-- Earnings-Per-Share Outlook for 2005 Raised to $3.40 to $3.60
from $3.20 to $3.40
-- Capital Spending for Energy Projects $1 Billion Through Three
Quarters
SAN DIEGO, Nov. 2, 2005 (PRIMEZONE) -- Sempra Energy (NYSE:SRE) today reported third-quarter 2005 earnings of $221 million, or $0.86 per diluted share, compared with third-quarter 2004 earnings of $231 million, or $0.98 per diluted share.
Net income in the third quarter 2005 included the effects of several items, including $71 million from the favorable resolution of prior-years' tax issues, a $38 million gain from the sale of Sempra Commodities' natural gas storage assets, and a $27 million benefit at San Diego Gas & Electric (SDG&E) from an electric-transmission-cost settlement. The quarterly results were negatively affected by a $189 million after-tax effect from an increase in reserves at the parent company and several of its subsidiaries, almost entirely for continuing litigation.
Excluding the impact of discontinued operations and the items listed above, net income would have been $275 million, or $1.07 per diluted share. In the prior-year's period, net income was $227 million, or $0.96 per diluted share, excluding the effects of a $9 million gain from the sale of property and $5 million in tax issues that negatively affected earnings.
For the first nine months of 2005, Sempra Energy's earnings were $565 million, or $2.26 per diluted share, up 3 percent over $549 million, or $2.36 per diluted share, for the same period in 2004.
"Our strong operating results in the third quarter, especially from our commodity operations, have contributed to an improved outlook for the rest of the year," said Stephen L. Baum, chairman and chief executive officer of Sempra Energy. "We are raising our 2005 GAAP earnings-per-share guidance to $3.40 to $3.60 from $3.20 to $3.40."
Sempra Energy's revenues in the third quarter 2005 were $2.7 billion, compared with $2.2 billion in the year-ago quarter, based on higher volatility in commodity prices that led to increased margins in natural gas and power sales at Sempra Commodities.
During the first nine months of 2005, Sempra Energy's capital expenditures totaled $1 billion -- more than half of which have been invested in SDG&E and Southern California Gas Co. (SoCalGas) -- compared with approximately $850 million during the same period last year.
"With energy supplies tight in North America, we continue to invest in natural gas and electric infrastructure to bring new supplies to market," said Baum.
OPERATING HIGHLIGHTS
Sempra Utilities
Third-quarter earnings for SDG&E rose to $102 million in 2005 from $60 million in 2004, due primarily to a $39 million tax benefit and the $27 million electric-transmission-cost settlement, offset by the effect of a $27 million after-tax increase in litigation reserves.
Net income for SoCalGas in the third quarter 2005 was $36 million, compared with $68 million in the third quarter 2004, due primarily to the effect of a $53 million after-tax increase in litigation reserves, partially offset by an $18 million tax benefit. Third-quarter 2004 results included a $9 million gain from a property sale.
SDG&E recently signed several major power-purchase contracts for renewable energy. Last month, the utility entered into an agreement with enXco of Escondido, Calif., for 205.5 megawatts (MW) of wind power with deliveries beginning in 2007-08. In September 2005, SDG&E contracted with Stirling Energy Systems of Arizona for 300 MW of solar power under a 20-year agreement and with San Diego-based Covanta for approximately 4 MW of power from a local landfill gas facility under a 10-year agreement.
"With these new contracts, SDG&E is well on its way to achieving its goal of meeting 20 percent of its customers' needs by 2010 with renewable energy and developing a balanced portfolio of energy resources," said Baum.
Sempra Commodities
Sempra Commodities posted strong quarterly results, earning $161 million in the third quarter 2005, up from $46 million in the same period last year. The bulk of the company's growth during the quarter came from its North American and European natural gas and power sales. The results for the quarter also included a $16 million tax benefit, the $38 million gain related to the sale of its natural gas storage assets and the effect of a $14 million after-tax increase in litigation reserves.
Sempra Generation
Sempra Generation's third-quarter net income was $30 million in 2005, compared with $64 million in 2004. Third-quarter 2005 earnings were affected by higher development costs, $19 million from temporary mark-to-market losses on forward sales and the effect of a $5 million after-tax increase in litigation reserves. Third-quarter 2004 results included approximately $7 million in temporary mark-to-market gains.
Sempra Pipelines & Storage
Based on improved performance at the company's distribution operations outside the United States, Sempra Pipelines & Storage's net income more than doubled to $19 million in the third quarter 2005 from $7 million in the same period last year.
