8-KMaterial Agreements

SEMPRA 8-K Report, Material Agreement (Sep 22, 2010)

Filed September 22, 2010For Securities:SRESREA

Summary

Sempra Energy (SRE) announced on September 21, 2010, a significant capital allocation decision through a $500 million Collared Accelerated Share Acquisition Program. This program utilizes a share forward transaction with JPMorgan Chase Bank, N.A. to repurchase shares of its common stock, signaling management's confidence in the company's value and its commitment to returning capital to shareholders. The transaction involves an upfront payment, with the exact number of shares repurchased determined over a valuation period, subject to minimum and maximum limits and a discount mechanism. This move is expected to reduce the number of outstanding shares used for earnings per share (EPS) calculations, potentially boosting EPS figures in the future. The $500 million prepayment will be recorded as a reduction in shareholders' equity. Investors should note the timing of the share delivery, with a substantial portion expected soon after prepayment and the remainder at the end of a hedging and valuation period, which may extend into the first quarter of 2011. The program is subject to standard market conditions and potential adjustments.

Key Highlights

  • 1Sempra Energy announced a $500 million share repurchase program.
  • 2The program is structured as a Collared Accelerated Share Acquisition Program with JPMorgan Chase Bank, N.A.
  • 3A prepayment of $500 million will be made to JPMorgan on September 24, 2010.
  • 4The number of shares repurchased will be determined based on a volume-weighted average price over a valuation period, less a discount.
  • 5The program aims to reduce outstanding shares, potentially increasing Earnings Per Share (EPS).
  • 6The $500 million prepayment will be reflected as a reduction in shareholders' equity.
  • 7The program may extend into the first quarter of 2011, with shares delivered in tranches.

Frequently Asked Questions

The primary purpose of the $500 million Collared Accelerated Share Acquisition Program is to repurchase Sempra Energy's common stock. This is typically done to return capital to shareholders, signal management's confidence in the company's stock value, and potentially enhance Earnings Per Share (EPS) by reducing the number of outstanding shares.

The exact number of shares to be repurchased will be determined by dividing the $500 million purchase price by the arithmetic mean of the volume-weighted average trading prices of Sempra Energy's common stock during a specific valuation period, minus a fixed discount. There are also minimum and maximum limits on the number of shares that will be purchased.

Sempra Energy will receive a substantial portion of the minimum number of shares on or shortly after the prepayment date of September 24, 2010. The balance of the minimum shares will be delivered at the end of a hedging period, and any additional shares above the minimum will be delivered at the end of the valuation period, which could extend into the first quarter of 2011.

The $500 million prepayment will be recorded as a reduction in shareholders' equity. As shares are delivered and repurchased, the number of outstanding shares used for calculating earnings per share will decrease, which could lead to an increase in EPS.