Sempra Energy Reports Strong Third-Quarter 2019 Earnings

SAN DIEGO, Nov. 1, 2019 /PRNewswire/ -- Sempra Energy (NYSE: SRE) today reported third-quarter 2019 earnings of $813 million, or $2.84 per diluted share, up from $274 million, or $0.99 per diluted share, in the third quarter 2018. On an adjusted basis, the company's third-quarter 2019 earnings were $425 million, or $1.50 per diluted share, compared to $339 million, or $1.23 per diluted share, in the third quarter 2018.

"At Sempra Energy, we laid out a plan last year to increasingly focus on core markets where we can produce the best results for our stakeholders," said Jeffrey W. Martin, chairman and CEO of Sempra Energy. "With our recently announced agreements to sell our South American businesses, it reflects our ongoing commitment to simplify our strategy. Our year-to-date financial results are a product of that more focused strategy, and the hard work and dedication of all of our employees."

Sempra Energy's earnings for the first nine months of 2019 were $1.61 billion, or $5.74 per diluted share, compared with earnings of $60 million, or $0.23 per diluted share, in the first nine months of 2018. Adjusted earnings for the first nine months of 2019 were $1.46 billion, or $5.23 per diluted share, compared with $1.07 billion, or $4.00 per diluted share, in the first nine months of 2018.

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 third quarter and first nine months of 2019 and 2018.

OPERATING HIGHLIGHTS

Sempra LNG

Sempra Energy is continuing to advance its liquefied natural gas (LNG) development projects.

Sempra Energy announced in October that it has entered into a memorandum of understanding (MOU) with Mitsui & Co., Ltd. (Mitsui) reflecting the parties' preliminary agreement for Mitsui's participation in the Cameron LNG Phase 2 project, and a future expansion of the Energía Costa Azul (ECA) LNG project in Baja California, Mexico. The MOU is non-binding and contemplates the continued mutual support for the development of Cameron LNG Phase 2, including Mitsui's potential purchase of up to one-third of the available capacity of the project, as well as the potential offtake of approximately 1 million tonnes per annum of LNG and equity participation in a future expansion of ECA LNG.

In September, Sempra LNG also entered into a MOU with China Three Gorges Corporation regarding potential cooperation in supplying LNG to support demand growth in China, including the growth of natural gas power generation.

In August, the Cameron LNG liquefaction-export project in Hackberry, La., began commercial operations at Train 1 of the facility. The project, including Trains 2 and 3, is over 96% complete. Commissioning of Train 2 is underway, and the previously disclosed project timeline remains unchanged.  

California Utilities

In September, San Diego Gas & Electric and Southern California Gas Co. received a final decision in the utilities' 2019 General Rate Case. The increased revenue requirements will enable the utilities to invest in critical energy infrastructure with a focus on enhancing safety and reliability for the communities they serve.

Texas Utilities

Oncor Electric Delivery Company LLC (Oncor) has increased its five-year capital plan. The increase is related to growth seen in and around Oncor's service territory. The infrastructure investments will help to facilitate renewables integration in Texas, support growth in West Texas and the Dallas-Fort Worth area, and strengthen and expand the grid in Oncor's service territory for the benefit of Oncor's customers and the communities it serves. Oncor now plans to spend approximately $11.9 billion between 2020 and 2024.

Sempra Mexico

Infraestructura Energética Nova, S.A.B. de C.V. (IEnova), Sempra Energy's Mexican subsidiary, continues to develop infrastructure that provides Mexico access to cleaner, more affordable and more reliable energy.

In August, IEnova reached constructive resolutions with the Federal Electricity Commission and the Mexican government on the Sur de Texas-Tuxpan pipeline and Guaymas-El Oro pipeline. Shortly thereafter, the Sur de Texas-Tuxpan pipeline, a joint venture with TC Energy Corporation, commenced commercial operations in September.

Announced Sale of South American Businesses

Sempra Energy recently announced two agreements that would conclude the company's planned sale of its South American businesses for combined proceeds of approximately $5.82 billion in cash, subject to adjustments and satisfaction of closing conditions. Both transactions, one to sell Sempra Energy's equity interests in its Peruvian businesses and the other to sell its equity interests in its Chilean businesses, are expected to be completed in the first quarter of 2020.

EARNINGS GUIDANCE

On a GAAP basis, the company's earnings-per-common-share (EPS) guidance range for full-year 2019 is $6.50 to $7.00. Sempra Energy today raised its 2019 adjusted EPS guidance from a range of $5.70 to $6.30 to a range of $6.00 to $6.50. The company also issued its full-year 2020 GAAP EPS guidance range of $12.78 to $14.26 and affirmed its full-year 2020 adjusted EPS guidance range of $6.70 to $7.50.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures include Sempra Energy's adjusted earnings and adjusted EPS for both the third quarter and first nine months of 2019 and 2018, adjusted diluted weighted-average common shares outstanding for the third quarter of 2019 and the first nine months of 2018, and 2020 and 2019 adjusted EPS guidance. See Table A for additional information regarding these non-GAAP financial measures.

