10-QPeriod: Q3 FY2013

SEMPRA Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 5, 2013For Securities:SRESREA

Summary

Sempra Energy reported increased earnings for the nine months ended September 30, 2013, driven by a combination of factors including the favorable impact of the 2012 General Rate Case (GRC) decision for its California Utilities (SDG&E and SoCalGas), gains from asset sales in Sempra Renewables, and a significant non-cash impairment charge reversal related to Rockies Express Pipeline in Sempra Natural Gas. However, the SDG&E segment experienced a notable earnings decrease driven by a loss from plant closure related to the San Onofre Nuclear Generating Station (SONGS), a charge for early retirement, and unfavorable tax items in the prior year. The company's financial health remains robust, supported by strong operational cash flows and available credit facilities, though capital expenditures remain significant across its various segments, particularly for infrastructure upgrades and new energy projects.

Financial Highlights

49 data points
Beta

Revenue

$2.55B

Net Income

$296.00M

11.6% Net Margin

EPS (Diluted)

$0.59

Total Assets

$36.90B

Cash & Equivalents

$1.06B

Free Cash Flow

$225.00M

Financial Statements
Beta
Revenue$2.55B
Interest Expense$137.00M
Net Income$296.00M
EPS (Basic)$0.60
EPS (Diluted)$0.59
Shares Outstanding (Basic)488.20M
Shares Outstanding (Diluted)498.60M

Key Highlights

  • 1Consolidated earnings increased by 153% to $719 million for the nine months ended September 30, 2013, compared to $566 million in the prior year period, with diluted EPS rising to $2.89 from $2.31.
  • 2SDG&E's earnings declined significantly due to a $119 million charge for the early retirement of the San Onofre Nuclear Generating Station (SONGS) and other factors, partially offset by favorable GRC impacts.
  • 3Sempra Natural Gas benefited from a $239 million impairment charge reversal in 2012 related to Rockies Express Pipeline and a $44 million gain on the sale of a portion of the Mesquite Power plant.
  • 4Sempra Renewables reported gains of $24 million from the sale of equity interests in two solar projects (Mesquite Solar 1 and Copper Mountain Solar 2).
  • 5Capital expenditures for the nine months ended September 30, 2013, were $1.785 billion, a decrease from $2.241 billion in the prior year, reflecting substantial ongoing investments in infrastructure and development.
  • 6The company maintained strong liquidity, with $1.061 billion in cash and cash equivalents and $3.676 billion in available unused credit facilities at September 30, 2013.

Frequently Asked Questions

The increase in consolidated earnings was primarily driven by a favorable impact from the retroactive application of the 2012 General Rate Case (GRC) decision for SDG&E and SoCalGas, gains from asset sales at Sempra Renewables, and a significant non-cash impairment charge reversal at Sempra Natural Gas related to Rockies Express Pipeline. These factors were partially offset by a charge related to the early retirement of SONGS and other items.

The SDG&E segment experienced a notable decline in earnings due to a $119 million charge for the early retirement of the San Onofre Nuclear Generating Station (SONGS). Additionally, there were unfavorable tax items in the prior year and lower CPUC-authorized rates of return. International operations also faced some currency translation and administrative cost pressures.

Sempra Energy maintained strong liquidity with substantial cash reserves and available credit facilities. Capital expenditures, while significant at $1.785 billion for the nine months, decreased compared to the prior year, reflecting ongoing investments in infrastructure and development across its diverse business segments. The company expects operational cash flows, distributions from equity investments, and potential debt issuances to adequately fund its capital needs.

The permanent retirement of SONGS Units 2 and 3 has led SDG&E to establish a new regulatory asset of $431 million as of September 30, 2013, representing the estimated probable recovery of its investment and related costs. However, the ultimate recovery is subject to CPUC decisions, and SDG&E has recognized a $200 million reserve for disallowance of rate recovery, impacting earnings by $119 million. There are ongoing legal proceedings against the steam generator manufacturer, MHI, to recover damages.