|
|
||||||||||||
|
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, 2014
|
|||||||||||
|
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 28, 2014:
|
||||||||||||
|
Sempra Energy
|
245,426,641 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
|
66
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
96
|
|
Item 4.
|
Controls and Procedures
|
97
|
|
PART II – OTHER INFORMATION
|
||
|
Item 1.
|
Legal Proceedings
|
98
|
|
Item 1A.
|
Risk Factors
|
98
|
|
Item 6.
|
Exhibits
|
99
|
|
Signatures
|
101
|
|
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.
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,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, opportunities, projections, 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, including issuances of permits to construct and licenses for operation, by the California Public Utilities Commission, California State Legislature, U.S. Department of Energy, Federal Energy Regulatory Commission, Nuclear Regulatory Commission, Atomic Safety and Licensing Board, 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;
|
|
§
|
the timing and success of business development efforts and construction, maintenance and capital projects, including risks in obtaining permits, licenses, certificates and other authorizations on a timely basis and risks in obtaining adequate and competitive financing for such projects;
|
|
§
|
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;
|
|
§
|
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 and the decommissioning of San Onofre Nuclear Generating Station (SONGS);
|
|
§
|
weather conditions, natural disasters, catastrophic accidents, and conservation efforts;
|
|
§
|
risks inherent with nuclear power facilities 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 nuclear facility due to an extended outage and facility closure, and increased regulatory oversight;
|
|
§
|
risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments;
|
|
§
|
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 that threaten system operations and critical infrastructure, and cybersecurity threats to the energy grid and the confidentiality of our proprietary information and the personal information of our customers;
|
|
§
|
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 San Diego Gas & Electric Company’s (SDG&E) electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources;
|
|
§
|
the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through SDG&E’s electric transmission and distribution system;
|
|
§
|
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 most recent Annual Report on Form 10-K filed 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,
|
|||
|
|
|
2014
|
2013
|
||
|
|
|
(unaudited)
|
|||
|
REVENUES
|
|
|
|
|
|
|
Utilities
|
$
|
2,485
|
$
|
2,334
|
|
|
Energy-related businesses
|
|
310
|
|
316
|
|
|
Total revenues
|
|
2,795
|
|
2,650
|
|
|
EXPENSES AND OTHER INCOME
|
|
|
|
|
|
|
Utilities:
|
|
|
|
|
|
|
Cost of natural gas
|
|
(620)
|
|
(556)
|
|
|
Cost of electric fuel and purchased power
|
|
(510)
|
|
(447)
|
|
|
Energy-related businesses:
|
|
|
|
|
|
|
Cost of natural gas, electric fuel and purchased power
|
|
(138)
|
|
(111)
|
|
|
Other cost of sales
|
|
(38)
|
|
(48)
|
|
|
Operation and maintenance
|
|
(676)
|
|
(724)
|
|
|
Depreciation and amortization
|
|
(286)
|
|
(295)
|
|
|
Franchise fees and other taxes
|
|
(105)
|
|
(106)
|
|
|
Gain on sale of equity interest and assets
|
|
27
|
|
74
|
|
|
Adjustment to loss from plant closure
|
|
13
|
|
―
|
|
|
Equity earnings, before income tax
|
|
17
|
|
10
|
|
|
Other income, net
|
|
40
|
|
37
|
|
|
Interest income
|
|
4
|
|
6
|
|
|
Interest expense
|
|
(136)
|
|
(138)
|
|
|
Income before income taxes and equity earnings
|
|
|
|
|
|
|
of certain unconsolidated subsidiaries
|
|
387
|
|
352
|
|
|
Income tax expense
|
|
(127)
|
|
(178)
|
|
|
Equity earnings, net of income tax
|
|
6
|
|
4
|
|
|
Net income
|
|
266
|
|
178
|
|
|
(Earnings) losses attributable to noncontrolling interests
|
|
(19)
|
|
