10-KPeriod: FY2003

SEMPRA Annual Report, Year Ended Dec 31, 2003

Filed February 25, 2004For Securities:SRESREA

Summary

Sempra Energy's 2003 Form 10-K highlights a year of growth and ongoing strategic development, with notable increases in operating revenues and net income compared to the previous year. The company's operations are segmented into California Utilities (SoCalGas and SDG&E), Sempra Energy Trading (SET), and Sempra Energy Resources (SER), alongside international and other businesses. The company navigates a complex regulatory landscape, particularly concerning its California utility operations, with the California Public Utilities Commission (CPUC) playing a significant role in rate setting and operational oversight. Key areas of focus for investors include the company's expansion in electric generation and LNG projects, such as the Mesquite Power plant and the Cameron LNG project, which signal future growth potential. However, Sempra Energy faces significant risks, including regulatory changes, market volatility in energy prices, potential litigation outcomes, and the successful execution of large-scale development projects. The company's financial health is also tied to its ability to manage debt and maintain credit ratings, particularly for its non-utility businesses.

Key Highlights

  • 1Operating revenues increased to $7.89 billion in 2003, up from $6.05 billion in 2002, indicating substantial top-line growth.
  • 2Net income rose to $649 million in 2003, compared to $591 million in 2002, showing improved profitability.
  • 3The company is actively expanding its energy generation portfolio with the completion of the Mesquite Power plant and the advancement of LNG projects like Cameron LNG.
  • 4Sempra Energy operates through four main segments: California Utilities (SoCalGas and SDG&E), Sempra Energy Trading (SET), and Sempra Energy Resources (SER), each with distinct operational characteristics and risk profiles.
  • 5Significant regulatory oversight from entities like the CPUC and FERC impacts the California Utilities, affecting rates, operations, and affiliate relationships.
  • 6The company faces substantial risks related to market volatility in commodity prices, potential adverse outcomes from ongoing litigation, and the successful development and operation of new energy infrastructure.
  • 7Sempra Energy reported $3.84 billion in long-term debt and $1.46 billion in short-term debt as of year-end 2003, highlighting its leverage position.

Frequently Asked Questions

Sempra Energy operates through four main reportable segments: Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E), collectively known as the California Utilities; Sempra Energy Trading (SET); and Sempra Energy Resources (SER). The company also has international and other energy-related businesses.

Key risks include extensive regulation of its utility operations by bodies like the CPUC and FERC, market volatility in energy prices affecting its trading and generation businesses, potential liabilities from ongoing litigation related to market manipulation allegations, the success of its large-scale development projects (e.g., LNG terminals), and the potential impact of a credit rating downgrade on its non-utility operations.

Sempra Energy demonstrated financial growth in 2003. Operating revenues increased significantly to $7.89 billion from $6.05 billion in 2002, and net income rose to $649 million from $591 million in 2002, indicating improved profitability.

San Diego Gas & Electric (SDG&E) owns a 20% interest in the San Onofre Nuclear Generating Station (SONGS). Risks associated with this include potential environmental and health effects from nuclear operations, limitations on commercially available insurance, and uncertainties related to decommissioning nuclear plants. While SDG&E has recovered its SONGS capital investment, the facility remains a point of ongoing regulatory and operational consideration.