-- Power Generation, Energy Trading Net Income Increase Sharply -- 2004 Earnings Guidance Raised to $3.15 to $3.25 per Share
SAN DIEGO, Nov. 4, 2004 (PRIMEZONE) -- Sempra Energy (NYSE:SRE) today reported third-quarter 2004 earnings of $231 million, or $0.98 per diluted share, compared with $211 million, or $1.00 per diluted share, in the third quarter 2003.
For the first nine months of 2004, Sempra Energy's earnings were $549 million, or $2.36 per diluted share, up 19 percent per share over the $415 million, or $1.98 per diluted share, for the same period in 2003. Earnings per share in 2004 have been affected by a greater number of shares outstanding.
"Our strong third-quarter results reflect the continued growth in our power-generation and energy-trading businesses," said Stephen L. Baum, chairman and chief executive officer of Sempra Energy. "Our year-to-date performance and positive outlook for the remainder of the year put us on pace for record results."
Based on the updated outlook, Baum said the company is raising its 2004 earnings-per-share guidance range to $3.15 to $3.25 from $2.90 to $3.10.
Sempra Energy's revenues in the third quarter 2004 were $2.2 billion, compared with $2.1 billion in the third quarter last year.
OPERATING HIGHLIGHTS
Sempra Energy Utilities
Net income for Southern California Gas Co. in the third-quarter 2004 rose to $68 million from $53 million in the year-earlier period, due to higher revenues and an after-tax $9 million one-time gain from a property sale. SoCalGas' third-quarter 2003 results included an after-tax charge of $32 million for litigation costs and losses associated with a sublease.
Third-quarter 2004 net income for San Diego Gas & Electric (SDG&E) was $60 million, compared with $120 million in last year's third quarter. Third-quarter 2003 results included an after-tax, one-time positive contribution of $65 million from the settlement of litigation with the California Public Utilities Commission (CPUC) related to intermediate-term power-purchase contracts owned by SDG&E, offset by an after-tax charge of $11 million for litigation costs.
Sempra Energy Trading
In the third quarter 2004, Sempra Energy Trading's net income doubled to $44 million from $22 million in last year's third quarter, driven primarily by increased profitability in its petroleum trading operations.
"Through the first three quarters, Sempra Energy Trading has earned $143 million and is off to a solid start in the fourth quarter," said Baum.
Sempra Energy Resources
Sempra Energy Resources' net income rose to $64 million in the third quarter 2004 from $33 million in the year-earlier period, due to an increase in contracted power sales and a full quarter of contributions from the new Texas power plants acquired in July 2004.
Sempra Energy International
Sempra Energy International's third-quarter 2004 net income was $7 million, compared with a $32 million loss last year during the same period. Quarterly results last year included an after-tax charge of $50 million related to the write-down of the carrying value of assets of Frontier Energy, a North Carolina-based gas utility subsidiary.
Sempra Energy LNG
Last month, Sempra Energy LNG announced two milestone agreements that have enabled the company to contract for the entire processing capacity of its Energia Costa Azul liquefied natural gas (LNG) receipt terminal in Baja California, Mexico. Site preparation has begun and discussions already are underway with existing customers and others for expansion of the facility.
The agreements ensure that Sempra Energy LNG retains full ownership and operating responsibility for the Energia Costa Azul terminal. The company signed a 20-year agreement with Shell International Gas Limited to provide Shell with half the capacity of the terminal. Sempra Energy LNG also signed a 20-year agreement with BP and its Tangguh LNG partners to supply the other half of the terminal's capacity with LNG from Indonesia. The total initial gas processing capacity for the Energia Costa Azul facility is 1 billion cubic feet per day. Operations are scheduled to begin in 2008.
Sempra Energy LNG also is developing LNG receipt terminals near Lake Charles, La., and Port Arthur, Texas.
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, 178618.
Sempra Energy (NYSE:SRE), based in San Diego, is a Fortune 500 energy services holding company with 2003 revenues of $7.9 billion. The Sempra Energy companies' 13,000 employees serve more than 10 million customers in the United States, Europe, Canada, Mexico, South America and Asia.
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: national, international, regional and local 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 market 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 pace of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; and other uncertainties, all of which are difficult to predict and many of which are beyond the company's control. 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 Energy Trading, Sempra Energy Resources, Sempra Energy International, Sempra Energy LNG and Sempra Energy Solutions are not the same as the utilities, San Diego Gas & Electric and Southern California Gas Co.