2
|
|
|
Preferred dividends of subsidiaries
|
|
―
|
|
(2)
|
|
|
Earnings
|
$
|
247
|
$
|
178
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
1.01
|
$
|
0.73
|
|
|
Weighted-average number of shares outstanding, basic (thousands)
|
|
245,277
|
|
243,294
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
$
|
0.99
|
$
|
0.72
|
|
|
Weighted-average number of shares outstanding, diluted (thousands)
|
|
249,669
|
|
247,534
|
|
|
Dividends declared per share of common stock
|
$
|
0.66
|
$
|
0.63
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SEMPRA ENERGY
|
|||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||||||||
|
(Dollars in millions)
|
|||||||||||
|
|
|
Three months ended March 31, 2014 and 2013
|
|||||||||
|
|
|
(unaudited)
|
|||||||||
|
|
|
Sempra Energy Shareholders' Equity
|
|
|
|
|
|||||
|
|
|
Pretax
|
Income Tax
|
Net-of-Tax
|
Noncontrolling
|
|
|||||
|
|
|
Amount
|
(Expense) Benefit
|
Amount
|
Interests (After-Tax)
|
Total
|
|||||
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
374
|
$
|
(127)
|
$
|
247
|
$
|
19
|
$
|
266
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
(43)
|
|
―
|
|
(43)
|
|
(2)
|
|
(45)
|
|
|
Pension and other postretirement benefits
|
|
5
|
|
(2)
|
|
3
|
|
―
|
|
3
|
|
|
Financial instruments
|
|
(8)
|
|
3
|
|
(5)
|
|
―
|
|
(5)
|
|
|
Total other comprehensive income (loss)
|
|
(46)
|
|
1
|
|
(45)
|
|
(2)
|
|
(47)
|
|
|
Comprehensive income
|
$
|
328
|
$
|
(126)
|
$
|
202
|
$
|
17
|
$
|
219
|
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
358
|
$
|
(178)
|
$
|
180
|
$
|
(2)
|
$
|
178
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
10
|
|
―
|
|
10
|
|
(4)
|
|
6
|
|
|
Pension and other postretirement benefits
|
|
5
|
|
(2)
|
|
3
|
|
―
|
|
3
|
|
|
Financial instruments
|
|
(20)
|
|
6
|
|
(14)
|
|
3
|
|
(11)
|
|
|
Total other comprehensive income (loss)
|
|
(5)
|
|
4
|
|
(1)
|
|
(1)
|
|
(2)
|
|
|
Comprehensive income (loss)
|
|
353
|
|
(174)
|
|
179
|
|
(3)
|
|
176
|
|
|
Preferred dividends of subsidiaries
|
|
(2)
|
|
―
|
|
(2)
|
|
―
|
|
(2)
|
|
|
Comprehensive income (loss), after preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends of subsidiaries
|
$
|
351
|
$
|
(174)
|
$
|
177
|
$
|
(3)
|
$
|
174
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||||||||
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
2014
|
2013(1)
|
|||
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
844
|
$
|
904
|
|
|
Restricted cash
|
|
26
|
|
24
|
|
|
Trade accounts receivable, net
|
|
1,230
|
|
1,308
|
|
|
Other accounts and notes receivable, net
|
|
175
|
|
214
|
|
|
Due from unconsolidated affiliates
|
|
2
|
|
4
|
|
|
Income taxes receivable
|
|
88
|
|
85
|
|
|
Deferred income taxes
|
|
375
|
|
301
|
|
|
Inventories
|
|
197
|
|
287
|
|
|
Regulatory balancing accounts – undercollected
|
|
665
|
|
556
|
|
|
Other regulatory assets
|
|
35
|
|
38
|
|
|
Fixed-price contracts and other derivatives
|
|
114
|
|
106
|
|
|
Asset held for sale, power plant
|
|
293
|
|
―
|
|
|
Other
|
|
180
|
|
170
|
|
|
Total current assets
|
|
4,224
|
|
3,997
|
|
|
|
|
|
|
|
|
|
Investments and other assets:
|
|
|
|
|
|
|
Restricted cash
|
|
27
|
|
25
|
|
|
Due from unconsolidated affiliate
|
|
31
|
|
14
|
|
|
Regulatory assets arising from pension and other postretirement
|
|
|
|
|
|
|
benefit obligations
|
|
454
|
|
435
|
|
|
Other regulatory assets
|
|
2,039
|
|
2,113
|
|
|
Nuclear decommissioning trusts
|
|
1,055
|
|
1,034
|
|
|
Investments
|
|
1,634
|
|
1,575
|
|
|
Goodwill
|
|
999
|
|
1,024
|
|
|
Other intangible assets
|
|
423
|
|
426
|
|
|
Sundry
|
|
1,146
|
|
1,141
|
|
|
Total investments and other assets
|
|
7,808
|
|
7,787
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
34,463
|
|
34,407
|
|
|
Less accumulated depreciation and amortization
|
|
(9,011)
|
|
(8,947)
|
|
|
Property, plant and equipment, net ($431 and $438 at March 31, 2014 and
December 31, 2013, respectively, related to VIE)
|
|
25,452
|
|
25,460
|
|
|
Total assets
|
$
|
37,484
|
$
|
37,244
|
|
|
(1)
|
Derived from audited financial statements.
