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Oct 30, 2017

Sempra Energy Announces Third-Quarter 2017 Earnings

- Company Achieves Strong Operating Results in Third Quarter, First Nine Months of 2017
- Texas Regulators Set 180-Day Schedule to Complete Review of Oncor Transaction

SAN DIEGO, Oct. 30, 2017 /PRNewswire/ -- Sempra Energy (NYSE: SRE) today reported third-quarter 2017 earnings of $57 million, or $0.22 per diluted share, compared with third-quarter 2016 earnings of $622 million, or $2.46 per diluted share.

On an adjusted basis, Sempra Energy's third-quarter 2017 earnings increased to $265 million, or $1.04 per diluted share, from $259 million, or $1.02 per diluted share, in the third quarter 2016. Adjusted earnings excluded a $208 million after-tax impairment in the most recent quarter related to a proposed decision by administrative law judges with the California Public Utilities Commission (CPUC) denying the request by San Diego Gas & Electric (SDG&E) to recover costs related to the 2007 San Diego wildfires. Adjusted earnings in last year's third quarter excluded a $350 million after-tax remeasurement gain related to the acquisition of PEMEX's share of the Gasoductos de Chihuahua (GdC) joint venture by Sempra Energy's Mexican subsidiary IEnova, a $78 million after-tax gain on the sale of EnergySouth and net after-tax losses of $65 million related to the planned sale of IEnova's Termoeléctrica de Mexicali (TdM) power plant.

For the first nine months of 2017, Sempra Energy's earnings were $757 million, or $2.99 per diluted share, compared with $991 million, or $3.93 per diluted share, in the first nine months of 2016. Adjusted earnings for the first nine months of 2017 increased to $979 million, or $3.87 per diluted share, from $884 million, or $3.51 per diluted share, for the first nine months of 2016.

These results reflect certain significant items as described in the following table of GAAP earnings, reconciled to adjusted earnings on an after-tax basis, for the third quarter and first nine months of 2017 and 2016:

 
                                 
 

Three months

ended September 30,

 

Nine months

ended September 30,

(Unaudited; Dollars, except EPS, and shares, in millions)

2017

 

2016

 

2017

 

2016

   

GAAP Earnings

$

57

   

$

622

   

$

757

   

$

991

 
               

SDG&E

                     

Impairment of Wildfire Regulatory Asset

208

   

   

208

   

 

Tax Repairs Adjustments Related to General Rate Case (GRC)

   

   

   

31

 
               

SoCalGas

             

Tax Repairs Adjustments Related to GRC

   

   

   

49

 
               

Sempra Mexico

             

Gain in Connection with Gasoductos de Chihuahua (GdC) Acquisition

   

(350)

   

   

(350)

 

Impairments and Losses Related to Termoeléctrica de Mexicali (TdM) Held For Sale

   

65

   

42

   

91

 
               

Sempra LNG & Midstream

             

Gain on Sale of EnergySouth

   

(78)

   

   

(78)

 

(Recoveries) Losses Related to Permanent Releases of Pipeline Capacity

   

   

(28)

   

123

 

Loss Related to Sale of Investment in Rockies Express Pipeline

   

   

   

27

 
               

Adjusted Earnings(1)

$

265

   

$

259

   

$

979

   

$

884

 
               
               

Diluted weighted-average shares outstanding

253

   

252

   

253

   

252

 
               

GAAP EPS

$

0.22

   

$

2.46

   

$

2.99

   

$

3.93

 
                       

Adjusted Earnings(1)

$

1.04

   

$

1.02

   

$

3.87

   

$

3.51

 
               
                       

(1)

Sempra Energy adjusted earnings and adjusted earnings per share are non-GAAP financial measures. See Table A in the appendix for information regarding non-GAAP financial measures and descriptions of adjustments above.

"Based on our strong operating and financial performance through the first nine months, we are on track for one of the best years in our history," said Debra L. Reed, chairman, president and CEO of Sempra Energy. "During the third quarter, we saw continued growth in our utility and infrastructure businesses, while laying the groundwork for a significant new growth platform with our agreement to acquire a majority stake in Oncor."

On Aug. 21, Sempra Energy entered into an agreement to acquire Energy Future Holdings Corp. (EFH), the indirect owner of approximately 80 percent of Oncor Electric Delivery Company LLC (Oncor), the largest electric utility in Texas. In September, the U.S. Bankruptcy Court for the District of Delaware approved EFH's entry into the merger agreement with Sempra Energy and, earlier this month, Sempra Energy and Oncor filed a joint Change-in-Control application with the Public Utility Commission of Texas (PUCT). On Oct. 16, the PUCT set a procedural schedule to complete a review of Sempra Energy's and Oncor's case within 180 days, by early April 2018. The EFH transaction closing remains subject to further approvals by the Bankruptcy Court, the PUCT and the Federal Energy Regulatory Commission, among other approvals and closing conditions. Sempra Energy expects the transaction to close in the first half of 2018.

SEMPRA UTILITIES

San Diego Gas & Electric

SDG&E recorded a net loss of $28 million in the third quarter 2017, compared with earnings of $183 million in last year's third quarter, due primarily to the $208 million after-tax impairment related to cost recovery for the 2007 San Diego wildfires, as SDG&E has determined that its regulatory asset no longer meets the probability threshold for recovery under applicable accounting guidance. The CPUC has yet to issue a final ruling in the cost-recovery proceeding.

For the first nine months of 2017, SDG&E's earnings were $276 million, compared with $419 million in the same period last year. SDG&E's earnings for the first nine months of 2017 included the third-quarter 2017 wildfires-related impairment. In last year's second quarter, SDG&E recorded an after-tax charge of $31 million, refunding to ratepayers the benefits from tax repairs deductions, related to the final 2016 General Rate Case Decision.

