, compared with net income of $373 million, or $1.43 per diluted share, in last year's second quarter, which included $188 million, or $0.72 per diluted share, of income primarily from asset sales.
For the first six months of 2007, Sempra Energy's income from continuing operations was $507 million, or $1.92 per diluted share, an increase of 21 percent over the $419 million, or $1.61 per diluted share, earned during the same period last year. Net income for the first half of 2007 was $505 million, or $1.91 per diluted share, compared with $628 million, or $2.42 per diluted share, in the first six months of 2006.
"I am pleased with our strong operating results through the first half of the year," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "All of our businesses are performing well, putting us on target to meet our 2007 financial plans. As anticipated, we are beginning to see the strong year-to-date economic performance of our commodities business in our second-quarter results. Under current accounting rules, our reported results in the first quarter did not reflect this business' mark-to-market profits on transportation and storage services related to natural gas contracts."
Sempra Energy's revenues increased in the second quarter 2007 to $2.7 billion from $2.5 billion in the prior-year's quarter, due primarily to higher commodity prices.
On July 9, 2007, Sempra Energy announced a joint venture with The Royal Bank of Scotland to expand Sempra Energy's commodities business globally. The joint venture, called RBS Sempra Commodities LLP, will absorb the operations of Sempra Commodities. RBS will provide the joint venture with all growth capital, credit and liquidity. As a result of this transaction, Sempra Energy expects to receive a majority of the joint venture's profits until the business almost doubles its 2006 record earnings. Upon closing, Sempra Energy will receive net proceeds of $1 billion to $1.2 billion in cash and will keep $1.3 billion invested in the joint venture.
Following the expected close of the transaction in the fourth quarter 2007, Sempra Energy intends to increase its quarterly dividend to $0.35, or $1.40 annually, from the current quarterly dividend of $0.31, or $1.24 annually, and maintain a targeted dividend payout ratio of 35 percent to 40 percent of net income. Additionally, the company intends to begin purchasing $1.5 billion to $2 billion of its common stock.
OPERATING HIGHLIGHTS
Sempra Utilities
Second-quarter net income for Sempra Utilities -- San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) -- was $105 million in 2007, compared with $123 million in 2006.
SDG&E earned second-quarter 2007 net income of $51 million, compared with $65 million in the year-ago period. In the most recent quarter, SDG&E benefited from higher transmission earnings, while, in last year's second quarter, the utility realized a $16-million benefit from the favorable resolution of certain regulatory and tax issues and a positive litigation-reserve adjustment.
SDG&E recently energized its Otay-Metro Powerloop electric-transmission project, a new 52-mile loop around the center of San Diego County designed to improve electric reliability in the region.
Southern California Gas Co.'s net income in the second quarter 2007 was $54 million, compared with $58 million in the same quarter last year.
Sempra Commodities
Sempra Commodities' second-quarter 2007 net income more than doubled to $155 million from $69 million in the second quarter 2006, due primarily to improved margins in all its commodity product lines. During the recent quarter, Sempra Commodities benefited from the recognition of a portion of the profits that were earned in the first quarter 2007 from natural gas storage and transportation contracts, but deferred under current accounting rules.
Sempra Generation
In the second quarter 2007, Sempra Generation's net income was $10 million, compared with $16 million in last year's second quarter. The change was due primarily to mark-to-market losses on forward contracts with Sempra Commodities.
During the quarter, Sempra Generation announced its entry into the renewable-energy business with the acquisition of the development assets associated with the proposed 250-megawatt La Rumorosa Wind Power project in Baja California, Mexico.
Sempra Pipelines & Storage
Second-quarter net income for Sempra Pipelines & Storage in 2007 was $17 million, compared with $28 million in 2006. Prior-year results were impacted favorably by the resolution of tax issues.
Sempra LNG
Sempra LNG reported a net loss of $13 million in the second quarter 2007, down from a net loss of $17 million in the prior-year's 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 the passcode 2402925.