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
2014
|
2013(1)
|
|||
|
|
|
(unaudited)
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term debt
|
$
|
1,084
|
$
|
545
|
|
|
Accounts payable – trade
|
|
1,062
|
|
1,088
|
|
|
Accounts payable – other
|
|
138
|
|
127
|
|
|
Dividends and interest payable
|
|
322
|
|
271
|
|
|
Accrued compensation and benefits
|
|
260
|
|
376
|
|
|
Regulatory balancing accounts – overcollected
|
|
88
|
|
91
|
|
|
Current portion of long-term debt
|
|
97
|
|
1,147
|
|
|
Fixed-price contracts and other derivatives
|
|
54
|
|
55
|
|
|
Customer deposits
|
|
155
|
|
154
|
|
|
Other
|
|
615
|
|
515
|
|
|
Total current liabilities
|
|
3,875
|
|
4,369
|
|
|
Long-term debt ($322 and $325 at March 31, 2014 and December 31, 2013, respectively,
related to VIE)
|
|
11,700
|
|
11,253
|
|
|
|
|
|
|
|
|
|
Deferred credits and other liabilities:
|
|
|
|
|
|
|
Customer advances for construction
|
|
158
|
|
155
|
|
|
Pension and other postretirement benefit obligations, net of plan assets
|
|
679
|
|
667
|
|
|
Deferred income taxes
|
|
2,958
|
|
2,804
|
|
|
Deferred investment tax credits
|
|
41
|
|
42
|
|
|
Regulatory liabilities arising from removal obligations
|
|
2,624
|
|
2,623
|
|
|
Asset retirement obligations
|
|
2,127
|
|
2,084
|
|
|
Fixed-price contracts and other derivatives
|
|
238
|
|
228
|
|
|
Deferred credits and other
|
|
1,195
|
|
1,169
|
|
|
Total deferred credits and other liabilities
|
|
10,020
|
|
9,772
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
Preferred stock (50 million shares authorized; none issued)
|
|
―
|
|
―
|
|
|
Common stock (750 million shares authorized; 245 million and 244 million shares
|
|
|
|
|
|
|
outstanding at March 31, 2014 and December 31, 2013, respectively; no par value)
|
|
2,401
|
|
2,409
|
|
|
Retained earnings
|
|
8,912
|
|
8,827
|
|
|
Accumulated other comprehensive income (loss)
|
|
(273)
|
|
(228)
|
|
|
Total Sempra Energy shareholders’ equity
|
|
11,040
|
|
11,008
|
|
|
Preferred stock of subsidiary
|
|
20
|
|
20
|
|
|
Other noncontrolling interests
|
|
829
|
|
822
|
|
|
Total equity
|
|
11,889
|
|
11,850
|
|
|
Total liabilities and equity
|
$
|
37,484
|
$
|
37,244
|
|
|
(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,
|
|||
|
|
|
2014
|
2013
|
||
|
|
|
(unaudited)
|
|||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income
|
$
|
266
|
$
|
178
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
286
|
|
295
|
|
|
Deferred income taxes and investment tax credits
|
|
95
|
|
252
|
|
|
Gain on sale of equity interest and assets
|
|
(27)
|
|
(74)
|
|
|
Adjustment to loss from plant closure
|
|
(13)
|
|
―
|
|
|
Equity earnings
|
|
(23)
|
|
(14)
|
|
|
Fixed-price contracts and other derivatives
|
|
(3)
|
|
17
|
|
|
Other
|
|
(24)
|
|
6
|
|
|
Net change in other working capital components
|
|
234
|
|
149
|
|
|
Changes in other assets
|
|
94
|
|
17
|
|
|
Changes in other liabilities
|
|
19
|
|
9
|
|
|
Net cash provided by operating activities
|
|
904
|
|
835
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(801)
|
|
(531)
|
|
|
Expenditures for investments
|
|
(12)
|
|
(5)
|
|
|
Proceeds from sale of equity interest and assets, net of cash sold
|
|
66
|
|
371
|
|
|
Distributions from investments
|
|
3
|
|
15
|
|
|
Purchases of nuclear decommissioning and other trust assets
|
|
(198)
|
|
(136)
|
|
|
Proceeds from sales by nuclear decommissioning and other trusts
|
|
195
|
|
134
|
|
|
Decrease in restricted cash
|
|
23
|
|
52
|
|
|
Increase in restricted cash
|
|
(27)
|
|
(60)
|
|
|
Advances to unconsolidated affiliates
|
|
(17)
|
|
―
|
|
|
Other
|
|
(2)
|
|
(2)
|
|
|
Net cash used in investing activities
|
|
(770)
|
|
(162)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Common dividends paid
|
|
(154)
|
|
(145)
|
|
|
Preferred dividends paid by subsidiaries
|
|
―
|
|
(2)
|
|
|
Issuances of common stock
|
|
11
|
|
15
|
|
|
Repurchases of common stock
|
|
(37)
|
|
(45)
|
|
|
Issuances of debt (maturities greater than 90 days)
|
|
1,188
|
|
608
|
|
|
Payments on debt (maturities greater than 90 days)
|
|
(1,138)
|
|
(645)
|
|
|
Proceeds from sale of noncontrolling interests, net of $25 in offering costs
|
|
―
|
|
574
|
|
|
Decrease in short-term debt, net
|
|
(69)
|
|
(43)
|
|
|
Other
|
|
6
|
|
3
|
|
|
Net cash (used in) provided by financing activities
|
|
(193)
|
|
320
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(1)
|
|
3
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