Southern California Gas Co.

Earnings for Southern California Gas Co. (SoCalGas) were $7 million in the third quarter 2017, compared with no earnings in last year's third quarter.

SoCalGas' nine-month earnings were $268 million in 2017, compared with $198 million in 2016. In last year's second quarter, SoCalGas recorded an after-tax charge of $49 million, refunding to ratepayers the benefits from tax repairs deductions, related to the final 2016 General Rate Case Decision.

Sempra South American Utilities

In the third quarter 2017, Sempra South American Utilities had earnings of $42 million, compared with $46 million in last year's third quarter.

For the first nine months of 2017, earnings for Sempra South American Utilities were $134 million, compared with $127 million in the first nine months of 2016.

SEMPRA INFRASTRUCTURE

Sempra Mexico

Third-quarter earnings for Sempra Mexico were $66 million in 2017, compared with $332 million in 2016. In last year's third quarter, Sempra Mexico's results included the $350 million after-tax remeasurement gain related to the GdC acquisition, offset by the $65 million after-tax charge related to the planned sale of TdM.

For the nine-month period, Sempra Mexico had earnings of $105 million in 2017, compared with $407 million in 2016.

On Oct. 6, IEnova announced it agreed to acquire an additional stake in the Los Ramones II Norte pipeline from Pemex Transformación Industrial, increasing IEnova's indirect ownership stake to 50 percent from 25 percent. The 452-km pipeline, which commenced operations in February 2016, transports natural gas from Nuevo Leon to San Luis Potosí in central Mexico.

Sempra Renewables

Earnings for Sempra Renewables in the third quarter 2017 were $15 million, compared with $17 million in the third quarter 2016.

During the first nine months of 2017, earnings for Sempra Renewables were $49 million, up from $43 million during the same period last year.

Sempra LNG & Midstream

In the third quarter 2017, Sempra LNG & Midstream recorded a net loss of $4 million, compared with earnings of $77 million in the third quarter 2016, due to the $78 million after-tax gain from the sale of EnergySouth in last year's third quarter.

For the first nine months of 2017, Sempra LNG & Midstream had earnings of $24 million, compared with a net loss of $104 million in the first nine months of 2016. Sempra LNG & Midstream recorded a $28 million after-tax recovery in the second quarter 2017 related to last year's permanent releases of certain pipeline capacity, compared with a related $123 million after-tax loss in 2016.

EARNINGS GUIDANCE    

Today, Sempra Energy updated its GAAP 2017 earnings-per-share guidance range to $4.13 to $4.43 from the prior range of $4.95 to $5.25, resulting from the impairment in the third quarter 2017 related to SDG&E's cost recovery for the 2007 San Diego wildfires. The company said it expects its adjusted 2017 earnings per share to be at the upper end of its guidance range of $5 to $5.30.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures include Sempra Energy's adjusted earnings and adjusted earnings per share for the third-quarter and nine-month periods in 2017 and 2016, as well as the adjusted 2017 earnings-per-share guidance range. Additional information regarding these non-GAAP financial measures is in the appendix on Table A of the third-quarter financial tables.

INTERNET BROADCAST

Sempra Energy will webcast a live discussion of its earnings results today at 12 p.m. EDT with senior management of the company. Access is available by logging onto the website 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 9618086.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2016 revenues of more than $10 billion. The Sempra Energy companies' more than 16,000 employees serve approximately 32 million consumers worldwide.

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. These statements can be identified by words such as "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," "contemplates," "assumes," "depends," "should," "could," "would," "will," "confident," "may," "can," "potential," "possible," "proposed," "target," "pursue," "outlook," "maintain," or similar expressions or discussions of guidance, strategies, plans, goals, opportunities, projections, initiatives, objectives or intentions. 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.

Factors, among others, that could cause actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: actions and the timing of actions, including decisions, new regulations, and issuances of permits and other authorizations by the California Public Utilities Commission, U.S. Department of Energy, California Division of Oil, Gas, and Geothermal Resources, Federal Energy Regulatory Commission, U.S. Environmental Protection Agency, Pipeline and Hazardous Materials Safety Administration, Los Angeles County Department of Public Health, states, cities and counties, and other regulatory and governmental bodies in the United States and other countries in which we operate; the timing and success of business development efforts and construction projects, including risks in obtaining or maintaining permits and other authorizations on a timely basis, risks in completing construction projects on schedule and on budget, and risks in obtaining the consent and participation of partners; the resolution of civil and criminal litigation and regulatory investigations; deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; modifications of settlements; delays in, or disallowance or denial of, regulatory agency authorizations to recover costs in rates from customers (including with respect to regulatory assets associated with the San Onofre Nuclear Generating Station facility and 2007 wildfires) or regulatory agency approval for projects required to enhance safety and reliability; the availability of electric power, natural gas and liquefied natural gas, and natural gas pipeline and storage capacity, including disruptions caused by failures in the transmission grid, moratoriums or limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures; changes in energy markets; volatility in commodity prices; moves to reduce or eliminate reliance on natural gas; the impact on the value of our investment in natural gas storage and related assets from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for storage services; risks posed by actions of third parties who control the operations of our investments, and risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments; weather conditions, natural disasters, accidents, equipment failures, computer system outages, explosions, terrorist attacks and other events that disrupt our operations, damage our facilities and systems, cause the release of greenhouse gases, radioactive materials and harmful emissions, cause wildfires and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits) or may be disputed by insurers; cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses and the confidentiality of our proprietary information and the personal information of our customers and employees; capital markets and economic conditions, including the availability of credit and the liquidity of our investments; fluctuations in inflation, interest and currency exchange rates and our ability to effectively hedge the risk of such fluctuations; changes in the tax code as a result of potential federal tax reform, uncertainty as to what proposals will be enacted, if any, and, if enacted, how they would be applied; changes in foreign and domestic trade policies and laws, including border tariffs, revisions to international trade agreements, such as the North American Free Trade Agreement, and changes that make our exports less competitive or otherwise restrict our ability to export or resolve trade disputes; the ability to win competitively bid infrastructure projects against a number of strong and aggressive competitors; expropriation of assets by foreign governments and title and other property disputes; the impact on reliability of San Diego Gas & Electric Company's (SDG&E) electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources; the impact on competitive customer rates due to the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through SDG&E's electric transmission and distribution system and from possible departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation or other forms of distributed and local power generation, and the potential risk of nonrecovery for stranded assets and contractual obligations; and other uncertainties, some of which may be difficult to predict and are beyond our control.

