Sempra Energy Reports Strong 2017 Operating Results

SAN DIEGO, Feb. 27, 2018 /PRNewswire/ -- Sempra Energy (NYSE: SRE) today reported earnings of $256 million, or $1.01 per diluted share, in 2017, compared with earnings of $1.37 billion, or $5.46 per diluted share, in 2016.

On an adjusted basis, Sempra Energy's 2017 earnings increased to $1.37 billion, or $5.42 per diluted share, from $1.27 billion, or $5.05 per diluted share, in 2016. Among the items excluded from 2017 adjusted earnings was a fourth-quarter $870 million income-tax expense related to the impact of the Tax Cuts and Jobs Act of 2017. A portion of this income-tax expense relates to Sempra Energy's plans to repatriate approximately $1.6 billion of undistributed foreign earnings over the next five years. Also excluded from Sempra Energy's 2017 adjusted earnings was the previously disclosed third-quarter $208 million after-tax write-off related to the California Public Utilities Commission (CPUC) denial of recovery by San Diego Gas & Electric (SDG&E) of costs related to the 2007 San Diego wildfires.

"In 2017, we produced outstanding financial and operating results, while making significant investments to fuel our future growth," said Debra L. Reed, chairman, president and CEO of Sempra Energy. "Our proposal to acquire a majority stake in Oncor continues to gain positive momentum and we expect state regulators to complete their review within the next month. Our California utilities are executing on their robust capital programs to reinforce their systems and filed their General Rate Case applications for 2019. Additionally, both SDG&E and Sempra LNG & Midstream recently resolved key business issues, resulting in better visibility going forward."

For the fourth quarter, Sempra Energy recorded a loss of $501 million, or $1.99 per diluted share, in 2017, compared with earnings of $379 million, or $1.51 per diluted share, in 2016. Excluding items in the table below, Sempra Energy's adjusted earnings in the fourth quarter 2017 increased to $389 million, or $1.54 per diluted share, from $383 million, or $1.52 per diluted share, in the fourth quarter 2016.

These financial results reflect certain significant items, as described on an after-tax basis in the following table of GAAP earnings, reconciled to adjusted earnings, for the fourth quarter and full year of 2017 and 2016.

Sempra Energy's board of directors last week approved an approximate 9-percent increase in the company's annualized dividend to $3.58 per common share from $3.29 per common share.

Yesterday, the U.S. Bankruptcy Court for the District of Delaware ruled that it will confirm the plan of reorganization and approve the merger for Sempra Energy to acquire Energy Future Holdings Corp. (EFH), including EFH's indirect, approximate 80-percent ownership interest in Oncor Electric Delivery Company LLC (Oncor). On Feb. 15, the Public Utility Commission of Texas (PUCT) waived scheduled hearings and directed PUCT staff to draft a proposed order approving the merger, for a potential final vote as early as March 8. Additionally, last month, Sempra Energy conducted successful equity and debt offerings to raise funds for the transaction.

SEMPRA UTILITIES

San Diego Gas & Electric

SDG&E's fourth-quarter earnings were $131 million in 2017, compared with $151 million in 2016. The decrease was primarily due to a $28 million income-tax expense related to the Tax Cuts and Jobs Act of 2017, partially offset by higher earnings from projects under construction.

SDG&E's full-year earnings were $407 million in 2017, down from $570 million in 2016, primarily due to the third-quarter 2017 after-tax write-off of $208 million in regulatory assets related to the denial of recovery of costs associated with the 2007 San Diego wildfires.

On Jan. 30, 2018, SDG&E entered into a settlement agreement with Southern California Edison and multiple parties to resolve the cost-allocation dispute related to the retirement of the San Onofre Nuclear Generating Station (SONGS). If approved by the CPUC, the settlement would conclude the CPUC's investigation into the original SONGS settlement. SDG&E has a 20-percent ownership stake in SONGS.

Southern California Gas Co.

In the fourth quarter 2017, SoCalGas' earnings were $128 million, down from $151 million in the fourth quarter 2016, due primarily to litigation reserves recorded in 2017 related to the Aliso Canyon natural gas leak.

For the full year, SoCalGas' earnings increased to $396 million in 2017 from $349 million in 2016, primarily due to higher earnings from the Pipeline Safety Enhancement Plan and Advanced Meter technology programs. Additionally, in 2016, SoCalGas had tax repairs adjustments related to the 2016 General Rate Case and an impairment charge related to CPUC denial of a proposed pipeline project.

