Sempra Energy/SDG&E/SoCalGas 03/31/2013 10-Q


  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
March 31, 2013
   
 
or
   
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from
   
to
 
     
 
Commission File No.
Exact Name of Registrants as Specified in their Charters, Address and Telephone Number
States of Incorporation
I.R.S. Employer
Identification Nos.
Former name, former address and former fiscal year, if changed since last report
1-14201
SEMPRA ENERGY
California
33-0732627
No change
 
101 Ash Street
     
 
San Diego, California 92101
     
 
(619)696-2000
     
         
1-03779
SAN DIEGO GAS & ELECTRIC COMPANY
California
95-1184800
No change
 
8326 Century Park Court
     
 
San Diego, California 92123
     
 
(619)696-2000
     
         
1-01402
SOUTHERN CALIFORNIA GAS COMPANY
California
95-1240705
No change
 
555 West Fifth Street
     
 
Los Angeles, California 90013
     
 
(213)244-1200
     
         
 
 
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
           
 
Yes
X
 
No
 

 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
           
Sempra Energy
Yes
X
 
No
 
San Diego Gas & Electric Company
Yes
X
 
No
 
Southern California Gas Company
Yes
X
 
No
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large
accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Sempra Energy
[  X  ]
[      ]
[       ]
[      ]
San Diego Gas & Electric Company
[       ]
[      ]
[  X  ]
[      ]
Southern California Gas Company
[       ]
[      ]
[  X  ]
[      ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
           
Sempra Energy
Yes
   
No
X
San Diego Gas & Electric Company
Yes
   
No
X
Southern California Gas Company
Yes
   
No
X
           
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
           
Common stock outstanding on April 29, 2013:
         
           
Sempra Energy
243,577,278 shares
San Diego Gas & Electric Company
Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company
Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy
 
 
 
 
 
 

 
SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
 
 
Page
Information Regarding Forward-Looking Statements
4
   
PART I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements
5
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
69
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
100
Item 4.
Controls and Procedures
101
     
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
102
Item 1A.
Risk Factors
102
Item 6.
Exhibits
102
     
Signatures
105
     

This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.

You should read this report in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Part I - Item 1 sections are provided for each reporting company, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companies are combined. All Items other than Part I – Item 1 are combined for the reporting companies.


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
 

We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
 
In this report, when we use words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “intends,” “depends,” “should,” “could,” “would,” “will,” “may,” “potential,” “target,” “pursue,” “goals,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, initiatives, objectives or intentions, we are making forward-looking statements.
 
Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include
 
§  
local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;
 
§  
actions and the timing of actions by the California Public Utilities Commission, California State Legislature, Federal Energy Regulatory Commission, U.S. Department of Energy, Nuclear Regulatory Commission, California Energy Commission, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
 
§  
capital markets conditions, including the availability of credit and the liquidity of our investments;
 
§  
inflation, interest and exchange rates;
 
§  
the impact of benchmark interest rates, generally Moody’s A-rated utility bond yields, on our California Utilities’ cost of capital;
 
§  
the timing and success of business development efforts and construction, maintenance and capital projects, including risks inherent in the ability to obtain, and the timing of granting of, permits, licenses, certificates and other authorizations;
 
§  
energy markets, including the timing and extent of changes and volatility in commodity prices;
 
§  
the availability of electric power, natural gas and liquefied natural gas, including disruptions caused by failures in the North American transmission grid, pipeline explosions and equipment failures;
 
§  
weather conditions, natural disasters, catastrophic accidents, and conservation efforts;
 
§  
risks inherent in nuclear power generation and radioactive materials storage, including the catastrophic release of such materials, the disallowance of the recovery of the investment in or operating costs of the generation facility due to an extended outage, and increased regulatory oversight;
 
§  
risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest;
 
§  
wars, terrorist attacks and cybersecurity threats;
 
§  
business, regulatory, environmental and legal decisions and requirements;
 
§  
expropriation of assets by foreign governments and title and other property disputes;
 
§  
the impact on reliability of SDG&E’s electric transmission and distribution system due to increased power supply from renewable energy sources;
 
§  
the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through our electric transmission and distribution system;
 
§  
the inability or determination not to enter into long-term supply and sales agreements or long-term firm capacity agreements;
 
§  
the resolution of litigation; and
 
§  
other uncertainties, all of which are difficult to predict and many of which are beyond our control.
 
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described in this report and in our Annual Report on Form 10-K and other reports that we file with the Securities and Exchange Commission.
 
 
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 

SEMPRA ENERGY
       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       
(Dollars in millions, except per share amounts)
       
     
   
Three months ended March 31,
   
2013 
2012 
   
(unaudited)
REVENUES
       
Utilities
$
 2,334 
$
 2,091 
Energy-related businesses
 
 316 
 
 292 
    Total revenues
 
 2,650 
 
 2,383 
EXPENSES AND OTHER INCOME
       
Utilities:
       
    Cost of natural gas
 
 (556)
 
 (431)
    Cost of electric fuel and purchased power
 
 (447)
 
 (388)
Energy-related businesses:
       
    Cost of natural gas, electric fuel and purchased power
 
 (111)
 
 (129)
    Other cost of sales
 
 (48)
 
 (33)
Operation and maintenance
 
 (724)
 
 (671)
Depreciation and amortization
 
 (295)
 
 (257)
Franchise fees and other taxes
 
 (106)
 
 (96)
Gain on sale of asset
 
 74 
 
 ― 
Equity earnings, before income tax
 
 10 
 
 12 
Other income, net
 
 37 
 
 75 
Interest income
 
 6 
 
 5 
Interest expense
 
 (138)
 
 (113)
Income before income taxes and equity earnings
       
    of certain unconsolidated subsidiaries
 
 352 
 
 357 
Income tax expense
 
 (178)
 
 (117)
Equity earnings, net of income tax
 
 4 
 
 11 
Net income
 
 178 
 
 251 
Losses (earnings) attributable to noncontrolling interests
 
 2 
 
 (13)
Preferred dividends of subsidiaries
 
 (2)
 
 (2)
Earnings
$
 178 
$
 236 
           
Basic earnings per common share
$
 0.73 
$
 0.98 
Weighted-average number of shares outstanding, basic (thousands)
 
 243,294 
 
 240,566 
           
Diluted earnings per common share
$
 0.72 
$
 0.97 
Weighted-average number of shares outstanding, diluted (thousands)
 
 247,534 
 
 243,761 
         
Dividends declared per share of common stock
$
 0.63 
$
 0.60 
See Notes to Condensed Consolidated Financial Statements.

