Sempra Energy Announces First-Quarter 2016 Financial Results

SEMPRA ENERGY

Table A

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 Three months ended March 31,

(Dollars in millions, except per share amounts)

2016

2015

(unaudited)

REVENUES

Utilities

$

2,442

$

2,422

Energy-related businesses

180

260

    Total revenues

2,622

2,682

EXPENSES AND OTHER INCOME

Utilities:

    Cost of natural gas

(311)

(346)

    Cost of electric fuel and purchased power

(515)

(481)

Energy-related businesses:

    Cost of natural gas, electric fuel and purchased power

(56)

(98)

    Other cost of sales

(35)

(35)

Operation and maintenance

(701)

(658)

Depreciation and amortization

(328)

(303)

Franchise fees and other taxes

(111)

(107)

Plant closure adjustment

         ―

21

Equity (losses) earnings, before income tax

(22)

19

Other income, net

49

39

Interest income

6

7

Interest expense

(143)

(134)

Income before income taxes and equity earnings of certain unconsolidated subsidiaries

455

606

Income tax expense

(142)

(163)

Equity earnings, net of income tax

17

15

Net income

330

458

Earnings attributable to noncontrolling interests

(11)

(21)

Earnings

$

319

$

437

Basic earnings per common share

$

1.28

$

1.76

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

249,734

247,722

Diluted earnings per common share

$

1.27

$

1.74

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

251,412

251,206

Dividends declared per share of common stock

$

0.76

$

0.70

SEMPRA ENERGY

Table A (Continued)

Sempra Energy Consolidated

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

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Common Share exclude items in 2016 and 2015 as follows:

2016:

•

$27 million after-tax impairment charge related to Sempra Natural Gas' investment in Rockies Express Pipeline LLC (Rockies Express)

•

$24 million deferred income tax expense related to our decision to hold Sempra Mexico's Termoeléctrica de Mexicali (TdM) natural gas-fired power plant for sale

2015:

•

$13 million reduction in the plant closure loss related to the San Onofre Nuclear Generating Station (SONGS) due to California Public Utilities Commission (CPUC) approval of a compliance filing related to San Diego Gas & Electric Company's (SDG&E) authorized recovery of its investment in SONGS

•

$4 million of liquefied natural gas (LNG) liquefaction development expenses

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 more 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 compounded 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.

Three months ended March 31,

(Dollars in millions, except per share amounts)

2016

2015

Sempra Energy GAAP Earnings

$      319

$      437

Exclude:

   Loss related to Rockies Express

27

                ―

   Deferred income tax expense associated with TdM

24

                ―

   SONGS plant closure adjustment

                ―

(13)

   LNG liquefaction development expenses ⁽¹⁾

                ―

4

Sempra Energy Adjusted Earnings

$      370

$      428

Diluted earnings per common share:

Sempra Energy GAAP Earnings

$     1.27

$     1.74

Sempra Energy Adjusted Earnings

$     1.47

$     1.71

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

251,412

251,206

(1)

LNG liquefaction development expenses for 2016 are included in 2016 Adjusted Earnings-Per-Share Guidance and therefore are not an adjusted earnings item in 2016.

SEMPRA ENERGY 2016 ADJUSTED EARNINGS-PER-SHARE GUIDANCE RANGE (Unaudited)

Sempra Energy 2016 Adjusted Earnings-Per-Share Guidance Range of $4.60 to $5.00 excludes:

•

any potential gain from the remeasurement of our equity method investment in Gasoductos de Chihuahua (GdC), a 50-50 joint venture between our Mexican subsidiary, IEnova, and Petróleos Mexicanos (PEMEX), in connection with the potential acquisition by IEnova of PEMEX's 50-percent interest in GdC; 

•

any earnings impact from any transaction to sell the TdM natural gas-fired power plant in Mexico, including the $24 million deferred income tax expense recorded in the first quarter of 2016;

•

the $27 million after-tax Rockies Express impairment charge;

•

approximately $100 million to $120 million charge expected in the second quarter of 2016 from Sempra Natural Gas' planned permanent release of uncontracted capacity;

•

approximately $70 million gain from the pending sale of the parent company of Mobile Gas and Willmut Gas in 2016; and

•

any impact from the adoption of new accounting standards in 2016.

