SAN DIEGO, May 2, 2006 (PRIMEZONE) -- Sempra Energy today reported first-quarter 2006 net income of $255 million, or $0.98 per diluted share, up 14 percent over first-quarter 2005 net income of $223 million, or $0.92 per diluted share. First-quarter 2005 results included $59 million in net income related to the favorable resolution of federal and state income-tax issues from prior years.
Revenues in the first quarter 2006 were $3.3 billion, compared with $2.7 billion in the year-ago period.
"Our Commodities group drove our strong first-quarter results," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "We are pleased with our 52-percent increase in operating income during the quarter and are off to a solid start to meet our previously announced guidance for the year of $3.40 to $3.60 per share."
Sempra Generation recently announced the sale of its two coal-fired power plants in Texas, the jointly owned, 632-megawatt (MW) Coleto Creek Power facility and 305-MW Twin Oaks plant. Coleto Creek Power is being sold for $1.14 billion -- the highest price paid for a U.S. coal-fired power plant in more than a decade -- to International Power plc. Sempra Generation and its partner, Riverstone Holdings, acquired Coleto Creek for $430 million in July 2004. Last month, Sempra Generation completed the sale of Twin Oaks to PNM Resources, Inc., for $480 million in cash. The plant was acquired by Sempra Generation in November 2002 for $120 million. During the first quarter 2006, Sempra Generation also entered into agreements to sell its businesses in energy-facilities management and energy-performance contracting.
"Our strategy is focused on developing natural gas infrastructure, primarily in our non-utility businesses, and expanding the energy-delivery capabilities of our California utilities," Felsinger said. "We are repositioning our portfolio, divesting some assets that are not core to this strategy. Through these asset sales, we expect to generate more than $1 billion in pre-tax proceeds to help fund our ongoing investments."
SUBSIDIARY OPERATING RESULTS
Sempra Utilities
First-quarter net income for San Diego Gas & Electric (SDG&E) was $47 million in 2006, compared with $59 million in 2005, due primarily to the favorable resolution of tax issues in the prior-year's quarter.
Net income for Southern California Gas Co. (SoCalGas) in the first quarter 2006 was $49 million, compared with $69 million in the year-ago period. In the first quarter 2005, SoCalGas benefited from favorable adjustments related to a California Public Utilities Commission ratemaking decision and favorable resolution of tax issues.
At the end of the first quarter 2006, SDG&E assumed ownership and operation of the 550-MW Palomar Energy Center in Escondido, Calif., the first major power plant built in San Diego County in more than 30 years.
Sempra Commodities
Sempra Commodities recorded $116 million in net income during the first quarter 2006, a 300-percent increase over first-quarter 2005 net income of $29 million. The sharp increase was due primarily to stronger natural gas and power marketing in North America.
"In the first quarter, Sempra Commodities continued a performance trend over the past nine months of outstanding results," Felsinger said.
Sempra Generation
First-quarter net income for Sempra Generation was $43 million in 2006, compared with $45 million in 2005, due primarily to a $15 million after-tax charge taken for an arbitration decision related to Sempra Generation's electricity-supply contract with the California Department of Water Resources. The charge was offset by gains related to the transfer of Palomar Energy to SDG&E during the quarter.
Sempra Pipelines & Storage
Sempra Pipelines & Storage had net income of $11 million in the first quarter 2006, compared with $13 million in the same quarter a year ago.
During the most recent quarter, Sempra Pipelines & Storage and Kinder Morgan Energy Partners announced that they have secured binding commitments from natural gas shippers for the entire capacity of the Rockies Express Pipeline project. The $4.4 billion, 1,323-mile pipeline will connect natural gas supply basins in the Rocky Mountain region to the eastern United States, transporting 1.8 billion cubic feet of gas per day when the project is completed in 2009. Sempra Pipelines & Storage currently owns one-third of the project.
Sempra LNG
Sempra LNG recorded a net loss of $5 million during the first quarter 2006, unchanged from the previous year.
In the first quarter 2006, Sempra LNG announced an open season to gauge market interest in an expansion of Energia Costa Azul, the company's liquefied natural gas (LNG) receipt terminal under construction in Baja California, Mexico. The terminal is more than 30-percent complete and, when operational in early 2008, it will be the first LNG receipt facility on the west coast of North America.