 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
   
Three months ended March 31,
   
2013
 
2012
   
(unaudited)
     
Non-
     
Non-
 
   
Sempra
controlling
   
Sempra
controlling
 
   
Energy
Interests
Total
 
Energy
Interests
Total
Net income (loss)
$
 180 
$
 (2)
$
 178 
 
$
 238 
$
 13 
$
 251 
Other comprehensive income (loss), net of income tax:
                         
    Foreign currency translation adjustments
 
 10 
 
 (4)
 
 6 
   
 67 
 
 4 
 
 71 
    Net actuarial gain
 
 3 
 
 ― 
 
 3 
   
 1 
 
 ― 
 
 1 
    Financial instruments
 
 (14)
 
 3 
 
 (11)
   
 3 
 
 ― 
 
 3 
Total other comprehensive income (loss)
 
 (1)
 
 (1)
 
 (2)
   
 71 
 
 4 
 
 75 
Total comprehensive income (loss)
 
 179 
 
 (3)
 
 176 
   
 309 
 
 17 
 
 326 
Preferred dividends of subsidiaries
 
 (2)
 
 ― 
 
 (2)
   
 (2)
 
 ― 
 
 (2)
Total comprehensive income (loss), after preferred
                         
    dividends of subsidiaries
$
 177 
$
 (3)
$
 174 
 
$
 307 
$
 17 
$
 324 
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
 
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 1,471 
$
 475 
    Restricted cash
 
 57 
 
 46 
    Trade accounts receivable, net
 
 1,131 
 
 1,146 
    Other accounts and notes receivable, net
 
 198 
 
 153 
    Income taxes receivable
 
 73 
 
 56 
    Deferred income taxes
 
 28 
 
 148 
    Inventories
 
 270 
 
 408 
    Regulatory balancing accounts – undercollected
 
 411 
 
 395 
    Regulatory assets
 
 42 
 
 62 
    Fixed-price contracts and other derivatives
 
 88 
 
 95 
    U.S. Treasury grants receivable
 
 236 
 
 258 
    Asset held for sale, power plant
 
 ― 
 
 296 
    Other
 
 118 
 
 157 
        Total current assets
 
 4,123 
 
 3,695 
           
Investments and other assets:
       
    Restricted cash
 
 19 
 
 22 
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 1,167 
 
 1,151 
    Regulatory assets arising from wildfire litigation costs
 
 360 
 
 364 
    Other regulatory assets
 
 1,233 
 
 1,227 
    Nuclear decommissioning trusts
 
 952 
 
 908 
    Investments
 
 1,519 
 
 1,516 
    Goodwill
 
 1,113 
 
 1,111 
    Other intangible assets
 
 434 
 
 436 
    Sundry
 
 895 
 
 878 
        Total investments and other assets
 
 7,692 
 
 7,613 
           
Property, plant and equipment:
       
    Property, plant and equipment
 
 34,011 
 
 33,528 
    Less accumulated depreciation and amortization
 
 (8,553)
 
 (8,337)
        Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
            December 31, 2012, respectively, related to VIE)
 
 25,458 
 
 25,191 
Total assets
$
 37,273 
$
 36,499 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
 
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Short-term debt
$
 762 
$
 546 
    Accounts payable – trade
 
 874 
 
 976 
    Accounts payable – other
 
 116 
 
 134 
    Dividends and interest payable
 
 323 
 
 266 
    Accrued compensation and benefits
 
 217 
 
 337 
    Regulatory balancing accounts – overcollected
 
 294 
 
 141 
    Current portion of long-term debt
 
 1,381 
 
 725 
    Fixed-price contracts and other derivatives
 
 71 
 
 77 
    Customer deposits
 
 142 
 
 143 
    Reserve for wildfire litigation
 
 221 
 
 305 
    Other
 
 788 
 
 608 
        Total current liabilities
 
 5,189 
 
 4,258 
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012, respectively,
        related to VIE)
 
 10,680 
 
 11,621 
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 139 
 
 144 
    Pension and other postretirement benefit obligations, net of plan assets
 
 1,466 
 
 1,456 
    Deferred income taxes
 
 2,248 
 
 2,100 
    Deferred investment tax credits
 
 46 
 
 46 
    Regulatory liabilities arising from removal obligations
 
 2,783 
 
 2,720 
    Asset retirement obligations
 
 2,056 
 
 2,033 
    Fixed-price contracts and other derivatives
 
 254 
 
 252 
    Reserve for wildfire litigation
 
 45 
 
 22 
    Deferred credits and other
 
 1,027 
 
 1,085 
        Total deferred credits and other liabilities
 
 10,064 
 
 9,858 
Contingently redeemable preferred stock of subsidiary
 
 79 
 
 79 
           
Commitments and contingencies (Note 10)
       
           
Equity:
       
    Preferred stock (50 million shares authorized; none issued)
 
 ― 
 
 ― 
    Common stock (750 million shares authorized; 244 million and 242 million shares
       
        outstanding at March 31, 2013 and December 31, 2012, respectively; no par value)
 
 2,334 
 
 2,217 
    Retained earnings
 
 8,466 
 
 8,441 
    Accumulated other comprehensive income (loss)
 
 (377)
 
 (376)
        Total Sempra Energy shareholders’ equity
 
 10,423 
 
 10,282 
    Preferred stock of subsidiary
 
 20 
 
 20 
    Other noncontrolling interests
 
 818 
 
 381 
        Total equity
 
 11,261 
 
 10,683 
Total liabilities and equity
$
 37,273 
$
 36,499 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
   
Three months ended March 31,
   
2013 
2012 
   
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 178 
$
 251 
    Adjustments to reconcile net income to net cash provided
       
        by operating activities:
       
            Depreciation and amortization
 
 295 
 
 257 
            Deferred income taxes and investment tax credits
 
 252 
 
 31 
            Gain on sale of asset
 
 (74)
 
 ― 
            Equity earnings
 
 (14)
 
 (23)
            Fixed-price contracts and other derivatives
 
 17 
 
 (12)
            Other
 
 6 
 
 14 
    Net change in other working capital components
 
 149 
 
 168 
    Changes in other assets
 
 17 
 
 12 
    Changes in other liabilities
 
 9 
 
 1 
        Net cash provided by operating activities
 
 835 
 
 699 
           
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (531)
 
 (811)
    Expenditures for investments
 
 (5)
 
 (51)
    Proceeds from sale of asset
 
 371 
 
 ― 
    Distributions from investments
 
 15 
 
 8 
    Purchases of nuclear decommissioning and other trust assets
 
 (136)
 
 (134)
    Proceeds from sales by nuclear decommissioning and other trusts
 
 134 
 
 135 
    Decrease in restricted cash
 
 52 
 
 39 
    Increase in restricted cash
 
 (60)
 
 (40)
    Other
 
 (2)
 
 (5)
        Net cash used in investing activities
 
 (162)
 
 (859)
           
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Common dividends paid
 
 (145)
 
 (115)
    Preferred dividends paid by subsidiaries
 
 (2)
 
 (2)
    Issuances of common stock
 
 15 
 
 13 
    Repurchases of common stock
 
 (45)
 
 (16)
    Issuances of debt (maturities greater than 90 days)
 
 608 
 
 1,008 
    Payments on debt (maturities greater than 90 days)
 
 (645)
 
 (347)
    Proceeds from sale of noncontrolling interests, net of $25 in offering costs
 
 574 
 
 ― 
    Decrease in short-term debt, net
 
 (43)
 
 (224)
    Distributions to noncontrolling interests
 
 (1)
 
 (3)
    Other
 
 4 
 
 (4)
        Net cash provided by financing activities
 
 320 
 
 310 
         
Effect of exchange rate changes on cash and cash equivalents
 
 3 
 
 2 
           
Increase in cash and cash equivalents
 
 996 
 
 152 
Cash and cash equivalents, January 1
 
 475 
 
 252 
Cash and cash equivalents, March 31
$
 1,471 
$
 404 
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
   
Three months ended March 31,
 
2013 
2012 
 
(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 87 
$
 62 
    Income tax payments, net of refunds
 
 14 
 
 38 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
       
    Accrued capital expenditures
$
 275 
$
 336 
    U.S. Treasury grants receivable
 
 (22)
 
 17 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
       
    Dividends declared but not paid
$
 160 
$
 151 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
   
 
Three months ended March 31,
 
2013 
2012 
 
(unaudited)
Operating revenues
       
    Electric
$
 772 
$
 671 
    Natural gas
 
 167 
 
 163 
        Total operating revenues
 
 939 
 
 834 
Operating expenses
       
    Cost of electric fuel and purchased power
 
 209 
 
 163 
    Cost of natural gas
 
 76 
 
 67 
    Operation and maintenance
 
 297 
 
 268 
    Depreciation and amortization
 
 134 
 
 112 
    Franchise fees and other taxes
 
 55 
 
 46 
        Total operating expenses
 
 771 
 
 656 
Operating income
 
 168 
 
 178 
Other income, net
 
 11 
 
 30 
Interest income
 
 1 
 
 ― 
Interest expense
 
 (48)
 
 (36)
Income before income taxes
 
 132 
 
 172 
Income tax expense
 
 (51)
 
 (60)
Net income
 
 81 
 
 112 
Losses (earnings) attributable to noncontrolling interest
 
 11 
 
 (6)
Earnings
 
 92 
 
 106 
Preferred dividend requirements
 
 (1)
 
 (1)
Earnings attributable to common shares
$
 91 
$
 105 
See Notes to Condensed Consolidated Financial Statements.