(60)
|
|
996
|
|
|
Cash and cash equivalents, January 1
|
|
904
|
|
475
|
|
|
Cash and cash equivalents, March 31
|
$
|
844
|
$
|
1,471
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
Three months ended March 31,
|
|||
|
|
2014
|
2013
|
|||
|
|
(unaudited)
|
||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
Interest payments, net of amounts capitalized
|
$
|
91
|
$
|
87
|
|
|
Income tax payments, net of refunds
|
|
41
|
|
14
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
Accrued capital expenditures
|
$
|
249
|
$
|
275
|
|
|
Increase in capital lease obligations for investment in property, plant and equipment
|
|
60
|
|
―
|
|
|
Capital expenditures recoverable by U.S. Treasury grants receivable
|
|
―
|
|
1
|
|
|
Sequestration of U.S. Treasury grants receivable
|
|
―
|
|
(23)
|
|
|
Dividends declared but not paid
|
|
168
|
|
160
|
|
|
Financing of build-to-suit property
|
|
9
|
|
―
|
|
|
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,
|
|||
|
|
2014
|
2013
|
||
|
|
(unaudited)
|
|||
|
Operating revenues
|
|
|
|
|
|
Electric
|
$
|
811
|
$
|
772
|
|
Natural gas
|
|
176
|
|
167
|
|
Total operating revenues
|
|
987
|
|
939
|
|
Operating expenses
|
|
|
|
|
|
Cost of electric fuel and purchased power
|
|
266
|
|
209
|
|
Cost of natural gas
|
|
75
|
|
76
|
|
Operation and maintenance
|
|
252
|
|
297
|
|
Depreciation and amortization
|
|
130
|
|
134
|
|
Franchise fees and other taxes
|
|
56
|
|
55
|
|
Adjustment to loss from plant closure
|
|
(13)
|
|
―
|
|
Total operating expenses
|
|
766
|
|
771
|
|
Operating income
|
|
221
|
|
168
|
|
Other income, net
|
|
13
|
|
11
|
|
Interest income
|
|
―
|
|
1
|
|
Interest expense
|
|
(50)
|
|
(48)
|
|
Income before income taxes
|
|
184
|
|
132
|
|
Income tax expense
|
|
(83)
|
|
(51)
|
|
Net income
|
|
101
|
|
81
|
|
(Earnings) losses attributable to noncontrolling interest
|
|
(2)
|
|
11
|
|
Earnings
|
|
99
|
|
92
|
|
Preferred dividend requirements
|
|
―
|
|
(1)
|
|
Earnings attributable to common shares
|
$
|
99
|
$
|
91
|
|
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, 2014 and 2013
|
|||||||||
|
|
(unaudited)
|
|||||||||
|
|
SDG&E Shareholder's Equity
|
|
|
|||||||
|
|
Pretax
|
Income Tax
|
Net-of-Tax
|
Noncontrolling
|
|
|||||
|
|
Amount
|
(Expense) Benefit
|
Amount
|
Interest (After-Tax)
|
Total
|
|||||
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
Net income/Comprehensive income
|
$
|
182
|
$
|
(83)
|
$
|
99
|
$
|
2
|
$
|
101
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
143
|
$
|
(51)
|
$
|
92
|
$
|
(11)
|
$
|
81
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
―
|
|
―
|
|
―
|
|
3
|
|
3
|
|
Total other comprehensive income
|
|
―
|
|
―
|
|
―
|
|
3
|
|
3
|
|
Comprehensive income (loss)
|
$
|
143
|
$
|
(51)
|
$
|
92
|
$
|
(8)
|
$
|
84
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||||||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
|
2014
|
2013(1)
|
||
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
12
|
$
|
27
|
|
|
Restricted cash
|
|
4
|
|
6
|
|
|
Accounts receivable – trade, net
|
|
272
|
|
266
|
|
|
Accounts receivable – other, net
|
|
19
|
|
28
|
|
|
Due from unconsolidated affiliates
|
|
12
|
|
1
|
|
|
Income taxes receivable
|
|
6
|
|
32
|
|
|
Deferred income taxes
|
|
188
|
|
103
|
|
|
Inventories
|
|
76
|
|
86
|
|
|
Regulatory balancing accounts, net
|
|
665
|
|
556
|
|
|
Other regulatory assets
|
|
29
|
|
29
|
|
|
Fixed-price contracts and other derivatives
|
|
64
|
|
61
|
|
|
Other
|
|
66
|
|
75
|
|
|
Total current assets
|
|
1,413
|
|
1,270
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
Restricted cash
|
|
27
|
|
25
|
|
|
Deferred taxes recoverable in rates
|
|
749
|
|
788
|
|
|
Regulatory assets arising from fixed-price contracts and other derivatives
|
|
62
|
|
63
|
|
|
Regulatory assets arising from pension and other postretirement
|
|
|
|
|
|
|
benefit obligations
|
|
111
|
|
106
|
|
|
Other regulatory assets
|
|
948
|
|
991
|
|
|
Nuclear decommissioning trusts
|
|
1,055
|
|
1,034
|
|
|
Sundry
|
|
255
|
|
254
|
|
|
Total other assets
|
|
3,207
|
|
3,261
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
14,606
|
|
14,346
|
|
|
Less accumulated depreciation and amortization
|
|
(3,592)
|
|
(3,500)
|
|
|
Property, plant and equipment, net ($431 and $438 at March 31, 2014 and
December 31, 2013, respectively, related to VIE)
|
|
11,014
|
|
10,846
|
|
|
Total assets
|
$
|
15,634
|
$
|
15,377
|
|
|
(1)
|
Derived from audited financial statements.
