SDG&E 8-K 11/4/2004

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT

 

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

Date of Report

 

(Date of earliest event reported):

November 4, 2004
- ----------------------

SAN DIEGO GAS & ELECTRIC COMPANY
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

 

CALIFORNIA
- --------------------------------

1-3779
- --------------------------------

95-1184800
- --------------------------------

(State of incorporation
or organization)

(Commission
File Number)

(I.R.S. Employer
Identification No.

 

8330 CENTURY PARK COURT, SAN DIEGO, CA
- ------------------------------------------------------------------

92123
- ----------------------

(Address of principal executive offices)

(Zip Code)

 

 

Registrant's telephone number, including area code

(619) 696-2000
- -------------------

 

---------------------------------------------------------------------
(Former name or former address, if changed since last report.)






FORM 8-K

Item 2.02 Results of Operations and Financial Condition

On November 4, 2004, Sempra Energy, of which San Diego Gas & Electric Company is a consolidated subsidiary, issued its earnings press release for the quarter ended September 30, 2004. The Sempra Energy financial information contained in the press release includes, on a consolidated basis, information regarding San Diego Gas & Electric Company's results of operations and financial condition. A copy of the press release is attached as Exhibit 99.1. The information furnished in this Item 12 and in Exhibit 99.1 shall not be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, nor shall it be deemed to be incorporated by reference in any filing of Sempra Energy, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

 

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1 November 4, 2004 Sempra Energy News Release (including tables)

 






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

San Diego Gas & Electric Company

Date: November 4, 2004

By: /s/ S.D. Davis
- -----------------------------------------

 

Name: S.D. Davis
Sr. Vice President-External Relations
and Chief Financial Officer

 

SEMPRA ENERGY 3rd QTR 2004 EARNINGS RELEASE

Exhibit 99.1

News Release

 

 

Media Contacts:

Doug Kline/Jennifer Andrews
Sempra Energy
(877) 866-2066
www.sempra.com

 
 
 

Financial Contacts:

Dennis Arriola/Karen Sedgwick
Sempra Energy
(877) 736-7727

 

 

SEMPRA ENERGY'S THIRD-QUARTER 2004

NET INCOME RISES 9.5 PERCENT


  • Power Generation, Energy Trading Net Income Increase Sharply
  • 2004 Earnings Guidance Raised to $3.15 to $3.25 per Share

SAN DIEGO, Nov. 4, 2004 -- Sempra Energy (NYSE: SRE) today reported third-quarter 2004 earnings of $231 million, or $0.98 per diluted share, compared with $211 million, or $1.00 per diluted share, in the third quarter 2003.

For the first nine months of 2004, Sempra Energy's earnings were $549 million, or $2.36 per diluted share, up 19 percent per share over the $415 million, or $1.98 per diluted share, for the same period in 2003. Earnings per share in 2004 have been affected by a greater number of shares outstanding.

"Our strong third-quarter results reflect the continued growth in our power-generation and energy-trading businesses," said Stephen L. Baum, chairman and chief executive officer of Sempra Energy. "Our year-to-date performance and positive outlook for the remainder of the year put us on pace for record results."

Based on the updated outlook, Baum said the company is raising its 2004 earnings-per-share guidance range to $3.15 to $3.25 from $2.90 to $3.10.


-more-


Sempra Energy's revenues in the third quarter 2004 were $2.2 billion, compared with $2.1 billion in the third quarter last year.

OPERATING HIGHLIGHTS

Sempra Energy Utilities

Net income for Southern California Gas Co. in the third-quarter 2004 rose to $68 million from $53 million in the year-earlier period, due to higher revenues and an after-tax $9 million one-time gain from a property sale. SoCalGas' third-quarter 2003 results included an after-tax charge of $32 million for litigation costs and losses associated with a sublease.

Third-quarter 2004 net income for San Diego Gas & Electric (SDG&E) was $60 million, compared with $120 million in last year's third quarter. Third-quarter 2003 results included an after-tax, one-time positive contribution of $65 million from the settlement of litigation with the California Public Utilities Commission (CPUC) related to intermediate-term power-purchase contracts owned by SDG&E, offset by an after-tax charge of $11 million for litigation costs.