 

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Three months ended March 31,
 
2013
 
2012
 
(unaudited)
   
Non-
     
Non-
 
   
controlling
     
controlling
 
 
SDG&E
Interest
Total
 
SDG&E
Interest
Total
Net income (loss)
$
 92 
$
 (11)
$
 81 
 
$
 106 
$
 6 
$
 112 
Other comprehensive income, net of income tax:
                         
    Financial instruments
 
 ― 
 
 3 
 
 3 
   
 ― 
 
 ― 
 
 ― 
Total other comprehensive income
 
 ― 
 
 3 
 
 3 
   
 ― 
 
 ― 
 
 ― 
Total comprehensive income (loss)
$
 92 
$
 (8)
$
 84 
 
$
 106 
$
 6 
$
 112 
See Notes to Condensed Consolidated Financial Statements.
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 106 
$
 87 
    Restricted cash
 
 15 
 
 10 
    Accounts receivable – trade, net
 
 259 
 
 252 
    Accounts receivable – other, net
 
 34 
 
 21 
    Due from unconsolidated affiliates
 
 1 
 
 39 
    Income taxes receivable
 
 ― 
 
 35 
    Deferred income taxes
 
 12 
 
 ― 
    Inventories
 
 81 
 
 82 
    Regulatory balancing accounts, net
 
 411 
 
 395 
    Regulatory assets arising from fixed-price contracts and other derivatives
 
 22 
 
 39 
    Other regulatory assets
 
 10 
 
 10 
    Fixed-price contracts and other derivatives
 
 45 
 
 41 
    Other
 
 43 
 
 76 
        Total current assets
 
 1,039 
 
 1,087 
           
Other assets:
       
    Restricted cash
 
 19 
 
 22 
    Deferred taxes recoverable in rates
 
 727 
 
 718 
    Regulatory assets arising from fixed-price contracts and other derivatives
 
 106 
 
 110 
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 307 
 
 303 
    Regulatory assets arising from wildfire litigation costs
 
 360 
 
 364 
    Other regulatory assets
 
 243 
 
 252 
    Nuclear decommissioning trusts
 
 952 
 
 908 
    Sundry
 
 143 
 
 117 
        Total other assets
 
 2,857 
 
 2,794 
           
Property, plant and equipment:
       
    Property, plant and equipment
 
 14,299 
 
 14,124 
    Less accumulated depreciation and amortization
 
 (3,343)
 
 (3,261)
        Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
            December 31, 2012, respectively, related to VIE)
 
 10,956 
 
 10,863 
Total assets
$
 14,852 
$
 14,744 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND EQUITY
       
Current liabilities:
       
    Accounts payable
$
 239 
$
 300 
    Due to unconsolidated affiliates
 
 35 
 
 19 
    Income taxes payable
 
 33 
 
 ― 
    Deferred income taxes
 
 ― 
 
 26 
    Dividends and interest payable
 
 55 
 
 36 
    Accrued compensation and benefits
 
 63 
 
 129 
    Current portion of long-term debt
 
 16 
 
 16 
    Fixed-price contracts and other derivatives
 
 47 
 
 56 
    Customer deposits
 
 58 
 
 60 
    Construction deposits
 
 51 
 
 51 
    Reserve for wildfire litigation
 
 221 
 
 305 
    Other
 
 170 
 
 106 
        Total current liabilities
 
 988 
 
 1,104 
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012,
    respectively, related to VIE)
 
 4,289 
 
 4,292 
           
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 18 
 
 17 
    Pension and other postretirement benefit obligations, net of plan assets
 
 345 
 
 340 
    Deferred income taxes
 
 1,714 
 
 1,636 
    Deferred investment tax credits
 
 26 
 
 25 
    Regulatory liabilities arising from removal obligations
 
 1,658 
 
 1,603 
    Asset retirement obligations
 
 744 
 
 733 
    Fixed-price contracts and other derivatives
 
 200 
 
 209 
    Reserve for wildfire litigation
 
 45 
 
 22 
    Deferred credits and other
 
 361 
 
 386 
        Total deferred credits and other liabilities
 
 5,111 
 
 4,971 
Contingently redeemable preferred stock
 
 79 
 
 79 
           
Commitments and contingencies (Note 10)
       
           
Equity:
       
    Common stock (255 million shares authorized; 117 million shares outstanding;
       
        no par value)
 
 1,338 
 
 1,338 
    Retained earnings
 
 2,986 
 
 2,895 
    Accumulated other comprehensive income (loss)
 
 (11)
 
 (11)
        Total SDG&E shareholder's equity
 
 4,313 
 
 4,222 
    Noncontrolling interest
 
 72 
 
 76 
        Total equity
 
 4,385 
 
 4,298 
Total liabilities and equity
$
 14,852 
$
 14,744 
(1)
Derived from audited financial statements.
       
See Notes to Condensed Consolidated Financial Statements.
       
 
 

 
 
SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Three months ended
March 31,
 
2013 
2012
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 81 
$
 112 
    Adjustments to reconcile net income to net cash provided by
       
        operating activities:
       
            Depreciation and amortization
 
 134 
 
 112 
            Deferred income taxes and investment tax credits
 
 36 
 
 152 
            Fixed-price contracts and other derivatives
 
 (2)
 
 (3)
            Other
 
 5 
 
 (27)
    Net change in other working capital components
 
 (2)
 
 (85)
    Changes in other assets
 
 4 
 
 8 
    Changes in other liabilities
 
 8 
 
 (3)
        Net cash provided by operating activities
 
 264 
 
 266 
         
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (237)
 
 (398)
    Purchases of nuclear decommissioning trust assets
 
 (135)
 
 (133)
    Proceeds from sales by nuclear decommissioning trusts
 
 134 
 
 131 
    Decrease in restricted cash
 
 17 
 
 37 
    Increase in restricted cash
 
 (19)
 
 (36)
        Net cash used in investing activities
 
 (240)
 
 (399)
         
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Preferred dividends paid
 
 (1)
 
 (1)
    Issuance of long-term debt
 
 ― 
 
 249 
    Payments on long-term debt
 
 (3)
 
 (3)
    Distributions to noncontrolling interests
 
 (1)
 
 ― 
    Other
 
 ― 
 
 (2)
        Net cash (used in) provided by financing activities
 
 (5)
 
 243 
         
Increase in cash and cash equivalents
 
 19 
 
 110 
Cash and cash equivalents, January 1
 
 87 
 
 29 
Cash and cash equivalents, March 31
$
 106 
$
 139 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 28 
$
 17 
    Income tax refunds
 
 ― 
 
 62 
         
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
       
    Accrued capital expenditures
$
 102 
$
 134 
         
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
       
    Dividends declared but not paid
$
 1 
$
 1 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
   
 
Three months ended March 31,
 
2013 
2012 
 
(unaudited)
         
Operating revenues
$
 983 
$
 880 
Operating expenses
       
    Cost of natural gas
 
 454 
 
 349 
    Operation and maintenance
 
 306 
 
 289 
    Depreciation and amortization
 
 100 
 
 87 
    Franchise fees and other taxes
 
 40 
 
 36 
        Total operating expenses
 
 900 
 
 761 
Operating income
 
 83 
 
 119 
Other income, net
 
 4 
 
 4 
Interest expense
 
 (17)
 
 (17)
Income before income taxes
 
 70 
 
 106 
Income tax expense
 
 (24)
 
 (40)
Net income/Earnings attributable to common shares
$
 46 
$
 66 
See Notes to Condensed Consolidated Financial Statements.