INTERNET BROADCAST
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. Eastern Time with senior management of the company. 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 passcode 7944055.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2005 revenues of $11.7 billion. The Sempra Energy companies' 14,000 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/1Q2006_Table_All.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
Three months ended
March 31,
(Dollars in millions, ------------------------
except per share amounts) 2006 2005
---------------------------------------------------------------------
(Unaudited)
Operating revenues
California utilities $ 2,128 $ 1,827
Sempra Global and parent 1,221 828
--------- ---------
Total operating revenues 3,349 2,655
--------- ---------
Operating expenses
California utilities:
Cost of natural gas 1,130 913
Cost of electric fuel and purchased power 210 145
Other cost of sales 679 560
Litigation expense 33 8
Other operating expenses 643 528
Depreciation and amortization 159 158
Franchise fees and other taxes 77 68
Impairment losses 2 1
--------- ---------
Total operating expenses 2,933 2,381
--------- ---------
Operating income 416 274
Other income, net 4 10
Interest income 14 10
Interest expense (96) (74)
Preferred dividends of subsidiaries (2) (2)
--------- ---------
Income from continuing operations
before income taxes and equity in
earnings of certain unconsolidated
subsidiaries 336 218
Income tax expense 110 7
Equity in earnings of certain
unconsolidated subsidiaries 10 10
--------- ---------
Income from continuing operations 236 221
Discontinued operations, net of income tax 19 2
--------- ---------
Net income $ 255 $ 223
========= =========
Basic earnings per share:
Income from continuing operations $ 0.93 $ 0.95
Discontinued operations, net of tax 0.07 0.01
--------- ---------
Net income $ 1.00 $ 0.96
========= =========
Weighted-average number of shares
outstanding (thousands) 254,257 232,939
========= =========
Diluted earnings per share:
Income from continuing operations $ 0.91 $ 0.91
Discontinued operations, net of tax 0.07 0.01
--------- ---------
Net income $ 0.98 $ 0.92
========= =========
Weighted-average number of shares
outstanding (thousands) 259,251 241,105
========= =========
Dividends declared per share
of common stock $ 0.30 $ 0.29
========= =========
The statements above reflect the decision in the first quarter of
2006 to dispose of the Twin Oaks power plant and the Energy Services
and Facilities Management businesses within Sempra Generation.
SEMPRA ENERGY
Table B
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
(Dollars in millions) 2006 2005
---------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 650 $ 770
Short-term investments 4 12
Accounts receivable 1,091 1,143
Due from unconsolidated affiliates 8 3
Deferred income taxes 173 134
Interest receivable 32 29
Trading-related receivables and
deposits, net 2,809 3,370
Derivative trading instruments 4,265 4,502
Commodities owned 2,106 2,498
Regulatory assets 249 255
Inventories 98 206
Other 212 285
------- -------
Current assets of continuing
operations 11,697 13,207
Current assets of discontinued
operations 391 454
------- -------
Total current assets 12,088 13,661
------- -------
Investments and other assets:
Due from unconsolidated affiliates 21 21
Regulatory assets arising from
fixed-price contracts and
other derivatives 389 398
Other regulatory assets 711 713
Nuclear decommissioning trusts 654 638
Investments 1,201 1,102
Sundry 817 802
------- -------
Total investments and other assets 3,793 3,674
------- -------
Property, plant and equipment, net 12,169 11,881
------- -------
Total assets $28,050 $29,216
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 673 $ 1,043
Accounts payable 989 1,396
Income taxes payable 195 69
Trading-related payables 3,297 4,127
Derivative trading instruments 3,210 3,246
Commodities sold with agreement
to repurchase 432 634
Dividends and interest payable 151 140
Regulatory balancing accounts, net 406 192
Fixed-price contracts and other
derivatives 126 130
Current portion of long-term debt 89 98
Other 1,005 1,012
------- -------
Current liabilities of continuing
operations 10,573 12,087
Current liabilities of discontinued
operations 143 131
------- -------
Total current liabilities 10,716 12,218
------- -------
Long-term debt 4,778 4,815
------- -------
Deferred credits and other liabilities:
Due to unconsolidated affiliate 162 162
Customer advances for construction 116 110
Postretirement benefits other
than pensions 119 121
Deferred income taxes 223 219
Deferred investment tax credits 71 73
Regulatory liabilities arising from
removal obligations 2,343 2,313
Asset retirement obligations 972 958
Other regulatory liabilities 206 200
Fixed-price contracts and
other derivatives 398 400
Deferred credits and other 1,284 1,288
------- -------
Total deferred credits and
other liabilities 5,894 5,844
------- -------
Preferred stock of subsidiaries 179 179
------- -------
Shareholders' equity 6,483 6,160
------- -------
Total liabilities and
shareholders' equity $28,050 $29,216
======= =======
The statements above reflect the decision in the first quarter of
2006 to dispose of the Twin Oaks power plant and the Energy Services
and Facilities Management businesses within Sempra Generation.
