10-QPeriod: Q2 FY2013

SEMPRA Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 6, 2013For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a significant increase in net income for the second quarter and the first six months of 2013 compared to the prior year, driven primarily by the absence of a substantial impairment charge on its investment in Rockies Express Pipeline in the prior year and favorable impacts from regulatory decisions for its California Utilities. The company recorded a significant "Loss from Plant Closure" of $200 million pre-tax related to SDG&E's investment in the San Onofre Nuclear Generating Station (SONGS), which has been permanently retired. Despite this significant charge, the overall financial performance improved, reflecting the company's diversified operations across utilities and energy-related businesses. Key operational highlights include the successful completion of the 2012 General Rate Case (GRC) for both SDG&E and SoCalGas, which retroactively increased authorized revenues. SDG&E saw increased electric revenues from transmission projects like Sunrise Powerlink and higher natural gas prices. SoCalGas also benefited from higher natural gas prices and increased authorized revenues. Sempra Renewables and Sempra Natural Gas reported mixed results, with Sempra Natural Gas seeing improved earnings from LNG and storage operations but impacted by the sale of a portion of the Mesquite Power plant. The company's liquidity remains strong with ample credit facilities available.

Financial Highlights

48 data points
Beta

Revenue

$2.65B

Net Income

$245.00M

9.2% Net Margin

EPS (Diluted)

$0.49

Total Assets

$37.02B

Cash & Equivalents

$954.00M

Free Cash Flow

$270.00M

Financial Statements
Beta
Revenue$2.65B
Interest Expense$138.00M
Net Income$245.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)487.20M
Shares Outstanding (Diluted)497.00M

Key Highlights

  • 1Net income increased significantly year-over-year due to the absence of a major impairment charge in the prior year and positive regulatory impacts for the California Utilities.
  • 2SDG&E recorded a $200 million pre-tax loss from plant closure related to the permanent retirement of its investment in the San Onofre Nuclear Generating Station (SONGS).
  • 3Both SDG&E and SoCalGas benefited from favorable retroactive application of the 2012 General Rate Case (GRC) decisions, increasing authorized revenues.
  • 4SDG&E's electric revenues were boosted by the Sunrise Powerlink transmission line and higher authorized revenues from transmission assets.
  • 5Sempra Natural Gas reported higher earnings from LNG and gas storage operations, partially offset by the sale of a portion of the Mesquite Power plant.
  • 6The company maintained strong liquidity, with significant available unused credit facilities.
  • 7Despite the SONGS closure charge, the overall financial performance shows improvement driven by core utility operations and energy-related businesses.

Frequently Asked Questions

Sempra Energy, through its subsidiary SDG&E, recorded a $200 million pre-tax loss from plant closure in the second quarter of 2013 due to the permanent retirement of its investment in SONGS. SDG&E has also established a regulatory asset of $322 million representing management's assessment of probable recovery in rates for its SONGS investment and related costs. The company continues to assess the probability of recovery and the ultimate impact on earnings could differ from current estimates.

The final decision in the 2012 General Rate Case (GRC) for both SDG&E and SoCalGas had a favorable impact, retroactively increasing authorized revenues for 2012 and the first quarter of 2013. SDG&E also benefited from higher authorized revenues for its electric transmission assets, including the Sunrise Powerlink project, and a lower authorized rate of return effective January 1, 2013. SoCalGas saw increases in its base operating margin as a result of the GRC decision and benefited from a reduction in income tax expense due to a change in accounting for certain repair expenditures.

The significant increase in net income was primarily driven by the absence of a $179 million non-cash impairment charge on the Rockies Express Pipeline investment in the prior year. Additionally, favorable regulatory outcomes for the California Utilities, including the retroactive application of the 2012 GRC and increased authorized revenues from transmission projects, contributed to the improved performance. Higher earnings from LNG and gas storage operations at Sempra Natural Gas also played a role.

Sempra Energy maintains strong liquidity through substantial available credit facilities totaling over $3.6 billion in unused credit at June 30, 2013. The company expects its cash flows from operations, distributions from equity investments, and potential securities issuances to be adequate to fund capital expenditures, dividends, and debt repayments. The company also benefited from proceeds from the IEnova stock offerings and the sale of a portion of the Mesquite Power plant.