Additional forward-looking statements include, but are not limited to, statements about the anticipated benefits of the proposed merger involving Sempra Energy, Energy Future Holdings Corp. (EFH) and EFH's indirect interest in Oncor Electric Delivery Company LLC (Oncor), including future financial or operating results of Sempra Energy or Oncor, Sempra Energy's, EFH's or Oncor's plans, objectives, expectations or intentions, the expected financing plans for the transaction, the expected timing of completion of the transaction, and other statements that are not historical facts. Important factors that could cause actual results and future actions to differ materially from those described in any such forward-looking statements include risks and uncertainties relating to: the risk that Sempra Energy, EFH or Oncor may be unable to obtain bankruptcy court and governmental and regulatory approvals required for the merger, or that required bankruptcy court and governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the transaction or be onerous to Sempra Energy; the risk that a condition to closing of the merger may not be satisfied, including receipt of a satisfactory supplemental private letter ruling from the Internal Revenue Service; the risk that the transaction may not be completed for other reasons, or may not be completed on the terms or timing currently contemplated; the risk that the anticipated benefits from the transaction may not be fully realized or may take longer to realize than expected; the risk that Sempra Energy may be unable to obtain the external financing necessary to pay the consideration and expenses related to the merger on terms favorable to Sempra Energy, if at all; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; and the diversion of management time and attention to merger-related issues and related legal, accounting and other costs, whether or not the merger is completed.

These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the U.S. Securities and Exchange Commission (SEC). These reports are available through the EDGAR system free-of-charge on the SEC's website, www.sec.gov, and on the company's website at www.sempra.com. Investors should not rely unduly on any forward-looking statements. These forward-looking statements speak only as of the date hereof, and the company undertakes no obligation to update or revise these forecasts or projections or other forward-looking statements, whether as a result of new information, future events or otherwise.

Sempra South American Utilities, Sempra Infrastructure, Sempra LNG & Midstream, Sempra Renewables, Sempra Mexico and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same as the California Utilities, San Diego Gas & Electric Company (SDG&E) or Southern California Gas Company (SoCalGas), and are not regulated by the California Public Utilities Commission.

SEMPRA ENERGY

Table A

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
 

Three months ended
September 30,

 

Nine months ended
September 30,

(Dollars in millions, except per share amounts)

2017

 

2016

 

2017

 

2016

 

(unaudited)

REVENUES

             

Utilities

$

2,277

   

$

2,264

   

$

7,172

   

$

6,700

 

Energy-related businesses

402

   

271

   

1,071

   

613

 

Total revenues

2,679

   

2,535

   

8,243

   

7,313

 
               

EXPENSES AND OTHER INCOME

             

Utilities:

             

Cost of electric fuel and purchased power

(650)

   

(604)

   

(1,730)

   

(1,680)

 

Cost of natural gas

(190)

   

(208)

   

(903)

   

(702)

 

Energy-related businesses:

             

Cost of natural gas, electric fuel and purchased power

(97)

   

(95)

   

(226)

   

(213)

 

Other cost of sales

(21)

   

(32)

   

(5)

   

(293)

 

Operation and maintenance

(762)

   

(703)

   

(2,207)

   

(2,109)

 

Depreciation and amortization

(378)

   

(328)

   

(1,106)

   

(970)

 

Franchise fees and other taxes

(114)

   

(108)

   

(325)

   

(315)

 

Impairment of wildfire regulatory asset

(351)

   

   

(351)

   

 

Other impairment losses

(1)

   

(132)

   

(72)

   

(154)

 

Gain on sale of assets

2

   

131

   

2

   

131

 

Equity earnings, before income tax

10

   

12

   

31

   

4

 

Remeasurement of equity method investment

   

617

   

   

617

 

Other income, net

41

   

26

   

301

   

98

 

Interest income

12

   

7

   

26

   

19

 

Interest expense

(165)

   

(136)

   

(493)

   

(421)

 

Income before income taxes and equity earnings (losses) of certain unconsolidated subsidiaries

15

   

982

   

1,185

   

1,325

 

Income tax benefit (expense)

84

   

(282)

   

(378)

   

(284)

 

Equity earnings (losses), net of income tax

3

   

19

   

(5)

   

69

 

Net income

102

   

719

   

802

   

1,110

 

Earnings attributable to noncontrolling interests

(45)

   

(97)

   

(44)

   

(118)

 

Preferred dividends of subsidiary

   

   

(1)

   

(1)

 

Earnings

$

57

   

$

622

   

$

757

   

$

991

 
               

Basic earnings per common share

$

0.23

   