SEMPRA ENERGY
Table C
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Three months ended
March 31,
------------------
(Dollars in millions) 2006 2005
---------------------------------------------------------------------
(Unaudited)
Cash Flows from Operating Activities:
Net income $ 255 $ 223
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 159 161
Deferred income taxes and investment tax credits (43) (68)
Accretion of interest 7 --
Other 23 3
Net changes in other working capital components 384 394
Changes in other assets 64 2
Changes in other liabilities 6 (3)
----- -----
Net cash provided by operating activities 855 712
----- -----
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (420) (269)
Proceeds from sale of assets 24 11
Investments in subsidiaries (103) (1)
Purchases of nuclear decommissioning and
other trust assets (122) (84)
Proceeds from sales by nuclear decommissioning
and other trusts 116 88
Dividends received from unconsolidated affiliates -- 2
Other (1) 14
----- -----
Net cash used in investing activities (506) (239)
----- -----
Cash Flows from Financing Activities:
Common dividends paid (65) (50)
Issuances of common stock 17 90
Repurchases of common stock (12) (6)
Redemption of mandatorily redeemable
preferred securities -- (200)
Payments on long-term debt (45) (50)
Decrease in short-term debt, net (366) (64)
Other 2 (3)
----- -----
Net cash used in financing activities (469) (283)
----- -----
Increase (decrease) in cash and cash equivalents (120) 190
Cash and cash equivalents, January 1 770 416
----- -----
Cash and cash equivalents, March 31 $ 650 $ 606
===== =====
SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS
(Unaudited)
Three months ended
March 31,
--------------------
(Dollars in millions) 2006 2005
-------------------------------------------------------------
Net Income
California Utilities:
San Diego Gas & Electric $ 47 $ 59
Southern California Gas 49 69
----- -----
Total California Utilities 96 128
----- -----
Sempra Global:
Sempra Commodities 116 29
Sempra Generation 43 45
Sempra Pipelines & Storage 11 13
Sempra LNG (5) (5)
----- -----
Total Sempra Global 165 82
----- -----
Sempra Financial 5 4
Parent & Other (30) 7
----- -----
Continuing Operations 236 221
Discontinued Operations 19 2
----- -----
Consolidated Net Income $ 255 $ 223
===== =====
The statements above reflect the decision in the first quarter of
2006 to dispose of the Twin Oaks power plant and the Energy Services
and Facilities Management businesses within Sempra Generation.
Three months ended
March 31,
------------------
(Dollars in millions) 2006 2005
---------------------------------------------------------------------
Capital Expenditures and Investments
California Utilities:
San Diego Gas & Electric $ 583 $ 94
Southern California Gas 97 63
----- -----
Total California Utilities 680 157
----- -----
Sempra Global:
Sempra Generation 34 49
Sempra Commodities 20 13
Sempra Pipelines & Storage 105 4
Sempra LNG 152 45
----- -----
Total Sempra Global 311 111
----- -----
Parent & Other (468)(a) 2
----- -----
Consolidated Capital Expenditures and Investments $ 523 $ 270
===== =====
(a) Reflects the transfer of the Palomar plant to SDG&E from Sempra
Generation.
SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
Three months ended
March 31,
---------------------
CALIFORNIA UTILITIES 2006 2005
---------------------------------------------------------------------
Revenues (Dollars in millions)
SDG&E (excludes intercompany sales) $ 718 $ 616
SoCalGas (excludes intercompany sales) $1,410 $1,211
Gas Sales (Bcf) 141 137
Transportation and Exchange (Bcf) 122 122
------ ------
Total Deliveries (Bcf) 263 259
------ ------
Total Gas Customers (Thousands) 6,406 6,316
Electric Sales (Millions of kWhs) 4,043 3,906
Direct Access (Millions of kWhs) 898 820
------ ------
Total Deliveries (Millions of kWhs) 4,941 4,726
------ ------
Total Electric Customers (Thousands) 1,342 1,323
SEMPRA GENERATION
---------------------------------------------------------------------
Power Sold (Millions of kWhs) 5,750 4,989(a)
(a) Revised to exclude the Twin Oaks power plant as a discontinued
operation.
