10-KPeriod: FY2009

SEMPRA Annual Report, Year Ended Dec 31, 2009

Filed February 26, 2010For Securities:SRESREA

Summary

Sempra Energy's 2009 Form 10-K report details the financial and operational performance of its diverse energy utility and non-utility businesses. The company operates through key segments including regulated utilities (San Diego Gas & Electric and Southern California Gas Company), Sempra Commodities, Sempra Generation, Sempra Pipelines & Storage, and Sempra LNG. A significant development highlighted is the pending sale of certain Sempra Commodities businesses to J.P. Morgan Ventures, expected to close in Q2 2010, which is part of RBS's divestiture plan. The report emphasizes the significant impact of government regulation on its utility operations, particularly from the CPUC and FERC, and discusses the ongoing efforts to comply with evolving environmental regulations, including those related to greenhouse gas emissions. For investors, the report underscores the stability and regulatory oversight of the utility segments, which form the core of the business. However, it also points to the inherent risks in the non-utility segments, such as commodity price volatility, competition, and the success of business development initiatives. The company highlights its significant capital expenditures and reliance on debt financing, while also noting its share repurchase program and dividend history. The financial statements incorporated by reference provide detailed insights into the consolidated financial condition and results of operations for Sempra Energy and its subsidiaries.

Financial Highlights

43 data points
Beta

Net Income

$1.12B

EPS (Diluted)

$2.26

Total Assets

$28.51B

Cash & Equivalents

$110.00M

Free Cash Flow

$1.88B

Financial Statements
Beta
Interest Expense$367.00M
Net Income$1.12B
EPS (Basic)$2.30
EPS (Diluted)$2.26
Shares Outstanding (Basic)486.68M
Shares Outstanding (Diluted)494.77M

Key Highlights

  • 1Sempra Energy is undergoing a significant transaction involving its Sempra Commodities segment, with the sale of certain businesses to J.P. Morgan Ventures expected to close in Q2 2010.
  • 2The company's utility operations (SDG&E and SoCalGas) are heavily regulated by entities like the CPUC and FERC, influencing rates, capital structure, and operations.
  • 3Environmental regulations, particularly concerning greenhouse gas (GHG) emissions and renewable energy mandates (like California's RPS), are a key focus and potential cost factor for Sempra.
  • 4Sempra Generation's operations face competition and market price volatility, while Sempra LNG is exposed to global LNG supply and demand dynamics.
  • 5The company has a substantial asset base, including natural gas distribution and storage facilities, electric generation plants, and LNG terminals, with ongoing capital expenditure plans.
  • 6Risk factors include dependence on subsidiary performance, financial market conditions, regulatory changes, environmental compliance costs, litigation, and natural disasters.

Frequently Asked Questions

Sempra Energy, along with RBS, entered into an agreement with J.P. Morgan Ventures Energy Corporation to purchase certain businesses from the RBS Sempra Commodities joint venture. This transaction is subject to regulatory approvals and is expected to close in the second quarter of 2010. RBS Sempra Commodities will retain its North American power and natural gas trading businesses and its retail energy solutions business.

Sempra's utility subsidiaries, SDG&E and SoCalGas, are primarily regulated by the California Public Utilities Commission (CPUC), which oversees rates, conditions of service, capital structure, and long-term resource procurement. SDG&E is also regulated by the California Energy Commission (CEC) for electric matters, and both are subject to federal regulations by the Federal Energy Regulatory Commission (FERC) concerning interstate gas transportation and wholesale electricity sales.

Sempra is significantly impacted by environmental regulations, including California's Renewables Portfolio Standard (RPS) requiring a percentage of retail demand from renewable sources, and Assembly Bill 32 (California Global Warming Solutions Act) aimed at reducing greenhouse gas (GHG) emissions. Compliance with these and other air and water quality standards can lead to significant costs, though many utility compliance costs are expected to be recovered in rates.

Key risks for investors include the company's reliance on its subsidiaries' performance for cash flow, adverse impacts from general economic and financial market conditions, changes in complex government regulations, substantial environmental compliance costs, potential liabilities from ongoing litigation (such as the 2007 California wildfires), and the operational and market risks associated with its non-utility businesses like energy trading and generation, which are subject to commodity price volatility and intense competition.