10-QPeriod: Q3 FY2015

SEMPRA Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 3, 2015For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a decrease in net income for the three months ended September 30, 2015, to $248 million ($0.99 per diluted share) from $348 million ($1.39 per diluted share) in the same period of 2014. This decline was primarily driven by a $113 million reduction in earnings at Southern California Gas Company (SoCalGas) due to the adoption of seasonal revenue recognition, impacting quarterly comparisons. Despite the quarterly dip, year-to-date net income increased by 13% to $980 million ($3.91 per diluted share) for the nine months ended September 30, 2015, compared to $864 million ($3.45 per diluted share) in the prior year. This year-to-date growth was supported by stronger performance in the California Utilities (excluding SoCalGas' seasonal impact), Sempra Mexico's pipeline earnings, and a gain from the sale of an asset by Sempra Natural Gas. Operationally, Sempra Energy is navigating a complex regulatory environment, particularly with the California Public Utilities Commission (CPUC) impacting its California Utilities. Significant capital expenditure plans are underway, including a substantial investment in Mexico for IEnova's acquisition of a stake in Gasoductos de Chihuahua and ongoing development of LNG and renewable energy projects. The company's credit facilities were amended and restated in October 2015 to provide $1 billion for Sempra Energy, $2.21 billion for Sempra Global, and $1 billion for the California Utilities, ensuring liquidity. Key risks include regulatory changes, commodity price volatility, and the execution of large-scale capital projects.

Financial Highlights

49 data points
Beta

Revenue

$2.48B

Net Income

$248.00M

10.0% Net Margin

EPS (Diluted)

$0.49

Total Assets

$40.57B

Cash & Equivalents

$697.00M

Free Cash Flow

$109.00M

Financial Statements
Beta
Revenue$2.48B
Interest Expense$143.00M
Net Income$248.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)496.80M
Shares Outstanding (Diluted)502.00M

Key Highlights

  • 1Three-month net income decreased by 29% to $248 million, with diluted EPS falling to $0.99.
  • 2Nine-month net income increased by 13% to $980 million, with diluted EPS rising to $3.91.
  • 3SoCalGas experienced a significant quarterly earnings decline due to the adoption of seasonal revenue recognition, impacting year-over-year comparisons.
  • 4Sempra Natural Gas reported a $36 million gain from the sale of the Mesquite Power plant's remaining block.
  • 5Sempra Mexico saw increased pipeline earnings, partly from new operations and AFUDC, partially offset by lower earnings at Mexicali power plant and a 2014 gain on sale.
  • 6Credit facilities for Sempra Energy, Sempra Global, and California Utilities were amended and restated in October 2015, ensuring continued liquidity.
  • 7Significant capital expenditure plans are in progress across various segments, including a major acquisition in Mexico and LNG/renewable energy projects.

Frequently Asked Questions

The primary reason for the decrease in net income for the three months ended September 30, 2015, was a $113 million reduction in earnings at Southern California Gas Company (SoCalGas) due to the adoption of seasonal revenue recognition for core natural gas customers, which impacted quarterly year-over-year comparisons. This change shifts earnings recognition to the first and fourth quarters.

For the first nine months of 2015, Sempra Energy's net income increased by 13% to $980 million, and diluted earnings per share rose by 13% to $3.91, compared to $864 million and $3.45, respectively, for the same period in 2014. This growth was driven by improved operations at its California Utilities (excluding the quarterly impact at SoCalGas), higher pipeline earnings in Sempra Mexico, and a gain on asset sale from Sempra Natural Gas.

Sempra Energy is progressing on several key capital projects. Notably, IEnova (Sempra Mexico) is set to acquire its joint venture partner's 50% stake in Gasoductos de Chihuahua for $1.325 billion, expected to close by year-end 2015. The company is also investing in LNG and renewable energy projects across its segments, including the Cameron LNG liquefaction project and various solar and wind farms.

Sempra Energy amended and restated its syndicated revolving credit agreements in October 2015. These new agreements provide credit facilities of $1 billion for Sempra Energy, $2.21 billion for Sempra Global, and $1 billion for the California Utilities, ensuring continued liquidity for operations, capital expenditures, and other financial needs. As of September 30, 2015, the company had substantial available unused credit.