During the quarter, Sempra Pipelines & Storage entered into a Memorandum of Understanding with Kinder Morgan Energy Partners, L.P. to pursue development of a proposed new 1,700-mile natural gas pipeline that would link producing areas in the Rocky Mountain region to the upper Midwest and eastern United States. As designed, the pipeline would have capacity of up to 2 billion cubic feet per day. Initially, Kinder Morgan would own two-thirds of the equity in the proposed pipeline and Sempra Pipelines & Storage would own one-third.
Sempra LNG
Sempra LNG reported a third-quarter loss of $5 million in 2005, compared with a loss of $4 million last year.
"With construction of our Louisiana and Mexico liquefied natural gas (LNG) terminals now under way and our Texas LNG terminal in the latter stages of permitting, we continue to make good progress toward becoming North America's leading importer of LNG," said Baum. "LNG remains a key to expanding domestic supplies and helping to stabilize natural gas prices in the future."
Last month, Sempra LNG announced that it is proceeding with detailed negotiations to deliver Algerian natural gas to the U.S. Gulf Coast. The negotiations follow a Heads of Agreement (HOA) signed earlier this year with Sonatrach S.A., one of the world's leading energy firms. The non-binding HOA contemplates a 20-year agreement to import the equivalent of 250 million cubic feet per day (MMcfd) to 500 MMcfd of Algerian liquefied natural gas to Sempra LNG's Cameron LNG receipt terminal.
Litigation Update
On Oct. 29, 2005, Sempra Energy, SoCalGas and SDG&E announced that the companies had entered into a legal settlement with the County of Los Angeles and 11 other plaintiffs that fully resolved their claims related to the Continental Forge case. Terms of the agreement were not disclosed.
"This settlement represents a very small part of the overall litigation related to the energy crisis," said Baum. "We are pleased with the mutually agreeable settlement."
Internet Broadcast
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EST with key company executives. Access is available by logging onto the Web site at www.sempra.com. For those unable to log onto the live Webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (706) 645-9291 and entering the passcode, 9806013.
Sempra Energy (NYSE:SRE), based in San Diego, is a Fortune 500 energy services holding company with 2004 revenues of $9.4 billion. The Sempra Energy companies' 13,000 employees serve more than 29 million consumers in the United States, Europe, Canada, Mexico, South America and Asia.
Income-statement information by business unit is available on Sempra Energy's Web site at http://www.sempra.com/downloads/3Q2005_Table_F.pdf.
This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When the company uses words like "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "would," "should" or similar expressions, or when the company discusses its strategy or plans, the company is making forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital markets conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; the availability of natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov and on the company's Web site, www.sempra.com.
Sempra LNG and Sempra Pipelines & Storage are not the same companies as the utilities, SDG&E or SoCalGas, and are not regulated by the California Public Utilities Commission. Sempra Energy Trading, doing business as Sempra Commodities, and Sempra Generation are not the same companies as the utilities, SDG&E or SoCalGas, and the California Public Utilities Commission does not regulate the terms of their products and services.
SEMPRA ENERGY
Table A
STATEMENTS OF CONSOLIDATED INCOME (Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- -----------------
(Dollars in millions,
except per share amounts) 2005 2004 2005 2004
----------------------------------------------- -----------------
Operating revenues
California utilities:
Natural gas $ 1,032 $ 909 $ 3,520 $ 3,189
Electric 463 445 1,263 1,246
Other 1,231 811 2,907 2,086
------- ------- ------- -------
Total operating revenues 2,726 2,165 7,690 6,521
------- ------- ------- -------
Operating expenses
California utilities:
Cost of natural gas 547 438 2,060 1,744
Cost of electric fuel and
purchased power 146 143 437 425
Other cost of sales 743 484 1,887 1,186
Other operating expenses 993 530 2,069 1,597
Depreciation and
amortization 157 171 481 501
Franchise fees and other
taxes 61 54 185 171
------- ------- ------- -------
Total operating expenses 2,647 1,820 7,119 5,624
------- ------- ------- -------
Operating income 79 345 571 897
Other income, net 131 40 157 58
Interest income 29 25 52 58
Interest expense (75) (74) (221) (234)
Preferred dividends of
subsidiaries (2) (2) (7) (7)
------- ------- ------- -------
Income from continuing
operations before income
taxes 162 334 552 772
Income tax expense
(benefit) (60) 103 (16) 191
------- ------- ------- -------
Income from continuing
operations 222 231 568 581
Discontinued operations,
net of tax (1) -- (3) (32)
------- ------- ------- -------
Net income $ 221 $ 231 $ 565 $ 549
======= ======= ======= =======
Basic earnings per share:
Income from continuing
operations $ 0.87 $ 1.01 $ 2.33 $ 2.55
Discontinued operations,
net of tax -- -- (0.01) (0.14)
------- ------- ------- -------