Sempra Energy 2016 Adjusted Earnings-Per-Share Guidance is a non-GAAP financial measure. Because of the significance and nature of the excluded items, management believes this non-GAAP measure provides better clarity into the ongoing results of the business and the comparability of such results to prior and future periods and also as a base for comparison of the projected EPS CAGR from 2016 to 2020. Sempra Energy 2016 Adjusted Earnings-Per-Share Guidance should not be considered an alternative to diluted earnings per share determined in accordance with GAAP. As the parties are in the process of restructuring the GdC transaction and an agreement for the sale of the TdM plant has yet to be obtained, any potential earnings impact, other than the TdM deferred income tax expense recorded in the first quarter of 2016, from these transactions cannot be reasonably estimated at this time. We are also not able to estimate the impact from the adoption of new accounting standards in 2016. Accordingly, we are not able to provide a corresponding GAAP equivalent to our 2016 Adjusted Earnings-Per-Share Guidance or our projected EPS CAGR from 2016 to 2020.

San Diego Gas & Electric Company (SDG&E)

RECONCILIATION OF SDG&E GAAP EARNINGS TO SDG&E ADJUSTED EARNINGS (Unaudited)

SDG&E Adjusted Earnings exclude, in 2015, a $13 million reduction in the plant closure loss related to SONGS due to CPUC approval of a compliance filing related to SDG&E's authorized recovery of its investment in SONGS.

SDG&E Adjusted Earnings is a non-GAAP financial measure. Because of the significance and nature of this item, management believes that this non-GAAP financial measure provides a more meaningful comparison of the performance of SDG&E's business operations from 2016 to 2015 and to future periods. 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 this non-GAAP financial measure to SDG&E Earnings, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

Three months ended March 31,

(Dollars in millions)

2016

2015

SDG&E GAAP Earnings

$      129

$      147

Exclude:

   SONGS plant closure adjustment

                ―

(13)

SDG&E Adjusted Earnings

$      129

$      134

SEMPRA ENERGY

Table B

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,

December 31,

(Dollars in millions)

2016

2015⁽¹⁾

Assets

Current assets:

Cash and cash equivalents

$       376

$           403

Restricted cash

23

27

Accounts receivable, net

1,277

1,473

Due from unconsolidated affiliates

7

6

Income taxes receivable

49

30

Inventories

231

298

Regulatory balancing accounts – undercollected

256

307

Fixed-price contracts and other derivatives

88

80

Assets held for sale, power plant

303

                ―

Other

273

267

Total current assets

2,883

2,891

Other assets:

Restricted cash

20

20

Due from unconsolidated affiliates

186

186

Regulatory assets

3,336

3,273

Nuclear decommissioning trusts

1,082

1,063

Investments

2,727

2,905

Goodwill 

849

819

Other intangible assets

402

404

Dedicated assets in support of certain benefit plans

432

464

Insurance receivable for Aliso Canyon costs

660

325

Sundry

825

761

Total other assets

10,519

10,220

Property, plant and equipment, net

28,433

28,039

Total assets

$   41,835

$       41,150

Liabilities and Equity

Current liabilities:

Short-term debt

$    1,177

$           622

Accounts payable

1,157

1,275

Due to unconsolidated affiliates

13

14

Dividends and interest payable

360

303

Accrued compensation and benefits

259

423

Regulatory balancing accounts – overcollected

45

34

Current portion of long-term debt

1,066

907

Fixed-price contracts and other derivatives

57

56

Customer deposits

147

153

Reserve for Aliso Canyon costs

302

274

Other

549

551

Total current liabilities

5,132

4,612

Long-term debt

12,975

13,134

Deferred credits and other liabilities:

Customer advances for construction

148

149

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

1,165

1,152

Deferred income taxes

3,222

3,157

Deferred investment tax credits

32

32

Regulatory liabilities arising from removal obligations

2,850

2,793

Asset retirement obligations

2,151

2,126

Fixed-price contracts and other derivatives

248

240

Deferred credits and other 

1,188

1,176

Total deferred credits and other liabilities

11,004

10,825

Equity:

Total Sempra Energy shareholders' equity

11,946

11,809

Preferred stock of subsidiary

20

20

Other noncontrolling interests

758

750

Total equity

12,724

12,579

Total liabilities and equity

$   41,835

$       41,150

(1)

Derived from audited financial statements.