 

 

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
Three months ended March 31,
 
2013
 
2012
 
(unaudited)
Net income
$
 46 
 
$
 66 
Total other comprehensive income, net of income tax
 
 ― 
   
 ― 
Total comprehensive income
$
 46 
 
$
 66 
See Notes to Condensed Consolidated Financial Statements.
 
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
ASSETS
       
Current assets:
       
    Cash and cash equivalents
$
 72 
$
 83 
    Accounts receivable – trade, net
 
 466 
 
 539 
    Accounts receivable – other, net
 
 94 
 
 51 
    Due from unconsolidated affiliates
 
 276 
 
 24 
    Income taxes receivable
 
 96 
 
 104 
    Deferred income taxes
 
 ― 
 
 3 
    Inventories
 
 34 
 
 151 
    Regulatory assets
 
 4 
 
 4 
    Other
 
 26 
 
 35 
        Total current assets
 
 1,068 
 
 994 
         
Other assets:
       
    Regulatory assets arising from pension and other postretirement
       
        benefit obligations
 
 848 
 
 835 
    Other regulatory assets
 
 155 
 
 148 
    Sundry
 
 79 
 
 77 
        Total other assets
 
 1,082 
 
 1,060 
         
Property, plant and equipment:
       
    Property, plant and equipment
 
 11,317 
 
 11,187 
    Less accumulated depreciation and amortization
 
 (4,244)
 
 (4,170)
        Property, plant and equipment, net
 
 7,073 
 
 7,017 
Total assets
$
 9,223 
$
 9,071 
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
March 31,
December 31,
   
2013 
2012(1)
   
(unaudited)
   
LIABILITIES AND SHAREHOLDERS' EQUITY
       
Current liabilities:
       
    Accounts payable – trade
$
 282 
$
 383 
    Accounts payable – other
 
 70 
 
 82 
    Due to unconsolidated affiliate
 
 ― 
 
 37 
    Deferred income taxes
 
 8 
 
 ― 
    Accrued compensation and benefits
 
 94 
 
 116 
    Regulatory balancing accounts, net
 
 294 
 
 141 
    Current portion of long-term debt
 
 254 
 
 4 
    Customer deposits
 
 76 
 
 76 
    Temporary LIFO liquidation
 
 49 
 
 ― 
    Other
 
 155 
 
 124 
        Total current liabilities
 
 1,282 
 
 963 
Long-term debt
 
 1,159 
 
 1,409 
Deferred credits and other liabilities:
       
    Customer advances for construction
 
 106 
 
 111 
    Pension and other postretirement benefit obligations, net of plan assets
 
 867 
 
 855 
    Deferred income taxes
 
 897 
 
 881 
    Deferred investment tax credits
 
 20 
 
 20 
    Regulatory liabilities arising from removal obligations
 
 1,110 
 
 1,103 
    Asset retirement obligations
 
 1,247 
 
 1,238 
    Deferred credits and other
 
 254 
 
 256 
        Total deferred credits and other liabilities
 
 4,501 
 
 4,464 
         
Commitments and contingencies (Note 10)
       
         
Shareholders' equity:
       
    Preferred stock
 
 22 
 
 22 
    Common stock (100 million shares authorized; 91 million shares outstanding;
       
        no par value)
 
 866 
 
 866 
    Retained earnings
 
 1,411 
 
 1,365 
    Accumulated other comprehensive income (loss)
 
 (18)
 
 (18)
        Total shareholders' equity
 
 2,281 
 
 2,235 
Total liabilities and shareholders' equity
$
 9,223 
$
 9,071 
(1)
Derived from audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
 
 
 

 
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
Three months ended March 31,
 
2013 
2012 
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
       
    Net income
$
 46 
$
 66 
    Adjustments to reconcile net income to net cash provided by
       
        operating activities:
       
            Depreciation and amortization
 
 100 
 
 87 
            Deferred income taxes and investment tax credits
 
 18 
 
 14 
            Other
 
 ― 
 
 (1)
    Net change in other working capital components
 
 250 
 
 280 
    Changes in other assets
 
 3 
 
 3 
    Changes in other liabilities
 
 (6)
 
 ― 
        Net cash provided by operating activities
 
 411 
 
 449 
         
CASH FLOWS FROM INVESTING ACTIVITIES
       
    Expenditures for property, plant and equipment
 
 (179)
 
 (165)
    Increase in loans to affiliates, net
 
 (243)
 
 (200)
        Net cash used in investing activities
 
 (422)
 
 (365)
         
CASH FLOWS FROM FINANCING ACTIVITIES
       
    Common dividends paid
 
 ― 
 
 (50)
        Net cash used in financing activities
 
 ― 
 
 (50)
         
(Decrease) increase in cash and cash equivalents
 
 (11)
 
 34 
Cash and cash equivalents, January 1
 
 83 
 
 36 
Cash and cash equivalents, March 31
$
 72 
$
 70 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
       
    Interest payments, net of amounts capitalized
$
 12 
$
 5 
    Income tax refunds, net
 
 ― 
 
 17 
         
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
       
    Accrued capital expenditures
$
 76 
$
 64 
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
SEMPRA ENERGY AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 

NOTE 1. GENERAL
 

 
PRINCIPLES OF CONSOLIDATION
 
 
Sempra Energy
 
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 holding company, and its consolidated subsidiaries and variable interest entities (VIEs). Sempra Energy’s principal operating units are
 
§  
San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), which are separate, reportable segments;
 
§  
Sempra International, which includes our Sempra South American Utilities and Sempra Mexico reportable segments; and
 
§  
Sempra U.S. Gas & Power, which includes our Sempra Renewables and Sempra Natural Gas reportable segments.
 
We provide descriptions of each of our segments in Note 11.
 
We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include the utilities in our Sempra International and Sempra U.S. Gas & Power operating units. Sempra Global is the holding company for most of our subsidiaries that are not subject to California utility regulation. All references in these Notes to “Sempra International,” “Sempra U.S. Gas & Power” and their respective reportable segments are not intended to refer to any legal entity with the same or similar name.
 
In the first quarter of 2013, a Sempra Energy subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova),  completed a private offering and concurrent public offering of common stock in Mexico. IEnova is reported within the Sempra Mexico reportable segment. We discuss the offerings and IEnova further in Note 5.
 
Sempra Energy uses the equity method to account for investments in affiliated companies over which we have the ability to exercise significant influence, but not control. We discuss our investments in unconsolidated subsidiaries in Note 4 herein and in Note 4 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012.
 
 
SDG&E
 
SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E is the primary beneficiary, as we discuss in Note 5 under “Variable Interest Entities.” SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.
 