Sempra South American Utilities

In the fourth quarter 2017, Sempra South American Utilities earnings increased to $52 million from $29 million in the fourth quarter 2016, primarily due to a $17 million charge in 2016 related to Peruvian tax reform, as well as higher operational earnings in 2017 in Peru.

In 2017, full-year earnings for Sempra South American Utilities were $186 million, up from $156 million in 2016.

SEMPRA INFRASTRUCTURE

Sempra Mexico

Sempra Mexico's fourth-quarter 2017 earnings rose to $64 million, from $56 million in the fourth quarter 2016, due primarily to favorable currency exchange rate and inflation effects.

Sempra Mexico's full-year earnings were $169 million in 2017, compared with $463 million in 2016, primarily due to the $350 million remeasurement gain in connection with IEnova's Gasoductos de Chihuahua acquisition in 2016.

Sempra Renewables

Fourth-quarter earnings for Sempra Renewables were $203 million in 2017, compared with $12 million in 2016, primarily due to a $192 million non-cash income-tax benefit related to the Tax Cuts and Jobs Act of 2017.   

In 2017, full-year earnings for Sempra Renewables were $252 million, up from $55 million in 2016.

Sempra LNG & Midstream

Sempra LNG & Midstream had earnings of $126 million in the fourth quarter 2017, compared with a net loss of $3 million in the fourth quarter 2016, due primarily to a $133 million non-cash income-tax benefit related to the Tax Cuts and Jobs Act of 2017.

For the full year, Sempra LNG & Midstream had earnings of $150 million in 2017, compared with a net loss of $107 million in 2016.

In December 2017, Sempra LNG & Midstream announced that the Cameron LNG joint-venture partners had reached a settlement agreement with their contractor, CCJV, related to construction of the Cameron LNG liquefaction project in Hackberry, La. The settlement resolves all of CCJV's project-related claims as of the date of the agreement and better aligns the interests of all parties in achieving the joint goal of having all three of Cameron LNG's liquefaction trains producing liquefied natural gas in 2019.

2018 EARNINGS GUIDANCE

Sempra Energy today affirmed its 2018 earnings-per-share guidance range of $5.30 to $5.80, reflecting both accretion from the expected closing of the Oncor transaction and the impact of federal tax reform.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures for Sempra Energy include fourth-quarter and full-year 2017 and 2016 adjusted earnings and adjusted earnings per share. Additional information regarding these non-GAAP financial measures is in the appendix on Table A of the fourth-quarter 2017 financial tables.

INTERNET BROADCAST

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 12 p.m. EST with senior management of the company. Access is available by logging onto the website 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 (888) 203-1112 and entering passcode 7936770.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2017 revenues of more than $11 billion. The Sempra Energy companies' 16,000 employees serve approximately 32 million consumers worldwide.

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. These statements can be identified by words such as "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," "contemplates," "assumes," "depends," "should," "could," "would," "will," "confident," "may," "can," "potential," "possible," "proposed," "target," "pursue," "outlook," "maintain," or similar expressions or discussions of guidance, strategies, plans, goals, opportunities, projections, initiatives, objectives or intentions. 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.

