Sempra Energy Announces 2016 Earnings

 Three months ended 

 Years ended 

December 31,

December 31,

(Dollars, except EPS, and shares, in millions)

2016

2015

2016

2015

 (Unaudited) 

GAAP Earnings

$  379

$  369

$ 1,370

$ 1,349

Gain in Connection with Gasoductos de Chihuahua Acquisition

-

-

(350)

-

Gain on Sale of EnergySouth

-

-

(78)

-

Permanent Releases of Pipeline Capacity

-

-

123

-

Losses Related to Termoeléctrica de Mexicali Held For Sale

4

-

95

-

Tax Repairs Adjustments Related to General Rate Case 

-

-

80

-

Loss Related to Sale of Investment in Rockies Express Pipeline

-

-

27

-

Adjustment to Loss on SONGS Plant Closure

-

(2)

-

(15)

Gain on Sale of Mesquite Power Block 2

-

-

-

(36)

Adjusted Earnings⁽¹⁾

$  383

$  367

$ 1,267

$ 1,298

Diluted Weighted-Average Shares Outstanding

252

251

251

251

GAAP Earnings Per Share (EPS)

$ 1.51

$ 1.47

$   5.46

$   5.37

Adjusted EPS⁽¹⁾

$ 1.52

$ 1.46

$   5.05

$   5.17

Sempra Energy adjusted earnings and adjusted EPS are non-GAAP financial measures and are shown after-tax, and if applicable, after noncontrolling interests. See Table A in the appendix for information regarding non-GAAP financial measures and descriptions of adjustments above. Adjusted earnings and adjusted EPS for the three months and year ended Dec. 31, 2015, have been revised to include after-tax LNG development expenses of $3 million and $10 million, respectively, for consistency with the comparable periods in 2016. LNG development expenses are included in adjusted earnings and adjusted EPS in 2016.

SEMPRA ENERGY

Table A

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended
December 31,

Years ended
December 31,

(Dollars in millions, except per share amounts)

2016

2015

2016

2015

(unaudited)

REVENUES

Utilities

$

2,561

$

2,486

$

9,261

$

9,254

Energy-related businesses

309

215

922

977

Total revenues

2,870

2,701

10,183

10,231

EXPENSES AND OTHER INCOME

Utilities:

Cost of electric fuel and purchased power

(508)

(491)

(2,188)

(2,136)

Cost of natural gas

(365)

(348)

(1,067)

(1,134)

Energy-related businesses:

Cost of natural gas, electric fuel and purchased power

(64)

(73)

(277)

(335)

Other cost of sales

(29)

(37)

(322)

(148)

Operation and maintenance

(861)

(814)

(2,970)

(2,886)

Depreciation and amortization

(342)

(325)

(1,312)

(1,250)

Franchise fees and other taxes

(111)

(109)

(426)

(423)

Impairment losses

1

(9)

(153)

(9)

Plant closure adjustment

—

5

—

26

Gain on sale of assets

3

8

134

70

Equity earnings, before income tax

2

25

6

104

Remeasurement of equity method investment

—

—

617

—

Other income, net

34

38

132

126

Interest income

7

6

26

29

Interest expense

(132)

(145)

(553)

(561)

Income before income taxes and equity earnings of certain unconsolidated subsidiaries

505

432

1,830

1,704

Income tax expense

(105)

(65)

(389)

(341)

Equity earnings, net of income tax

9

21

78

85

Net income

409

388

1,519

1,448

Earnings attributable to noncontrolling interests

(30)

(19)

(148)

(98)

Preferred dividends of subsidiary

—

—

(1)

(1)

Earnings

$

379

$

369

$

1,370

$

1,349

Basic earnings per common share

$

1.51

$

1.48

$

5.48

$

5.43

Weighted-average number of shares outstanding, basic (thousands)

250,645

248,722

250,217

248,249

Diluted earnings per common share

$

1.51

$

1.47

$

5.46

$

5.37

Weighted-average number of shares outstanding, diluted (thousands)

251,611

251,450

251,155

250,923

Dividends declared per share of common stock

$

0.75

$

0.70

$

3.02

$

2.80

SEMPRA ENERGY

Table A (Continued)

RECONCILIATION OF SEMPRA ENERGY GAAP EARNINGS TO SEMPRA ENERGY ADJUSTED EARNINGS (Unaudited)

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share exclude items (after the effects of taxes and, if applicable, noncontrolling interests) in 2016 and 2015 as follows:

Three months ended December 31, 2016:

▪

$(4) million deferred income tax expense related to our decision to hold Termoeléctrica de Mexicali (TdM) for sale

Three months ended December 31, 2015:

▪

$2 million reduction in the plant closure loss at San Diego Gas & Electric (SDG&E) related to the San Onofre Nuclear Generating Station (SONGS) for the shareholder portion of a settlement agreement with Nuclear Electric Insurance Limited to resolve all of SONGS' insurance claims arising out of the failures of replacement steam generators

Year ended December 31, 2016:

▪

$350 million noncash gain from the remeasurement of our equity method investment in GdC

▪

$78 million gain on the sale of EnergySouth

▪

$(123) million losses from the permanent release of pipeline capacity at Sempra LNG & Midstream

▪

$(80) million adjustments related to tax repairs deductions reallocated to ratepayers as a result of the 2016 General Rate Case Final Decision (2016 GRC FD) at the California Utilities

▪

$(27) million impairment charge related to Sempra LNG & Midstream's investment in Rockies Express Pipeline LLC (Rockies Express)

▪

$(90) million impairment of TdM assets held for sale

▪

$(5) million deferred income tax expense related to our decision to hold TdM for sale

Year ended December 31, 2015:

▪

$36 million gain on the sale of the remaining block of Sempra LNG & Midstream's Mesquite Power plant

▪

$15 million reduction in the plant closure loss related to SONGS, $13 million of which is due to California Public Utilities Commission approval of a compliance filing related to SDG&E's authorized recovery of its investment in SONGS

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and nature of these items, management believes that these non-GAAP financial measures provide a meaningful comparison of the performance of Sempra Energy's business operations from 2016 to 2015 and to future periods, and also as a base for projection of future earnings-per-share compound annual growth rate (EPS CAGR) from 2016 to 2020. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles for historical periods these non-GAAP financial measures to Sempra Energy Earnings and Diluted Earnings Per Common Share, which we consider to be the most directly comparable financial measures calculated in accordance with GAAP. 

Pretax
amount

Income tax
expense
(benefit)(1)

Non-
controlling
interests

Earnings

Pretax
amount

Income tax
expense(1)

Non-
controlling
interests

Earnings

(Dollars in millions, except per share amounts)

Three months ended December 31, 2016

Three months ended December 31, 2015

Sempra Energy GAAP Earnings

$

379

$

369

Exclude:

   Deferred income tax expense associated with TdM

$

—

$

7

$

(3)

4

$

—

$

—

$

—

—

   SONGS plant closure adjustment

—

—

—

—

(5)

3

—

(2)

Sempra Energy Adjusted Earnings

$

383

$

367

⁽²⁾ 

Diluted earnings per common share:

   Sempra Energy GAAP Earnings

$

1.51

$

1.47

   Sempra Energy Adjusted Earnings

$

1.52

$

1.46

⁽²⁾ 

Weighted-average number of shares outstanding, diluted (thousands)

251,611

251,450

Year ended December 31, 2016

Year ended December 31, 2015

Sempra Energy GAAP Earnings

$

1,370

$

1,349

Exclude:

   Remeasurement gain in connection with GdC

$

(617)

$

185

$

82

(350)

$

—

$

—

$

—

—

   Gain on sale of EnergySouth

(130)

52

—

(78)

—

—

—

—

   Permanent release of pipeline capacity

206

(83)

—

123

—

—

—

—

   SDG&E tax repairs adjustments related to 2016 GRC FD

52

(21)

—

31

—

—

—

—

   SoCalGas tax repairs adjustments related to 2016 GRC FD

83

(34)

—

49

—

—

—

—

   Impairment of investment in Rockies Express

44

(17)

—

27

—

—

—

—

Impairment of TdM assets held for sale

131

(20)

(21)

90

—

—

—

—

   Deferred income tax expense associated with TdM

—

8

(3)

5

—

—

—

—

   Gain on sale of Mesquite Power block 2

—

—

—

—

(61)

25

—

(36)

   SONGS plant closure adjustment

—

—

—

—

(26)

11

—

(15)

Sempra Energy Adjusted Earnings

$

1,267

$

1,298

⁽²⁾ 

Diluted earnings per common share:

   Sempra Energy GAAP Earnings

$

5.46

$

5.37

   Sempra Energy Adjusted Earnings

$

5.05

$

5.17

⁽²⁾ 

Weighted-average number of shares outstanding, diluted (thousands)

251,155

250,923

(2)

Adjusted earnings and adjusted earnings per share for the three months and year ended December 31, 2015 have been revised to include after-tax LNG development expenses of $3 million and $10 million, respectively, for consistency with the comparable periods in 2016. LNG development expenses are included in adjusted earnings and diluted earnings per common share in 2016.