 
SoCalGas
 
SoCalGas’ Condensed Consolidated Financial Statements include its subsidiaries, which comprise less than one percent of its consolidated financial position and results of operations. SoCalGas’ common stock is wholly owned by Pacific Enterprises (PE), which is a wholly owned subsidiary of Sempra Energy.
 
 
BASIS OF PRESENTATION
 
This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
 
We have prepared the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) and in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year. We evaluated events and transactions that occurred after March 31, 2013 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation.  These adjustments are only of a normal, recurring nature.
 
All December 31, 2012 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2012 consolidated financial statements. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the Securities and Exchange Commission.
 
You should read the information in this Quarterly Report in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012 (the Annual Report) which is a combined report for Sempra Energy, SDG&E and SoCalGas.
 
Sempra South American Utilities has controlling interests in two electric distribution utilities in South America. Sempra Natural Gas owns Mobile Gas Service Corporation (Mobile Gas) in southwest Alabama and Willmut Gas Company (Willmut Gas) in Mississippi, and Sempra Mexico owns Ecogas Mexico, S. de R.L. de C.V. (Ecogas) in Northern Mexico, all natural gas distribution utilities. The California Utilities, Sempra Natural Gas’ Mobile Gas and Willmut Gas, and Sempra Mexico’s Ecogas prepare their financial statements in accordance with U.S. GAAP provisions governing regulated operations, as we discuss in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
 
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes, except for the adoption of new accounting standards as we discuss in Note 2.
 

 

NOTE 2. NEW ACCOUNTING STANDARDS
 

We describe below recent pronouncements that have had or may have a significant effect on our financial statements. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our financial condition, results of operations, cash flows or disclosures.
 
 
SEMPRA ENERGY, SDG&E AND SOCALGAS
 
Accounting Standards Update (ASU) 2011-11, “Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11) and ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (ASU 2013-01): In order to allow for balance sheet comparison between U.S. GAAP and International Financial Reporting Standards (IFRSs), ASU 2011-11 requires enhanced disclosures related to financial assets and liabilities eligible for offsetting in the statement of financial position.  An entity must disclose both gross and net information about financial instruments and transactions subject to a master netting arrangement and eligible for offset, including cash collateral received and posted.
 
ASU 2013-01 clarifies that the scope of ASU 2011-11 applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions.
 
We adopted ASU 2011-11 and ASU 2013-01 on January 1, 2013 as required and it did not affect our financial condition, results of operations or cash flows. We provide the additional disclosure in Note 7.
 
ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02): ASU 2013-02 requires an entity to present, either on the face of the statement of operations or in the notes to financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.
 
We adopted ASU 2013-02 on January 1, 2013 as required and it did not affect our financial condition, results of operations or cash flows. We provide the additional disclosure in Note 5.
 
ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (ASU 2013-04): The standard provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in the ASU also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations.
 
We will adopt ASU 2013-04 on January 1, 2014 as required and do not expect it to affect our financial condition, results of operations or cash flows.  We will provide the additional disclosure in our 2014 interim financial statements.
 

 

NOTE 3. ACQUISITION AND INVESTMENT ACTIVITY
 

We discuss our investments in unconsolidated entities in Note 4.
 
 
SEMPRA NATURAL GAS
 
 
Mesquite Power Sale
 
In February 2013, Sempra Natural Gas sold one 625-megawatt (MW) block of its 1,250-MW Mesquite Power natural gas-fired power plant in Arizona, including a portion related to common plant, for approximately $371 million in cash to the Salt River Project Agricultural Improvement and Power District (SRP). The asset was classified as held for sale at December 31, 2012 and we recognized a gain on the sale of $74 million in 2013. In connection with the sale, we entered into a 20-year operations and maintenance agreement with SRP on February 28, 2013, whereby SRP assumes plant operations and maintenance of the facility, including our remaining 625-MW block. We provide additional information concerning the operations and maintenance agreement in Note 10.
 
 
Willmut Gas Company
 
In May 2012, Sempra Natural Gas acquired 100 percent of the outstanding common stock of Willmut Gas, a regulated natural gas distribution utility serving approximately 20,000 customers in Hattiesburg, Mississippi, for $19 million in cash and the assumption of $10 million of liabilities. Pro forma impacts on revenues and earnings for Sempra Energy had the acquisition occurred on January 1, 2011 were additional revenues of $6 million and negligible earnings for the three months ended March 31, 2012.
 

 

NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIES
 

We provide additional information concerning all of our equity method investments in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
 
 
SEMPRA SOUTH AMERICAN UTILITIES
 
Sempra South American Utilities owns 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. As a result of the devaluation of the Argentine peso at the end of 2001 and subsequent changes in the value of the peso, Sempra South American Utilities reduced the carrying value of its investment by a cumulative total of $270 million as of March 31, 2013. These noncash adjustments, based on fluctuations in the value of the Argentine peso, did not affect earnings, but were recorded in Comprehensive Income and Accumulated Other Comprehensive Income (Loss).
 
In December 2006, we decided to sell our Argentine investments, and we continue to actively pursue their sale. We continue to evaluate the fair value of our investment based on several factors and as a result, recorded a noncash impairment charge of $10 million ($7 million after-tax) in the first quarter of 2013. The net charge is reported in Equity Earnings, Net of Income Tax on the Condensed Consolidated Statement of Operations for the three months ended March 31, 2013. The remaining carrying value of our investment is $20 million, excluding an $80 million deferred tax asset associated with the investment. We provide additional information concerning our investments in Sodigas Pampeana and Sodigas Sur in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
 
 
SEMPRA RENEWABLES
 
Sempra Renewables invested $5 million and $50 million in its renewable wind generation joint ventures in the three months ended March 31, 2013 and 2012, respectively.
 
 
RBS SEMPRA COMMODITIES
 
RBS Sempra Commodities LLP (RBS Sempra Commodities) is a United Kingdom limited liability partnership that owned and operated commodities-marketing businesses previously owned by us. We and our partner in the joint venture, The Royal Bank of Scotland plc (RBS), sold substantially all of the partnership’s businesses and assets in four separate transactions completed in 2010 and early 2011. We account for our investment in RBS Sempra Commodities under the equity method, and report our share of partnership earnings and other associated costs in Parent and Other.
 
In April 2011, we and RBS entered into a letter agreement (Letter Agreement) which amended certain provisions of the agreements that formed RBS Sempra Commodities. The Letter Agreement addresses the wind-down of the partnership and the distribution of the partnership’s remaining assets. The investment balance of $126 million at March 31, 2013 reflects remaining distributions expected to be received from the partnership in accordance with the Letter Agreement. The timing and amount of distributions may be impacted by the matters we discuss related to RBS Sempra Commodities in Note 10 under “Other Litigation.” In addition, amounts may be retained by the partnership for an extended period of time to help offset unanticipated future general and administrative costs necessary to complete the dissolution of the partnership.
 
In connection with the Letter Agreement described above, we also released RBS from its indemnification obligations with respect to the items for which J.P. Morgan Chase & Co. (JP Morgan), one of the buyers of the partnership’s businesses, has agreed to indemnify us.
 
We recorded no equity earnings or losses related to the partnership for the three months ended March 31, 2013 and 2012.
 