Sempra Energy Trading

In the third quarter 2004, Sempra Energy Trading's net income doubled to $44 million from $22 million in last year's third quarter, driven primarily by increased profitability in its petroleum trading operations.

"Through the first three quarters, Sempra Energy Trading has earned $143 million and is off to a solid start in the fourth quarter," said Baum.

Sempra Energy Resources

Sempra Energy Resources' net income rose to $64 million in the third quarter 2004 from $33 million in the year-earlier period, due to an increase in contracted power sales and a full quarter of contributions from the new Texas power plants acquired in July 2004.


-more-


Sempra Energy International

Sempra Energy International's third-quarter 2004 net income was $7 million, compared with a $32 million loss last year during the same period. Quarterly results last year included an after-tax charge of $50 million related to the write-down of the carrying value of assets of Frontier Energy, a North Carolina-based gas utility subsidiary.

Sempra Energy LNG

Last month, Sempra Energy LNG announced two milestone agreements that have enabled the company to contract for the entire processing capacity of its Energía Costa Azul liquefied natural gas (LNG) receipt terminal in Baja California, Mexico. Site preparation has begun and discussions already are underway with existing customers and others for expansion of the facility.

The agreements ensure that Sempra Energy LNG retains full ownership and operating responsibility for the Energía Costa Azul terminal. The company signed a 20-year agreement with Shell International Gas Limited to provide Shell with half the capacity of the terminal. Sempra Energy LNG also signed a 20-year agreement with BP and its Tangguh LNG partners to supply the other half of the terminal's capacity with LNG from Indonesia. The total initial gas processing capacity for the Energía Costa Azul facility is 1 billion cubic feet per day. Operations are scheduled to begin in 2008.

Sempra Energy LNG also is developing LNG receipt terminals near Lake Charles, La., and Port Arthur, Texas.

Internet Broadcast

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EST with key company executives. Access is available by logging onto the Web site at www.sempra.com. For those unable to log onto the live Webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (706) 645-9291 and entering the passcode, 178618.

-more-


Sempra Energy (NYSE: SRE), based in San Diego, is a Fortune 500 energy services holding company with 2003 revenues of $7.9 billion. The Sempra Energy companies' 13,000 employees serve more than 10 million customers in the United States, Europe, Canada, Mexico, South America and Asia.

###

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: national, international, regional and local economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Co mmission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital 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; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the pace of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; and other uncertainties, all of which are difficult to predict and many of which are beyond the company's control. 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 Energy Trading, Sempra Energy Resources, Sempra Energy International, Sempra Energy LNG and Sempra Energy Solutions are not the same as the utilities, San Diego Gas & Electric and Southern California Gas Co.

 






SEMPRA ENERGY

Table A

STATEMENTS OF CONSOLIDATED INCOME (Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

(Dollars in millions, except per share amounts)

2004

2003

2004

2003

Operating revenues

California utilities:

Natural gas

$ 909

$ 870

$ 3,189

$ 2,961

Electric

445

576

1,246

1,368

Other

811

612

2,086

1,492

Total operating revenues

2,165

2,058

6,521

5,821

Operating expenses

California utilities:

Cost of natural gas

438

372

1,744

1,529

Cost of electric fuel and purchased power

143

128

425

428

Other cost of sales

484

371

1,186

886

Other operating expenses

530

668

1,597

1,631

Depreciation and amortization

171

158

501

455

Franchise fees and other taxes

54

54

171

167

Total operating expenses

1,820

1,751

5,624

5,096

Operating income

345

307

897

725

Other income - net

40

34

58

38

Interest income

25

8

58

30

Interest expense

(74)

(78)

(234)

(223)

Preferred dividends / distributions by subsidiaries

(2)

(2)

(7)

(17)

Income from continuing operations before income taxes

334

269

772

553

Income tax expense

103

58

191

109

Income from continuing operations

231

211

581

444

Loss from discontinued operations, net of tax

-

-

(30)

