10-QPeriod: Q1 FY2013

SEMPRA Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 2, 2013For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a decrease in net income for the first quarter of 2013 compared to the same period in 2012. This decline was primarily attributed to higher expenses and a significant income tax expense related to a corporate reorganization for the IEnova stock offerings, as well as delays in the General Rate Case (GRC) decisions for its California Utilities, SDG&E and SoCalGas, which resulted in revenue being recorded based on prior year authorized levels. The company did experience improved earnings in its Sempra Natural Gas segment, driven by a gain from the sale of a portion of its Mesquite Power plant. Investors should note the ongoing regulatory proceedings impacting the California Utilities, particularly the delayed GRC decisions and their potential retroactive impact, and the significant capital expenditure plans for the upcoming years across various segments, including renewable energy and natural gas infrastructure projects.

Financial Highlights

46 data points
Beta

Revenue

$2.65B

Net Income

$178.00M

6.7% Net Margin

EPS (Diluted)

$0.36

Total Assets

$37.27B

Cash & Equivalents

$1.47B

Free Cash Flow

$835.00M

Financial Statements
Beta
Revenue$2.65B
Interest Expense$138.00M
Net Income$178.00M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)486.60M
Shares Outstanding (Diluted)495.00M

Key Highlights

  • 1Net income decreased by 25% to $178 million in Q1 2013 compared to Q1 2012, with diluted EPS falling to $0.72 from $0.97.
  • 2A $63 million income tax expense related to the IEnova stock offering reorganization significantly impacted earnings.
  • 3California Utilities (SDG&E and SoCalGas) recorded lower earnings due to delays in their 2012 General Rate Case (GRC) decisions, leading to revenue recognition based on 2011 authorized levels.
  • 4Sempra Natural Gas segment's earnings improved due to a $44 million gain from the sale of a portion of the Mesquite Power plant.
  • 5Capital expenditures are projected to be approximately $3.3 billion for 2013, with a significant portion allocated to the California Utilities for infrastructure improvements and safety initiatives.
  • 6SDG&E is facing potential regulatory scrutiny and cost disallowances related to the ongoing issues at the San Onofre Nuclear Generating Station (SONGS), including replacement power costs.
  • 7Sempra Mexico successfully completed debt and equity offerings for its subsidiary IEnova, raising substantial capital to fund growth and corporate purposes.

Frequently Asked Questions

The primary driver for the decrease in net income was a combination of higher expenses, a significant income tax expense resulting from a corporate reorganization related to IEnova stock offerings, and the impact of delayed General Rate Case (GRC) decisions for its California Utilities, SDG&E and SoCalGas.

The delay in the 2012 GRC decisions meant that SDG&E and SoCalGas recorded revenues based on their 2011 authorized revenue requirements. A final decision is expected in the second quarter of 2013, with potential retroactive adjustments to revenues, which could impact financial results starting in 2013.

Sempra Energy planned approximately $3.3 billion in capital expenditures and investments for 2013. This includes significant investments in infrastructure improvements, pipeline projects in Mexico, renewable energy projects, and natural gas storage facilities across its various operating segments.

SONGS units remain offline due to steam generator issues. SDG&E is incurring replacement power costs, and the CPUC is investigating whether these costs and other SONGS-related expenditures should be removed from customer rates. The outcome of this investigation could materially impact SDG&E's financial condition and results of operations.