8-KOther EventsExhibits & Filings

SEMPRA 8-K Report, Corporate Update (Sep 9, 2005)

Filed September 9, 2005For Securities:SRESREA

Summary

Sempra Energy (SRE) filed an 8-K on September 8, 2005, to provide an update on the significant Continental Forge Litigation. This class-action lawsuit, filed in 2000 and consolidated in San Diego Superior Court, alleges antitrust and unfair competition by Sempra's California utilities and El Paso Natural Gas Company. While El Paso settled for approximately $1.6 billion in 2003, Sempra and its utilities continue to litigate claims seeking $23 billion in damages. This filing details a newly approved stipulation that structures the initial trial for specific plaintiff subclasses. The stipulation outlines an initial jury trial focused on residential gas and electricity customers in Ventura County and other residential electricity customers of Southern California Edison. The estimated damages for these specific subclasses are approximately $80 million and $1.2 billion, respectively (after trebling), plus additional amounts for unfair competition claims. Importantly, the stipulation allows Sempra to appeal an unfavorable judgment in the initial trial, with bond requirements capped at $75 million. The outcome of this initial trial and subsequent appeals will have a binding effect on common issues for remaining plaintiffs, potentially impacting Sempra's future financial condition.

Key Highlights

  • 1Sempra Energy is updating investors on the ongoing Continental Forge Litigation, a significant antitrust and unfair competition lawsuit.
  • 2The lawsuit seeks damages totaling $23 billion from Sempra's California utilities, Southern California Gas Company and San Diego Gas & Electric Company.
  • 3A new stipulation has been approved to structure an initial jury trial for specific plaintiff subclasses: Ventura County residential gas/electricity customers and other Southern California Edison residential electricity customers.
  • 4Estimated damages for the initial trial plaintiffs are approximately $80 million (Ventura) and $1.2 billion (Edison), after trebling, plus additional unfair competition claims.
  • 5The stipulation allows Sempra to appeal an unfavorable judgment from the initial trial, with a maximum bond requirement of $75 million.
  • 6The outcome of the initial trial and subsequent appeals will determine liability and damages for common issues and will bind other plaintiffs in future proceedings.
  • 7Sempra has accrued $241 million as of June 30, 2005, to cover litigation costs, but acknowledges that actual costs could materially differ and adversely affect financial results.

Frequently Asked Questions

The Continental Forge Litigation is a consolidated class-action lawsuit filed in 2000 alleging antitrust and unfair competition practices by Sempra Energy's California utility subsidiaries. It is significant because it seeks substantial damages, originally estimated at $23 billion, which could materially impact Sempra's financial condition if an unfavorable judgment is reached.

The stipulation defines the scope of the first jury trial, limiting it to two specific plaintiff subclasses: Ventura County residential gas and electricity customers, and other Southern California Edison residential electricity customers. It also outlines how verdicts on liability, causation, and damages for these groups will be reached, and establishes procedures for appeals and future proceedings.

The lawsuit seeks damages of $23 billion. While Sempra has accrued $241 million as of June 30, 2005, for litigation costs, the company states that actual costs could differ materially and adversely affect its business, cash flows, results of operations, and financial condition due to the inherent uncertainties of complex jury trials and appeals.

Yes, the stipulation allows Sempra Energy and its California utilities to appeal any final judgment in the initial trial that is unfavorable to them. The maximum amount required for an appeal bond is capped at $75 million.