10-KPeriod: FY2008

SEMPRA Annual Report, Year Ended Dec 31, 2008

Filed February 24, 2009For Securities:SRESREA

Summary

Sempra Energy's 2008 Form 10-K reveals a company heavily regulated, particularly its utility subsidiaries, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas). The report highlights the complex regulatory landscape in California, overseen by the CPUC, CEC, and CARB, which impacts rates, resource planning, and environmental compliance. Sempra's non-utility businesses, consolidated under Sempra Global, operate in competitive markets including commodities, generation, pipelines & storage, and LNG, with significant risks associated with market volatility, regulatory changes, and project development. The company faced risks related to the prevailing economic conditions and financial market turmoil in 2008, impacting liquidity and the cost of capital. Legal proceedings, particularly those stemming from the 2007 California wildfires and litigation related to power agreements, present significant contingent liabilities. Despite these challenges, Sempra Energy reported a substantial consolidated net income, with its parent company benefiting from equity in earnings of its subsidiaries, demonstrating resilience in its core utility operations while navigating broader market and regulatory complexities.

Financial Highlights

27 data points
Beta

Net Income

$1.11B

EPS (Diluted)

$2.21

Cash & Equivalents

$331.00M

Free Cash Flow

$1.19B

Financial Statements
Beta
Interest Expense$253.00M
Net Income$1.11B
EPS (Basic)$2.25
EPS (Diluted)$2.21
Shares Outstanding (Basic)494.77M
Shares Outstanding (Diluted)502.32M

Key Highlights

  • 1Sempra Energy operates through distinct segments, including regulated utilities (SDG&E, SoCalGas) and unregulated businesses (Sempra Global: Commodities, Generation, Pipelines & Storage, LNG).
  • 2The company is subject to extensive government regulation, primarily from the California Public Utilities Commission (CPUC) for its utility operations, impacting rates, services, and capital structure.
  • 3Key risks identified include economic and financial market conditions, regulatory changes, environmental compliance costs, potential natural disasters, and ongoing litigation, especially related to the 2007 California wildfires.
  • 4Sempra Global's non-utility businesses operate in highly competitive energy markets, facing risks from commodity price volatility, competition, and project development uncertainties.
  • 5SDG&E has a 20% ownership in the San Onofre Nuclear Generating Station (SONGS), exposing it to risks associated with nuclear operations and decommissioning.
  • 6The company has a significant joint venture in RBS Sempra Commodities, highlighting its involvement in commodity marketing, which is subject to intense competition and financial market risks.
  • 7Customer growth for both natural gas and electricity utility segments was slowing in 2008, with projections for continued decline in 2009 due to housing market forecasts and the economic downturn.

Frequently Asked Questions

Sempra Energy operates through five main reportable segments: San Diego Gas & Electric (SDG&E), Southern California Gas Company (SoCalGas), Sempra Commodities, Sempra Generation, and Sempra Pipelines & Storage. Sempra LNG is also a significant business unit under Sempra Global, which holds most of Sempra's non-utility subsidiaries.

Sempra Energy's utility subsidiaries, SDG&E and SoCalGas, are primarily regulated by the California Public Utilities Commission (CPUC). They are also subject to oversight from the California Energy Commission (CEC) and the California Air Resources Board (CARB). Federally, the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) have regulatory roles.

The company highlighted several key risks, including adverse impacts from economic conditions and financial markets, complex and changing government regulations, environmental compliance costs, natural disasters, and the outcomes of numerous pending legal proceedings, notably those related to the 2007 California wildfires.

Sempra Energy is involved in the commodities market through its investment in RBS Sempra Commodities LLP, a joint venture formed in April 2008 with The Royal Bank of Scotland. This business unit engages in commodities marketing and is subject to intense competition and financial market risks.