10-QPeriod: Q2 FY2014

SEMPRA Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:SRESREA

Summary

Sempra Energy (SRE) reported strong financial results for the six months ended June 30, 2014, with diluted earnings per share increasing by 22% to $2.07 compared to the same period in 2013. This growth was primarily driven by a significant turnaround at SDG&E, which benefited from the absence of a large plant closure loss recorded in the prior year and higher authorized operating margins. SoCalGas, while experiencing a slight earnings decline due to the favorable retroactive impact of a prior General Rate Case settlement in 2013, continued to operate steadily. The company's diversified business segments, including Sempra Mexico and Sempra Renewables, contributed positively, with the latter showing a significant gain from the sale of an equity interest in a solar power facility. Sempra Energy also highlighted substantial capital expenditure plans for 2014, totaling approximately $3.4 billion, to support infrastructure improvements and development projects across its various operating units.

Financial Highlights

47 data points
Beta

Revenue

$2.68B

Net Income

$269.00M

10.0% Net Margin

EPS (Diluted)

$0.54

Total Assets

$38.31B

Cash & Equivalents

$789.00M

Free Cash Flow

$130.00M

Financial Statements
Beta
Revenue$2.68B
Interest Expense$138.00M
Net Income$269.00M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)491.40M
Shares Outstanding (Diluted)500.20M

Key Highlights

  • 1Diluted EPS increased 22% to $2.07 for the first six months of 2014, demonstrating improved profitability.
  • 2SDG&E's earnings saw a significant year-over-year improvement, largely due to the absence of a substantial plant closure loss recorded in Q2 2013 and higher authorized operating margins.
  • 3Sempra Mexico contributed positively with an $11 million allowance for funds used during construction (AFUDC) related to its Sonora pipeline project.
  • 4Sempra Renewables recorded a $16 million after-tax gain from the sale of a 50% equity interest in the Copper Mountain Solar 3 facility.
  • 5The company plans capital expenditures of approximately $3.4 billion for 2014, split between California Utilities ($2.2 billion) and other subsidiaries ($1.2 billion), focusing on infrastructure improvements and new projects.
  • 6Sempra Energy maintained strong liquidity with $789 million in unrestricted cash and cash equivalents and $2.4 billion in available unused credit at June 30, 2014.

Frequently Asked Questions

The primary drivers for the earnings increase were the absence of a significant plant closure loss at SDG&E in the prior year, higher authorized operating margins at SDG&E and SoCalGas due to the 2012 General Rate Case decision, and a gain from the sale of an equity interest in the Copper Mountain Solar 3 project by Sempra Renewables. Sempra Mexico also benefited from AFUDC on its Sonora pipeline project.

SDG&E showed strong earnings growth driven by the absence of prior year charges and higher authorized margins. SoCalGas experienced a decrease in earnings compared to the prior year, which was primarily due to the favorable retroactive impact of a 2012 General Rate Case settlement recognized in Q2 2013. Significant regulatory matters include the ongoing implementation of the Pipeline Safety Enhancement Plan (PSEP) for both utilities and the proposed settlement agreement for the San Onofre Nuclear Generating Station (SONGS) outage, which, if approved, is not expected to have a material adverse impact on SDG&E's future results.

Sempra Energy plans approximately $3.4 billion in capital expenditures and investments for 2014. This includes $2.2 billion for its California Utilities, primarily for infrastructure improvements and pipeline safety, and $1.2 billion for its international and U.S. gas & power businesses, supporting development of LNG, natural gas, and renewable energy projects. These expenditures are expected to be funded through operating cash flows, debt issuances, and project financing.