Sempra Energy Reports Higher First-Quarter 2017 Earnings

SEMPRA ENERGY

Table A

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended
March 31,

(Dollars in millions, except per share amounts)

2017

2016⁽¹⁾

(unaudited)

REVENUES

Utilities

$

2,698

$

2,442

Energy-related businesses

333

180

Total revenues

3,031

2,622

EXPENSES AND OTHER INCOME

Utilities:

Cost of electric fuel and purchased power

(527)

(515)

Cost of natural gas

(485)

(311)

Energy-related businesses:

Cost of natural gas, electric fuel and purchased power

(67)

(56)

Other cost of sales

(22)

(35)

Operation and maintenance

(714)

(701)

Depreciation and amortization

(360)

(328)

Franchise fees and other taxes

(110)

(111)

Equity earnings (losses), before income tax

3

(22)

Other income, net

169

49

Interest income

6

6

Interest expense

(169)

(143)

Income before income taxes and equity (losses) earnings of certain unconsolidated subsidiaries

755

455

Income tax expense

(295)

(108)

Equity (losses) earnings, net of income tax

(8)

17

Net income

452

364

Earnings attributable to noncontrolling interests

(11)

(11)

Earnings

$

441

$

353

Basic earnings per common share

$

1.76

$

1.41

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

251,131

249,734

Diluted earnings per common share

$

1.75

$

1.40

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

252,246

251,487

Dividends declared per share of common stock

$

0.82

$

0.76

(1)

As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.

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 2017 and 2016 as follows:

Three months ended March 31, 2017:

▪

$3 million deferred income tax benefit on Sempra Mexico's Termoeléctrica de Mexicali (TdM) natural gas-fired power plant that is held for sale

Three months ended March 31, 2016:

▪

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

▪

$(24) million deferred income tax expense on the TdM natural gas-fired power plant that is held for sale

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 2017 to 2016 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 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
benefit⁽¹⁾

Non-
controlling
interests

Earnings

Pretax
amount

Income tax
(benefit)
expense⁽¹⁾

Non-
controlling
interests

Earnings

(Dollars in millions, except per share amounts)

Three months ended March 31, 2017

Three months ended March 31, 2016(2)

Sempra Energy GAAP Earnings

$

441

$

353

Exclude:

Impairment of investment in Rockies Express

$

—

$

—

$

—

—

$

44

$

(17)

$

—

27

Deferred income tax (benefit) expense associated with TdM

—

(5)

2

(3)

—

29

(5)

24

Sempra Energy Adjusted Earnings

$

438

$

404

Diluted earnings per common share:

Sempra Energy GAAP Earnings

$

1.75

$

1.40

Sempra Energy Adjusted Earnings

$

1.74

$

1.60

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

252,246

251,487

SEMPRA ENERGY

Table B

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

March 31,
2017

December 31,
2016(1)

(unaudited)

Assets

Current assets:

   Cash and cash equivalents

$

290

$

349

   Restricted cash

72

66

   Accounts receivable, net

1,468

1,554

   Due from unconsolidated affiliates

24

26

   Income taxes receivable

65

43

   Inventories

210

258

   Regulatory balancing accounts – undercollected

202

259

   Fixed-price contracts and other derivatives

161

83

   Assets held for sale

196

201

   Other

265

271

   Total current assets

2,953

3,110

Other assets:

   Restricted cash

5

10

   Due from unconsolidated affiliates

187

201

   Regulatory assets

3,503

3,414

   Nuclear decommissioning trusts

1,062

1,026

   Investments

2,120

2,097

   Goodwill

2,380

2,364

   Other intangible assets

544

548

   Dedicated assets in support of certain benefit plans

412

430

   Insurance receivable for Aliso Canyon costs

621

606

   Deferred income taxes

188

234

   Sundry

817

815

   Total other assets

11,839

11,745

Property, plant and equipment, net

33,492

32,931

Total assets

$

48,284

$

47,786

Liabilities and Equity

Current liabilities:

