10-QPeriod: Q1 FY2014

SEMPRA Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a solid first quarter for 2014, with net income attributable to common shareholders increasing by 39% year-over-year to $247 million, or $0.99 per diluted share. This growth was driven by a combination of factors, including the positive impact of the finalized 2012 General Rate Case decisions for its California Utilities (SDG&E and SoCalGas) and a significant gain from the sale of a solar power facility by Sempra Renewables. The company's diversified portfolio across utilities, international operations, and various energy businesses contributed to the overall positive performance. Operationally, the California Utilities saw improved margins due to the retroactive application of the 2012 GRC, which benefited both SDG&E and SoCalGas. Sempra Mexico also demonstrated strong performance, driven by lower income tax expenses and AFUDC related to pipeline construction. Sempra Natural Gas experienced a decline in earnings due to a one-time gain in the prior year from asset sales, while Sempra Renewables reported substantial growth, largely attributable to a gain on the sale of a solar asset. Investors should note the ongoing capital expenditure plans across all segments, particularly in infrastructure improvements and new energy projects, which are expected to be funded through a combination of operating cash flow and debt.

Financial Highlights

47 data points
Beta

Revenue

$2.79B

Net Income

$247.00M

8.8% Net Margin

EPS (Diluted)

$0.49

Total Assets

$37.48B

Cash & Equivalents

$844.00M

Free Cash Flow

$904.00M

Financial Statements
Beta
Revenue$2.79B
Interest Expense$136.00M
Net Income$247.00M
EPS (Basic)$0.51
EPS (Diluted)$0.49
Shares Outstanding (Basic)490.60M
Shares Outstanding (Diluted)499.40M

Key Highlights

  • 1Net income attributable to common shareholders increased by 39% to $247 million, or $0.99 per diluted share, compared to $178 million, or $0.72 per diluted share, in the prior year's first quarter.
  • 2The California Utilities (SDG&E and SoCalGas) benefited from the retroactive application of the 2012 General Rate Case (GRC) decision, leading to higher authorized revenues and improved earnings.
  • 3Sempra Renewables recorded a $16 million after-tax gain from the sale of a 50% equity interest in its Copper Mountain Solar 3 facility.
  • 4Sempra Mexico's earnings increased significantly due to lower income tax expenses and allowance for funds used during construction (AFUDC) on pipeline projects.
  • 5Sempra Natural Gas' earnings were lower year-over-year, impacted by a significant gain from asset sales in the first quarter of 2013.
  • 6The company continued to invest heavily in capital expenditures, with approximately $3.2 billion planned for 2014 across all segments to support infrastructure improvements and new projects.
  • 7SDG&E is facing a potential regulatory disallowance related to the San Onofre Nuclear Generating Station (SONGS) settlement, resulting in a $9 million after-tax charge in the quarter.

Frequently Asked Questions

The primary drivers for the increase in net income were the improved earnings from the California Utilities (SDG&E and SoCalGas) due to the retroactive application of the 2012 General Rate Case (GRC) decision, and a gain from the sale of a solar asset by Sempra Renewables. Additionally, lower income tax expenses and AFUDC from pipeline projects in Sempra Mexico contributed positively.

SDG&E is involved in a proposed settlement agreement with the California Public Utilities Commission (CPUC) regarding the SONGS outage and retirement. While the settlement aims to allow for recovery of remaining investment over a ten-year period, it also includes disallowances and refunds. For the first quarter of 2014, SDG&E recorded a $9 million after-tax charge related to a reduction in tax regulatory assets due to the proposed settlement. The outcome of the CPUC's approval of this settlement is still pending.

Sempra Energy plans substantial capital expenditures for 2014, estimated at $3.2 billion. These investments are expected to be funded through a combination of operating cash flows, debt issuances, and potentially equity contributions or project financing for specific projects, particularly in its international and renewable energy segments.

Regulatory decisions are critical to the performance of SDG&E and SoCalGas. The retroactive application of the 2012 General Rate Case (GRC) decision significantly boosted earnings for both utilities in the first quarter of 2014 compared to the prior year, which was impacted by a delay in the GRC decision. Ongoing regulatory proceedings, such as those for pipeline safety enhancements and electric rate reform, are closely watched as they could affect future costs and revenues.