$

2.48

   

$

3.01

   

$

3.96

 

Weighted-average number of shares outstanding, basic (thousands)

251,692

   

250,386

   

251,425

   

250,073

 
               

Diluted earnings per common share

$

0.22

   

$

2.46

   

$

2.99

   

$

3.93

 

Weighted-average number of shares outstanding, diluted (thousands)

253,364

   

252,405

   

252,987

   

251,976

 
               

Dividends declared per share of common stock

$

0.82

   

$

0.76

   

$

2.47

   

$

2.27

 
               

 

SEMPRA ENERGY

Table A (Continued)

 

RECONCILIATION OF SEMPRA ENERGY ADJUSTED EARNINGS TO SEMPRA ENERGY GAAP EARNINGS (Unaudited)

 

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share exclude items (after the effects of income taxes and, if applicable, noncontrolling interests) in 2017 and 2016 as follows:

 

Three months ended September 30, 2017:

$(208) million impairment of wildfire regulatory asset at SDG&E

 

Three months ended September 30, 2016:

$350 million noncash gain from the remeasurement of our equity method investment in IEnova Pipelines (formerly Gasoductos de Chihuahua or GdC), a 50-50 joint venture between our Mexican subsidiary, IEnova, and Petróleos Mexicanos (PEMEX), in connection with IEnova's September 2016 acquisition of PEMEX's 50-percent interest in GdC

$78 million gain at Sempra LNG & Midstream on the September 2016 sale of EnergySouth Inc., the parent company of Mobile Gas and Willmut Gas

$(90) million impairment of Sempra Mexico's Termoeléctrica de Mexicali (TdM) assets held for sale

$25 million reduction of deferred income tax liability related to the impairment in carrying value of TdM's assets

 

Nine months ended September 30, 2017:

$(208) million impairment of wildfire regulatory asset at SDG&E

$(47) million impairment of TdM assets held for sale

$5 million deferred income tax benefit on the TdM assets held for sale

$28 million of recoveries related to 2016 permanent releases of pipeline capacity

 

Nine months ended September 30, 2016:

$350 million noncash gain from the remeasurement of our equity method investment in IEnova Pipelines

$78 million gain on the sale of EnergySouth

$(123) million losses from the permanent releases of pipeline capacity at Sempra LNG & Midstream

$(80) million adjustments related to tax repairs deductions reallocated to ratepayers as a result of the 2016 General Rate Case Final Decision (2016 GRC FD) at the California Utilities

$(27) million impairment charge related to Sempra LNG & Midstream's investment in Rockies Express Pipeline LLC (Rockies Express)

$(90) million impairment of TdM assets held for sale

$(1) million deferred income tax expense on the TdM assets held for sale

 

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and/or nature of the excluded items, management believes that these non-GAAP financial measures provide a meaningful comparison of the performance of Sempra Energy's business operations from 2017 to 2016 and to future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles for historical periods these non-GAAP financial measures to Sempra Energy GAAP Earnings and GAAP Diluted Earnings Per Common Share, which we consider to be the most directly comparable financial measures calculated in accordance with GAAP.

 
                                                       
   

Pretax
amount

Income tax
(benefit)
expense(1)

Non-
controlling
interests

Earnings

 

Pretax
amount

Income tax
expense
(benefit)(1)

Non-
controlling
interests

Earnings

 

(Dollars in millions, except per share amounts)

Three months ended September 30, 2017

 

Three months ended September 30, 2016

 

Sempra Energy GAAP Earnings

     

$

57

         

$

622

   

Excluded items:

                   

Impairment of wildfire regulatory asset

$

351

 

$

(143)

 

$

 

208

   

$

 

$

 

$

 

   

Remeasurement gain in connection with GdC acquisition

 

 

 

   

(617)

 

185

 

82

 

(350)

   

Gain on sale of EnergySouth

 

 

 

   

(130)

 

52

 

 

(78)

   

Impairment of TdM assets held for sale

 

 

 

   

131

 

(20)

 

(21)

 

90

   

Reduction of deferred income tax liability associated with TdM

 

 

 

   

 

(31)

 

6

 

(25)

   

Sempra Energy Adjusted Earnings

       

$

265

         

$

259

   
                       

Diluted earnings per common share:

                   

Sempra Energy GAAP Earnings

     

$

0.22

         

$

2.46

   

Sempra Energy Adjusted Earnings

     

$

1.04

         

$

1.02

   

Weighted-average number of shares outstanding, diluted (thousands)

     

253,364

         

252,405

   
                       
   

Nine months ended September 30, 2017

 

Nine months ended September 30, 2016

 

Sempra Energy GAAP Earnings

     

$

757

         

$

991

   

Excluded items:

                   

Impairment of wildfire regulatory asset

$

351

 

$

(143)

 

$

 

208

   

$

 

$

 

$

 

   

Impairment of TdM assets held for sale

71

 

 

(24)

 

47

   

131

 

(20)

 

(21)

 

90

   

Deferred income tax (benefit) expense associated with TdM

 

(8)

 

3

 

(5)

   

 

1

 

 

1

   

Recoveries related to 2016 permanent releases of pipeline capacity

(47)

 

19

 

 

(28)

   

 

 

 

   

Remeasurement gain in connection with GdC acquisition

 

 

 

   

(617)

 

185

 

82

 

(350)

   

Gain on sale of EnergySouth

 

 

 

   

(130)

 

52

 

 

(78)

   

Permanent releases of pipeline capacity

 

 

 

   

206

 

(83)

 

 

123

   

SDG&E tax repairs adjustments related to 2016 GRC FD

 

 

 

   

52

 

(21)

