What was the primary driver for the decrease in net income in Q1 2007?

The primary driver for the decrease in net income to $228 million in Q1 2007 from $255 million in Q1 2006 was a $45 million decrease in net income from Sempra Commodities, attributed to lower margins in natural gas and power trading due to decreased market volatility and specific accounting treatments for certain inventories and hedges.

What major capital projects are underway, and how are they being funded?

Sempra Energy is undertaking significant capital projects, including the Energía Costa Azul and Cameron LNG receipt terminals, and pipeline expansions in Mexico and the US through Sempra Pipelines & Storage. These projects are being funded through a combination of operating cash flow, security issuances, and existing credit facilities, with a total expected capital expenditure of $2.1 billion for 2007.

How is the company addressing its legal liabilities, particularly those from the California energy crisis?

Sempra Energy has set aside reserves of $626 million for litigation as of March 31, 2007. This includes settlements reached to resolve litigation arising from the 2000-2001 California energy crisis, with ongoing appeals and specific settlement terms being managed.

What is the company's liquidity position as of March 31, 2007?

The company maintained a strong liquidity position, with $1.7 billion in unrestricted cash and cash equivalents and $6.3 billion in available unused, committed lines of credit to support operations and commercial paper.

SRE/SREA 10-Q Quarterly Report Q1 FY2007 — Revenue, Net Income, EPS

Summary

Sempra Energy reported a decrease in net income for the first quarter of 2007 compared to the same period in 2006, largely driven by reduced performance in its Sempra Commodities segment. This decline was partially offset by improved results from the Sempra Utilities (SoCalGas and SDG&E) and Sempra Generation. Significant capital expenditures are underway for infrastructure projects, particularly in LNG terminals and pipeline expansions, which will influence future performance and liquidity. The company is actively managing various legal proceedings, including those stemming from the 2000-2001 California energy crisis, which have resulted in substantial settlement reserves. Financially, Sempra Energy maintained a strong liquidity position with substantial unrestricted cash and available credit lines. The company has adopted new accounting standards, including SFAS 157 for fair value measurements and FIN 48 for income tax uncertainties, which have had a minor impact on retained earnings and require enhanced disclosures. Future operational success is contingent on regulatory approvals for key projects, successful management of commodity market volatility, and the successful integration of new accounting standards.

Key Highlights

1Net income decreased by 11% to $228 million for the first quarter of 2007 compared to $255 million in the prior year, primarily due to lower performance in Sempra Commodities.
2Sempra Utilities (SoCalGas and SDG&E) showed improved net income, driven by higher authorized base margins and contributions from new generating facilities.
3Significant investments in Sempra LNG and Sempra Pipelines & Storage are ongoing, with major projects like the Energía Costa Azul and Cameron LNG terminals, and the Liberty Gas Storage facility under construction.
4The company maintained strong liquidity with $1.7 billion in unrestricted cash and $6.3 billion in available credit lines as of March 31, 2007.
5Sempra Energy adopted new accounting standards SFAS 157 (Fair Value Measurements) and FIN 48 (Accounting for Uncertainty in Income Taxes), with minor adjustments to retained earnings.
6The company continues to manage substantial legal proceedings, with reserves of $626 million set aside for litigation, including those related to the California energy crisis.

SEMPRA Quarterly Report for Q1 Ended Mar 31, 2007

Summary

Key Highlights

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