-

Loss on disposal of discontinued operations, net of tax

-

-

(2)

-

Income before cumulative effect of change in accounting principle

231

211

549

444

Cumulative effect of change in accounting principle, net of tax

-

-

-

(29)

Net income

$ 231

$ 211

$ 549

$ 415

Basic earnings per share:

Income from continuing operations

$ 1.01

$ 1.01

$ 2.55

$ 2.14

Discontinued operations, net of tax

-

-

(0.14)

-

Cumulative effect of change in accounting principle, net of tax

-

-

-

(0.14)

Net income

$ 1.01

$ 1.01

$ 2.41

$ 2.00

Weighted-average number of shares outstanding (thousands)

229,376

208,816

227,412

207,620

Diluted earnings per share:

Income from continuing operations

$ 0.98

$ 1.00

$ 2.50

$ 2.12

Discontinued operations, net of tax

-

-

(0.14)

-

Cumulative effect of change in accounting principle, net of tax

-

-

-

(0.14)

Net income

$ 0.98

$ 1.00

$ 2.36

$ 1.98

Weighted-average number of shares outstanding (thousands)

235,936

212,273

232,366

210,160

Dividends declared per share of common stock

$ 0.25

$ 0.25

$ 0.75

$ 0.75






SEMPRA ENERGY

Table B

CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30,

December 31,

(Dollars in millions)

 

2004

2003

Assets

Current assets:

Cash and cash equivalents

$ 267

$ 432

Short-term investments

-

363

Accounts receivable

770

1,002

Due from affiliate

7

-

Income taxes receivable

-

1

Deferred income taxes

58

2

Interest receivable

82

62

Trading assets

6,156

5,250

Regulatory assets arising from fixed-price contracts and other derivatives

155

144

Other regulatory assets

109

89

Inventories

225

147

Other

198

157

Current assets of continuing operations

8,027

7,649

Current assets of discontinued operations

82

220

Total current assets

8,109

7,869

Investments and other assets:

Due from affiliates

45

55

Regulatory assets arising from fixed-price contracts and other derivatives

530

650

Other regulatory assets

476

552

Nuclear decommissioning trusts

575

570

Investments

1,132

1,114

Sundry

750

706

Total investments and other assets

3,508

3,647

Property, plant and equipment - net

10,847

10,474

Total assets

$ 22,464

$ 21,990

Liabilities and Shareholders' Equity

Current liabilities:

Short-term debt

$ 435

$ 28

Accounts payable

834

841

Income taxes payable

302

156

Deferred income taxes

-

26

Trading liabilities

4,860

4,457

Dividends and interest payable

134

136

Regulatory balancing accounts - net

347

424

Fixed-price contracts and other derivatives

164

148

Current portion of long-term debt

99

1,433

Other

690

681

Current liabilities of continuing operations

7,865

8,330

Current liabilities of discontinued operations

19

52

Total current liabilities

7,884

8,382

Long-term debt

4,414

3,841

Deferred credits and other liabilities:

Due to affiliates

362

362

Customer advances for construction

85

89

Postretirement benefits other than pensions

121

131

Deferred income taxes

170

208

Deferred investment tax credits

80

84

Regulatory liabilities arising from cost of removal obligations

2,331

2,238

Regulatory liabilities arising from asset retirement obligations

300

303

Other regulatory liabilities

112

108

Fixed-price contracts and other derivatives

530

680

Asset retirement obligations

321

313

Deferred credits and other

1,194

1,182

Total deferred credits and other liabilities

5,606

5,698

Preferred stock of subsidiaries

179

179

Shareholders' equity

4,381

3,890

Total liabilities and shareholders' equity

$ 22,464

$ 21,990






SEMPRA ENERGY

Table C

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)

Nine months ended

September 30,

(Dollars in millions)

 

2004

2003

Cash Flows from Operating Activities:

Net income

$ 549

$ 415

Adjustments to reconcile net income to net cash provided by operating

activities:

Loss from discontinued operations, net of tax

30

-

Loss on disposal of discontinued operations, net of tax

2

-

Cumulative effect of change in accounting principle

-

29

Depreciation and amortization

501

455

Impairment losses

8

79

Deferred income taxes and investment tax credits

(7)