SEMPRA ENERGY

Table B

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

December 31,
2016

December 31,
2015

Assets

Current assets:

  Cash and cash equivalents

$

349

$

403

  Restricted cash

66

27

  Accounts receivable, net

1,554

1,473

  Due from unconsolidated affiliates

26

6

  Income taxes receivable

43

30

  Inventories

258

298

  Regulatory balancing accounts - undercollected

259

307

  Fixed-price contracts and other derivatives

83

80

  Assets held for sale

201

—

  Other

271

267

  Total current assets

3,110

2,891

Other assets:

  Restricted cash

10

20

  Due from unconsolidated affiliates

201

186

  Regulatory assets

3,414

3,273

  Nuclear decommissioning trusts

1,026

1,063

  Investments

2,097

2,905

  Goodwill

2,364

819

  Other intangible assets

548

404

  Dedicated assets in support of certain benefit plans

430

464

  Insurance receivable for Aliso Canyon costs

606

325

  Deferred income taxes

234

120

  Sundry

815

641

  Total other assets

11,745

10,220

Property, plant and equipment, net

32,931

28,039

Total assets

$

47,786

$

41,150

Liabilities and Equity

Current liabilities:

  Short-term debt

$

1,779

$

622

  Accounts payable

1,476

1,275

  Due to unconsolidated affiliates

11

14

  Dividends and interest payable

319

303

  Accrued compensation and benefits

409

423

  Regulatory balancing accounts - overcollected

122

34

  Current portion of long-term debt

913

907

  Fixed-price contracts and other derivatives

83

56

  Customer deposits

158

153

  Reserve for Aliso Canyon costs

53

274

  Liabilities held for sale

47

—

  Other

557

551

  Total current liabilities

5,927

4,612

Long-term debt

14,429

13,134

Deferred credits and other liabilities:

  Customer advances for construction

152

149

  Pension and other postretirement benefit plan obligations, net of plan assets

1,208

1,152

  Deferred income taxes

3,745

3,157

  Deferred investment tax credits

28

32

  Regulatory liabilities arising from removal obligations

2,697

2,793

  Asset retirement obligations

2,431

2,126

  Fixed-price contracts and other derivatives

405

240

  Deferred credits and other

1,523

1,176

  Total deferred credits and other liabilities

12,189

10,825

Equity:

  Total Sempra Energy shareholders' equity

12,951

11,809

  Preferred stock of subsidiary

20

20

  Other noncontrolling interests

2,270

750

  Total equity

15,241

12,579

Total liabilities and equity

$

47,786

$

41,150

SEMPRA ENERGY

Table C

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,

(Dollars in millions)

2016

2015

Cash Flows from Operating Activities

Net income

$

1,519

$

1,448

Adjustments to reconcile net income to net cash provided by operating activities:

  Depreciation and amortization

1,312

1,250

  Deferred income taxes and investment tax credits

217

239

  Impairment losses

153

9

  Plant closure adjustment

—

(26)

  Gain on sale of assets

(134)

(70)

  Equity earnings

(84)

(189)

  Remeasurement of equity method investment

(617)

—

  Fixed-price contracts and other derivatives

21

(10)

  Other

63

66

Net change in other working capital components

(59)

699

Insurance receivable for Aliso Canyon costs

(281)

(325)

Changes in other assets

56

(162)

Changes in other liabilities

153

(24)

  Net cash provided by operating activities

2,319

2,905

Cash Flows from Investing Activities

Expenditures for property, plant and equipment

(4,214)

(3,156)

Expenditures for investments and acquisition of businesses, net of cash and cash equivalents acquired

(1,582)

(200)

Proceeds from sale of assets, net of cash sold

763

373

Distributions from investments

25

15

Purchases of nuclear decommissioning and other trust assets

(1,034)

(531)

Proceeds from sales by nuclear decommissioning and other trusts

1,134

577

Increases in restricted cash

(139)

(100)

Decreases in restricted cash

175

93

Advances to unconsolidated affiliates

(25)

(31)

Repayments of advances to unconsolidated affiliates

11

74

Other

—

1

  Net cash used in investing activities

(4,886)

(2,885)

Cash Flows from Financing Activities

Common dividends paid

(686)

(628)

Preferred dividends paid by subsidiary

(1)

(1)

Issuances of common stock

51

52

Repurchases of common stock

(56)

(74)

Issuances of debt (maturities greater than 90 days)

2,951

2,992

Payments on debt (maturities greater than 90 days)

(2,057)

(1,854)

Increase (decrease) in short-term debt, net

692

(622)

Proceeds from sale of noncontrolling interests, net of $40 in offering costs

1,692

—

Net distributions to noncontrolling interests

(63)

(73)

Tax benefit related to share-based compensation

—

52

Other

(10)

(17)

  Net cash provided by (used in) financing activities

2,513

(173)

Effect of exchange rate changes on cash and cash equivalents

—

(14)

Decrease in cash and cash equivalents

(54)

(167)

