SEMPRA Quarterly Report for Q2 Ended Jun 30, 2010

Summary

Sempra Energy reported mixed results for the second quarter and first half of 2010, with consolidated earnings increasing year-over-year for the quarter but declining for the six-month period, largely due to significant litigation expenses and reduced earnings from its Sempra Commodities segment. The utility operations of SDG&E and SoCalGas showed resilience, with SDG&E's earnings declining slightly due to increased wildfire insurance premiums and other factors, while SoCalGas saw a modest increase in earnings driven by a lower effective tax rate and higher authorized margins. Sempra Global segments presented a varied picture, with Sempra Pipelines & Storage showing a strong recovery following an asset write-off in the prior year, while Sempra Generation faced litigation expenses impacting its six-month results. Sempra LNG demonstrated improved performance. Operationally, Sempra Energy continued to invest in infrastructure, notably with the acquisition of Mexican pipeline assets by Sempra Pipelines & Storage. The company also provided an update on its capital expenditure plans for 2010, which include significant investments in its utility infrastructure, particularly for SDG&E's Sunrise Powerlink transmission line and SoCalGas' advanced metering infrastructure. The company maintained a strong liquidity position with substantial available credit lines. Investors should note the ongoing wildfire litigation and associated cost recovery mechanisms, as well as the significant sale of businesses within RBS Sempra Commodities, which is expected to provide proceeds that may be used for share buybacks or debt reduction.

Key Highlights

• 1Consolidated earnings increased by 12% to $222 million for Q2 2010 compared to $198 million in Q2 2009, but decreased by 36% to $328 million for the first six months of 2010 compared to $514 million in the same period of 2009.
• 2SDG&E's earnings decreased by 7% to $158 million for the first six months of 2010, impacted by higher wildfire insurance premiums and a write-down of deferred tax assets.
• 3SoCalGas' earnings increased by 8% to $134 million for the first six months of 2010, primarily due to a lower effective tax rate and higher authorized margins.
• 4Sempra Pipelines & Storage showed a significant turnaround, reporting $39 million in earnings for Q2 2010, compared to a loss of $27 million in the prior year, largely due to the absence of a prior year asset write-off and the recent acquisition of Mexican pipeline assets.
• 5Sempra Generation incurred significant litigation expense impacting its six-month results, leading to a loss of $5 million for the first half of 2010, a reversal from a $76 million profit in the prior year.
• 6Sempra Energy acquired Mexican pipeline and natural gas infrastructure assets for $307 million, expanding its footprint in Mexico.
• 7The company maintained a strong liquidity position with $3.1 billion in available unused credit at June 30, 2010.

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