 

 

31

   

SoCalGas tax repairs adjustments related to 2016 GRC FD

 

 

 

   

83

 

(34)

 

 

49

   

Impairment of investment in Rockies Express

 

 

 

   

44

 

(17)

 

 

27

   

Sempra Energy Adjusted Earnings

     

$

979

         

$

884

   
                       

Diluted earnings per common share:

                   

   Sempra Energy GAAP Earnings

     

$

2.99

         

$

3.93

   

   Sempra Energy Adjusted Earnings

     

$

3.87

         

$

3.51

   

Weighted-average number of shares outstanding, diluted (thousands)

     

252,987

         

251,976

   
     

(1)

Income taxes were calculated based on applicable statutory tax rates, except for adjustments that are solely income tax. Income taxes associated with TdM were calculated based on the applicable statutory tax rate, including translation from historic to current exchange rates. An income tax benefit of $12 million associated with the 2017 TdM impairment has been fully reserved.

 

 

SEMPRA ENERGY

Table A (Continued)

 

RECONCILIATION OF SEMPRA ENERGY 2017 ADJUSTED EARNINGS-PER-SHARE GUIDANCE RANGE TO SEMPRA ENERGY 2017 GAAP EARNINGS-PER-SHARE GUIDANCE RANGE (Unaudited)

 

Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance Range of $5.00 to $5.30 excludes items (after the effects of income taxes and, if applicable, noncontrolling interests) as follows:

$(208) million impairment of wildfire regulatory asset at SDG&E

$(47) million impairment of Sempra Mexico's TdM assets held for sale

$5 million deferred income tax benefit on the TdM assets held for sale

$28 million of recoveries related to 2016 permanent release of pipeline capacity

 

Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance is a non-GAAP financial measure. Because of the significance and/or nature of the excluded items, management believes this non-GAAP financial measure provides additional clarity into the ongoing results of the business and the comparability of such results to prior and future periods and also as a base for projected earnings-per-share compound annual growth rate. Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance should not be considered an alternative to Earnings-Per-Share Guidance determined in accordance with GAAP. The table below reconciles Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance Range to Sempra Energy 2017 GAAP Earnings-Per-Share Guidance Range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

 
                   
     

Full-Year 2017

Sempra Energy GAAP Earnings-Per-Share Guidance Range

$

4.13

 

to

$

4.43

 

Excluded items(1):

     

                Impairment of wildfire regulatory asset

0.82

   

0.82

 

                Impairment of TdM assets held for sale

0.18

   

0.18

 

                Deferred income tax benefit associated with TdM

(0.02)

   

(0.02)

 

                Recoveries related to 2016 permanent release of pipeline capacity

(0.11)

   

(0.11)

 

Sempra Energy Adjusted Earnings-Per-Share Guidance Range

$

5.00

 

to

$

5.30

 

Weighted-average number of shares outstanding, diluted (thousands)

   

254,000

 
   

(1)

The effects of income taxes and noncontrolling interests for excluded items are provided in the reconciliation
of Sempra Energy GAAP Earnings to Sempra Energy Adjusted Earnings above.

 

SEMPRA ENERGY

Table B

             

CONDENSED CONSOLIDATED BALANCE SHEETS

       

(Dollars in millions)

September 30,
2017

 

December 31,
2016(1)

 

(unaudited)

   

Assets

     

Current assets:

     

  Cash and cash equivalents

$

189

   

$

349

 

  Restricted cash

59

   

66

 

  Accounts receivable, net

1,387

   

1,554

 

  Due from unconsolidated affiliates

31

   

26

 

  Income taxes receivable

118

   

43

 

  Inventories

296

   

258

 

  Regulatory balancing accounts - undercollected

170

   

259

 

  Fixed-price contracts and other derivatives

174

   

83

 

  Assets held for sale

117

   

201

 

  Other

337

   

271

 

    Total current assets

2,878

   

3,110

 
       

Other assets:

     

  Restricted cash

13

   

10

 

  Due from unconsolidated affiliates

506

   

201

 

  Regulatory assets

3,186

   

3,414

 

  Nuclear decommissioning trusts

1,041

   

1,026

 

  Investments

2,128

   

2,097

 

  Goodwill

2,393

   

2,364

 

  Other intangible assets

537

   

548

 

  Dedicated assets in support of certain benefit plans

435

   

430

 

  Insurance receivable for Aliso Canyon costs

542

   

606

 

  Deferred income taxes

132

   

234

 

  Sundry

954

   

815

 

    Total other assets

11,867

   

11,745

 

Property, plant and equipment, net

35,384

   

32,931

 

Total assets

$

50,129

   

$

47,786

 
       

Liabilities and Equity

     

Current liabilities:

     

  Short-term debt

$

2,498

   

$

1,779

 

  Accounts payable

1,333

   

1,476

 

  Due to unconsolidated affiliates

10

   

11

 

  Dividends and interest payable

386

   

319

 

  Accrued compensation and benefits

334

   

409

 

  Regulatory balancing accounts - overcollected

278

   

122

 

  Current portion of long-term debt

1,423

   

913

 

  Fixed-price contracts and other derivatives

105

   

83

 

  Customer deposits

149

   

158

 

  Reserve for Aliso Canyon costs

42

   

53

 

  Liabilities held for sale

47

   

47

 

  Other

589

   

557

 

    Total current liabilities

7,194

   

5,927

 

Long-term debt

14,803

   

14,429

 
       

Deferred credits and other liabilities:

     

  Customer advances for construction

148

   

152

 

  Pension and other postretirement benefit plan obligations, net of plan assets

1,238

   

1,208

 

  Deferred income taxes

4,090

   

3,745

 

  Deferred investment tax credits

28

   

28

 

  Regulatory liabilities arising from removal obligations

2,774

   

2,697

 

  Asset retirement obligations

2,482

   

2,431

 

  Fixed-price contracts and other derivatives

301

   

405

 

  Deferred credits and other

1,569

   

1,523

 

  Total deferred credits and other liabilities

12,630

   

12,189

 

Equity:

     

  Total Sempra Energy shareholders' equity

13,265

   

12,951

 

  Preferred stock of subsidiary

20

   

20

 

  Other noncontrolling interests

2,217

   

2,270

 

    Total equity

15,502

   

15,241

 

Total liabilities and equity

$

50,129

   

$

47,786

 
       

(1)

Derived from audited financial statements.