SEMPRA PIPELINES & STORAGE
(Represents 100% of these subsidiaries, although only the Mexican
subsidiaries are 100% owned by Sempra Energy).
---------------------------------------------------------------------
Natural Gas Sales (Bcf)
Argentina 52 51
Mexico 10 10
Chile 1 1
Natural Gas Customers (Thousands)
Argentina 1,511 1,459
Mexico 99 97
Chile 38 38
Electric Sales (Millions of kWhs)
Peru 1,165 1,052
Chile 614 733
Electric Customers (Thousands)
Peru 772 753
Chile 525 512
------ ------
SEMPRA ENERGY
Table E (Continued)
SEMPRA COMMODITIES
--------------------------------------------------------------------
Three months ended
March 31,
------------------------
Margin (a) (Dollars in millions) 2006 2005
--------------------------------------------------------------------
Geographical:
North America $359 $125
Europe/Asia 6 29
------------------------
Total $365 $154
------------------------
Product Line:
Gas $179 $(15)
Power 101 42
Oil - Crude & Products 53 80
Metals 27 14
Other 5 33
------------------------
Total $365 $154
------------------------
(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
March 31,
------------------------
Effect of EITF 02-03
(Dollars in 2006 2005
millions)
--------------------------------------------------------------------
Mark-to-Market Earnings (b) $160 $ 52
Effect of EITF 02-03 (c) (44) (23)
------------------------
GAAP Net Income $116 $ 29
------------------------
(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.
Net Unrealized Revenue (Dollars in millions)
Fair
Market
Value Scheduled Maturity (in months)
March 31, ------------------------------
2006 0-12 13-24 25-36 More
Than 36
--------------------------------------------------------------------
Sources of Over-the-Counter
(OTC) Fair Value:
Prices actively quoted $ 978 $ 185 $ 316 $ 397 $ 80
Prices provided by other
external sources 51 (1) 1 (1) 52
Prices based on models and
other valuation
methods (9) -- -- -- (9)
---------------------------------------
Total OTC Fair Value (d) 1,020 184 317 396 123
---------------------------------------
Maturity of OTC Fair
Value - Cumulative
Percentages 18.0% 49.1% 87.9% 100.0%
---------------------------------------
Exchange Contracts (e) 223 501 (112) (145) (21)
---------------------------------------
Total Net Unrealized Revenue
at March 31, 2006 $1,243 $ 685 $ 205 $ 251 $ 102
---------------------------------------
Net Unrealized Revenue -
Cumulative Percentages 55.1% 71.6% 91.8% 100.0%
---------------------------------------
(d) The present value of unrealized revenue to be received or (paid)
from outstanding OTC contracts
(e) Cash received or (paid) associated with open Exchange Contracts
Credit Quality of Unrealized March 31, December 31,
Trading Assets (net of margin) 2006 2005
--------------------------------------------------------------------
Commodity Exchanges 5% 2%
Investment Grade 69% 75%
Below Investment Grade 26% 23%
Three months ended
March 31,
Risk Adjusted Performance
Indicators (Mark-to-Market Basis) 2006 2005
--------------------------------------------------------------------
VaR at 95% (Dollars in millions) (f) $ 22.0 $ 8.5
VaR at 99% (Dollars in millions) (g) $ 31.1 $ 11.9
Risk Adjusted Return on Capital (RAROC) (h) 37% 38%
(f) Average Daily Value-at-Risk for the period using a 95%
confidence level
(g) Average Daily Value-at-Risk for the period using a 99%
confidence level
(h) Average Daily Trading Margin/Average Daily VaR at 95%
confidence level
Physical Statistics
--------------------------------------------------------------------
Natural Gas (BCF/Day) 12.6 12.2
Electric (Billions of kWhs) 114.9 107.8
Oil & Liquid Products (Millions Bbls/Day) 0.7 0.9