(160)

Other - net

8

38

Net changes in other working capital components

(523)

75

Changes in other assets

(66)

(36)

Changes in other liabilities

21

28

Net cash provided by continuing operations

523

923

Net cash used in discontinued operations

(30)

-

Net cash provided by operating activities

493

923

Cash Flows from Investing Activities:

Expenditures for property, plant and equipment

(782)

(664)

Proceeds from sale of assets

371

(1)

-

Proceeds from disposal of discontinued operations

137

-

Investments and acquisitions of subsidiaries, net of cash acquired

(70)

(182)

Dividends received from affiliates

50

21

Affiliate loan

-

(54)

Other - net

-

(8)

Net cash used in investing activities

(294)

(887)

Cash Flows from Financing Activities:

Common dividends paid

(162)

(155)

Issuances of common stock

120

81

Repurchases of common stock

(1)

(6)

Issuances of long-term debt

897

400

Payments on long-term debt

(1,648)

(481)

Increase in short-term debt - net

434

89

Other - net

(4)

(8)

Net cash used in financing activities

(364)

(80)

Decrease in cash and cash equivalents

(165)

(44)

Cash and cash equivalents, January 1

432

455

Cash and cash equivalents, September 30

$ 267

$ 411

(1)

Primarily proceeds from the sale of U.S. Treasury obligations which previously securitized the Mesquite synthetic lease.






SEMPRA ENERGY

Table D

BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)

Three months ended

Nine months ended

September 30,

 

September 30,

(Dollars in millions)

2004

2003

2004

2003

Net Income

California Utilities:

San Diego Gas & Electric

$ 60

$ 120

$ 140

$ 206

Southern California Gas

68

53

174

148

Total California Utilities

128

173

314

354

Global Enterprises:

Trading

44

22

143

67

Resources

64

33

123

48

International

7

(32)

(3)

35

(7)

(3)

LNG

(4)

-

-

-

Solutions

1

-

1

8

Total Global Enterprises

112

23

302

116

Financial

10

13

26

32

Parent & Other

(19)

2

(61)

(58)

Continuing Operations

231

211

581

444

Discontinued Operations (1)

-

-

(32)

-

Cumulative Effect of Change in Accounting Principle

-

-

-

(29)

(2)

Consolidated Net Income

$ 231

$ 211

$ 549

$ 415

(1)

Reflects Atlantic Electric & Gas and includes ($2) related to the disposal.

(2)

The effects to Trading and Solutions were ($28) and ($1), respectively.

(3)

Includes ($50) write-down of the carrying value of assets of Frontier Energy.

Three months ended

Nine months ended

September 30,

September 30,

(Dollars in millions)

2004

 

2003

 

2004

 

2003

Capital Expenditures and Investments

California Utilities:

San Diego Gas & Electric

$ 102

$ 102

$ 283

$ 285

Southern California Gas

90

82

234

217

Total California Utilities

192

184

517

502

Global Enterprises:

Resources

104

60

153

231

Trading

21

8

103

20

International

7

10

18

37

LNG

8

-

35

28

Total Global Enterprises

140

78

309

316

Parent & Other

9

9

26

28

Consolidated Capital Expenditures and Investments

$ 341

$ 271

$ 852

$ 846






SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended

Nine months ended

September 30,

 

September 30,

CALIFORNIA UTILITIES

2004

 

2003

 

2004

 

2003

Revenues (Dollars in millions)

SDG&E (excludes intercompany sales)

$ 545

$ 662

$ 1,649

$ 1,735

SoCalGas (excludes intercompany sales)

$ 809

$ 784

$ 2,786

$ 2,594

Gas Sales (Bcf)

67

65

288

279

Transportation and Exchange (Bcf)

162

163

411

410

Total Deliveries (Bcf)

229

228

699

689

Total Gas Customers (Thousands)

6,271

6,188

Electric Sales (Millions of kWhs)

4,247

4,160

11,806

11,223

Direct Access (Millions of kWhs)