SEMPRA ENERGY Table A STATEMENTS OF CONSOLIDATED INCOME (Unaudited) Three months Nine months ended ended September 30, September 30, ----------------- ----------------- (Dollars in millions, except per share amounts) 2004 2003 2004 2003 ---------------------------------------------------------------- Operating revenues California utilities: Natural gas $ 909 $ 870 $3,189 $ 2,961 Electric 445 576 1,246 1,368 Other 811 612 2,086 1,492 ------- ------- ------- ------- Total operating revenues 2,165 2,058 6,521 5,821 ------- ------- ------- ------- Operating expenses California utilities: Cost of natural gas 438 372 1,744 1,529 Cost of electric fuel and purchased power 143 128 425 428 Other cost of sales 484 371 1,186 886 Other operating expenses 530 668 1,597 1,631 Depreciation and amortization 171 158 501 455 Franchise fees and other taxes 54 54 171 167 ------- ------- ------- ------- Total operating expenses 1,820 1,751 5,624 5,096 ------- ------- ------- ------- Operating income 345 307 897 725 Other income - net 40 34 58 38 Interest income 25 8 58 30 Interest expense (74) (78) (234) (223) Preferred dividends / distributions by subsidiaries (2) (2) (7) (17) ------- ------- ------- ------- Income from continuing operations before income taxes 334 269 772 553 Income tax expense 103 58 191 109 ------- ------- ------- ------- Income from continuing operations 231 211 581 444 Loss from discontinued operations, net of tax -- -- (30) -- Loss on disposal of discontinued operations, net of tax -- -- (2) -- ------- ------- ------- ------- Income before cumulative effect of change in accounting principle 231 211 549 444 Cumulative effect of change in accounting principle, net of tax -- -- -- (29) ------- ------- ------- ------- Net income $ 231 $ 211 $ 549 $ 415 ======= ======= ======= ======= Basic earnings per share: Income from continuing operations $ 1.01 $ 1.01 $ 2.55 $ 2.14 Discontinued operations, net of tax -- -- (0.14) -- Cumulative effect of change in accounting principle, net of tax -- -- -- (0.14) ------- ------- ------- ------- Net income $ 1.01 $ 1.01 $ 2.41 $ 2.00 ======= ======= ======= ======= Weighted-average number of shares outstanding (thousands) 229,376 208,816 227,412 207,620 ======= ======= ======= ======= Diluted earnings per share: Income from continuing operations $ 0.98 $ 1.00 $ 2.50 $ 2.12 Discontinued operations, net of tax -- -- (0.14) -- Cumulative effect of change in accounting principle, net of tax -- -- -- (0.14) ------- ------- ------- ------- Net income $ 0.98 $ 1.00 $ 2.36 $ 1.98 ======= ======= ======= ======= Weighted-average number of shares outstanding (thousands) 235,936 212,273 232,366 210,160 ======= ======= ======= ======= Dividends declared per share of common stock $ 0.25 $ 0.25 $ 0.75 $ 0.75 ======= ======= ======= ======= SEMPRA ENERGY Table B CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (Dollars in millions) 2004 2003 ------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 267 $ 432 Short-term investments - 363 Accounts receivable 770 1,002 Due from affiliate 7 - Income taxes receivable - 1 Deferred income taxes 58 2 Interest receivable 82 62 Trading assets 6,156 5,250 Regulatory assets arising from fixed-price contracts and other derivatives 155 144 Other regulatory assets 109 89 Inventories 225 147 Other 198 157 -------- -------- Current assets of continuing operations 8,027 7,649 Current assets of discontinued operations 82 220 -------- -------- Total current assets 8,109 7,869 -------- -------- Investments and other assets: Due from affiliates 45 55 Regulatory assets arising from fixed-price contracts and other derivatives 530 650 Other regulatory assets 476 552 Nuclear decommissioning trusts 575 570 Investments 1,132 1,114 Sundry 750 706 -------- -------- Total investments and other assets 3,508 3,647 -------- -------- Property, plant and equipment - net 10,847 10,474 -------- -------- Total assets $ 22,464 $ 21,990 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Short-term debt $ 435 $ 28 Accounts payable 834 841 Income taxes payable 302 156 Deferred income taxes -- 26 Trading liabilities 4,860 4,457 Dividends and interest payable 134 136 Regulatory balancing accounts - net 347 424 Fixed-price contracts and other derivatives 164 148 Current portion of long-term debt 99 1,433 Other 690 681 -------- -------- Current liabilities of continuing operations 7,865 8,330 Current liabilities of discontinued operations 19 52 -------- -------- Total current liabilities 7,884 8,382 -------- -------- Long-term debt 4,414 3,841 -------- -------- Deferred credits and other liabilities: Due to affiliates 362 362 Customer