We discuss the RBS Sempra Commodities sales transactions, the Letter Agreement and other matters concerning the partnership in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
 

 
 

NOTE 5. OTHER FINANCIAL DATA
 

 
U.S. TREASURY GRANTS RECEIVABLE
 
As of March 31, 2013, Sempra Renewables has recorded grants receivable totaling $236 million. Based on eligible costs at its Mesquite Solar 1 and Copper Mountain Solar 2 generating facilities, the grants are recognized as receivables when the projects, or portions of projects, are placed into service. The grants are expected to be received in 2013. During the first quarter of 2013, the federal government imposed automatic federal budget cuts, known as “sequestration,” as required by The Budget Control Act of 2011. As a result, cash grant payments to eligible taxpayers for renewable energy projects were reduced, and Sempra Renewables recorded a reduction to its grants receivable of $23 million and a reversal of income tax benefit of $5 million during the first quarter of 2013.
 
 
TEMPORARY LIFO LIQUIDATION
 
SoCalGas values natural gas inventory by the last-in first-out (LIFO) method. As inventories are sold, differences between the LIFO valuation and the estimated replacement cost are reflected in customer rates. Temporary LIFO liquidation represents the difference between the carrying value of natural gas inventory withdrawn during the period for delivery to customers and the projected cost of the replacement of that inventory during summer months.
 

 
INVENTORIES
 
The components of inventories by segment are as follows:
 

INVENTORY BALANCES
(Dollars in millions)
   
Natural Gas
Liquefied Natural Gas
Materials and Supplies
Total
   
March 31, 2013
December 31, 2012
March 31, 2013
December 31, 2012
March 31, 2013
December 31, 2012
March 31, 2013
December 31, 2012
SDG&E
$
 1 
$
 3 
$
 ― 
$
 ― 
$
 80 
$
 79 
$
 81 
$
 82 
SoCalGas
 
 8 
 
 128 
 
 ― 
 
 ― 
 
 26 
 
 23 
 
 34 
 
 151 
Sempra South American
                               
     Utilities
 
 ― 
 
 ― 
 
 ― 
 
 ― 
 
 38 
 
 34 
 
 38 
 
 34 
Sempra Mexico
 
 ― 
 
 ― 
 
 7 
 
 8 
 
 12 
 
 8 
 
 19 
 
 16 
Sempra Renewables
 
 ― 
 
 ― 
 
 ― 
 
 ― 
 
 3 
 
 3 
 
 3 
 
 3 
Sempra Natural Gas
 
 84 
 
 109 
 
 6 
 
 8 
 
 5 
 
 5 
 
 95 
 
 122 
Sempra Energy Consolidated
$
 93 
$
 240 
$
 13 
$
 16 
$
 164 
$
 152 
$
 270 
$
 408 
   
 
 
GOODWILL
 
Goodwill is the excess of the purchase price over the fair value of the identifiable net assets of acquired companies measured at the time of acquisition. Goodwill is not amortized but is tested annually on October 1 for impairment or whenever events or changes in circumstances necessitate an evaluation. Impairment of goodwill occurs when the carrying amount (book value) of goodwill exceeds its implied fair value.  If the carrying value of the reporting unit, including goodwill, exceeds its fair value, and the book value of goodwill is greater than its fair value on the test date, we record a goodwill impairment loss.
 
Goodwill included on the Sempra Energy Condensed Consolidated Balance Sheets is recorded as follows:
 

GOODWILL
               
(Dollars in millions)
               
     
Sempra
           
     
South American
 
Sempra
 
Sempra
   
     
Utilities
 
Mexico
 
Natural Gas
 
Total
Balance at December 31, 2012
$
 1,014 
$
 25 
$
 72 
$
 1,111 
Foreign currency translation(1)
 
 2 
 
 ― 
 
 ― 
 
 2 
Balance at March 31, 2013
$
 1,016 
$
 25 
$
 72 
$
 1,113 
(1)
We record the offset of this fluctuation to other comprehensive income.
   

 
 
We provide additional information concerning goodwill in Notes 1 and 3 of the Notes to Consolidated Financial Statements in the Annual Report. 
 
 
VARIABLE INTEREST ENTITIES (VIE)
 
We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based upon qualitative and quantitative analyses, which assess
 
§  
the purpose and design of the VIE;
 
§  
the nature of the VIE’s risks and the risks we absorb;
 
§  
the power to direct activities that most significantly impact the economic performance of the VIE; and
 
§  
the obligation to absorb losses or right to receive benefits that could be significant to the VIE.
 

 
SDG&E
 
Tolling Agreements
 
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements).  SDG&E’s obligation to absorb natural gas costs may be a significant variable interest.  In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based upon our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If we determine that SDG&E is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE, as we discuss below.
 
Otay Mesa VIE
 
SDG&E has an agreement to purchase power generated at the Otay Mesa Energy Center (OMEC), a 605-MW generating facility. In addition to tolling, the agreement provides SDG&E with the option to purchase the power plant at the end of the contract term in 2019, or upon earlier termination of the purchased-power agreement, at a predetermined price subject to adjustments based on performance of the facility. If SDG&E does not exercise its option, under certain circumstances, it may be required to purchase the power plant at a predetermined price, which we refer to as the put option.
 
The facility owner, Otay Mesa Energy Center LLC (OMEC LLC), is a VIE (Otay Mesa VIE), of which SDG&E is the primary beneficiary.  SDG&E has no OMEC LLC voting rights and does not operate OMEC. In addition to the risks absorbed under the tolling agreement, SDG&E absorbs separately through the put option a significant portion of the risk that the value of Otay Mesa VIE could decline. SDG&E and Sempra Energy have consolidated Otay Mesa VIE since the second quarter of 2007. Otay Mesa VIE’s equity of $72 million at March 31, 2013 and $76 million at December 31, 2012 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interest for SDG&E.
 
OMEC LLC has a loan outstanding of $342 million at March 31, 2013, the proceeds of which were used for the construction of OMEC. The loan is with third party lenders and is secured by OMEC’s property, plant and equipment. SDG&E is not a party to the loan agreement and does not have any additional implicit or explicit financial responsibility to OMEC LLC. The loan fully matures in April 2019 and bears interest at rates varying with market rates. In addition, OMEC LLC has entered into interest rate swap agreements to moderate its exposure to interest rate changes. We provide additional information concerning the interest rate swaps in Note 7.
 
 
Other Variable Interest Entities
 
SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various power purchase arrangements which include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary. SDG&E has determined that no contracts, other than the one relating to Otay Mesa VIE mentioned above, result in SDG&E being the primary beneficiary as of March 31, 2013. In addition to the tolling agreements described above, other variable interests involve various elements of fuel and power costs, including certain construction costs, tax credits, and other components of cash flow expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects are not expected to significantly affect the financial position, results of operations, or liquidity of SDG&E. In addition, SDG&E is not exposed to losses or gains as a result of these other VIEs, because all such variability would be recovered in rates.
 
Sempra Energy’s other operating units also enter into arrangements which could include variable interests. We evaluate these arrangements and applicable entities based upon the qualitative and quantitative analyses described above. Certain of these entities are service companies that are VIEs. As the primary beneficiary of these service companies, we consolidate them. In all other cases, we have determined that these contracts are not variable interests in a VIE and therefore are not subject to the U.S. GAAP requirements concerning the consolidation of VIEs.
 
The Condensed Consolidated Statements of Operations of Sempra Energy and SDG&E include the following amounts associated with Otay Mesa VIE. The amounts are net of eliminations of transactions between SDG&E and Otay Mesa VIE. The financial statements of other consolidated VIEs are not material to the financial statements of Sempra Energy. The captions on the table below generally correspond to SDG&E’s Condensed Consolidated Statements of Operations.
 