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
|
2014
|
2013(1)
|
||
|
|
|
(unaudited)
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term debt
|
$
|
90
|
$
|
59
|
|
|
Accounts payable
|
|
337
|
|
420
|
|
|
Due to unconsolidated affiliates
|
|
35
|
|
39
|
|
|
Dividends and interest payable
|
|
51
|
|
39
|
|
|
Accrued compensation and benefits
|
|
75
|
|
113
|
|
|
Current portion of long-term debt
|
|
30
|
|
29
|
|
|
Fixed-price contracts and other derivatives
|
|
38
|
|
38
|
|
|
Customer deposits
|
|
71
|
|
71
|
|
|
Other
|
|
310
|
|
271
|
|
|
Total current liabilities
|
|
1,037
|
|
1,079
|
|
|
Long-term debt ($322 and $325 at March 31, 2014 and December 31, 2013,
respectively, related to VIE)
|
|
4,580
|
|
4,525
|
|
|
|
|
|
|
|
|
|
Deferred credits and other liabilities:
|
|
|
|
|
|
|
Customer advances for construction
|
|
37
|
|
34
|
|
|
Pension and other postretirement benefit obligations, net of plan assets
|
|
138
|
|
132
|
|
|
Deferred income taxes
|
|
2,107
|
|
2,021
|
|
|
Deferred investment tax credits
|
|
23
|
|
24
|
|
|
Regulatory liabilities arising from removal obligations
|
|
1,428
|
|
1,403
|
|
|
Asset retirement obligations
|
|
872
|
|
861
|
|
|
Fixed-price contracts and other derivatives
|
|
172
|
|
175
|
|
|
Deferred credits and other
|
|
426
|
|
404
|
|
|
Total deferred credits and other liabilities
|
|
5,203
|
|
5,054
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
Common stock (255 million shares authorized; 117 million shares outstanding;
|
|
|
|
|
|
|
no par value)
|
|
1,338
|
|
1,338
|
|
|
Retained earnings
|
|
3,398
|
|
3,299
|
|
|
Accumulated other comprehensive income (loss)
|
|
(9)
|
|
(9)
|
|
|
Total SDG&E shareholder's equity
|
|
4,727
|
|
4,628
|
|
|
Noncontrolling interest
|
|
87
|
|
91
|
|
|
Total equity
|
|
4,814
|
|
4,719
|
|
|
Total liabilities and equity
|
$
|
15,634
|
$
|
15,377
|
|
|
(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,
|
|||
|
|
2014
|
2013
|
||
|
|
(unaudited)
|
|||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
$
|
101
|
$
|
81
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
130
|
|
134
|
|
Deferred income taxes and investment tax credits
|
|
57
|
|
36
|
|
Adjustment to loss from plant closure
|
|
(13)
|
|
―
|
|
Fixed-price contracts and other derivatives
|
|
(2)
|
|
(2)
|
|
Other
|
|
(9)
|
|
5
|
|
Net change in other working capital components
|
|
(76)
|
|
(2)
|
|
Changes in other assets
|
|
63
|
|
4
|
|
Changes in other liabilities
|
|
10
|
|
8
|
|
Net cash provided by operating activities
|
|
261
|
|
264
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(294)
|
|
(237)
|
|
Purchases of nuclear decommissioning trust assets
|
|
(198)
|
|
(135)
|
|
Proceeds from sales by nuclear decommissioning trusts
|
|
195
|
|
134
|
|
Decrease in restricted cash
|
|
10
|
|
17
|
|
Increase in restricted cash
|
|
(10)
|
|
(19)
|
|
Net cash used in investing activities
|
|
(297)
|
|
(240)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Preferred dividends paid
|
|
―
|
|
(1)
|
|
Payments on long-term debt
|
|
(3)
|
|
(3)
|
|
Increase in short-term debt, net
|
|
31
|
|
―
|
|
Capital distribution made by Otay Mesa VIE
|
|
(7)
|
|
(1)
|
|
Net cash provided by (used in) financing activities
|
|
21
|
|
(5)
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
(15)
|
|
19
|
|
Cash and cash equivalents, January 1
|
|
27
|
|
87
|
|
Cash and cash equivalents, March 31
|
$
|
12
|
$
|
106
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
Interest payments, net of amounts capitalized
|
$
|
36
|
$
|
28
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
Accrued capital expenditures
|
$
|
99
|
$
|
102
|
|
Increase in capital lease obligations for investment in property, plant and equipment
|
|
60
|
|
―
|
|
Dividends declared but not paid
|
|
―
|
|
1
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
|
SOUTHERN CALIFORNIA GAS COMPANY
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
|
(Dollars in millions)
|
||||
|
|
Three months ended March 31,
|
|||
|
|
2014
|
2013
|
||
|
|
(unaudited)
|
|||
|
|
|
|
|
|
|
Operating revenues
|
$
|
1,085
|
$
|
983
|
|
Operating expenses
|
|
|
|
|
|
Cost of natural gas
|
|
508
|
|
454
|
|
Operation and maintenance
|
|
305
|
|
306
|
|
Depreciation and amortization
|
|
105
|
|
100
|
|
Franchise fees and other taxes
|
|
38
|
|
40
|
|
Total operating expenses
|
|
956
|
|
900
|
|
Operating income
|
|
129
|
|
83
|
|
Other income, net
|
|
4
|
|
4
|
|
Interest expense
|
|
(17)
|
|
(17)
|
|
Income before income taxes
|
|
116
|
|
70
|
|
Income tax expense
|
|
(38)
|
|
(24)
|
|
Net income/Earnings attributable to common shares
|
$
|
78
|
$
|
46
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
|
SOUTHERN CALIFORNIA GAS COMPANY
|
||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||
|
(Dollars in millions)
|
||||||
|
|
Three months ended March 31, 2014 and 2013
|
|||||
|
|
(unaudited)
|
|||||
|
|
|
|
|
|
|
|
|
|
Pretax
|
Income Tax
|
Net-of-Tax
|
|||
|
|
Amount
|
(Expense) Benefit
|
Amount
|
|||
|
2014:
|
|
|
|
|
|
|
|