SEMPRA ENERGY

Table C

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

Three months ended March 31,

(Dollars in millions)

2016

2015

(unaudited)

Cash Flows from Operating Activities

Net income

$   330

$   458

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

Depreciation and amortization

328

303

Deferred income taxes and investment tax credits

112

131

Plant closure adjustment

     ―

(21)

Equity losses (earnings)

5

(34)

Fixed-price contracts and other derivatives

4

11

Other

2

(27)

Net change in other working capital components

165

19

Insurance receivable for Aliso Canyon costs

(335)

     ―

Changes in other assets

(29)

(42)

Changes in other liabilities

10

13

Net cash provided by operating activities

592

811

Cash Flows from Investing Activities

Expenditures for property, plant and equipment

(971)

(780)

Expenditures for investments and acquisition of business

(30)

(34)

Distributions from investments

9

1

Purchases of nuclear decommissioning and other trust assets

(94)

(95)

Proceeds from sales by nuclear decommissioning and other trusts

93

94

Increases in restricted cash

(16)

(18)

Decreases in restricted cash

20

25

Advances to unconsolidated affiliates

(6)

(5)

Repayments of advances to unconsolidated affiliates

9

33

Other

(3)

9

Net cash used in investing activities

(989)

(770)

Cash Flows from Financing Activities

Common dividends paid

(161)

(149)

Issuances of common stock

15

17

Repurchases of common stock

(54)

(65)

Issuances of debt (maturities greater than 90 days)

55

938

Payments on debt (maturities greater than 90 days)

(54)

(654)

Increase (decrease) in short-term debt, net

531

(363)

Tax benefit related to share-based compensation

34

52

Other 

(2)

(7)

Net cash provided by (used in) financing activities

364

(231)

Effect of exchange rate changes on cash and cash equivalents

6

(3)

Decrease in cash and cash equivalents

(27)

(193)

Cash and cash equivalents, January 1

403

570

Cash and cash equivalents, March 31

$   376

$   377

SEMPRA ENERGY

Table D

SEGMENT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS 

Three months ended March 31,

(Dollars in millions)

2016

2015

    (unaudited)

Earnings (Losses) 

California Utilities:

San Diego Gas & Electric

$   129

$   147

Southern California Gas

195

214

Sempra International:

Sempra South American Utilities

38

41

Sempra Mexico

17

47

Sempra U.S. Gas & Power:

Sempra Renewables

13

13

Sempra Natural Gas

(36)

2

Parent and other

(37)

(27)

Earnings

$   319

$  437

Three months ended March 31,

(Dollars in millions)

2016

2015

    (unaudited)

Capital Expenditures and Investments

California Utilities:

San Diego Gas & Electric

$   329

$   355

Southern California Gas

340

315

Sempra International:

Sempra South American Utilities

43

31

Sempra Mexico

40

55

Sempra U.S. Gas & Power:

Sempra Renewables

199

22

Sempra Natural Gas

47

25

Parent and other

3

11

Consolidated Capital Expenditures and Investments

$  1,001

$  814

SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended March 31,

UTILITIES

2016

2015

California Utilities - SDG&E and SoCalGas

Gas Sales (Bcf)⁽¹⁾

113

99

Transportation (Bcf)⁽¹⁾

148

155

Total Deliveries (Bcf)⁽¹⁾

261

254

Total Gas Customers (Thousands)

6,782

6,746

Electric Sales (Millions of kWhs)⁽¹⁾

3,773

3,832

Direct Access (Millions of kWhs)

834

867

Total Deliveries (Millions of kWhs)⁽¹⁾

4,607

4,699

Total Electric Customers (Thousands)

