01—Abstract
Summary
Summary of the 10-K/A filed March 28, 2012. Cited figures are marked; the original filing is the authoritative source.
This filing is a Form 10-K/A Amendment (Item 15 exhibits index) from Sempra Energy (SRE), dated March 28, 2012, that primarily serves to add the financial statements of RBS Sempra Commodities LLP under Rule 3-09 of Regulation S-X.
The core Sempra 2011 financial statements were not included here; they were previously filed as Exhibit 13.1 to the original 10-K filed February 28, 2012. For investors, this document is therefore mainly an administrative and supplemental filing rather than a source of new Sempra operating or earnings results. The most material content concerns Sempra's former 50%a joint venture, RBS Sempra Commodities LLP (RBSSC).
Its 2011 statements, prepared on a liquidation basis and unaudited, show net assets in liquidation of $238.8 millionb at December 31, 2011, down from $1,651.1 million a year earlier, after $1.39 billion of distributions to members during 2011. The partnership recorded a 2011 net loss of $13.8 million, and it expects liquidation to be substantially complete by the end of 2012. The sale of its trading businesses to JP Morgan, Noble, and Societe Generale in 2010 and 2011 effectively wound down Sempra's commodity trading exposure, which had been a significant source of volatility in prior years.
Investors should note that the RBSSC liquidation implies a reduced earnings contribution from commodities trading going forward, and that Sempra's residual exposure is primarily through its indemnity and guarantee arrangements with RBS and the risk-transfer agreements with JP Morgan. The filing discloses no material new liabilities for Sempra itself, but the financial statements presented are unaudited, which limits the level of assurance they provide.
02—Key points
Key Highlights
- Form 10-K/A adds RBS Sempra Commodities LLP financial statements under Rule 3-09; Sempra's own 2011 financials were previously filed as Exhibit 13.1 on February 28, 2012.
- RBSSC net assets in liquidation fell to $238.8 million at December 31, 2011, from $1,651.1 million at December 31, 2010, reflecting $1.39 billion in member distributions.
- RBSSC reported a 2011 net loss of $13.8 million, versus a $168.8 million net loss in 2010 that included $154.9 million of net disposal losses.
- The partnership's trading businesses were sold to JP Morgan (2010 Oil, Metals, European Power & Gas and North American Power & Gas), Noble Group (2010 Sempra Energy Solutions), and Societe Generale (2011 residual assets).
- RBSSC expects liquidation to be substantially complete by end of 2012, though timing may shift depending on realization of assets and settlement of liabilities.
- The financial statements of RBSSC for 2010 and 2011 are unaudited, and the 2011 statements are prepared on a liquidation basis of accounting.
- Residual exposure includes FERC refund proceedings in the Pacific Northwest market, which the partnership remains a respondent in, with Sempra's indemnity covering certain pre-formation matters.
03—Questions
Frequently Asked Questions
Where can I find Sempra Energy's full 2011 financial statements in this filing?
They are not included in this 10-K/A. Sempra's 2011 financial statements were filed as Exhibit 13.1 (Annual Report to Shareholders) with the original Form 10-K on February 28, 2012. This amendment adds only the RBS Sempra Commodities LLP financial statements under Rule 3-09 as Exhibits 99.1 through 99.3.
Why did RBS Sempra Commodities LLP's net assets fall so sharply in 2011?
The decline from $1,651.1 million to $238.8 million was driven mainly by $1,391.99 million in distributions paid to members during 2011, as the partnership returned capital while winding down. The partnership also recorded a $13.8 million net loss and a $6.4 million reduction from unrealized losses on available-for-sale securities.
Does the RBSSC wind-down create ongoing financial risk for Sempra investors?
Risk appears limited but not zero. The partnership states that its remaining credit risk is de minimis, and most trading positions have been transferred to JP Morgan under risk transfer agreements. Sempra also remains exposed through its guarantee of certain non-novated counterparties (indemnified by RBS) and through FERC refund proceedings, for which Sempra agreed to indemnify RBS and the partnership for pre-formation liabilities.
Why should investors be cautious about the RBSSC financial statements in this filing?
The 2010 and 2011 RBSSC financial statements are labeled unaudited, and the 2011 statements use a liquidation basis of accounting, where assets are stated at net realizable value and liabilities at estimated settlement amounts. Those estimates may change, and actual outcomes could differ materially from what is reported.
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