Net income/Comprehensive income
|
$
|
116
|
$
|
(38)
|
$
|
78
|
|
2013:
|
|
|
|
|
|
|
|
Net income/Comprehensive income
|
$
|
70
|
$
|
(24)
|
$
|
46
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
|
SOUTHERN CALIFORNIA GAS COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
|
2014
|
2013(1)
|
||
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
32
|
$
|
27
|
|
|
Accounts receivable – trade, net
|
|
557
|
|
595
|
|
|
Accounts receivable – other, net
|
|
55
|
|
97
|
|
|
Due from unconsolidated affiliates
|
|
104
|
|
21
|
|
|
Income taxes receivable
|
|
41
|
|
25
|
|
|
Inventories
|
|
45
|
|
69
|
|
|
Regulatory assets
|
|
6
|
|
5
|
|
|
Other
|
|
39
|
|
34
|
|
|
Total current assets
|
|
879
|
|
873
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
Regulatory assets arising from pension obligations
|
|
341
|
|
326
|
|
|
Other regulatory assets
|
|
272
|
|
262
|
|
|
Other postretirement benefit plan assets, net of plan liabilities
|
|
95
|
|
95
|
|
|
Sundry
|
|
126
|
|
124
|
|
|
Total other assets
|
|
834
|
|
807
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
12,041
|
|
11,831
|
|
|
Less accumulated depreciation and amortization
|
|
(4,423)
|
|
(4,364)
|
|
|
Property, plant and equipment, net
|
|
7,618
|
|
7,467
|
|
|
Total assets
|
$
|
9,331
|
$
|
9,147
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SOUTHERN CALIFORNIA GAS COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
|
|||||
|
(Dollars in millions)
|
|||||
|
|
|
March 31,
|
December 31,
|
||
|
|
|
2014
|
2013(1)
|
||
|
|
|
(unaudited)
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term debt
|
$
|
―
|
$
|
42
|
|
|
Accounts payable – trade
|
|
410
|
|
346
|
|
|
Accounts payable – other
|
|
79
|
|
79
|
|
|
Due to unconsolidated affiliates
|
|
11
|
|
16
|
|
|
Deferred income taxes
|
|
75
|
|
45
|
|
|
Accrued compensation and benefits
|
|
107
|
|
141
|
|
|
Regulatory balancing accounts, net
|
|
88
|
|
91
|
|
|
Current portion of long-term debt
|
|
1
|
|
252
|
|
|
Customer deposits
|
|
75
|
|
75
|
|
|
Other
|
|
175
|
|
125
|
|
|
Total current liabilities
|
|
1,021
|
|
1,212
|
|
|
Long-term debt
|
|
1,408
|
|
1,159
|
|
|
Deferred credits and other liabilities:
|
|
|
|
|
|
|
Customer advances for construction
|
|
108
|
|
108
|
|
|
Pension obligation, net of plan assets
|
|
354
|
|
339
|
|
|
Regulatory liabilities arising from other postretirement benefit assets
|
|
95
|
|
95
|
|
|
Deferred income taxes
|
|
1,014
|
|
993
|
|
|
Deferred investment tax credits
|
|
18
|
|
18
|
|
|
Regulatory liabilities arising from removal obligations
|
|
1,180
|
|
1,205
|
|
|
Asset retirement obligations
|
|
1,220
|
|
1,182
|
|
|
Deferred credits and other
|
|
286
|
|
287
|
|
|
Total deferred credits and other liabilities
|
|
4,275
|
|
4,227
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
Preferred stock
|
|
22
|
|
22
|
|
|
Common stock (100 million shares authorized; 91 million shares outstanding;
|
|
|
|
|
|
|
no par value)
|
|
866
|
|
866
|
|
|
Retained earnings
|
|
1,757
|
|
1,679
|
|
|
Accumulated other comprehensive income (loss)
|
|
(18)
|
|
(18)
|
|
|
Total shareholders' equity
|
|
2,627
|
|
2,549
|
|
|
Total liabilities and shareholders' equity
|
$
|
9,331
|
$
|
9,147
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SOUTHERN CALIFORNIA GAS COMPANY
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
|
(Dollars in millions)
|
||||
|
|
Three months ended March 31,
|
|||
|
|
2014
|
2013
|
||
|
|
(unaudited)
|
|||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
$
|
78
|
$
|
46
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
105
|
|
100
|
|
Deferred income taxes and investment tax credits
|
|
26
|
|
18
|
|
Net change in other working capital components
|
|
197
|
|
250
|
|
Changes in other assets
|
|
18
|
|
3
|
|
Changes in other liabilities
|
|
3
|
|
(6)
|
|
Net cash provided by operating activities
|
|
427
|
|
411
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(260)
|
|
(179)
|
|
Increase in loans to affiliates, net
|
|
(117)
|
|
(243)
|
|
Net cash used in investing activities
|
|
(377)
|
|
(422)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Issuance of long-term debt
|
|
248
|
|
―
|
|
Repayment of long-term debt
|
|
(250)
|
|
―
|
|
Decrease in short-term debt, net
|
|
(42)
|
|
―
|
|
Other
|
|
(1)
|
|
―
|
|
Net cash used in financing activities
|
|
(45)
|
|
―
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
5
|
|
(11)
|
|
Cash and cash equivalents, January 1
|
|
27
|
|
83
|
|
Cash and cash equivalents, March 31
|
$
|
32
|
$
|
72
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
Interest payments, net of amounts capitalized
|
$
|
12
|
$
|
12
|
|
Income tax payments, net of refunds
|
|
30
|
|
―
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
|
|
|
|
|
Accrued capital expenditures
|
$
|
111
|
$
|
76
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PRINCIPLES OF CONSOLIDATION
Sempra Energy
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 energy-services 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 12.