   Short-term debt

$

2,054

$

1,779

   Accounts payable

1,092

1,476

   Due to unconsolidated affiliates

13

11

   Dividends and interest payable

382

319

   Accrued compensation and benefits

239

409

   Regulatory balancing accounts – overcollected

189

122

   Current portion of long-term debt

839

913

   Fixed-price contracts and other derivatives

115

83

   Customer deposits

160

158

   Reserve for Aliso Canyon costs

49

53

   Liabilities held for sale

40

47

   Other

640

557

   Total current liabilities

5,812

5,927

Long-term debt

14,409

14,429

Deferred credits and other liabilities:

   Customer advances for construction

145

152

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

1,212

1,208

   Deferred income taxes

4,025

3,745

   Deferred investment tax credits

26

28

   Regulatory liabilities arising from removal obligations

2,761

2,697

   Asset retirement obligations

2,455

2,431

   Fixed-price contracts and other derivatives

343

405

   Deferred credits and other

1,527

1,523

   Total deferred credits and other liabilities

12,494

12,189

Equity:

   Total Sempra Energy shareholders' equity

13,264

12,951

   Preferred stock of subsidiary

20

20

   Other noncontrolling interests

2,285

2,270

   Total equity

15,569

15,241

Total liabilities and equity

$

48,284

$

47,786

(1)

Derived from audited financial statements.

SEMPRA ENERGY

Table C

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

(Dollars in millions)

2017

2016⁽¹⁾

(unaudited)

Cash Flows from Operating Activities

Net income

$

452

$

364

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

   Depreciation and amortization

360

328

   Deferred income taxes and investment tax credits

268

78

   Equity losses

5

5

   Fixed-price contracts and other derivatives

(106)

4

   Other

(22)

36

Net change in other working capital components

84

165

Insurance receivable for Aliso Canyon costs

(15)

(335)

Changes in other assets

(41)

(29)

Changes in other liabilities

19

10

   Net cash provided by operating activities

1,004

626

Cash Flows from Investing Activities

Expenditures for property, plant and equipment

(992)

(971)

Expenditures for investments

(59)

(30)

Distributions from investments

17

9

Purchases of nuclear decommissioning and other trust assets

(350)

(94)

Proceeds from sales by nuclear decommissioning and other trusts

357

93

Increases in restricted cash

(93)

(16)

Decreases in restricted cash

93

20

Advances to unconsolidated affiliates

(5)

(6)

Repayments of advances to unconsolidated affiliates

2

9

Other

4

(3)

   Net cash used in investing activities

(1,026)

(989)

Cash Flows from Financing Activities

Common dividends paid

(176)

(161)

Issuances of common stock

17

15

Repurchases of common stock

(14)

(54)

Issuances of debt (maturities greater than 90 days)

542

55

Payments on debt (maturities greater than 90 days)

(313)

(54)

(Decrease) increase in short-term debt, net

(97)

531

Other

(5)

(2)

   Net cash (used in) provided by financing activities

(46)

330

Effect of exchange rate changes on cash and cash equivalents

9

6

Decrease in cash and cash equivalents

(59)

(27)

Cash and cash equivalents, January 1

349

403

Cash and cash equivalents, March 31

$

290

$

376

(1)

As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.

SEMPRA ENERGY

Table D

SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES AND INVESTMENTS

Three months ended
March 31,

(Dollars in millions)

2017

2016⁽¹⁾

(unaudited)

Earnings (Losses)

Sempra Utilities:

   San Diego Gas & Electric

$

155

$

136

   Southern California Gas

203

199

   Sempra South American Utilities

47

38

Sempra Infrastructure:

   Sempra Mexico

48

18

   Sempra Renewables

11

14

   Sempra LNG & Midstream

1

(32)

Parent and other

(24)

(20)

Earnings

$

441

$

353

Three months ended
March 31,

(Dollars in millions)

2017

2016

(unaudited)

Capital Expenditures and Investments

Sempra Utilities:

   San Diego Gas & Electric

$

418

$

329

   Southern California Gas

357

340

   Sempra South American Utilities

43

43

Sempra Infrastructure:

   Sempra Mexico

140

40

   Sempra Renewables

69

199

   Sempra LNG & Midstream

15

47

Parent and other

9

3

Consolidated Capital Expenditures and Investments

$

1,051

$

1,001

(1)

As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.

SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended
March 31,

UTILITIES

2017

2016

SDG&E and SoCalGas

Gas Sales (Bcf)⁽¹⁾

126

113

Transportation (Bcf)⁽¹⁾

156

148

Total Deliveries (Bcf)⁽¹⁾

282

261

Total Gas Customers (Thousands)

6,816

6,782

Electric Sales (Millions of kWhs)⁽¹⁾

3,764

3,773

Direct Access (Millions of kWhs)

787

834

Total Deliveries (Millions of kWhs)⁽¹⁾

4,551

4,607

Total Electric Customers (Thousands)

1,436

1,428

Other Utilities

Natural Gas Sales (Bcf)

   Sempra Mexico

8

8

   Mobile Gas^{(2) (3)}

—

13

   Willmut Gas⁽³⁾

—

1

Natural Gas Customers (Thousands)

   Sempra Mexico

119

114

   Mobile Gas^{(2) (3)}

—

84

   Willmut Gas⁽³⁾

—

19

Electric Sales (Millions of kWhs)

   Peru

1,894

1,949

   Chile

811

799

Electric Customers (Thousands)

   Peru

1,080

1,058

   Chile

689

675

ENERGY-RELATED BUSINESSES

Sempra Infrastructure

Power Sold (Millions of kWhs)

   Sempra Mexico⁽⁴⁾

1,055

580

   Sempra Renewables⁽⁵⁾

1,014

767

   Sempra LNG & Midstream

265

221

(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 in 2017, at the Ventika wind power generation facilities acquired in December 2016. 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. These subsidiaries are not consolidated within Sempra Energy, and the related investments are accounted for under the equity method.

         SEMPRA ENERGY

           Table F (Unaudited)

STATEMENT OF OPERATIONS DATA BY SEGMENT

Three months ended March 31, 2017

(Dollars in millions)

SDG&E

SoCalGas

Sempra
South
American
Utilities

Sempra
Mexico

Sempra
Renewables

Sempra
LNG &
Midstream

Consolidating
Adjustments,
Parent &
Other

Total

Revenues

$

1,057

$

1,241

$

412

$

264

$

22

$

132

$

(97)

$

3,031

Cost of sales and other expenses

(616)

(800)

(326)

(121)

(15)

(128)

81

(1,925)

Depreciation and amortization

(163)

(126)

(13)

(36)

(9)

(10)

(3)

(360)

Equity earnings, before income tax

—

—

—

—

2

1

—

3

Other income, net

18

11

3

127

—

1

9

169

Income (loss) before interest and tax ⁽¹⁾

296

326

76

234

—

(4)

(10)

918

Net interest (expense) income ⁽²⁾

(49)

(25)

(4)

(30)

(3)

6

(58)

(163)

Income tax (expense) benefit

(90)

(98)

(19)

(142)

11

(1)

44

(295)

Equity earnings (losses), net of income tax

—

—

1

(9)

—

—

—

(8)

(Earnings) losses attributable to noncontrolling interests

(2)

—

(7)

(5)

3

—

—

(11)

Earnings (losses)

$

155

$

203

$

47

$

48

$

11

$

1

$

(24)

$

441

Three months ended March 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

$

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 ⁽³⁾

(65)

(83)

(14)

(40)

13

29

52

(108)

Equity earnings, net of income tax

—

—

2

15

—

—

—

17

(Earnings) losses attributable to noncontrolling interests

(1)

—

(6)

(5)

—

1

—

(11)

Earnings(losses) ⁽³⁾

$

136

$

199

$

38

$

18

$

14

$

(32)

$

(20)

$

353

(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.

(3)

As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.