Cash and cash equivalents, January 1

403

570

Cash and cash equivalents, December 31

$

349

$

403

SEMPRA ENERGY

Table D

SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES, INVESTMENTS AND ACQUISITION OF BUSINESSES

Three months ended
December 31,

Years ended
December 31,

(Dollars in millions)

2016

2015

2016

2015

    (unaudited)

Earnings (Losses)

Sempra Utilities:

  San Diego Gas & Electric

$

151

$

144

$

570

$

587

  Southern California Gas

151

143

349

419

  Sempra South American Utilities

29

46

156

175

Sempra Infrastructure:

  Sempra Mexico

56

53

463

213

  Sempra Renewables

12

16

55

63

  Sempra LNG & Midstream

(3)

1

(107)

44

Parent and other

(17)

(34)

(116)

(152)

Earnings

$

379

$

369

$

1,370

$

1,349

Three months ended
December 31,

Years ended
December 31,

(Dollars in millions)

2016

2015

2016

2015

    (unaudited)

Capital Expenditures, Investments and Acquisition of Businesses

Sempra Utilities:

  San Diego Gas & Electric

$

440

$

298

$

1,399

$

1,133

  Southern California Gas

370

406

1,319

1,352

  Sempra South American Utilities

61

49

194

154

Sempra Infrastructure:

  Sempra Mexico

452

117

1,818

302

  Sempra Renewables

140

38

879

105

  Sempra LNG & Midstream

28

38

164

261

Parent and other

6

—

23

49

Consolidated Capital Expenditures, Investments and Acquisition of Businesses

$

1,497

$

946

$

5,796

$

3,356

SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended
December 31,

Years ended or at
December 31,

UTILITIES

2016

2015

2016

2015

SDG&E and SoCalGas

Gas Sales (Bcf)⁽¹⁾

92

102

334

329

Transportation (Bcf)⁽¹⁾

164

169

641

669

Total Deliveries (Bcf)⁽¹⁾

256

271

975

998

Total Gas Customers (Thousands)

6,808

6,774

Electric Sales (Millions of kWhs)⁽¹⁾

3,987

4,314

15,649

16,264

Direct Access (Millions of kWhs)

942

969

3,515

3,652

Total Deliveries (Millions of kWhs)⁽¹⁾

4,929

5,283

19,164

19,916

Total Electric Customers (Thousands)

1,434

1,426

Other Utilities

Natural Gas Sales (Bcf)

  Sempra Mexico

7

6

29

25

  Mobile Gas^{(2) (3)}

—

12

33

47

  Willmut Gas⁽³⁾

—

1

2

3

Natural Gas Customers (Thousands)

  Sempra Mexico

119

113

  Mobile Gas^{(2) (3)}

—

85

  Willmut Gas⁽³⁾

—

19

Electric Sales (Millions of kWhs)

  Peru

1,780

1,854

7,387

7,549

  Chile

739

715

2,900

2,887

Electric Customers (Thousands)

  Peru

1,078

1,053

  Chile

688

672

ENERGY-RELATED BUSINESSES

Sempra Infrastructure

Power Sold (Millions of kWhs)

  Sempra Mexico⁽⁴⁾

826

1,088

3,173

3,956

  Sempra Renewables⁽⁵⁾

815

740

2,956

2,851

  Sempra LNG & Midstream⁽⁶⁾

383

806

1,230

3,129

(1)

Includes intercompany sales.

(2)

Includes transportation.

(3)

On September 12, 2016, Sempra LNG & Midstream completed the sale of the parent company of Mobile Gas and Willmut Gas.

(4)

Includes power sold at the Termoeléctrica de Mexicali natural gas-fired power plant and the Ventika wind power generation facilities. Also includes 50 percent of total power sold at the Energía Sierra Juárez wind power generation facility, in which Sempra Energy has a 50-percent ownership interest. Energía Sierra Juárez is not consolidated within Sempra Energy, and the related investment is accounted for under the equity method.

(5)

Includes 50 percent of total power sold related to solar and wind projects in which Sempra Energy has a 50-percent ownership interest. These subsidiaries are not consolidated within Sempra Energy, and the related investments are accounted for under the equity method.

(6)

Includes power sold from marketing activities and from the remaining 625-megawatt block of the Mesquite Power natural gas-fired power plant before its sale in April 2015.

         SEMPRA ENERGY

           Table F (Unaudited)

STATEMENT OF OPERATIONS DATA BY SEGMENT

Three months ended December 31, 2016

(Dollars in millions)

SDG&E

SoCalGas

Sempra
South
American
Utilities

Sempra Mexico

Sempra Renewables

Sempra
LNG &
Midstream

Consolidating
Adjustments,
Parent &
 Other

Total

Revenues

$

1,061

$

1,135

$

386

$

244

$

9

$

124

$

(89)

$

2,870

Cost of sales and other expenses

(632)

(779)

(318)

(124)

(16)

(127)