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.
Our Sempra Mexico segment includes the operating companies of our subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova), as well as certain holding companies and risk management activity. We discuss IEnova further in Note 5 under “Shareholders’ Equity and Noncontrolling Interests – Sale of Noncontrolling Interests.”
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 entities in Note 4 herein and in Notes 3 and 4 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013 (the Annual Report), which includes the combined reports for Sempra Energy, SDG&E and SoCalGas.
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 accounts and the de minimus accounts of inactive subsidiaries. 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 of America (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, 2014 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, 2013 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2013 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 the Annual Report.
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 México, 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.
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) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11): ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purposes, an entity is required to present the unrecognized tax benefit in the financial statements as a liability instead of combined with deferred tax assets.
We adopted ASU 2013-11 on January 1, 2014 as required, and it did not significantly affect our financial condition, results of operations or cash flows.
SEMPRA RENEWABLES
In March 2014, Sempra Renewables formed a joint venture with Consolidated Edison Development (ConEdison Development), a non-related party, by selling a 50-percent interest in its 250-megawatt (MW) Copper Mountain Solar 3 solar power facility for $66 million in cash, net of $2 million cash sold, subject to a final purchase price adjustment that we do not expect to be significant. Sempra Renewables recognized a pretax gain on the sale of $27 million ($16 million after-tax), included in Gain on Sale of Equity Interest and Assets on our Condensed Consolidated Statement of Operations for the three months ended March 31, 2014. Our remaining 50-percent interest in Copper Mountain Solar 3 is now accounted for under the equity method. We measured our equity method investment in Copper Mountain Solar 3 at historical cost and, therefore, no portion of the gain was attributable to a remeasurement of the retained investment to fair value.
The following table summarizes the deconsolidation:
|
DECONSOLIDATION OF SUBSIDIARY
|
|||
|
(Dollars in millions)
|
|||
|
|
Copper Mountain Solar 3
|
||
|
Proceeds from sale, net of negligible transaction costs
|
$
|
68
|
|
|
Cash
|
|
(2)
|
|
|
Property, plant and equipment, net
|
|
(247)
|
|
|
Other assets
|
|
(11)
|
|
|
Accounts payable and accrued expenses
|
|
82
|
|
|
Long-term debt, including current portion
|
|
97
|
|
|
Other long-term liabilities
|
|
3
|
|
|
Accumulated other comprehensive income
|
|
(2)
|
|
|
Gain on sale of equity interest and assets
|
|
(27)
|
|
|
Equity method investment upon deconsolidation
|
$
|
(39)
|
|
|
|
|
||
SEMPRA NATURAL GAS
Mesquite Power Sale
In February 2013, Sempra Natural Gas sold one 625-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). We recognized a pretax gain on the sale of $74 million ($44 million after-tax), included in Gain on Sale of Equity Interest and Assets on our Condensed Consolidated Statement of Operations for the three months ended March 31, 2013. In connection with the sale, we entered into a 20-year operations and maintenance agreement with SRP on February 28, 2013, whereby SRP assumed 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 15 of the Notes to Consolidated Financial Statements in the Annual Report.
Asset Held for Sale, Power Plant
In January 2014, management approved a formal plan to market and sell the remaining 625-MW block of the Mesquite Power plant. We expect to complete the sale in 2014.
We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next twelve months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs, and we stop recording depreciation expense on the asset.
At March 31, 2014, the carrying amount of the major classes of assets and related liability held for sale associated with the plant includes the following:
|
(Dollars in millions)
|
|||
|
Property, plant and equipment, net
|
$
|
290
|
|
|
Inventories
|
|
3
|
|
|
Total assets held for sale
|
|
293
|
|
|
Liability held for sale - asset retirement obligation(1)
|
|
(6)
|
|
|
Total
|
$
|
287
|
|
|
(1)
|
Included in Other Current Liabilities on the Condensed Consolidated Balance Sheet.
|
||
The estimated fair value, including estimated costs to sell, exceeds the carrying amount at March 31, 2014.