AMOUNTS ASSOCIATED WITH OTAY MESA VIE
(Dollars in millions)
 
Three months ended March 31,
 
2013 
2012 
         
Operating revenues
       
    Electric
$
 (1)
$
 ― 
    Natural gas
 
 ― 
 
 ― 
        Total operating revenues
 
 (1)
 
 ― 
Operating expenses
       
    Cost of electric fuel and purchased power
 
 (17)
 
 (19)
    Operation and maintenance
 
 17 
 
 4 
    Depreciation and amortization
 
 7 
 
 6 
        Total operating expenses
 
 7 
 
 (9)
Operating (loss) income
 
 (8)
 
 9 
Interest expense
 
 (3)
 
 (3)
(Loss) income before income taxes/Net (loss) income
 
 (11)
 
 6 
Losses (earnings) attributable to noncontrolling interest
 
 11 
 
 (6)
   Earnings
$
 ― 
$
 ― 

We provide additional information regarding Otay Mesa VIE in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
 
 
PENSION AND OTHER POSTRETIREMENT BENEFITS
 
 
Net Periodic Benefit Cost
 
The following three tables provide the components of net periodic benefit cost:
 

NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 
Pension Benefits
Other Postretirement Benefits
 
Three months ended March 31,
Three months ended March 31,
 
2013 
2012 
2013 
2012 
Service cost
$
 27 
$
 23 
$
 7 
$
 8 
Interest cost
 
 37 
 
 41 
 
 11 
 
 14 
Expected return on assets
 
 (40)
 
 (39)
 
 (15)
 
 (13)
Amortization of:
               
    Prior service cost (credit)
 
 1 
 
 1 
 
 (1)
 
 ― 
    Actuarial loss
 
 15 
 
 12 
 
 2 
 
 3 
Regulatory adjustment
 
 (32)
 
 (30)
 
 2 
 
 3 
Total net periodic benefit cost
$
 8 
$
 8 
$
 6 
$
 15 


NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
 
Pension Benefits
Other Postretirement Benefits
 
Three months ended March 31,
Three months ended March 31,
 
2013 
2012 
2013 
2012 
Service cost
$
 8 
$
 7 
$
 2 
$
 2 
Interest cost
 
 10 
 
 12 
 
 2 
 
 2 
Expected return on assets
 
 (13)
 
 (12)
 
 (2)
 
 (1)
Amortization of:
               
    Prior service cost
 
 ― 
 
 ― 
 
 1 
 
 1 
    Actuarial loss
 
 4 
 
 4 
 
 ― 
 
 ― 
Regulatory adjustment
 
 (8)
 
 (10)
 
 ― 
 
 ― 
Total net periodic benefit cost
$
 1 
$
 1 
$
 3 
$
 4 

NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 
Pension Benefits
Other Postretirement Benefits
 
Three months ended March 31,
Three months ended March 31,
 
2013 
2012 
2013 
2012 
Service cost
$
 16 
$
 13 
$
 4 
$
 5 
Interest cost
 
 23 
 
 25 
 
 9 
 
 11 
Expected return on assets
 
 (25)
 
 (24)
 
 (12)
 
 (11)
Amortization of:
               
    Prior service cost (credit)
 
 1 
 
 1 
 
 (2)
 
 (1)
    Actuarial loss
 
 9 
 
 6 
 
 2 
 
 3 
Regulatory adjustment
 
 (24)
 
 (20)
 
 2 
 
 3 
Total net periodic benefit cost
$
 ― 
$
 1 
$
 3 
$
 10 
 
 
Benefit Plan Contributions
 
The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2013:
 

 
Sempra Energy
   
(Dollars in millions)
Consolidated
SDG&E
SoCalGas
Contributions through March 31, 2013:
           
    Pension plans
$
 11 
$
 ― 
$
 2 
    Other postretirement benefit plans
 
 7 
 
 3 
 
 3 
Total expected contributions in 2013:
           
    Pension plans
$
 154 
$
 57 
$
 70 
    Other postretirement benefit plans
 
 26 
 
 11 
 
 11 
 
 
RABBI TRUST
 
In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including investments in life insurance contracts, in a Rabbi Trust, which trust totaled $492 million and $510 million at March 31, 2013 and December 31, 2012, respectively.
 
 
EARNINGS PER SHARE
 
The following table provides the per share computations for our earnings for the three months ended March 31, 2013 and 2012. Basic earnings per common share (EPS) is calculated by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
 

EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
   
Three months ended March 31,
   
2013 
2012 
Numerator:
       
    Earnings/Income attributable to common shareholders
$
 178 
$
 236 
         
Denominator:
       
    Weighted-average common shares outstanding for basic EPS
 
 243,294 
 
 240,566 
    Dilutive effect of stock options, restricted stock awards and restricted stock units
 
 4,240 
 
 3,195 
    Weighted-average common shares outstanding for diluted EPS
 
 247,534 
 
 243,761 
 
       
Earnings per share:
       
    Basic
$
 0.73 
$
 0.98 
    Diluted
$
 0.72 
$
 0.97 

 
The dilution from common stock options is based on the treasury stock method. Under this method, proceeds based on the exercise price plus unearned compensation and windfall tax benefits recognized and minus tax shortfalls recognized are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits are tax deductions we would receive upon the assumed exercise of stock options in excess of the deferred income taxes we recorded related to the compensation expense on the stock options. Tax shortfalls occur when the assumed tax deductions are less than recorded deferred income taxes. The calculation excludes options for which the exercise price on common stock was greater than the average market price during the period (out-of-the-money options). We had no such antidilutive stock options outstanding during the three months ended March 31, 2013 and 767,833 such options outstanding during the three months ended March 31, 2012.
 
We had no stock options outstanding during either the three months ended March 31, 2013 or 2012 that were antidilutive because of the unearned compensation and windfall tax benefits included in the assumed proceeds under the treasury stock method.
 
The dilution from unvested restricted stock awards (RSAs) and restricted stock units (RSUs) is also based on the treasury stock method. Proceeds equal to the unearned compensation and windfall tax benefits recognized and minus tax shortfalls recognized related to the awards and units are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits recognized or tax shortfalls recognized are the difference between tax deductions we would receive upon the assumed vesting of RSAs or RSUs and the deferred income taxes we recorded related to the compensation expense on such awards and units.  There were 774 antidilutive RSUs from the application of unearned compensation in the treasury stock method for the three months ended March 31, 2013 and no such antidilutive RSUs for the three months ended March 31, 2012. There were 3,090 and 15,932 such antidilutive RSAs for the three months ended March 31, 2013 and 2012, respectively.
 
Each performance-based RSU represents the right to receive between zero and 1.5 shares of Sempra Energy common stock based on Sempra Energy’s four-year cumulative total shareholder return compared to the Standard & Poor’s (S&P) 500 Utilities Index, as follows:
 
 
Four-Year Cumulative Total Shareholder Return Ranking versus S&P 500 Utilities Index(1)
  Number of Sempra Energy Common Shares Received for Each Restricted Stock Unit(2)
75th Percentile or Above
1.5 
50th Percentile
35th Percentile or Below
(1)
If Sempra Energy ranks at or above the 50th percentile compared to the S&P 500 Index, participants will receive a minimum of 1.0 share for each restricted stock unit.
(2)
Participants may also receive additional shares for dividend equivalents on shares subject to restricted stock units, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.

 

RSAs have a maximum potential of 100 percent vesting. We include our performance-based RSUs in potential dilutive shares at zero to 150 percent to the extent that they currently meet the performance requirements for vesting, subject to the application of the treasury stock method. Due to market fluctuations of both Sempra Energy stock and the comparative index, dilutive RSU shares may vary widely from period-to-period. We include our RSAs, which are solely service-based, in potential dilutive shares at 100 percent.
 
