-- 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