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Sempra Annual Report, Year Ended Dec 31, 2004

Filing Date
Filed February 23, 2005
Period End
December 31, 2004
Securities
SRESREA
In the record · 2016–202610-K1110-Q338-K215

SRE filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 215 current reports (8-K) between 2016 and 2026.

  1. Impairment8-K · Sep ’16Sep ’16
  2. Leadership change8-K · Dec ’18Dec ’18
  3. FY2020 annual report10-K · Feb ’21Feb ’21
  4. Leadership change8-K · Jun ’25Jun ’25

01—Abstract

Summary

Summary of the 10-K filed February 23, 2005. Cited figures are marked; the original filing is the authoritative source.

Sempra Energy's 2004 Form 10-K shows a strong year driven by its non-utility businesses.

Net income rose 37.9% to $895 milliona, and diluted EPS rose 26.4% to $3.83 (up from $3.03). Operating revenues increased to $9.41 billion from $7.89 billion, and operating income to $1.27 billion from $939 million. Sempra Commodities (net income $320 million, up from $157 million) and Sempra Generation ($137 million, up from $71 million) drove most of the gain, aided by market volatility and higher volumes under the DWR power contract.

The California Utilities earned $440 millionb, down from $543 million, largely because of 2003 one-time items and lower SDG&E earnings after SONGS ratemaking changed. Management also raised the quarterly dividend to $0.29 from $0.25 and reported book value per share of $20.77, up from $17.17. The main risks are litigation and regulatory exposure.

Plaintiffs in the California energy crisis antitrust case against Sempra and the California Utilities have claimed damages of up to $24 billionc, with trial set for September 2005. The DWR contract for 1,900 MW is under appeal and arbitration, and FERC refund and manipulation proceedings remain open.

Sempra Commodities' earnings are volatile and depend on its credit rating, and the company's LNG build-out (Energia Costa Azul, Cameron, Port Arthur) requires large capital commitments, with 2005 capex expected at $1.6 billiond. Debt-to-capitalization was 49%, and the company reported $419 million of unrestricted cash and $4.5 billion of unused committed credit lines.

02—Key points

Key Highlights

  1. Net income rose 37.9% to $895 million and diluted EPS rose 26.4% to $3.83, led by Sempra Commodities ($320M net income) and Sempra Generation ($137M).
  2. Operating revenues increased 19% to $9.41 billion, and operating income increased 35% to $1.27 billion.
  3. The California Utilities' net income fell to $440 million from $543 million, reflecting 2003 one-time gains and lower SDG&E earnings after the SONGS ratebase reset.
  4. Litigation exposure is significant: California energy crisis antitrust suits seek up to $24 billion, with trial set for September 2005, and the DWR contract is under appeal and arbitration.
  5. The LNG build-out is expanding, with 2005 capex guided to $1.6 billion, including the Energia Costa Azul terminal, Cameron LNG, and Port Arthur (estimated $600M).
  6. The quarterly dividend was raised to $0.29 from $0.25 per share, and book value per share rose to $20.77 from $17.17.
  7. Liquidity is adequate, with $419 million in cash and $4.5 billion of unused committed credit lines, while the debt-to-capitalization ratio is 49%.

03—Questions

Frequently Asked Questions

  1. What drove Sempra's 2004 earnings growth?

    Earnings growth came mainly from Sempra Commodities, where higher trading margins ($1.03 billion, up from $611 million) reflected market volatility in metals, natural gas and petroleum. Sempra Generation also grew, helped by increased sales under the DWR contract. The 2003 results included large write-downs (Frontier Energy and AEG) and an IRS settlement, which made the comparison easier.

  2. What is the biggest legal risk facing Sempra?

    The most significant risk is the California energy crisis antitrust litigation against Sempra and the California Utilities, where plaintiffs claim up to $24 billion in damages. The companies have lost summary judgment motions, and a trial is scheduled for September 2005. Separately, the DWR is contesting the 1,900 MW power contract, and FERC refund and manipulation proceedings could require additional payments from Sempra Commodities.

  3. Is the dividend safe and how strong is the balance sheet?

    The board raised the quarterly dividend to $0.29 per share, and the company generated $949 million in operating cash flow in 2004. Credit ratings are investment grade (Sempra unsecured debt BBB+/Baa1/A) with stable outlooks. However, the debt-to-capitalization ratio is 49%, and the California Utilities' ability to pay dividends to the parent is restricted by CPUC capital structure rules.

  4. Why did the California Utilities' earnings decline in 2004?

    The California Utilities earned $440 million, down from $543 million. 2003 included a $79 million tax benefit at SDG&E, a $65 million after-tax gain from intermediate-term power contract settlements, and ICIP income on SONGS. SONGS ratebase reset to zero on January 1, 2004, which removed most SONGS earnings. Partial offsets came from higher transmission margins and favorable cost-of-service resolution.

  5. What are the main growth projects Sempra is investing in?

    Sempra LNG is developing receipt terminals, including Energia Costa Azul in Mexico (cost $900M to $1B, with long-term supply contracts from BP and Shell), Cameron LNG in Louisiana ($700M), and Port Arthur in Texas ($600M). Sempra Generation is building the 550 MW Palomar plant, which SDG&E will purchase in 2006. Sempra Pipelines & Storage is developing the Pine Prairie and Liberty gas storage projects, and Topaz acquired 1,950 MW of operating Texas plants.

04—Continue

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