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/2Q2007.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," "could," "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, California State Legislature, California Department of Water Resources, Federal Energy Regulatory Commission, Federal Reserve Board, U.K. Financial Services Authority, 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 Six months ended
June 30, June 30,
------------------ ------------------
(Dollars in millions, except
per share amounts) 2007 2006 2007 2006
------------------------------------------------- ------------------
(Unaudited)
Operating revenues
Sempra Utilities $ 1,620 $ 1,568 $ 3,679 $ 3,696
Sempra Global and parent 1,041 918 1,986 2,126
-------- -------- -------- --------
Total operating revenues 2,661 2,486 5,665 5,822
-------- -------- -------- --------
Operating expenses
Sempra Utilities:
Cost of natural gas 603 535 1,653 1,665
Cost of electric fuel and
purchased power 163 153 312 363
Sempra Global and parent:
Cost of natural gas, electric
fuel and purchased power 278 233 614 531
Other cost of sales 221 313 540 689
Other operating expenses 743 680 1,376 1,356
Depreciation and amortization 171 171 340 328
Franchise fees and other taxes 68 64 149 141
-------- -------- -------- --------
Total operating expenses 2,247 2,149 4,984 5,073
-------- -------- -------- --------
Operating income 414 337 681 749
Other income (expense), net 45 (5) 56 (1)
Interest income 24 25 50 39
Interest expense (66) (87) (136) (183)
Preferred dividends of
subsidiaries (3) (3) (5) (5)
-------- -------- -------- --------
Income from continuing
operations before income taxes
and equity in earnings of
certain unconsolidated
subsidiaries 414 267 646 599
Income tax expense 143 96 206 204
Equity in earnings of certain
unconsolidated subsidiaries 9 14 67 24
-------- -------- -------- --------
Income from continuing
operations 280 185 507 419
Discontinued operations, net of
income tax (3) 188 (2) 209
-------- -------- -------- --------
Net income $ 277 $ 373 $ 505 $ 628
======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations $ 1.08 $ 0.73 $ 1.95 $ 1.64
Discontinued operations, net
of income tax (0.01) 0.73 (0.01) 0.82
-------- -------- -------- --------
Net income $ 1.07 $ 1.46 $ 1.94 $ 2.46
======== ======== ======== ========
Weighted-average number of
shares outstanding
(thousands) 260,198 255,728 259,830 254,996
======== ======== ======== ========
Diluted earnings per share:
Income from continuing
operations $ 1.06 $ 0.71 $ 1.92 $ 1.61
Discontinued operations, net
of income tax (0.01) 0.72 (0.01) 0.81
-------- -------- -------- --------
Net income $ 1.05 $ 1.43 $ 1.91 $ 2.42
======== ======== ======== ========
Weighted-average number of
shares outstanding (thousands) 264,963 260,320 264,518 259,804
======== ======== ======== ========
Dividends declared per share
of common stock $ 0.31 $ 0.30 $ 0.62 $ 0.60
======== ======== ======== ========
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
June 30, December 31,
(Dollars in millions) 2007 2006
---------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,352 $ 920
Restricted cash 1 4
Accounts receivable 772 1,035
Deferred income taxes 349 270
Interest receivable 5 40
Trading-related receivables and deposits, net 2,346 3,047
Derivative trading instruments 3,197 4,068
Commodities owned 1,763 1,845
Inventories 167 215
Regulatory assets 136 193
Other 442 317
------- -------
Current assets of continuing operations 10,530 11,954
Current assets of discontinued operations 58 62
------- -------
Total current assets 10,588 12,016
------- -------
Investments and other assets:
Regulatory assets arising from fixed-price
contracts and other derivatives 331 353
Regulatory assets arising from pension and
other postretirement benefit obligations 373 356
Other regulatory assets 445 472
Nuclear decommissioning trusts 728 702
Investments 1,122 1,086
Sundry 840 789
------- -------
Total investments and other assets 3,839 3,758
------- -------
Property, plant and equipment, net 14,050 13,175
------- -------
Total assets $28,477 $28,949
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 627 $ 252
Accounts payable 1,318 1,587
Due to unconsolidated affiliate 60 --
Income taxes payable 28 9
Trading-related payables 2,531 3,211
Derivative trading instruments 2,243 2,304
Commodities sold with agreement to repurchase 407 537
Dividends and interest payable 143 145
Regulatory balancing accounts, net 555 332
Fixed-price contracts and other derivatives 53 87
Current portion of long-term debt 340 681
Other 1,157 1,197
------- -------
Current liabilities of continuing operations 9,462 10,342
Current liabilities of discontinued
operations 5 7
------- -------
Total current liabilities 9,467 10,349
------- -------
Long-term debt 4,219 4,525
