Summary
Sempra Energy's second quarter 2008 report shows a decrease in net income compared to the prior year, largely driven by lower earnings in the Sempra Commodities segment and increased losses in Sempra LNG and Parent/Other segments. This was partially offset by improved performance in SDG&E, Sempra Generation, and Sempra Pipelines & Storage. The company completed a significant transaction on April 1, 2008, forming RBS Sempra Commodities LLP with The Royal Bank of Scotland, which transferred Sempra Energy's commodity-marketing businesses into a joint venture. This transaction resulted in a substantial cash inflow and a gain recognized in the current period. Liquidity remains a key focus, with Sempra Energy reporting significant available credit facilities. The company also announced an agreement to acquire EnergySouth, Inc. for $510 million, expected to close by year-end, which will be funded by cash flow and debt. Management believes current cash flows, credit facilities, and potential security issuances will be adequate to meet capital expenditures, dividends, and other commitments, including the planned acquisition.
Key Highlights
- 1Net income for the six months ended June 30, 2008, was $486 million, a decrease from $505 million in the same period of 2007. Net income for the three months ended June 30, 2008, was $244 million, down from $277 million in the prior year's quarter.
- 2The formation of RBS Sempra Commodities LLP on April 1, 2008, resulted in Sempra Energy contributing its commodity-marketing businesses to a joint venture, receiving approximately $1.2 billion in cash net of contributions and recognizing a $67 million after-tax gain.
- 3Sempra Utilities (SoCalGas and SDG&E) showed improved net income due to regulatory adjustments and lower effective tax rates.
- 4Sempra Commodities' net income decreased significantly due to the transition to equity accounting for the new joint venture, although the equity earnings from RBS Sempra Commodities were substantial ($146 million for the quarter).
- 5Sempra LNG reported increased net losses due to higher income tax expenses and mark-to-market losses, partially offset by a cash payment for early termination of a capacity agreement.
- 6The company announced a definitive agreement to acquire EnergySouth, Inc. for $510 million, subject to shareholder and regulatory approvals.
- 7As of June 30, 2008, Sempra Energy had $230 million in unrestricted cash and cash equivalents and $4.1 billion in available unused, committed lines of credit.