 

SEMPRA ENERGY

Table C

             

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

             
       

Nine months ended September 30,

(Dollars in millions)

 

2017

 

2016

   

(unaudited)

Cash Flows from Operating Activities

       

Net income

 

$

802

   

$

1,110

 

Adjustments to reconcile net income to net cash provided by operating activities:

       

  Depreciation and amortization

 

1,106

   

970

 

  Deferred income taxes and investment tax credits

 

302

   

170

 

  Impairment of wildfire regulatory asset

 

351

   

 

  Other impairment losses

 

72

   

154

 

  Gain on sale of assets

 

(2)

   

(131)

 

  Equity earnings, net

 

(26)

   

(73)

 

  Remeasurement of equity method investment

 

   

(617)

 

  Fixed-price contracts and other derivatives

 

(142)

   

39

 

  Other

 

20

   

50

 

Net change in other working capital components

 

229

   

224

 

Insurance receivable for Aliso Canyon costs

 

64

   

(339)

 

Changes in other assets

 

(137)

   

(4)

 

Changes in other liabilities

 

71

   

138

 

  Net cash provided by operating activities

 

2,710

   

1,691

 
         

Cash Flows from Investing Activities

       

Expenditures for property, plant and equipment

 

(2,880)

   

(3,087)

 

Expenditures for investments and acquisition of businesses,
net of cash and cash equivalents acquired

 

(110)

   

(1,212)

 

Proceeds from sale of assets, net of cash sold

 

12

   

761

 

Distributions from investments

 

25

   

23

 

Purchases of nuclear decommissioning and other trust assets

 

(1,082)

   

(418)

 

Proceeds from sales by nuclear decommissioning and other trusts

 

1,082

   

486

 

Increases in restricted cash

 

(293)

   

(53)

 

Decreases in restricted cash

 

298

   

71

 

Advances to unconsolidated affiliates

 

(321)

   

(12)

 

Repayments of advances to unconsolidated affiliates

 

8

   

11

 

Other

 

1

   

(2)

 

  Net cash used in investing activities

 

(3,260)

   

(3,432)

 
         

Cash Flows from Financing Activities

       

Common dividends paid

 

(561)

   

(510)

 

Preferred dividends paid by subsidiary

 

(1)

   

(1)

 

Issuances of common stock

 

37

   

40

 

Repurchases of common stock

 

(15)

   

(55)

 

Issuances of debt (maturities greater than 90 days)

 

2,395

   

2,013

 

Payments on debt (maturities greater than 90 days)

 

(1,829)

   

(1,298)

 

Increase in short-term debt, net

 

475

   

1,636

 

Deposit for sale of noncontrolling interest

 

   

78

 

Net distributions to noncontrolling interests

 

(109)

   

(43)

 

Other

 

(11)

   

(12)

 

  Net cash provided by financing activities

 

381

   

1,848

 
         

Effect of exchange rate changes on cash and cash equivalents

 

9

   

8

 
         

(Decrease) increase in cash and cash equivalents

 

(160)

   

115

 

Cash and cash equivalents, January 1

 

349

   

403

 

Cash and cash equivalents, September 30

 

$

189

   

$

518

 

 

 

SEMPRA ENERGY

 

Table D

 
                 

SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES, INVESTMENTS AND ACQUISITION OF BUSINESSES

 
                 
   

Three months ended
September 30,

 

Nine months ended
September 30,

(Dollars in millions)

 

2017

 

2016

 

2017

 

2016

   

    (unaudited)

(Losses) Earnings

               

Sempra Utilities:

               

    San Diego Gas & Electric

 

$

(28)

   

$

183

   

$

276

   

$

419

 

    Southern California Gas

 

7

   

   

268

   

198

 

    Sempra South American Utilities

 

42

   

46

   

134

   

127

 

Sempra Infrastructure:

               

    Sempra Mexico

 

66

   

332

   

105

   

407

 

    Sempra Renewables

 

15

   

17

   

49

   

43

 

    Sempra LNG & Midstream

 

(4)

   

77

   

24

   

(104)

 

Parent and other

 

(41)

   

(33)

   

(99)

   

(99)

 

Earnings

 

$

57

   

$

622

   

$

757

   

$

991

 
                 
                 
   

Three months ended
September 30,

 

Nine months ended
September 30,

(Dollars in millions)

 

2017

 

2016

 

2017

 

2016

   

    (unaudited)

Capital Expenditures, Investments and Acquisition of Businesses

               

Sempra Utilities:

               

    San Diego Gas & Electric

 

$

359

   

$

357

   

$

1,122

   

$

959

 

    Southern California Gas

 

351

   

299

   

1,033

   

949

 

    Sempra South American Utilities

 

62

   

51

   

139

   

133

 

Sempra Infrastructure:

               

    Sempra Mexico

 

38

   

1,226

   

265

   

1,366

 