1,428

1,419

Other Utilities

Natural Gas Sales (Bcf)

Mexico

8

7

Mobile Gas⁽²⁾

13

13

Willmut Gas

1

1

Natural Gas Customers (Thousands) 

Mexico

114

108

Mobile Gas⁽²⁾

84

87

Willmut Gas

19

19

Electric Sales (Millions of kWhs)

Peru

1,949

1,923

Chile

799

792

Electric Customers (Thousands)

Peru

1,058

1,036

Chile

675

661

ENERGY-RELATED BUSINESSES

Sempra International

Power Sold (Millions of kWhs)

Sempra Mexico

528

910

Sempra U.S. Gas & Power

Power Sold (Millions of kWhs)

Sempra Renewables⁽³⁾

767

727

Sempra Natural Gas⁽⁴⁾

221

1,373

(1)

Includes intercompany sales.

(2)

Includes transportation.

(3)

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

(4)

Sempra Natural Gas sold the remaining 625-megawatt block of its Mesquite Power natural gas-fired power plant in April 2015.

         SEMPRA ENERGY

           Table F (Unaudited)

Statement of Operations Data by Segment

Three Months Ended March 31, 2016

(Dollars in millions)

SDG&E

SoCalGas

Sempra South
American
Utilities

Sempra
Mexico

Sempra
Renewables

Sempra
Natural Gas

Consolidating
Adjustments,
Parent & Other

Total

Revenues

$   991

$   1,033

$            400

$  138

$            7

$        130

$              (77)

$2,622

Cost of sales and other expenses

(596)

(617)

(329)

(82)

(13)

(154)

62

(1,729)

Depreciation and amortization

(159)

(122)

(13)

(17)

(1)

(13)

(3)

(328)

Equity earnings (losses), before income tax

-

-

-

-

7

(29)

-

(22)

Other income, net

14

10

2

11

-

-

12

49

Income (loss) before interest and tax ⁽¹⁾

250

304

60

50

-

(66)

(6)

592

Net interest (expense) income ⁽²⁾

(48)

(22)

(4)

(2)

1

4

(66)

(137)

Income tax (expense) benefit

(72)

(87)

(14)

(41)

12

25

35

(142)

Equity earnings, net of income tax

-

-

2

15

-

-

-

17

(Earnings) losses attributable to noncontrolling interests

(1)

-

(6)

(5)

-

1

-

(11)

Earnings (losses)

$   129

$      195

$              38

$    17

$          13

$         (36)

$              (37)

$   319

Three Months Ended March 31, 2015

(Dollars in millions)

SDG&E

SoCalGas

Sempra South
American
Utilities

Sempra
Mexico

Sempra
Renewables

Sempra
Natural Gas

Consolidating
Adjustments,
Parent & Other

Total

Revenues

$   966

$   1,048

$            389

$  163

$            8

$        197

$              (89)

$2,682

Cost of sales and other expenses

(560)

(615)

(314)

(102)

(11)

(196)

73

(1,725)

Depreciation and amortization

(145)

(113)

(13)

(17)

(2)

(12)

(1)

(303)

Plant closure adjustment

21

-

-

-

-

-

-

21

Equity earnings, before income tax

-

-

-

-

2

17

-

19

Other income, net

9

8

3

9

-

-

10

39

Income (loss) before interest and tax ⁽¹⁾

291

328

65

53

(3)

6

(7)

733

Net interest expense ⁽²⁾

(52)

(19)

(1)

(3)

(1)

(2)

(49)

(127)

Income tax (expense) benefit

(88)

(95)

(16)

(8)

17

(2)

29

(163)

Equity (losses) earnings, net of income tax

-

-

(1)

16

-

-

-

15

Earnings attributable to noncontrolling interests

(4)

-

(6)

(11)

-

-

-

(21)

Earnings (losses)

$   147

$      214

$              41

$    47

$          13

$            2

$              (27)

$   437

(1)

Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments' performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

(2)

Includes interest income, interest expense and preferred dividends of subsidiary.