10-QPeriod: Q1 FY2002

SEMPRA Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 10, 2002For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a decrease in net income for the first quarter of 2002 to $146 million ($0.71 per share) from $178 million ($0.88 per share) in the prior year period. This decline was primarily driven by lower earnings from Sempra Energy Trading (SET) due to reduced energy commodity market volatility and prices, as well as the absence of a gain on sale of Energy America recorded in the prior year. Total operating revenues also saw a significant drop, falling to $1.525 billion from $3.242 billion, largely due to decreased natural gas and electric revenues from its California utilities. Despite the dip in profitability, the company's balance sheet strengthened with an increase in cash and cash equivalents to $740 million from $605 million. Sempra also completed significant acquisitions in its metals trading business through SET and raised $600 million in Equity Units to repay short-term debt. The company continues to navigate the evolving California energy market, with ongoing proceedings related to electric industry restructuring and potential impacts from Argentine investments being managed. Overall, while revenues and net income declined year-over-year, the company is taking steps to diversify its trading business and manage its debt structure.

Key Highlights

  • 1Net income decreased to $146 million from $178 million in the prior year's first quarter, resulting in lower EPS of $0.71 compared to $0.88.
  • 2Total operating revenues declined significantly to $1.525 billion from $3.242 billion, impacted by lower energy commodity prices and reduced utility volumes.
  • 3Sempra Energy Trading (SET) experienced a substantial decrease in net income to $42 million from $86 million, attributed to reduced market volatility and lower energy commodity prices.
  • 4Cash and cash equivalents increased to $740 million from $605 million, indicating improved liquidity.
  • 5The company completed three acquisitions to expand its metals trading business under Sempra Energy Trading (SET), including Enron Metals Limited, for a combined $225 million.
  • 6Sempra Energy raised $600 million through the public offering of Equity Units to repay short-term debt.
  • 7The company is facing ongoing legal proceedings related to alleged market manipulation and natural gas price fixing, though management believes these allegations are without merit.

Frequently Asked Questions

The primary reason for the decrease in net income was lower earnings from Sempra Energy Trading (SET) due to reduced volatility and prices in energy commodity markets, as well as the absence of a significant gain on the sale of Energy America that was recorded in the prior year's first quarter.

The company's liquidity improved. Cash and cash equivalents increased from $605 million at December 31, 2001, to $740 million at March 31, 2002. This was supported by increased cash flow from operations and strategic financing activities.

SET completed three acquisitions in the metals trading sector, adding base metals trading and warehousing capabilities. These acquisitions are expected to contribute to Sempra Energy's earnings in 2002 and diversify SET's business beyond energy commodities.

Sempra Energy is involved in several legal proceedings related to the California electric industry restructuring, including allegations of market manipulation and natural gas price fixing. Management believes these allegations are without merit. The company is also monitoring developments in Argentina, where SEI has a significant investment and has recorded currency adjustments.