    Sempra Renewables

 

261

   

261

   

361

   

739

 

    Sempra LNG & Midstream

 

16

   

44

   

53

   

136

 

Parent and other

 

4

   

9

   

17

   

17

 

Consolidated Capital Expenditures, Investments and Acquisition of Businesses

 

$

1,091

   

$

2,247

   

$

2,990

   

$

4,299

 
                 
       

 

 
                             

SEMPRA ENERGY

Table E

 

OTHER OPERATING STATISTICS (Unaudited)

 
 

Three months ended
September 30,

 

Nine months ended
September 30,

UTILITIES

2017

 

2016

 

2017

 

2016

               

SDG&E and SoCalGas

             

Gas Sales (Bcf)(1)

56

   

56

   

253

   

242

 

Transportation (Bcf)(1)

184

   

185

   

488

   

477

 

Total Deliveries (Bcf)(1)

240

   

241

   

741

   

719

 
               

Total Gas Customers (Thousands)

       

6,835

   

6,799

 
               

Electric Sales (Millions of kWhs)(1)

4,443

   

4,377

   

11,772

   

11,662

 

Direct Access (Millions of kWhs)

957

   

967

   

2,530

   

2,573

 

Total Deliveries (Millions of kWhs)(1)

5,400

   

5,344

   

14,302

   

14,235

 
               

Total Electric Customers (Thousands)

       

1,440

   

1,432

 
               

Other Utilities

             

Natural Gas Sales (Bcf)

             

  Sempra Mexico

7

   

7

   

22

   

22

 

  Mobile Gas(2)

   

9

   

   

33

 

  Willmut Gas(2)

   

   

   

2

 

Natural Gas Customers (Thousands)

             

  Sempra Mexico

       

120

   

117

 

  Mobile Gas(2)

       

   

84

 

  Willmut Gas(2)

       

   

19

 

Electric Sales (Millions of kWhs)

             

  Peru

1,647

   

1,771

   

5,321

   

5,607

 

  Chile

699

   

680

   

2,201

   

2,161

 

Electric Customers (Thousands)

             

  Peru

       

1,093

   

1,071

 

  Chile

       

700

   

684

 
               

ENERGY-RELATED BUSINESSES

             
               

Sempra Infrastructure

             

Power Sold (Millions of kWhs)

             

  Sempra Mexico(3)

1,327

   

1,102

   

3,032

   

2,347

 

  Sempra Renewables(4)

894

   

649

   

3,100

   

2,141

 

  Sempra LNG & Midstream

373

   

383

   

867

   

847

 
   
 

(1)

Includes intercompany sales.

(2)

On September 12, 2016, Sempra LNG & Midstream completed the sale of the parent company of Mobile Gas and Willmut Gas.

(3)

Includes power sold at the Termoeléctrica de Mexicali natural gas-fired power plant and in 2017, at the Ventika wind power generation facilities acquired in December 2016. Also includes 50 percent of total power sold at the Energía Sierra Juárez wind power generation facility, in which Sempra Energy has a 50-percent ownership interest. Energía Sierra Juárez is not consolidated within Sempra Energy, and the related investment is accounted for under the equity method.

(4)

Includes 50 percent of total power sold related to solar and wind projects in which Sempra Energy has a 50-percent ownership. These subsidiaries are not consolidated within Sempra Energy, and the related investments are accounted for under the equity method.

 

SEMPRA ENERGY

Table F (Unaudited)

STATEMENTS OF OPERATIONS DATA BY SEGMENT

                 
                                 

Three months ended September 30, 2017

                               

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra South American Utilities

 

Sempra Mexico

 

Sempra Renewables

 

Sempra LNG & Midstream

 

Consolidating Adjustments, Parent & Other

   

Total

                                   

Revenues

$

1,236

   

$

684

   

$

376

   

$

336

   

$

26

   

$

152

   

$

(131)

     

$

2,679

 

Cost of sales and other expenses

(769)

   

(542)

   

(296)

   

(153)

   

(22)

   

(154)

   

104

     

(1,832)

 

Depreciation and amortization

(170)

   

(132)

   

(14)

   

(41)

   

(9)

   

(10)

   

(2)

     

(378)

 

Impairments

(351)

   

   

   

(1)

   

   

   

     

(352)

 

Equity earnings, before income tax

   

   

   

   

7

   

3

   

     

10

 

Other income, net

16

   

8

   

3

   

4

   

   

1

   

9

     

41

 

(Loss) income before interest and tax (1)

(38)

   

18

   

69

   

145

   

2

   

(8)

   

(20)

     

168

 

Net interest (expense) income (2)

(53)

   

(25)

   

(4)

   

(14)

   

(2)

   

5

   

(60)

     

(153)

 

Income tax benefit (expense)

72

   

14

   

(18)

   

(34)

   

9

   

2

   

39

     

84

 

Equity earnings, net of income tax

   

   

1

   

2

   

   

   

     

3

 

(Earnings) losses attributable to noncontrolling interests

(9)

   

   

(6)

   

(33)

   

6

   

(3)

   

     

(45)

 

(Losses) earnings

$

(28)

   

$

7

   

$

42

   

$

66

   

$

15

   

$

(4)

   

$

(41)

     

$

57

 
                                   

Three months ended September 30, 2016

                               

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra South American Utilities

 

Sempra Mexico

 

Sempra Renewables

 

Sempra LNG & Midstream

 

Consolidating Adjustments, Parent & Other

   

Total

                                   

Revenues

$

1,209

   

$

686

   

$

385

   

$

196

   

$

12

   

$

164

   

$

(117)

     

$

2,535

 

Cost of sales and other expenses

(725)

