10-QPeriod: Q2 FY2011

SEMPRA Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 9, 2011For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a significant increase in earnings for the second quarter and first half of 2011, primarily driven by a substantial gain from the remeasurement of equity method investments following the acquisition of controlling interests in South American utilities Chilquinta Energía and Luz del Sur. This acquisition, completed in April 2011, contributed positively to the Sempra Pipelines & Storage segment's performance. Despite the positive earnings impact from the acquisition, the company's utilities, SDG&E and SoCalGas, saw modest year-over-year earnings declines in their respective segments due to various factors including higher insurance premiums and litigation resolution impacts. The company also highlighted substantial capital expenditure plans for 2011, focusing on utility infrastructure improvements and renewable energy projects. Overall, the financial performance shows a strong rebound in earnings driven by strategic acquisitions, while operational segments exhibit mixed but generally stable performance.

Financial Highlights

47 data points
Beta

Revenue

$2.42B

Net Income

$503.00M

20.8% Net Margin

EPS (Diluted)

$1.04

Total Assets

$31.84B

Cash & Equivalents

$392.00M

Free Cash Flow

$334.00M

Financial Statements
Beta
Revenue$2.42B
Interest Expense$118.00M
Net Income$503.00M
EPS (Basic)$1.05
EPS (Diluted)$1.04
Shares Outstanding (Basic)478.80M
Shares Outstanding (Diluted)481.60M

Key Highlights

  • 1Net income for the quarter ended June 30, 2011, was $511 million, a substantial increase from $222 million in the prior year's quarter, driven by a $277 million gain from remeasuring equity method investments.
  • 2Diluted earnings per share for the quarter increased to $2.12 from $0.89 in the same period last year, reflecting the significant gain and a reduction in outstanding shares due to the company's share repurchase program.
  • 3Sempra Pipelines & Storage segment showed a significant increase in earnings, up to $337 million from $39 million year-over-year, largely due to the consolidation of newly acquired South American utilities.
  • 4SDG&E's earnings decreased slightly to $71 million from $75 million, impacted by higher insurance premiums and the resolution of litigation matters from prior periods.
  • 5SoCalGas experienced a decrease in earnings to $59 million from $69 million, attributed to increased employee benefit costs and other operating expenses.
  • 6Capital expenditures for 2011 are projected to be around $3.8 billion, primarily allocated to utility infrastructure projects and acquisitions in South America.
  • 7The company maintains substantial liquidity, with $2.9 billion in available unused credit on its committed lines of credit as of June 30, 2011.

Frequently Asked Questions

The primary driver of the significant earnings increase was a $277 million gain resulting from the remeasurement of equity method investments in Chilquinta Energía and Luz del Sur, following Sempra Pipelines & Storage's acquisition of controlling interests in these South American utilities.

The acquisition of Chilquinta Energía and Luz del Sur was a major positive contributor, particularly to the Sempra Pipelines & Storage segment. It led to a substantial increase in earnings and resulted in the consolidation of these businesses, adding goodwill of $959 million to the balance sheet.

SDG&E's earnings decline was primarily due to higher liability insurance premiums for wildfire coverage and the resolution of prior litigation matters, partially offset by increased AFUDC and lower wildfire claim settlement expenses. SoCalGas' earnings decrease was mainly due to increased employee benefit costs, other operating expenses, lower non-core storage revenues, and higher bad debt accruals, partially offset by higher authorized margins and a favorable tax law change.

The company plans to invest approximately $3.8 billion in capital expenditures for 2011. This includes approximately $2.6 billion for the Sempra Utilities (SDG&E and SoCalGas) for capital projects and infrastructure improvements, and about $1.4 billion for other subsidiaries, primarily for the acquisition of South American entities, development of natural gas storage, and renewable generation projects.