RSUs and RSAs may be excluded from potential dilutive shares by the application of unearned compensation in the treasury stock method, as we discuss above, or because performance goals are currently not met.  The maximum excluded RSAs and RSUs, assuming performance goals were met at maximum levels, were 1,659,995 and 3,191,073 for the three months ended March 31, 2013 and 2012, respectively.
 
 
SHARE-BASED COMPENSATION
 
We discuss our share-based compensation plans in Note 9 of the Notes to Consolidated Financial Statements in the Annual Report. We recorded share-based compensation expense, net of income taxes, of $6 million and $5 million for the three months ended March 31, 2013 and 2012, respectively. Pursuant to our share-based compensation plans, we granted 645,502 performance-based RSUs, 103,222 service-based RSUs and 4,617 RSAs during the three months ended March 31, 2013, primarily in January.
 
 
CAPITALIZED FINANCING COSTS
 
Capitalized financing costs include capitalized interest costs and, primarily at the California Utilities, an allowance for funds used during construction (AFUDC) related to both debt and equity financing of construction projects.  The following table shows capitalized financing costs for the three months ended March 31, 2013 and 2012.
 

CAPITALIZED FINANCING COSTS
(Dollars in millions)
 
Three months ended March 31,
 
2013 
2012 
Sempra Energy Consolidated:
       
    AFUDC related to debt
$
 6 
$
 14 
    AFUDC related to equity
 
 15 
 
 35 
    Other capitalized financing costs
 
 5 
 
 11 
        Total Sempra Energy Consolidated
$
 26 
$
 60 
SDG&E:
       
    AFUDC related to debt
$
 4 
$
 12 
    AFUDC related to equity
 
 10 
 
 29 
        Total SDG&E
$
 14 
$
 41 
SoCalGas:
       
    AFUDC related to debt
$
 2 
$
 2 
    AFUDC related to equity
 
 5 
 
 6 
        Total SoCalGas
$
 7 
$
 8 


 
COMPREHENSIVE INCOME
 
The following tables present the changes in Accumulated Other Comprehensive Income by component and amounts reclassified out of Accumulated Other Comprehensive Income (Loss) to net income, excluding amounts attributable to noncontrolling interests:
 

CHANGES IN COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (1)
(Dollars in millions)
   
Foreign
         
Total
   
Currency
Unamortized
Unamortized
 
Accumulated Other
   
Translation
Net
Prior Service
Financial
Comprehensive
   
Adjustments
Actuarial Loss
Credit
Instruments
Income (Loss)
Sempra Energy Consolidated:
                   
Balance as of December 31, 2012
$
 (240)
$
 (102)
$
 1 
$
 (35)
$
 (376)
Other comprehensive income (loss) before
                   
   reclassifications
 
 10 
 
 ― 
 
 ― 
 
 (16)
 
 (6)
Amounts reclassified from accumulated other
                   
   comprehensive income
 
 ― 
 
 3 
 
 ― 
 
 2 
 
 5 
Net other comprehensive income (loss)
 
 10 
 
 3 
 
 ― 
 
 (14)
 
 (1)
Balance as of March 31, 2013
$
 (230)
$
 (99)
$
 1 
$
 (49)
$
 (377)
(1)
All amounts are net of income tax, if subject to tax, and exclude noncontrolling interests.
 
 

 
RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Three months ended March 31, 2013
 
Amount reclassified
 
Details about accumulated
from accumulated other
Affected line item
other comprehensive income components
comprehensive income (loss)
on Condensed Consolidated Statement of Operations
Sempra Energy Consolidated:
               
Financial instruments:
               
    Interest rate instruments
 
$
 3 
 
Interest Expense
    Interest rate instruments
   
 2 
 
Equity Earnings, Before Income Tax
Total Before Income Tax
 
 5 
   
         
 (1)
 
Income Tax Expense
Net of Income Tax
 
 4 
   
         
 (2)
 
Earnings Attributable to Noncontrolling Interests
       
$
 2 
         
                     
Amortization of defined benefit pension
               
   and postretirement benefits items:
               
 
Actuarial loss
 
$
 5 
 
(1)
         
 (2)
 
Income Tax Expense
Net of Income Tax
$
 3 
   
SDG&E:
               
Financial instruments:
               
    Interest rate instruments
 
$
 2 
 
Interest Expense
         
 (2)
 
Earnings Attributable to Noncontrolling Interest
       
$
 ― 
         
(1)
Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).

 
 
For the three months ended March 31, 2013, Other Comprehensive Income, excluding amounts attributable to noncontrolling interests, at SDG&E and SoCalGas was negligible and reclassifications out of Accumulated Other Comprehensive Income (Loss) to Net Income were negligible as well for SoCalGas.
 

The amounts for comprehensive income in the Condensed Consolidated Statements of Comprehensive Income are net of income tax expense (benefit) as follows:
 

INCOME TAX EXPENSE (BENEFIT) ASSOCIATED WITH OTHER COMPREHENSIVE INCOME
(Dollars in millions)
     
Three months ended March 31,
     
2013 
 
2012 
     
Sempra
         
Sempra
       
     
Energy
         
Energy
       
     
Share-
Non-
   
Share-
Non-
 
     
holders'
controlling
Total
 
holders'
controlling
Total
     
Equity
Interests
Equity
 
Equity
Interests
Equity
Sempra Energy Consolidated:
                         
 
Other comprehensive income before
                         
   
reclassifications:
                         
   
    Financial instruments
$
 (7)
$
 ― 
$
 (7)
 
$
 2 
$
 ― 
$
 2 
                               
 
Amounts reclassified from accumulated other
                         
   
comprehensive income:
                         
   
    Pension and other postretirement benefits
$
 2 
$
 ― 
$
 2 
 
$
 1 
$
 ― 
$
 1 
   
    Financial instruments
 
 1 
 
 ― 
 
 1 
   
 1 
 
 ― 
 
 1 

Income tax amounts associated with other comprehensive income during the three months ended March 31, 2013 and 2012 at SDG&E and SoCalGas were negligible.
 

 
SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
 
The following two tables provide a reconciliation of Sempra Energy’s and SDG&E’s shareholders’ equity and noncontrolling interests for the three months ended March 31, 2013 and 2012.
 

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
(Dollars in millions)
   
Sempra
       
   
Energy
 
Non-
   
   
Shareholders’
 
controlling
 
Total
   
Equity
 
Interests
 
Equity
Balance at December 31, 2012
$
 10,282 
$
 401 
$
 10,683 
Comprehensive income (loss)
 
 179 
 
 (3)
 
 176 
Preferred dividends of subsidiaries
 
 (2)
 
 ― 
 
 (2)
Share-based compensation expense
 
 10 
 
 ― 
 
 10 
Common stock dividends declared
 
 (153)
 
 ― 
 
 (153)
Issuance of common stock
 
 15 
 
 ― 
 
 15 
Repurchase of common stock
 
 (45)
 
 ― 
 
 (45)
Tax benefit related to share-based compensation
 
 2 
 
 ― 
 
 2 
Sale of noncontrolling interests, net of offering costs
 
 135 
 
 439 
 
 574 
Equity contributed by noncontrolling interest
 
 ― 
 
 4 
 
 4 
Distributions to noncontrolling interests
 
 ― 
 
 (3)
 
 (3)
Balance at March 31, 2013
$
 10,423 
$
 838 
$
 11,261 
Balance at December 31, 2011
$