Net income $ 0.87 $ 1.01 $ 2.32 $ 2.41
======= ======= ======= =======
Weighted-average number of
shares outstanding
(thousands) 252,974 229,376 243,342 227,412
======= ======= ======= =======
Diluted earnings per share:
Income from continuing
operations $ 0.86 $ 0.98 $ 2.27 $ 2.50
Discontinued operations,
net of tax -- -- (0.01) (0.14)
------- ------- ------- -------
Net income $ 0.86 $ 0.98 $ 2.26 $ 2.36
======= ======= ======= =======
Weighted-average number of
shares outstanding
(thousands) 257,370 235,936 249,874 232,366
======= ======= ======= =======
Dividends declared per
share of common stock $ 0.29 $ 0.25 $ 0.87 $ 0.75
======= ======= ======= =======
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Dollars in millions) 2005 2004
---------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 503 $ 419
Short-term investments 12 15
Accounts receivable 800 1,032
Due from unconsolidated affiliate 4 4
Deferred income taxes 36 15
Interest receivable 32 80
Trading-related receivables and deposits,
net 3,281 2,606
Derivative trading instruments 5,547 2,339
Commodities owned 2,456 1,547
Regulatory assets arising from fixed-
price contracts and other derivatives 121 152
Other regulatory assets 107 103
Inventories 240 172
Other 274 222
------- -------
Current assets of continuing operations 13,413 8,706
Current assets of discontinued
operations 55 70
------- -------
Total current assets 13,468 8,776
------- -------
Investments and other assets:
Due from unconsolidated affiliates 27 42
Regulatory assets arising from fixed-
price contracts and other derivatives 411 500
Other regulatory assets 564 619
Nuclear decommissioning trusts 631 612
Investments 1,104 1,164
Sundry 994 844
------- -------
Total investments and other assets 3,731 3,781
------- -------
Property, plant and equipment, net 11,780 11,086
------- -------
Total assets $28,979 $23,643
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 305 $ 405
Accounts payable 1,088 1,126
Due to unconsolidated affiliates
(mandatorily redeemable preferred
securities) -- 205
Income taxes payable 75 187
Trading-related payables 4,501 3,182
Derivative trading instruments 4,742 1,484
Commodities sold with agreement to
repurchase 394 513
Dividends and interest payable 137 123
Regulatory balancing accounts, net 522 509
Fixed-price contracts and other
derivatives 128 157
Current portion of long-term debt 401 398
Other 820 776
------- -------
Current liabilities of continuing
operations 13,113 9,065
Current liabilities of discontinued
operations 7 17
------- -------
Total current liabilities 13,120 9,082
------- -------
Long-term debt 4,346 4,192
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliates 162 162
Customer advances for construction 95 97
Postretirement benefits other than
pensions 124 129
Deferred income taxes 227 420
Deferred investment tax credits 74 78
Regulatory liabilities arising from cost
of removal obligations 2,444 2,359
Regulatory obligations arising from
asset retirement obligations 342 333
Other regulatory liabilities 60 67
Fixed-price contracts and other
derivatives 412 500
Asset retirement obligations 334 326
Deferred credits and other 1,183 854
------- -------
Total deferred credits and other
liabilities 5,457 5,325
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 5,877 4,865
------- -------
Total liabilities and shareholders'
equity $28,979 $23,643
======= =======
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
Nine months ended
September 30,
--------------------
(Dollars in millions) 2005 2004
------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 565 $ 549
Adjustments to reconcile net income to net
cash provided by operating
activities:
Loss from discontinued operations,
net of tax 3 32
Depreciation and amortization 481 501
Gain on sale of assets (105) (15)
Impairment losses 11 8
Deferred income taxes and investment
tax credits (161) (7)
Other 7 42
Net changes in other working capital
components (387) (519)
Changes in other assets (99) (72)
Changes in other liabilities 349 21
------- -------
Net cash provided by continuing operations 664 540
Net cash used in discontinued operations (3) (30)
------- -------
Net cash provided by operating activities 661 510
------- -------
Cash Flows from Investing Activities:
Expenditures for property, plant and
equipment (957) (782)
Proceeds from sale of assets 274 371(a)
Proceeds from disposal of discontinued
operations 3 137
Investments and acquisitions of
subsidiaries, net of cash acquired (80) (70)
Dividends received from affiliates 46 50
Other (8) 8
------- -------
Net cash used in investing activities (722) (286)
------- -------
Cash Flows from Financing Activities:
Common dividends paid (193) (145)
Issuance of common stock 692 90
Repurchases of common stock (95) (5)
Issuance of long-term debt 255 897
Payments on long-term debt (209) (1,648)
Redemption of mandatorily redeemable
preferred securities (200) --
Increase (decrease) in short-term debt, net (102) 434
Other (3) (4)
------- -------
Net cash provided by (used in) financing
activities 145 (381)
------- -------
Increase (decrease) in cash and cash
equivalents 84 (157)
Cash and cash equivalents, January 1 419 409
------- -------
Cash and cash equivalents, September 30 $ 503 $ 252
======= =======
(a) Includes $363 proceeds from the sale of U.S. Treasury
obligations which previously securitized the Mesquite synthetic
lease.
