8-KMaterial AgreementsExhibits & Filings

SEMPRA 8-K Report, Material Agreement (Sep 27, 2021)

Filed September 27, 2021For Securities:SRESREA

Summary

Sempra Energy (SRE) and its subsidiary Southern California Gas Company (SoCalGas) have entered into significant settlement agreements to resolve a substantial portion of the litigation stemming from the 2015-2016 Aliso Canyon natural gas leak. The company has agreed to pay up to $1.8 billion to settle claims from approximately 36,000 individual plaintiffs in the Individual Plaintiff Litigation, $40 million for the Property Class Action, and $100,000 for the Business Class Action named plaintiffs. These agreements represent a material step towards resolving a long-standing and costly legal issue for the company. While these settlements address a large part of the civil litigation, investors should note that certain other legal matters remain. These include regulatory actions by the California Public Utilities Commission (CPUC), specific lawsuits from property developers, Proposition 65 claims, and shareholder derivative actions. The company expects to record a pre-tax charge of approximately $1.57 billion ($1.13 billion after tax) in September 2021 related to these settlements. Sempra expects its net, after-tax cash outflows to be up to approximately $895 million, offset by insurance receivables. Sempra is providing equity contributions to SoCalGas to maintain its capital structure, and no common equity issuance is expected.

Key Highlights

  • 1SoCalGas and Sempra reached a settlement for up to $1.8 billion with over 80% of plaintiffs in the Individual Plaintiff Litigation concerning the Aliso Canyon natural gas leak.
  • 2An additional $40 million settlement has been agreed upon for the Property Class Action, with a final court approval pending.
  • 3A $100,000 settlement has been agreed upon for the named plaintiffs in the Business Class Action.
  • 4The company expects to record a significant pre-tax charge of approximately $1.57 billion (after-tax $1.13 billion) in September 2021 related to these settlements.
  • 5Net, after-tax cash outflows are anticipated to be up to approximately $895 million, with insurance receivables expected to offset some of this amount.
  • 6Sempra will provide equity contributions to SoCalGas to support its capital structure, with no expected common equity issuance by Sempra.
  • 7Important legal matters, including CPUC regulatory actions and other specific litigation, remain unresolved and could materially impact the company.

Frequently Asked Questions

Sempra expects to record a pre-tax charge of approximately $1.57 billion (or $1.13 billion after tax) in September 2021. The net, after-tax cash outflows are expected to be up to approximately $895 million, which will be partially offset by anticipated insurance receivables.

No, these agreements resolve a significant portion of the civil litigation. However, they do not cover regulatory actions by the California Public Utilities Commission (CPUC), lawsuits by five property developers, claims for violations of Proposition 65, or shareholder derivative actions.

The settlement is contingent on acceptance by at least 97% of the plaintiffs in the Individual Plaintiff Litigation by June 1, 2022, although SoCalGas and Sempra can waive this condition. The agreement also requires court approval for the allocation process and a stay of the litigation.

No, Sempra has elected to make equity contributions to SoCalGas to maintain its approved capital structure in connection with these accruals. The company does not expect to issue common equity related to these settlement agreements.