advances for construction 85 89 Postretirement benefits other than pensions 121 131 Deferred income taxes 170 208 Deferred investment tax credits 80 84 Regulatory liabilities arising from cost of removal obligations 2,331 2,238 Regulatory liabilities arising from asset retirement obligations 300 303 Other regulatory liabilities 112 108 Fixed-price contracts and other derivatives 530 680 Asset retirement obligations 321 313 Deferred credits and other 1,194 1,182 -------- -------- Total deferred credits and other liabilities 5,606 5,698 -------- -------- Preferred stock of subsidiaries 179 179 -------- -------- Shareholders' equity 4,381 3,890 -------- -------- Total liabilities and shareholders' equity $ 22,464 $ 21,990 ======== ======== SEMPRA ENERGY Table C CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) Nine months ended September 30, --------------------------------- (Dollars in millions) 2004 2003 ------------------------------------------------------------------ Cash Flows from Operating Activities: Net income $ 549 $ 415 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations, net of tax 30 -- Loss on disposal of discontinued operations, net of tax 2 -- Cumulative effect of change in accounting principle -- 29 Depreciation and amortization 501 455 Impairment losses 8 79 Deferred income taxes and investment tax credits (7) (160) Other - net 8 38 Net changes in other working capital components (523) 75 Changes in other assets (66) (36) Changes in other liabilities 21 28 -------------- ------------ Net cash provided by continuing operations 523 923 Net cash used in discontinued operations (30) -- -------------- ------------ Net cash provided by operating activities 493 923 -------------- ------------ Cash Flows from Investing Activities: Expenditures for property, plant and equipment (782) (664) Proceeds from sale of assets 371 (1) -- Proceeds from disposal of discontinued operations 137 -- Investments and acquisitions of subsidiaries, net of cash acquired (70) (182) Dividends received from affiliates 50 21 Affiliate loan -- (54) Other - net -- (8) -------------- ------------ Net cash used in investing activities (294) (887) -------------- ------------ Cash Flows from Financing Activities: Common dividends paid (162) (155) Issuances of common stock 120 81 Repurchases of common stock (1) (6) Issuances of long-term debt 897 400 Payments on long-term debt (1,648) (481) Increase in short-term debt - net 434 89 Other - net (4) (8) -------------- ------------ Net cash used in financing activities (364) (80) -------------- ------------ Decrease in cash and cash equivalents (165) (44) Cash and cash equivalents, January 1 432 455 -------------- ------------ Cash and cash equivalents, September 30 $ 267 $ 411 ============== ============ (1) Primarily 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) 2004 2003 2004 2003 --------------------------------------------------------------------- Net Income California Utilities: San Diego Gas & Electric $ 60 $ 120 $ 140 $ 206 Southern California Gas 68 53 174 148 ----- ----- ----- ----- Total California Utilities 128 173 314 354 Global Enterprises: Trading 44 22 143 67 Resources 64 33 123 48 International 7 (32)(3) 35 (7)(3) LNG (4) -- -- -- Solutions 1 -- 1 8 ----- ----- ----- ----- Total Global Enterprises 112 23 302 116 Financial 10 13 26 32 Parent & Other (19) 2 (61) (58) ----- ----- ----- ----- Continuing Operations 231 211 581 444 Discontinued Operations (1) -- -- (32) -- Cumulative Effect of Change in Accounting Principle -- -- -- (29)(2) ----- ----- ----- ----- Consolidated Net Income $ 231 $ 211 $ 549 $ 415 ===== ===== ===== ===== (1) Reflects Atlantic Electric & Gas and includes ($2) related to the disposal (2) The effects to Trading and Solutions were ($28) and ($1), respectively (3) Includes ($50) write-down of the carrying value of assets of Frontier Energy Three months ended Nine months ended September 30, September 30, ------------------ ----------------- (Dollars in millions) 2004 2003 2004 2003 --------------------------------------------------------------------- Capital Expenditures and Investments California Utilities: San Diego Gas & Electric $ 102 $ 102 $ 283 $ 285 Southern California Gas 90 82 234 217 ----- ----- ----- ----- Total California Utilities 192 184 517 502 ----- ----- ----- ----- Global Enterprises: Resources 104 60 153 231 Trading 21 8 103 20 International 7 10 18 37 LNG 8 -- 35 28 ----- ----- ----- ----- Total Global Enterprises 140 78 309 316 ----- ----- ----- ----- Parent & Other 9 9 26 28 ----- ----- ----- ----- Consolidated Capital Expenditures and Investments $ 341 $ 271 $ 852 $ 846 ===== ===== ===== ===== SEMPRA ENERGY Table E OTHER OPERATING STATISTICS (Unaudited) Three months ended Nine months ended September 30, September 30, ------------------ ----------------- CALIFORNIA UTILITIES 2004 2003 2004 2003 ------------------------------------------------------------------- Revenues (Dollars in millions) SDG&E (excludes intercompany sales) $ 545 $ 662 $ 1,649 $ 1,735 SoCalGas (excludes intercompany sales) $ 809 $ 784 $ 2,786 $ 2,594 Gas Sales (Bcf) 67 65 288 279 Transportation and Exchange (Bcf) 162 163 411 410 ------ ----- ------- ------- Total Deliveries (Bcf) 229 228 699 689 ------ ----- ------- ------- Total Gas Customers (Thousands) 6,271 6,188 Electric Sales (Millions of kWhs) 4,247 4,160 11,806 11,223 Direct Access (Millions of kWhs) 902 891 2,560 2,456 ------ ----- ------ ------ Total Deliveries (Millions of kWhs) 5,149 5,051 14,366 13,679 ------ ----- ------ ------ Total Electric Customers (Thousands) 1,312 1,293 RESOURCES -------------------------------------------------------------------- Power Sold (Millions of kWhs) 6,435 4,011 14,796 7,464 SOLUTIONS -------------------------------------------------------------------- Revenues (Dollars in millions) $ 38 $ 37 $ 111 $ 134 INTERNATIONAL (Represents 100% of these subsidiaries,although only the Mexican subsidiaries are 100% owned by Sempra Energy). -------------------------------------------------------------------- Natural Gas Sales (BCF) Argentina 78 78 191 174 Mexico 13 11 33 30 Chile 1 1 2 2 Natural Gas Customers (Thousands) Argentina 1,444 1,398 Mexico 99 90 Chile 37 36 Electric Sales (Millions of kWhs) Peru 997 996 3,020 3,009 Chile 474 445 1,484 1,379 Electric Customers (Thousands) Peru 744 727 Chile 504 492 SEMPRA ENERGY Table E (Continued) TRADING --------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, Trading Margin ------------------ ----------------- (Dollars in millions) 2004 2003 2004 2003 ------------------------------------------------ ----------------- Geographical: North America $ 118 $ 111 $ 359 $ 262 Europe/Asia 53 24 173 97 ----------------- ----------------- Total $ 171 $ 135 $ 532 $ 359 ----------------- ----------------- Product Line: Gas $ (13) $ 21 $ 78 $ 113 Power 24 36 53 48 Oil - Crude & Products 107 27 196 77 Metals 17 21 125 47 Other 36 30 80 74 ----------------- ----------------- Total $ 171 $ 135 $ 532 $ 359 ----------------- ----------------- Physical Statistics --------------------------------------------------------------------- Natural Gas (BCF/Day) 13.5 13.2 13.3 13.3 Electric (Billions of kWhs) 85.6 81.7 253.7 213.1 Oil & Liquid Products (Millions Bbls/Day) 2.5 1.4 2.1 1.6 Fair Scheduled Maturity Market Value (in months) Net Unrealized Revenue September 30, --------------------------- (Dollars in millions) 2004 0-12 13-24 25-36 > 36 --------------------------------------------------------------------- Sources of Over-the-Counter (OTC) Fair Value: Prices actively quoted $ 623 $548 $ 50 $ (1) $ 26 Prices provided by other external sources 1 (9) 10 Prices based on models and other valuation methods (22) (33) 11 -------------------------------------- Total OTC Fair Value (1) 602 506 50 (1) 47 Maturity of OTC Fair Value -------------------------------------------------------------------- Percentage 100.0% 84.1% 8.3% -0.2% 7.8% Cumulative Percentages 84.1% 92.4% 92.2% 100.0% -------------------------------------- -------------------------------------------------------------------- Exchange Contracts (2) $ 188 $249 $(58) $ (1) $ (2) -------------------------------------- Total Net Unrealized Revenue $ 790 ----- (1) The present value of unrealized revenue to be received or (paid) from outstanding OTC contracts (2) Cash received associated with open Exchange Contracts Credit Quality of Unrealized Trading Assets (net of margin) --------------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2004 2004 2004 2003 2003 -------- ------- -------- ------- -------- Commodity Exchanges 10% 8% 6% 8% 8% Investment Grade 70% 71% 63% 70% 66% Below Investment Grade 20% 21% 31% 22% 26% Three months ended Nine months ended Risk Adjusted September 30, September 30, Performance Indicators 2004 2003 2004 2003 ---------------------------------------------- --------------- VaR at 95% (Dollars in millions) (1) $ 8.4 $ 6.2 $ 6.9 $ 7.2 VaR at 99% (Dollars in millions) (2) $11.9 $ 8.7 $ 9.7 $10.2 Risk Adjusted Return on Capital (RAROC) (3) 45% 17% 40% 20% (1) Average Daily Value-at-Risk for the period using a 95% confidence level (2) Average Daily Value-at-Risk for the period using a 99% confidence level (3) Average Daily Trading Margin/Average Daily VaR at 95% confidence level