   

(526)

   

(302)

   

(121)

   

(14)

   

(163)

   

101

     

(1,750)

 

Depreciation and amortization

(161)

   

(121)

   

(14)

   

(15)

   

(1)

   

(12)

   

(4)

     

(328)

 

Impairments

   

(1)

   

   

(131)

   

   

   

     

(132)

 

Gain on sale of assets

   

   

1

   

   

   

130

   

     

131

 

Equity earnings, before income tax

   

   

   

   

12

   

   

     

12

 

Remeasurement of equity method investment

   

   

   

617

   

   

   

     

617

 

Other income (expense), net

11

   

8

   

3

   

(7)

   

   

1

   

10

     

26

 

Income (loss) before interest and tax (1)

334

   

46

   

73

   

539

   

9

   

120

   

(10)

     

1,111

 

Net interest (expense) income (2)

(49)

   

(25)

   

(4)

   

(3)

   

1

   

8

   

(57)

     

(129)

 

Income tax (expense) benefit

(91)

   

(21)

   

(17)

   

(142)

   

7

   

(51)

   

33

     

(282)

 

Equity earnings, net of income tax

   

   

1

   

18

   

   

   

     

19

 

(Earnings) losses attributable to noncontrolling interests

(11)

   

   

(7)

   

(80)

   

   

   

1

     

(97)

 

Earnings (losses)

$

183

   

$

   

$

46

   

$

332

   

$

17

   

$

77

   

$

(33)

     

$

622

 
   
 

(1)

Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments' performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

(2)

Includes interest income, interest expense and preferred dividends of subsidiary.

 

SEMPRA ENERGY

Table F (Unaudited)

                                   

STATEMENTS OF OPERATIONS DATA BY SEGMENT

             
                                   

Nine months ended September 30, 2017

                               

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra South American Utilities

 

Sempra Mexico

 

Sempra Renewables

 

Sempra LNG & Midstream

 

Consolidating Adjustments, Parent & Other

   

Total

                                   

Revenues

$

3,351

   

$

2,695

   

$

1,169

   

$

873

   

$

74

   

$

406

   

$

(325)

     

$

8,243

 

Cost of sales and other expenses

(2,036)

   

(1,891)

   

(916)

   

(404)

   

(57)

   

(353)

   

263

     

(5,394)

 

Depreciation and amortization

(499)

   

(384)

   

(40)

   

(114)

   

(28)

   

(31)

   

(10)

     

(1,106)

 

Impairments

(351)

   

   

   

(72)

   

   

   

     

(423)

 

Equity earnings, before income tax

   

   

   

   

25

   

6

   

     

31

 

Other income, net

49

   

28

   

8

   

191

   

1

   

2

   

22

     

301

 

Income (loss) before interest and tax (1)

514

   

448

   

221

   

474

   

15

   

30

   

(50)

     

1,652

 

Net interest (expense) income (2)

(151)

   

(77)

   

(13)

   

(61)

   

(7)

   

14

   

(173)

     

(468)

 

Income tax (expense) benefit

(72)

   

(103)

   

(57)

   

(278)

   

25

   

(17)

   

124

     

(378)

 

Equity earnings (losses), net of income tax

   

   

2

   

(7)

   

   

   

     

(5)

 

(Earnings) losses attributable to noncontrolling interests

(15)

   

   

(19)

   

(23)

   

16

   

(3)

   

     

(44)

 

Earnings (losses)

$

276

   

$

268

   

$

134

   

$

105

   

$

49

   

$

24

   

$

(99)

     

$

757

 
                                   

Nine months ended September 30, 2016

                               

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra South American Utilities

 

Sempra Mexico

 

Sempra Renewables

 

Sempra LNG & Midstream

 

Consolidating Adjustments, Parent & Other

   

Total

                                   

Revenues

$

3,192

   

$

2,336

   

$

1,170

   

$

481

   

$

25

   

$

384

   

$

(275)

     

$

7,313

 

Cost of sales and other expenses

(1,985)

   

(1,637)

   

(937)

   

(289)

   

(40)

   

(653)

   

229

     

(5,312)

 

Depreciation and amortization

(478)

   

(355)

   

(41)

   

(47)

   

(4)

   

(37)

   

(8)

     

(970)

 

Impairments

   

(23)

   

   

(131)

   

   

   

     

(154)

 

Gain on sale of assets

   

   

1

   

   

   

130

   

     

131

 

Equity earnings (losses), before income tax

   

   

   

   

30

   

(26)

   

     

4

 

Remeasurement of equity method investment

   

   

   

617

   

   

   

     

617

 

Other income (expense), net

38

   

24

   

10

   

(11)

   

1

   

2

   

34

     

98

 

Income (loss) before interest and tax (1)

767

   

345

   

203

   

620

   

12

   

(200)

   

(20)

     

1,727

 

Net interest (expense) income (2)

(145)

   

(72)

   

(14)

   

(8)

   

2

   

19

   

(185)

     

(403)

 

Income tax (expense) benefit

(204)

   

(75)

   

(46)

   

(170)

   

29

   

77

   

105

     

(284)

 

Equity earnings, net of income tax

   

   

3

   

66

   

   

   

     

69

 

Losses (earnings) attributable to noncontrolling interests

1

   

   

(19)

   

(101)

   

   

   

1

     

(118)

 

Earnings (losses)

$

419

   

$

198

   

$

127

   

$

407

   

$

43

   

$

(104)

   

$

(99)

     

$

991

 
   
 

(1)

Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments' performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

(2)

Includes interest income, interest expense and preferred dividends of subsidiary.

 

 

[SRE-F]

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