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 102 162
Customer advances for construction 127 126
Pension and other postretirement benefit
obligations, net of plan assets 620 609
Deferred income taxes 437 412
Deferred investment tax credits 64 67
Regulatory liabilities arising from removal
obligations 2,382 2,330
Asset retirement obligations 1,204 1,128
Other regulatory liabilities 228 221
Fixed-price contracts and other derivatives 343 358
Deferred credits and other 940 961
------- -------
Total deferred credits and other
liabilities 6,447 6,374
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Minority interests 176 11
------- -------
Shareholders' equity 7,989 7,511
------- -------
Total liabilities and shareholders' equity $28,477 $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
Six months ended
June 30,
-------------------
(Dollars in millions) 2007 2006
-------------------------------------------------------------------
(Unaudited)
Cash Flows from Operating Activities:
Net income $ 505 $ 628
Adjustments to reconcile net income to net
cash provided by operating activities:
Discontinued operations 2 (209)
Depreciation and amortization 340 328
Deferred income taxes and investment tax
credits (39) (216)
Equity in income of unconsolidated
subsidiaries (55) (6)
Other (16) 82
Net changes in other working capital
components 918 79
Changes in other assets 33 (2)
Changes in other liabilities (10) 32
------- -------
Net cash provided by continuing operations 1,678 716
Net cash provided by (used in) discontinued
operations (3) 76
------- -------
Net cash provided by operating activities 1,675 792
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (889) (893)
Proceeds from sale of assets from continuing
operations 61 24
Expenditures for investments (5) (120)
Distributions from investments -- 104
Purchases of nuclear decommissioning and other
trust assets (341) (398)
Proceeds from sales by nuclear decommissioning
and other trusts 300 371
Dividends received from unconsolidated
affiliates 4 3
Other (9) (5)
------- -------
Net cash used in continuing operations (879) (914)
Net cash provided by discontinued operations -- 560
------- -------
Net cash used in investing activities (879) (354)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (152) (134)
Issuances of common stock 28 46
Repurchases of common stock -- (12)
Increase (decrease) in short-term debt, net 374 (668)
Payments on long-term debt (654) (64)
Issuance of long-term debt 4 253
Financing transaction related to Sempra
Financial -- 83
Other 7 8
------- -------
Net cash used in continuing operations (393) (488)
Net cash provided by discontinued operations -- 2
------- -------
Net cash used in financing activities (393) (486)
------- -------
Increase (decrease) in cash and cash
equivalents 403 (48)
Cash and cash equivalents, January 1 920 769
Cash assumed in connection with FIN 46(R)
consolidation 29 --
------- -------
Cash and cash equivalents, June 30 $ 1,352 $ 721
======= =======
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 Six months
ended ended
June 30, June 30,
-------------- --------------
(Dollars in millions) 2007 2006 2007 2006
--------------------------------------------- --------------
Net Income
Sempra Utilities:
San Diego Gas & Electric $ 51 $ 65 $ 113 $ 112
Southern California Gas 54 58 109 107
-------------- --------------
Total Sempra Utilities 105 123 222 219
Sempra Global:
Sempra Commodities 155 69 226 185
Sempra Generation* 10 16 64 57
Sempra Pipelines & Storage* 17 28 33 39
Sempra LNG (13) (17) (23) (22)
-------------- --------------
Total Sempra Global 169 96 300 259
Parent & Other 6 (34) (15) (59)
-------------- --------------
Continuing Operations 280 185 507 419
Discontinued Operations, Net of
Income Tax (3) 188 (2) 209
-------------- --------------
Consolidated Net Income $ 277 $ 373 $ 505 $ 628
============== ==============
* Excludes amounts now classified as discontinued operations.
Three months Six months
ended ended
June 30, June 30,
--------------- ---------------
(Dollars in millions) 2007 2006 2007 2006
---------------------------------------------- ---------------
Capital Expenditures and
Investments
Sempra Utilities:
San Diego Gas & Electric $ 148 $ 140 $ 305 $ 723
Southern California Gas 105 96 191 193
------ ------ ------ ------
Total Sempra Utilities 253 236 496 916
------ ------ ------ ------
Sempra Global:
Sempra Commodities 12 10 25 30
Sempra Generation 3 6 4 35
Sempra Pipelines & Storage 58 41 137 146
Sempra LNG 138 193 224 345
------ ------ ------ ------
Total Sempra Global 211 250 390 556
------ ------ ------ ------
Parent & Other 2 9 8 (459)(a)
------ ------ ------ ------
Consolidated Capital
Expenditures and Investments $ 466 $ 495 $ 894 $1,013
====== ====== ====== ======
(a) Reflects the transfer of the Palomar plant to SDG&E from Sempra
Generation.
