01—Abstract
Summary
Summary of the 10-K/A filed March 31, 2011. Cited figures are marked; the original filing is the authoritative source.
This filing is Sempra Energy's (SRE) Form 10-K/A filed March 31, 2011, and it is an exhibit-focused amendment rather than a full annual report.
The Sempra 2010 financial statements were already filed with the original 10-K on February 24, 2011, so the amendment's main purpose is to add Rule 3-09 financial statements for RBS Sempra Commodities LLP (RBSSC), an unconsolidated 50/50 joint venture with The Royal Bank of Scotland. Investors should therefore read this filing as a supplement covering the joint venture, not as a source of new consolidated Sempra results, segment data, or guidance. The most material content is the RBSSC financial data.
As of December 31, 2010, RBSSC reported net assets in liquidation of about $1.65 billiona, against total assets of $4.55 billion and total liabilities of $2.90 billion. For 2010 it recorded a net loss of $168.8 million, driven by a $154.9 million net loss on disposal activities, which included $215.9 million of disposal costs. The partnership adopted liquidation-basis accounting effective December 31, 2010, after selling substantially all of its operations to JP Morgan and Noble Group.
Those sales brought in roughly $1.6 billionb, $318 million, and about $9 million for the Oil, Metals and European Power and Gas business, the Sempra Energy Solutions business, and the North American Power and Gas trading book respectively. Distributions to members totaled $1.86 billion in 2010. For Sempra, the practical implication is that the joint venture has effectively wound down, with remaining residual assets and risk-transfer arrangements expected to be finalized by the third quarter of 2011.
The filing also confirms Sempra's ongoing indemnity and guarantee exposure tied to the joint venture, including a guarantee of certain non-novated counterparties and RBS's indemnity back to Sempra. It lists the existing contract and compensation exhibits, but it does not disclose new consolidated financials in this document. Investors should note that the joint venture's wind-down reduces Sempra's future exposure to the commodity trading business, but the amendment itself is a limited-scope filing.
02—Key points
Key Highlights
- Form 10-K/A adds Rule 3-09 financial statements for RBS Sempra Commodities LLP; Sempra's own 2010 financials were previously filed on February 24, 2011.
- RBSSC reported a 2010 net loss of $168.8 million, including a $154.9 million net loss on disposal activities and $215.9 million in disposal costs.
- Net assets in liquidation were approximately $1.65 billion at December 31, 2010, with liquidation-basis accounting adopted effective that date.
- The partnership sold its Oil, Metals and European Power and Gas business to JP Morgan for about $1.61 billion, its Sempra Energy Solutions business to Noble Group for $318 million, and most of its North American Power and Gas trading book to JP Morgan for about $9 million.
- Distributions to members totaled $1.86 billion in 2010, and remaining residual trading risk is expected to transfer to JP Morgan by the end of Q3 2011.
- Sempra retains indemnity and guarantee exposure on non-novated counterparties, with RBS agreeing to indemnify Sempra for associated claims.
- The filing contains no new consolidated Sempra income statement, balance sheet, or segment results, so it should not be used as a standalone source for Sempra's operating performance.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2010filed March 31, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $9.00B$8.11B | +11.1% |
| Interest Expense | $436.00M$367.00M | +18.8% |
| Net Income | $709.00M$1.12B | −36.6% |
| EPS (Basic) | $1.45$2.30 | −37.0% |
| EPS (Diluted) | $1.43$2.26 | −36.7% |
| Shares Outstanding (Basic) | 489.47M486.68M | +0.6% |
| Shares Outstanding (Diluted) | 495.88M494.77M | +0.2% |
05—Questions
Frequently Asked Questions
Why did Sempra file a 10-K/A if its 2010 financial statements were already filed?
The amendment was filed to include separate financial statements of RBS Sempra Commodities LLP as required by Rule 3-09 of Regulation S-X. This is because the joint venture is a significant unconsolidated investee, so its standalone financials must be disclosed.
Why did RBS Sempra Commodities LLP adopt liquidation-basis accounting?
The partnership sold substantially all of its operations in 2010 and sent termination notices to employees in December 2010. Liquidation appears imminent and the net realizable value of remaining assets is reasonably determinable, so it adopted liquidation-basis accounting effective December 31, 2010.
What drove the joint venture's 2010 net loss?
The $168.8 million net loss was primarily caused by a $154.9 million net loss on disposal activities. This included a $371.4 million goodwill write-off and a $275.5 million loss on the North American Power and Gas assets, partly offset by $479 million and $230 million gains on the Oil, Metals and European Power and Gas sale and the Sempra Energy Solutions sale. Disposal costs of $215.9 million were also recorded.
What financial exposure does Sempra still have related to the joint venture?
Sempra has guaranteed performance of certain non-novated counterparties, but RBS has agreed to indemnify Sempra for associated claims. Sempra also retains certain indemnification commitments tied to the formation and sale transactions, and remaining residual assets and risk transfers are expected to be completed by Q3 2011.
Should investors expect ongoing earnings contribution from RBSSC?
No. The partnership has sold or is in the process of selling substantially all of its operating businesses, and it expects only residual activity during liquidation. Future distributions to members will depend on the disposal of remaining assets and settlement of obligations, so the joint venture should not be viewed as a continuing source of earnings.
06—Continue