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- ------------------
(Dollars in millions) 2005 2004 2005 2004
------------------------------------------------ ------------------
Net Income
California Utilities:
San Diego Gas & Electric $ 102 $ 60 $ 190 $ 140
Southern California Gas 36 68 163 174
----- ----- ----- -----
Total California Utilities 138 128 353 314
Sempra Global:
Sempra Commodities 161 46 216 149
Sempra Generation 30 64 103 118
Sempra Pipelines & Storage 19 7 48 35
Sempra LNG (5) (4) (15) --
----- ----- ----- -----
Total Sempra Global 205 113 352 302
Sempra Financial 8 10 19 26
Parent & Other (129) (20) (156) (61)
----- ----- ----- -----
Continuing Operations 222 231 568 581
Discontinued Operations(a) (1) -- (3) (32)
----- ----- ----- -----
Consolidated Net Income $ 221 $ 231 $ 565 $ 549
===== ===== ===== =====
(a) Reflects Atlantic Electric & Gas.
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
(Dollars in millions) 2005 2004 2005 2004
---------------------------------------------------------------------
Capital Expenditures and Investments
California Utilities:
San Diego Gas & Electric $ 146 $ 102 $ 342 $ 283
Southern California Gas 99 90 245 234
------ ------ ------ ------
Total California Utilities 245 192 587 517
------ ------ ------ ------
Sempra Global:
Sempra Generation 115 106 209 154
Sempra Commodities 32 21 61 103
Sempra Pipelines & Storage 4 2 11 18
Sempra LNG 43 13 156 35
------ ------ ------ ------
Total Sempra Global 194 142 437 310
------ ------ ------ ------
Parent & Other 7 7 13 25
------ ------ ------ ------
Consolidated Capital
Expenditures and
Investments $ 446 $ 341 $1,037 $ 852
====== ====== ====== ======
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------------------
CALIFORNIA UTILITIES 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes intercompany
sales) $ 596 $ 545 $ 1,747 $ 1,649
SoCalGas (excludes intercompany
sales) $ 899 $ 809 $ 3,036 $ 2,786
Gas Sales (Bcf) 67 67 290 288
Transportation and Exchange (Bcf) 142 162 381 411
------ ------ ------- -------
Total Deliveries (Bcf) 209 229 671 699
------ ------ ------- -------
Total Gas Customers (Thousands) 6,358 6,271
Electric Sales (Millions of kWhs) 4,300 4,247 11,988 11,806
Direct Access (Millions of kWhs) 865 902 2,493 2,560
------ ------ ------- -------
Total Deliveries (Millions
of kWhs) 5,165 5,149 14,481 14,366
------ ------ ------- -------
Total Electric Customers
(Thousands) 1,333 1,312
SEMPRA GENERATION
----------------------------------------------- ------------------
Power Sold (Millions of kWhs) 6,317 6,435 16,967 14,796
SEMPRA PIPELINES & STORAGE
(Represents 100% of these
subsidiaries, although only the
Mexican subsidiaries are 100%
owned by Sempra Energy.)