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 Six months
ended ended
June 30, June 30,
----------------------------------
SEMPRA UTILITIES 2007 2006 2007 2006
-------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes intercompany
sales) $ 655 $ 660 $1,360 $1,378
SoCalGas (excludes
intercompany sales) $ 965 $ 908 $2,319 $2,318
Gas Sales (Bcf) 84 89 225 230
Transportation and Exchange
(Bcf) 123 132 243 254
------ ------ ------ ------
Total Deliveries (Bcf) 207 221 468 484
------ ------ ------ ------
Total Gas Customers
(Thousands) 6,501 6,427
Electric Sales (Millions of
kWhs) 3,869 3,832 8,059 7,875
Direct Access (Millions of
kWhs) 716 756 1,494 1,654
------ ------ ------ ------
Total Deliveries (Millions of
kWhs) 4,585 4,588 9,553 9,529
------ ------ ------ ------
Total Electric Customers
(Thousands) 1,360 1,346
SEMPRA GENERATION
--------------------------------------------------------------------
Power Sold (Millions of kWhs) 4,148 3,646(a) 9,525 8,556(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 78 67 141 119
Mexico 11 11 22 21
Chile -- -- -- 1
Natural Gas Customers
(Thousands)
Argentina 1,568 1,514
Mexico 98 99
Chile 39 38
Electric Sales (Millions of
kWhs)
Peru 1,258 1,157 2,527 2,322
Chile 621 563 1,286 1,177
Electric Customers (Thousands)
Peru 799 777
Chile 541 528
SEMPRA ENERGY
Table E (Continued)
SEMPRA COMMODITIES
-------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
----------------- ------------------
Margin* (Dollars in
millions) 2007 2006 2007 2006
---------------------------------------- ------------------
Geographical:
North America $ 388 $ 247 $ 492 $ 606
Europe/Asia 79 18 142 24
----------------- ------------------
Total $ 467 $ 265 $ 634 $ 630
----------------- ------------------
Product Line:
Gas $ 212 $ 105 $ 156 $ 284
Power 117 110 199 211
Oil - Crude & Products 57 33 114 86
Metals 64 (2) 124 25
Other 17 19 41 24
----------------- ------------------
Total $ 467 $ 265 $ 634 $ 630
----------------- ------------------
* Margin is a non-GAAP financial measure, consisting of operating
revenues less cost of sales (primarily transportation and storage
costs), both GAAP financial measures, reduced by certain
transaction-related execution costs (primarily brokerage and other
fees) and net interest income/expense, as follows:
Three months ended Six months ended
June 30, June 30,
----------------- ------------------
(Dollars in millions) 2007 2006 2007 2006
---------------------------------------- ------------------
Revenues $ 710 $ 614 $ 1,222 $ 1,394
Cost of sales (220) (314) (540) (689)
----------------- ------------------
490 300 682 705
Other related costs (23) (35) (48) (75)
----------------- ------------------
Margin $ 467 $ 265 $ 634 $ 630
Three months ended Six months ended
June 30, June 30,
Effect of EITF 02-3 ----------------- ------------------
(Dollars in millions) 2007 2006 2007 2006
---------------------------------------- ------------------
Mark-to-Market
Earnings * $ 122 $ 83 $ 279 $ 243
Effect of EITF 02-3 ** 33 (14) (53) (58)
----------------- ------------------
GAAP Net Income $ 155 $ 69 $ 226 $ 185
* 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.
Scheduled Maturity (in months)
---------------------------------
Net Unrealized Fair greater
Revenue Market Value than
(Dollars in millions) June 30, 2007 0 - 12 13 - 24 25 - 36 36
---------------------------------------------------------------------
OTC Fair Value of
forwards, swaps and
options (a) $ 961 $ 442 $ 306 $ 54 $ 159
---------------------------------------------
Maturity of OTC Fair
Value - Cumulative
Percentages 46.0% 77.8% 83.5% 100.0%
---------------------------------
Exchange
Contracts (b) 428 418 27 47 (64)
--------------------------------------------------------------------
Total Net Unrealized
Revenue at June 30,
2007 $ 1,389 $ 860 $ 333 $ 101 $ 95
---------------------------------------------
Net Unrealized
Revenue - Cumulative
Percentages 61.9% 85.9% 93.2% 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 June 30, December 31,
Trading Assets (net of margin) 2007 2006
---------------------------------------------------------------
Commodity Exchanges 11% 13%
Investment Grade 56% 57%
Below Investment Grade 33% 30%
Risk Adjusted Performance Three months ended Six months ended
Indicators June 30, June 30,
------------------- -----------------
(Mark-to-Market Basis) 2007 2006 2007 2006
------------------------------------------------- -----------------
VaR at 95% (Dollars in
millions) (a) $ 10.6 $ 14.3 $ 10.5 $ 18.1
VaR at 99% (Dollars in
millions) (b) $ 15.0 $ 20.1 $ 14.8 $ 25.6
(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
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
Physical Statistics 2007 2006 2007 2006
------------------------------------------------- -----------------
Natural Gas (Bcf/Day) 11.9 11.6 12.1 12.1
Electric (Billions of kWhs) 122.6 109.0 245.5 223.9
Oil & Liquid Products
(Millions Bbls/Day) 0.6 0.9 0.6 0.8