902

891

2,560

2,456

Total Deliveries (Millions of kWhs)

5,149

5,051

14,366

13,679

Total Electric Customers (Thousands)

1,312

1,293

RESOURCES

 

 

 

 

 

 

 

Power Sold (Millions of kWhs)

6,435

4,011

14,796

7,464

SOLUTIONS

 

 

 

 

 

 

 

Revenues (Dollars in millions)

$ 38

$ 37

$ 111

$ 134

INTERNATIONAL

(Represents 100% of these subsidiaries, although only the Mexican subsidiaries are 100% owned by Sempra Energy).

Natural Gas Sales (BCF)

Argentina

78

78

191

174

Mexico

13

11

33

30

Chile

1

1

2

2

Natural Gas Customers (Thousands)

Argentina

1,444

1,398

Mexico

99

90

Chile

37

36

Electric Sales (Millions of kWhs)

Peru

997

996

3,020

3,009

Chile

474

445

1,484

1,379

Electric Customers (Thousands)

Peru

744

727

Chile

504

492






SEMPRA ENERGY

Table E (Continued)

TRADING

 

 

 

 

 

Three months ended

Nine months ended

September 30,

September 30,

Trading Margin (Dollars in millions)

2004

2003

2004

2003

Geographical:

North America

$ 118

$ 111

$ 359

$ 262

Europe/Asia

53

24

173

97

Total

$ 171

$ 135

$ 532

$ 359

Product Line:

Gas

$ (13)

$ 21

$ 78

$ 113

Power

24

36

53

48

Oil - Crude & Products

107

27

196

77

Metals

17

21

125

47

Other

36

30

80

74

Total

$ 171

$ 135

$ 532

$ 359

Physical Statistics

 

 

 

 

 

Natural Gas (BCF/Day)

13.5

13.2

13.3

13.3

Electric (Billions of kWhs)

85.6

81.7

253.7

213.1

Oil & Liquid Products (Millions Bbls/Day)

2.5

1.4

2.1

1.6

Fair

Market Value

September 30,

Scheduled Maturity (in months)

Net Unrealized Revenue (Dollars in millions)

2004

0 - 12

13 - 24

25 - 36

> 36

Sources of Over-the-Counter (OTC) Fair Value:

Prices actively quoted

$ 623

$ 548

$ 50

$ (1)

$ 26

Prices provided by other external sources

1

(9)

10

Prices based on models and other valuation methods

(22)

(33)

 

 

11

Total OTC Fair Value (1)

602

506

50

(1)

47

Maturity of OTC Fair Value

Percentage

100.0%

84.1%

8.3%

-0.2%

7.8%

Cumulative Percentages

 

84.1%

92.4%

92.2%

100.0%

 

 

 

 

 

 

Exchange Contracts (2)

$ 188

$ 249

$ (58)

$ (1)

$ (2)

Total Net Unrealized Revenue

$ 790

(1) The present value of unrealized revenue to be received or (paid) from outstanding OTC contracts

(2) Cash received associated with open Exchange Contracts

September 30,

June 30,

March 31,

December 31,

September 30,

Credit Quality of Unrealized Trading Assets (net of margin)

2004

2004

2004

2003

2003

Commodity Exchanges

10%

8%

6%

8%

8%

Investment Grade

70%

71%

63%

70%

66%

Below Investment Grade

20%

21%

31%

22%

26%

Three months ended

Nine months ended

September 30,

September 30,

Risk Adjusted Performance Indicators

2004

2003

2004

2003

VaR at 95% (Dollars in millions) (1)

$ 8.4

$ 6.2

$ 6.9

$ 7.2

VaR at 99% (Dollars in millions) (2)

$ 11.9

$ 8.7

$ 9.7

$ 10.2

Risk Adjusted Return on Capital (RAROC) (3)

45%

17%

40%

20%

(1) Average Daily Value-at-Risk for the period using a 95% confidence level

(2) Average Daily Value-at-Risk for the period using a 99% confidence level

(3) Average Daily Trading Margin/Average Daily VaR at 95% confidence level