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 previously owned 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. In the first quarter of 2013, we recorded a noncash impairment charge of $10 million ($7 million after-tax) to reduce the carrying value of our investments to estimated fair value at that time. 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.
SEMPRA RENEWABLES
In March 2014, Sempra Renewables and ConEdison Development entered into an agreement to partner in four solar projects in California. The projects include ConEdison Development’s CED California Holdings, LLC portfolio, which consists of the 50-MW Alpaugh 50, the 20-MW Alpaugh North and the 20-MW White River 1 facilities in Tulare County, and the 20-MW Corcoran 1 facility in Kings County (collectively, the California solar partnership). The renewable power from all of the projects has been sold under long-term contracts. The agreement is subject to regulatory approvals. Upon consummation of the transaction under the agreement, Sempra Renewables and ConEdison Development will each own a 50-percent interest in the four solar facilities.
Sempra Renewables invested $51 million (which included $39 million that was deconsolidated upon the formation of the Copper Mountain Solar 3 joint venture, as we discuss in Note 3) and $5 million in its solar and wind generation joint ventures in the three months ended March 31, 2014 and 2013, 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, if any, in Equity Earnings, Before Income Tax on our Condensed Consolidated Statements of Operations.
The investment balance of $73 million at March 31, 2014 reflects remaining distributions expected to be received from the partnership in accordance with provisions of a 2011 agreement between us and RBS that addresses the wind-down of the partnership and the distribution of the partnership’s remaining assets. The timing and amount of distributions may be impacted by the matters we discuss related to RBS Sempra Commodities in Note 11 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.
We recorded no equity earnings or losses related to the partnership for the three months ended March 31, 2014 and 2013.
U.S. TREASURY GRANTS
At December 31, 2012, we had receivables for U.S. Treasury grants based on eligible costs at certain of our renewable generating facilities. 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, we recorded a reduction to our grants receivable of $23 million and a reversal of income tax benefit of $5 million during the first quarter of 2013. The remaining grants receivable were received in the second and third quarters of 2013.
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,
2014
|
December 31,
2013
|
March 31,
2014
|
December 31,
2013
|
March 31,
2014
|
December 31,
2013
|
March 31,
2014
|
December 31,
2013
|
||||||||
|
SDG&E
|
$
|
4
|
$
|
3
|
$
|
―
|
$
|
―
|
$
|
72
|
$
|
83
|
$
|
76
|
$
|
86
|
|
|
SoCalGas
|
|
17
|
|
42
|
|
―
|
|
―
|
|
28
|
|
27
|
|
45
|
|
69
|
|
|
Sempra South American
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilities
|
|
―
|
|
―
|
|
―
|
|
―
|
|
39
|
|
40
|
|
39
|
|
40
|
|
|
Sempra Mexico
|
|
―
|
|
―
|
|
4
|
|
3
|
|
9
|
|
9
|
|
13
|
|
12
|
|
|
Sempra Renewables
|
|
―
|
|
―
|
|
―
|
|
―
|
|
2
|
|
2
|
|
2
|
|
2
|
|
|
Sempra Natural Gas
|
|
16
|
|
68
|
|
5
|
|
5
|
|
1
|
|
5
|
|
22
|
|
78
|
|
|
Sempra Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
|
37
|
$
|
113
|
$
|
9
|
$
|
8
|
$
|
151
|
$
|
166
|
$
|
197
|
$
|
287
|
|
|
|
|
||||||||||||||||
GOODWILL
We discuss goodwill in Notes 1 and 3 of the Notes to Consolidated Financial Statements in the Annual Report. The decrease in goodwill from $1.024 billion at December 31, 2013 to $999 million at March 31, 2014 is due to foreign currency translation at Sempra South American Utilities. We record the offset of this fluctuation in Other Comprehensive Income (Loss).
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 a qualitative approach in which we consider 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 $87 million at March 31, 2014 and $91 million at December 31, 2013 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 $332 million at March 31, 2014, 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 at March 31, 2014. 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,
|
|||
|
|
2014
|
2013
|
||
|
|
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
Electric
|
$
|
―
|
$
|
(1)
|
|
Natural gas
|
|
―
|
|
―
|
|
Total operating revenues
|
|
―
|
|
(1)
|
|
Operating expenses
|
|
|
|
|
|
Cost of electric fuel and purchased power
|
|
(18)
|
|
(17)
|
|
Operation and maintenance
|
|
5
|
|
17
|
|
Depreciation and amortization
|
|
7
|
|
7
|
|
Total operating expenses
|
|
(6)
|
|
7
|
|
Operating income (loss)
|
|
6
|
|
(8)
|
|
Interest expense
|
|
(4)
|
|
(3)
|
|
Income (loss) before income taxes/Net income (loss)
|
|
2
|
|
(11)
|
|
(Earnings) losses attributable to noncontrolling interest
|
|
(2)
|
|
11
|
|
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,
|
|||||||