Summary
Sempra Energy (SRE) has announced agreements to settle certain antitrust and unfair competition litigation stemming from the California energy crisis of 2000-2001. These settlements, which are subject to court approval, aim to resolve claims related to alleged conspiracies to restrict natural gas supplies and manipulate natural gas prices. The company and its subsidiaries, including Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E), deny wrongdoing but have opted for settlement to avoid the significant costs and uncertainties of protracted legal battles. The total cash consideration for these settlements is approximately $377 million, with additional non-cash considerations including electricity price discounts and changes to natural gas operations and transmission facilities.
Key Highlights
- 1Sempra Energy and its subsidiaries have reached agreements to settle three major lawsuits related to the California energy crisis: Continental Forge Antitrust Litigation, Nevada Antitrust Litigation, and California Class Action Price Reporting Litigation.
- 2The total cash payment for these settlements is approximately $377 million, to be paid in installments over several years.
- 3A significant non-cash component involves Sempra Generation providing a discount of $4.15 per megawatt-hour on its electricity supply contract with the California Department of Water Resources (CDWR), valued at approximately $300 million over the contract's remaining term.
- 4Other non-cash considerations include agreements on re-gasified liquefied natural gas (LNG) sales from Mexico and proposed integration of natural gas transmission facilities by SoCalGas and SDG&E.
- 5Sempra Energy will record an after-tax charge of $100 million for the quarter ended December 31, 2005, to establish additional reserves for these settlements, bringing the total reserved amount to $580 million.
- 6The settlements are contingent upon court approvals, expected by the end of the second quarter of 2006, and approval by the Los Angeles City Council for certain agreements.
- 7The company maintains that it and its subsidiaries deny any wrongdoing alleged in the litigation.