INTERNET BROADCAST

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 12 p.m. ET 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 6278133.

Sempra Energy's mission is to be North America's premier energy infrastructure company. With more than $60 billion in total assets reported in 2018, the San Diego-based company is the utility holding company with the largest U.S. customer base. The Sempra Energy companies' more than 20,000 employees deliver energy with purpose to approximately 40 million consumers worldwide. The company is focused on the most attractive markets in North America, including California, Texas, Mexico and the LNG export market. Sempra Energy has been consistently recognized for its leadership in diversity and inclusion, and sustainability, and is a member of the S&P 500 Utilities Index and the Dow Jones Utility Index.

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 when we discuss our guidance, strategy, plans, goals, vision, mission, 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: the greater degree and prevalence of wildfires in California in recent years and the risk that we may be found liable for damages regardless of fault, such as where inverse condemnation applies, and the risk that we may not be able to recover any such costs from insurance, the California wildfire fund or in rates from customers in California or otherwise; actions and the timing of actions, including decisions, investigations, new regulations and issuances of permits and other authorizations and renewal of franchises by the Comisión Federal de Electricidad (CFE), California Public Utilities Commission, U.S. Department of Energy, California Department of Conservation's Division of Oil, Gas, and Geothermal Resources, Los Angeles County Department of Public Health, U.S. Environmental Protection Agency, Federal Energy Regulatory Commission, Pipeline and Hazardous Materials Safety Administration, Public Utility Commission of Texas, states, cities and counties, and other regulatory and governmental bodies in the U.S. and other countries in which we operate; the success of business development efforts, construction projects, and major acquisitions, divestitures and internal structural changes, including risks in (i) obtaining or maintaining authorizations; (ii) completing construction projects on schedule and budget; (iii) obtaining the consent of partners; (iv) counterparties' financial ability or otherwise to fulfill contractual commitments; (v) winning competitively bid infrastructure projects; (vi) the ability to complete contemplated acquisitions and/or divestitures and the disruptions caused by such efforts; and (vii) the ability to realize anticipated benefits from any of these efforts once completed; the resolution of civil and criminal litigation, regulatory investigations and proceedings, and arbitrations; actions by credit rating agencies to downgrade our credit ratings or those of our subsidiaries or to place those ratings on negative outlook and our ability to borrow at favorable interest rates; deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; denial of approvals of proposed settlements; delays in, or denial of, regulatory agency authorizations to recover costs in rates from customers or regulatory agency approval for projects required to enhance safety and reliability; and moves to reduce or eliminate reliance on natural gas; 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 harmful materials, cause fires 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 affordable insurance; the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures; risks posed by actions of third parties who control the operations of our investments; 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; expropriation of assets, the failure to honor the terms of contracts by foreign governments and state-owned entities such as the CFE, and other property disputes; the impact at San Diego Gas & Electric Company on competitive customer rates and reliability of electric transmission and distribution systems due to the growth in distributed and local power generation 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; Oncor Electric Delivery Company LLC's (Oncor) ability to eliminate or reduce its quarterly dividends due to regulatory capital requirements and other regulatory and governance commitments, including the determination by a majority of Oncor's independent directors or a minority member director to retain such amounts to meet future requirements; changes in capital markets, energy markets and economic conditions, including the availability of credit; and volatility in foreign currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility; changes in foreign and domestic trade policies and laws, including border tariffs and revisions to or replacement of international trade agreements, such as the North American Free Trade Agreement, that may increase our costs or impair our ability to resolve trade disputes; actions of activist shareholders, which could disrupt our operations by, among other things, requiring significant time by management and our board of directors; the impact of federal or state tax reform and our ability to mitigate adverse impacts; and other uncertainties, some of which may be difficult to predict and are beyond our control.

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, and on the company's website, www.sempra.com. 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 North American Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor Electric Delivery Company LLC (Oncor) and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same companies as the California utilities, San Diego Gas & Electric Company (SDG&E) or Southern California Gas Company (SoCalGas), and Sempra South American Utilities, Sempra North American Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor and IEnova are not regulated by the California Public Utilities Commission.