---------------------------------------------------------------------
Natural Gas Sales (Bcf)
Argentina 88 78 210 191
Mexico 12 13 33 33
Chile 1 1 2 2
Natural Gas Customers (Thousands)
Argentina 1,488 1,444
Mexico 98 99
Chile 37 37
Electric Sales (Millions of kWhs)
Peru 1,058 997 3,185 3,020
Chile 511 474 1,752 1,484
Electric Customers (Thousands)
Peru 762 744
Chile 518 504
SEMPRA ENERGY
Table E (Continued)
SEMPRA COMMODITIES
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
Margin(a) (Dollars in millions)
2005 2004 2005 2004
------------------------------------------------- -----------------
Geographical:
North America $ 254 $ 129 $ 548 $ 396
Europe/Asia 119 53 113 173
----- ----- ----- -----
Total $ 373 $ 182 $ 661 $ 569
----- ----- ----- -----
Product Line:
Gas $ 121 $ (11) $ 122 $ 83
Power 110 37 234 91
Oil - Crude & Products 89 107 160 198
Metals 3 16 42 125
Other 50 33 103 72
----- ----- ----- -----
Total $ 373 $ 182 $ 661 $ 569
----- ----- ----- -----
(a) Margin consists of net revenues less related costs (primarily
brokerage, transportation and storage) plus or minus net interest
expense/income, and is used by management in evaluating its
geographical and product line performance.
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
Effect of EITF 02-03 (Dollars in millions)
2005(d) 2004 2005(d) 2004
------------------------------------------------- -----------------
Mark-to-Market
Earnings(b) $153 $84 $282 $183
Effect of EITF 02-03(c) 8 (38) (66) (34)
----- ----- ----- -----
GAAP Net Income $161 $46 $216 $149
----- ----- ----- -----
(b) Represents the fair market value of all commodities
transactions. This metric is a useful measurement of
profitability because it simultaneously recognizes changes in
the various components of transactions and reflects how the
business is managed
(c) Consists of the income statement effect of not recognizing
changes in the fair market value of certain physical inventories
and capacity contracts for transportation and storage.
(d) Includes after-tax gain of $38 million related to the sale of
certain storage assets.
Fair
Market Value Scheduled Maturity (in months)
Net Unrealized Revenue September 30, ------------------------------
(Dollars in millions) 2005 0-12 13-24 25-36 >36
---------------------------------------------------------------------
Sources of Over-the-
Counter (OTC) Fair
Value:
Prices actively quoted $ 835 $ 675 $(120) $ 197 $ 83
Prices provided by
other external sources 32 (6) 3 1 34
Prices based on models
and other valuation
methods 9 12 (3)
----------------------------------------------
Total OTC Fair
Value (e) $ 876 $681 $(117) $ 198 $ 114
Maturity of OTC Fair
Value
----------------------------------------------
Percentage 100.0% 77.8% (13.4%) 22.6% 13.0%
Cumulative Percentages 77.8% 64.4% 87.0% 100.0%
----------------------------------------------
Exchange Contracts (f) $(276) $(198) $ 143 $(177) $ (44)
----------------------------------------------
Total Net Unrealized
Revenue at
September 30, 2005 $ 600
--------
(e) The present value of unrealized revenue to be received or (paid)
from outstanding OTC contracts
(f) Cash received or (paid) associated with open Exchange Contracts
Credit Quality of
Unrealized Trading September 30, December 31,
Assets (net of margin) 2005 2004
----------------------------------------------------
Commodity Exchanges 12% 10%
Investment Grade 71% 66%
Below Investment Grade 17% 24%
Three months ended Nine months ended
September 30, September 30,
------------------ ----------------
Risk Adjusted Performance
Indicators (Mark-to-Market
Basis) 2005 2004 2005 2004
---------------------------------------------- -----------------
VaR at 95% (Dollars in
millions) (g) $ 12.8 $ 8.4 $ 10.3 $ 6.9
VaR at 99% (Dollars in
millions) (h) $ 18.0 $ 11.9 $ 14.6 $ 9.7
Risk Adjusted Return on
Capital (RAROC) (i) 41% 45% 38% 40%
(g) Average Daily Value-at-Risk for the period using a 95%
confidence level
(h) Average Daily Value-at-Risk for the period using a 99%
confidence level
(i) Average Daily Trading Margin/Average Daily VaR at 95% confidence
level
Physical Statistics
----------------------------------------------- -----------------
Natural Gas (BCF/Day) 11.7 13.6 11.5 13.4
Electric (Billions
of kWhs) 107.0 89.8 300.8 265.6
Oil & Liquid Products
(Millions Bbls/Day) 1.9 2.5 2.0 2.1