Factors, among others, that could cause our actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: actions and the timing of actions, including decisions, new regulations, and issuances of permits and other authorizations by the California Public Utilities Commission (CPUC), U.S. Department of Energy, California Division of Oil, Gas, and Geothermal Resources, Federal Energy Regulatory Commission, U.S. Environmental Protection Agency, Pipeline and Hazardous Materials Safety Administration, Los Angeles County Department of Public Health, states, cities and counties, and other regulatory and governmental bodies in the United States and other countries in which we operate; the timing and success of business development efforts and construction projects, including risks in obtaining or maintaining permits and other authorizations on a timely basis, risks in completing construction projects on schedule and on budget, and risks in obtaining the consent and participation of partners; the resolution of civil and criminal litigation and regulatory investigations; deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; approvals of proposed settlements or modifications of settlements; delays in, or disallowance or denial of, regulatory agency authorizations to recover costs in rates from customers (including with respect to amounts associated with the San Onofre Nuclear Generating Station facility and 2007 wildfires) or regulatory agency approval for projects required to enhance safety and reliability; the greater degree and prevalence of wildfires in California in recent years and risk that we may be found liable for damages regardless of fault, such as in cases where the doctrine of inverse condemnation applies, and risk that we may not be able to recover any such costs in rates from customers in California; the risk that rulings by the CPUC such as denying recovery for wildfire damages may raise our cost of capital and materially impair our ability to finance our operations; the availability of electric power, natural gas and liquefied natural gas, and natural gas pipeline and storage capacity, including disruptions caused by failures in the transmission grid, moratoriums or limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures; changes in energy markets; volatility in commodity prices; moves to reduce or eliminate reliance on natural gas; the impact on the value of our investments in natural gas storage and related assets from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for storage services; risks posed by actions of third parties who control the operations of our investments, and risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments; weather conditions, natural disasters, accidents, equipment failures, computer system outages, explosions, terrorist attacks and other events that disrupt our operations, damage our facilities and systems, cause the release of greenhouse gases, radioactive materials and harmful emissions, cause wildfires and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits), may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of insurance, to the extent that such insurance is available or not prohibitively expensive; cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses and the confidentiality of our proprietary information and the personal information of our customers and employees; capital markets and economic conditions, including the availability of credit and the liquidity of our investments; fluctuations in inflation, interest and currency exchange rates and our ability to effectively hedge the risk of such fluctuations; the impact of recent federal tax reform and uncertainty as to how it may be applied, and our ability to mitigate any adverse impacts; actions by credit rating agencies to downgrade our credit ratings or those of our subsidiaries or to place those ratings on negative outlook; changes in foreign and domestic trade policies and laws, including border tariffs, and revisions to international trade agreements, such as the North American Free Trade Agreement, that make us less competitive or impair our ability to resolve trade disputes; the ability to win competitively bid infrastructure projects against a number of strong and aggressive competitors; expropriation of assets by foreign governments and title and other property disputes; the impact on reliability of San Diego Gas & Electric Company's (SDG&E) electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources; the impact on competitive customer rates due to the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through SDG&E's electric transmission and distribution system and from possible departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation or other forms of distributed and local power generation, and the potential risk of nonrecovery for stranded assets and contractual obligations; and other uncertainties, some of which may be difficult to predict and are beyond our control.

Forward-looking statements also include, statements about the anticipated benefits of the proposed merger involving Sempra Energy, EFH, and EFH's 80.03 percent indirect interest in Oncor, including future financial or operating results of Sempra Energy or Oncor, Sempra Energy's, EFH's or Oncor's plans, objectives, expectations or intentions, the anticipated impact of the merger, if consummated, on the credit ratings of Sempra Energy or Oncor, the expected timing of completion of the merger, plans regarding future capital investments by Sempra Energy or Oncor, future return on equity or capital structure of Sempra Energy or Oncor, and other statements that are not historical facts. Additional factors, among others, that could cause our actual results and future actions to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: the risk that Sempra Energy, EFH or Oncor may be unable to satisfy all closing conditions including obtaining governmental and regulatory approvals required for the merger, or that required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger or be onerous to Sempra Energy; the risk that the merger may not be completed for other reasons, or may not be completed on the terms or timing currently contemplated; the risk that the anticipated benefits from the merger may not be fully realized or may take longer to realize than expected and that liabilities that survive the bankruptcy will be greater than we anticipate; the risk that Sempra Energy may be unable to obtain, additional permanent equity financing for the merger on favorable terms; the risk that indebtedness Sempra Energy incurs in connection with the merger may make it more difficult for Sempra Energy to repay or refinance its debt or take other actions, which may decrease business flexibility and increase borrowing costs; the diversion of management time and attention to merger-related issues; merger-related costs, whether or not the merger is completed, as well as disruptions to our business; and the risk that Oncor will eliminate or reduce its quarterly dividends due to its requirement to meet and maintain its new regulatory capital structure, or because any of the three major credit rating agencies rates Oncor's senior secured debt securities below BBB (or the equivalent) or Oncor's independent directors or a minority member director determine it is in the best interest of Oncor to retain such amounts to meet future capital expenditures.

These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the U.S. Securities and Exchange Commission (SEC). These reports are available through the EDGAR system free-of-charge on the SEC's website, www.sec.gov. Investors should not rely unduly on any forward-looking statements. These forward-looking statements speak only as of the date hereof, and the company undertakes no obligation to update or revise these forecasts or projections or other forward-looking statements, whether as a result of new information, future events or otherwise.

Sempra South American Utilities, Sempra Infrastructure, Sempra LNG & Midstream, Sempra Renewables, Sempra Mexico and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same as the California Utilities, San Diego Gas & Electric Company (SDG&E) or Southern California Gas Company (SoCalGas), and are not regulated by the California Public Utilities Commission.

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SOURCE Sempra Energy

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