How are the California Utilities (SDG&E and SoCalGas) performing, and what regulatory factors are impacting them?

SDG&E showed strong performance with a 54% increase in third-quarter earnings and a 37% year-to-date increase, benefiting from tax advantages and lower litigation costs. SoCalGas' earnings saw a modest decline. Both utilities are subject to pending General Rate Case (GRC) applications, which will determine their revenue requirements. The ongoing San Onofre Nuclear Generating Station (SONGS) outage is a significant concern for SDG&E, with regulatory bodies investigating cost recovery, which could impact future earnings.

What is the outlook for Sempra's renewable energy and natural gas businesses?

Sempra Renewables is performing well, with earnings growth driven by increased investments in solar and wind assets and higher deferred tax benefits. Sempra Natural Gas faced significant headwinds, with lower earnings due to contract expirations, lower commodity prices, and the Rockies Express impairment. The company is pursuing significant development in LNG export facilities at Cameron LNG, which is expected to be a key growth area.

What are the main financial risks or uncertainties for Sempra Energy going forward?

Key risks include the potential for significant negative impacts from the ongoing SONGS outage and related regulatory proceedings, the outcome of which could lead to disallowances of costs or refunds. Additionally, the substantial wildfire litigation settlement costs for SDG&E, while deemed probable for recovery from ratepayers, carry timing differences and regulatory uncertainty. The company's heavy investment in capital projects also requires careful management of financing costs and regulatory approvals.

SRE/SREA 10-Q Quarterly Report Q3 FY2012 — Revenue, Net Income, EPS

Q: What caused the significant decrease in Sempra Energy's net income for the nine months ended September 30, 2012?

The primary driver for the decrease in net income was a substantial non-cash impairment charge of $400 million related to Sempra's investment in Rockies Express Pipeline LLC. Additionally, lower earnings from Sempra Natural Gas due to the expiration of a significant contract with the DWR and the sale of an asset, along with the absence of a large remeasurement gain recorded in the prior year's South American utilities acquisition, also contributed to the decline.

Summary

Sempra Energy (SRE) reported a decrease in earnings for the third quarter and first nine months of 2012 compared to the same periods in 2011. The consolidated net income for the quarter was $290 million, down from $319 million in the prior year. For the nine-month period, net income was $615 million, a significant drop from $1,073 million in 2011. This decline was primarily driven by a substantial non-cash impairment charge of $400 million related to its investment in Rockies Express Pipeline LLC, along with lower earnings from Sempra Natural Gas due to the expiration of a significant contract and the sale of an asset. Despite these challenges, Sempra's California utilities, SDG&E and SoCalGas, showed improved results, with SDG&E's earnings up significantly year-over-year. The company is also navigating regulatory proceedings, including general rate cases and cost of capital adjustments for its utilities, and is closely monitoring developments at the San Onofre Nuclear Generating Station (SONGS), which remains offline, potentially impacting future cost recovery. Overall, the company's financial performance in this period was significantly impacted by a large non-cash impairment charge. While the California utilities demonstrated resilience and growth, the energy-related businesses faced headwinds. Investors should closely monitor the outcome of regulatory proceedings, especially concerning the wildfire litigation and the SONGS outage, as these could have material impacts on future financial performance and cash flows. The company continues to invest heavily in capital projects, particularly in renewable energy and natural gas infrastructure, which are expected to drive future growth.

Financial Highlights

47 data points

Beta

Revenue

$2.51B

Net Income

$268.00M

0.1% Net Margin

EPS (Diluted)

$0.55

Total Assets

$35.39B

Cash & Equivalents

$530.00M

Free Cash Flow

$536.00M

Financial Statements

Beta

Revenue	$2.51B
Interest Expense	$126.00M
Net Income	$268.00M
EPS (Basic)	$0.56
EPS (Diluted)	$0.55
Shares Outstanding (Basic)	483.40M
Shares Outstanding (Diluted)	491.60M

Key Highlights

1Net income decreased to $290 million for the third quarter of 2012 from $319 million in the prior year, and to $615 million for the nine months ended September 30, 2012, from $1,073 million in 2011.
2A significant non-cash impairment charge of $400 million ($179 million in Q2 and $100 million in Q3) was recorded for Sempra's investment in Rockies Express Pipeline LLC.
3SDG&E's earnings increased by 54% in the third quarter and 37% year-to-date, driven by tax benefits, higher transmission margins, and lower wildfire litigation expenses.
4SoCalGas' earnings decreased by 12% in the third quarter and 9% year-to-date, primarily due to higher depreciation expenses and a slightly higher effective tax rate.
5Sempra Renewables showed significant earnings growth, driven by higher deferred income tax benefits and improved performance from solar and wind assets.
6The San Onofre Nuclear Generating Station (SONGS) Units 2 and 3 remain offline, leading to regulatory investigations and potential cost disallowances, with SDG&E estimating $153 million in revenue collected for its share of SONGS investment and operating costs during the first nine months of 2012.
7Sempra Natural Gas experienced a substantial decline in earnings, largely due to the expiration of a major contract with the DWR and lower commodity prices, compounded by a $60 million write-down on its Rockies Express investment.

SEMPRA Quarterly Report for Q3 Ended Sep 30, 2012

Summary

Financial Highlights

Key Highlights

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