10-KPeriod: FY2011

SEMPRA Annual Report, Year Ended Dec 31, 2011

Filed February 28, 2012For Securities:SRESREA

Summary

Sempra Energy's 2011 10-K report highlights a diversified energy company with significant operations in natural gas and electricity utilities, as well as global energy infrastructure. The company's primary regulated utility segments, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas), operate in a heavily regulated environment primarily under the California Public Utilities Commission (CPUC). Diversification extends to non-utility segments including Sempra Generation, Sempra Pipelines & Storage, and Sempra LNG, operating domestically and internationally. Key financial and operational aspects for investors include the company's reliance on regulated utility operations for stable cash flows, balanced by the growth potential and inherent risks of its global non-utility businesses. The report details extensive regulatory frameworks, environmental compliance, and operational risks such as cybersecurity, natural disasters, and litigation, particularly the ongoing recovery of wildfire litigation costs for SDG&E. Strategic realignments aimed at simplifying operations and focusing on key growth areas, such as the regrouping of Sempra Global units into Sempra U.S. Gas & Power and Sempra International, are noted for future impact.

Financial Highlights

47 data points
Beta

Revenue

$10.04B

Net Income

$1.33B

13.3% Net Margin

EPS (Diluted)

$2.75

Total Assets

$33.25B

Cash & Equivalents

$252.00M

Free Cash Flow

$1.87B

Financial Statements
Beta
Revenue$10.04B
Interest Expense$465.00M
Net Income$1.33B
EPS (Basic)$2.77
EPS (Diluted)$2.75
Shares Outstanding (Basic)479.44M
Shares Outstanding (Diluted)483.05M

Key Highlights

  • 1The company operates through distinct reportable segments including regulated utilities (SDG&E, SoCalGas) and non-utility businesses (Sempra Generation, Sempra Pipelines & Storage, Sempra LNG), with a planned realignment of Sempra Global segments in 2012.
  • 2SDG&E and SoCalGas are subject to significant regulation by the CPUC, affecting rates, capital structure, and operations, while also facing FERC and other governmental oversight.
  • 3Sempra Energy has a 20% ownership in the San Onofre Nuclear Generating Station (SONGS), posing associated nuclear operational and decommissioning risks, and potential impacts from the Fukushima incident.
  • 4The company is actively managing recovery of costs related to the 2007 San Diego County wildfires through regulatory mechanisms, with a significant regulatory asset recorded.
  • 5Environmental compliance, including greenhouse gas emission regulations and renewable energy mandates (like California's 33% RPS Program), presents ongoing operational considerations and potential costs.
  • 6The company relies on long-term debt financing for capital expenditures, with credit ratings and market conditions posing potential liquidity and cost-of-funding risks.
  • 7Sempra's non-utility businesses, particularly Sempra LNG and Sempra Generation, face competitive markets and commodity price volatility, managed through contracts and hedging strategies.

Frequently Asked Questions

Sempra Energy's primary business segments for 2011 included its regulated utilities, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas), along with its non-utility businesses under Sempra Global, which comprised Sempra Generation, Sempra Pipelines & Storage, and Sempra LNG. For 2012, the company planned to realign Sempra Global into two new operating units: Sempra U.S. Gas & Power and Sempra International.

The primary regulatory body for SDG&E and SoCalGas is the California Public Utilities Commission (CPUC), which oversees rates, service conditions, capital structure, and long-term resource procurement. Additionally, the Federal Energy Regulatory Commission (FERC) regulates interstate aspects of natural gas and electricity transmission and wholesale sales, while the Nuclear Regulatory Commission (NRC) oversees nuclear facilities like SONGS.

Sempra Energy faces a range of risks including regulatory changes, market volatility in energy commodities, environmental compliance costs (especially related to greenhouse gas emissions), cybersecurity threats to its infrastructure, natural disasters, and significant litigation risks, notably the recovery of costs from the 2007 wildfires. Additionally, its global operations expose it to foreign political and economic risks, and its reliance on debt financing means it is sensitive to financial market conditions and credit ratings.

SDG&E holds a 20% ownership interest in SONGS. The company faces risks associated with nuclear generation, including potential catastrophic failures, environmental impacts, and increasing regulatory scrutiny following the Fukushima incident. SDG&E also faces costs related to decommissioning and spent fuel disposal, although it has a contract with the U.S. Department of Energy for spent fuel disposal.