SEMPRA ENERGY
Table A (Continued)

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

Sempra Energy Adjusted Earnings and Adjusted Diluted Earnings Per Common Share (Adjusted EPS) exclude items (after the effects of income taxes and, if applicable, noncontrolling interests) in 2019 and 2018 as follows:

Three months ended September 30, 2019:

• $196 million incremental revenue increases for the first six months of 2019 from the retroactive application of the final decision in the 2019 General Rate Case (GRC FD) at the California Utilities

Associated with holding the South American businesses for sale:

• $192 million income tax benefit associated with outside basis differences in our South American businesses primarily related to a change in the anticipated structure of the sale of those businesses

Three months ended September 30, 2018:

• $(65) million impairment of RBS Sempra Commodities LLP (RBS Sempra Commodities) equity method investment at Parent and other

Nine months ended September 30, 2019:

• $45 million gain on the sale of certain Sempra Renewables assets

Associated with holding the South American businesses for sale:

• $89 million income tax benefit from outside basis differences in our South American businesses primarily related to the change in our indefinite reinvestment assertion from our decision in January 2019 to hold those businesses for sale and a change in the anticipated structure of the sale
• $10 million income tax benefit to reduce a valuation allowance against certain net operating loss (NOL) carryforwards as a result of our decision to sell our South American businesses

Nine months ended September 30, 2018:

• $(22) million impacts associated with Aliso Canyon natural gas storage facility litigation at Southern California Gas Company (SoCalGas)
• $(145) million other-than-temporary impairment of certain U.S. wind equity method investments at Sempra Renewables
• $(755) million impairment of certain non-utility natural gas storage assets at Sempra LNG
• $(65) million impairment of RBS Sempra Commodities equity method investment
• $(25) million income tax expense to adjust the Tax Cuts and Jobs Act of 2017 (TCJA) provisional amounts

Sempra Energy Adjusted Earnings, Weighted-Average Common Shares Outstanding – Adjusted and Adjusted EPS are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and/or nature of the excluded items, management believes that these non-GAAP financial measures provide a meaningful comparison of the performance of Sempra Energy's business operations to prior and 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 GAAP Earnings, Weighted-Average Common Shares Outstanding – GAAP and GAAP Diluted Earnings Per Common Share (GAAP EPS), which we consider to be the most directly comparable financial measures calculated in accordance with GAAP.

SEMPRA ENERGY
Table A (Continued)

SEMPRA ENERGY
Table A (Continued)

RECONCILIATION OF SEMPRA ENERGY 2019 ADJUSTED EPS GUIDANCE RANGE TO SEMPRA ENERGY 2019 GAAP EPS GUIDANCE RANGE (Unaudited)

Sempra Energy 2019 Adjusted EPS Guidance Range of $6.00 to $6.50 excludes items as follows:

• $45 million gain on the sale of certain Sempra Renewables assets

Associated with holding the South American businesses for sale:

• $89 million income tax benefit from outside basis differences in our South American businesses primarily related to the change in our indefinite reinvestment assertion from our decision in January 2019 to hold those businesses for sale and a change in the anticipated structure of the sale

• $10 million income tax benefit to reduce a valuation allowance against certain NOL carryforwards as a result of our decision to sell our South American businesses

Sempra Energy 2019 Adjusted EPS Guidance is a non-GAAP financial measure. Because of the significance and/or nature of the excluded items, management believes that this non-GAAP financial measure provides a meaningful comparison of the performance of Sempra Energy's business operations to prior and future periods. Sempra Energy 2019 Adjusted EPS Guidance should not be considered an alternative to Sempra Energy 2019 GAAP EPS Guidance. 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 Sempra Energy 2019 Adjusted EPS Guidance Range to Sempra Energy 2019 GAAP EPS Guidance Range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

SEMPRA ENERGY
Table A (Continued)

RECONCILIATION OF SEMPRA ENERGY 2020 ADJUSTED EPS GUIDANCE RANGE TO SEMPRA ENERGY 2020 GAAP EPS GUIDANCE RANGE (Unaudited)

Sempra Energy 2020 Adjusted EPS Guidance Range of $6.70 to $7.50 excludes approximately $1.8 billion to $2.0 billion estimated after-tax gain on the sale of our South American businesses, net of approximately $1.2 billion of income tax expense, which was calculated primarily based on applicable statutory tax rates.

Sempra Energy 2020 Adjusted EPS Guidance is a non-GAAP financial measure. Because of the significance and/or nature of the excluded item, management believes that this non-GAAP financial measure provides a meaningful comparison of the performance of Sempra Energy's business operations to prior and future periods. Sempra Energy 2020 Adjusted EPS Guidance should not be considered an alternative to Sempra Energy 2020 GAAP EPS Guidance. 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 Sempra Energy 2020 Adjusted EPS Guidance Range to Sempra Energy 2020 GAAP EPS Guidance Range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

SOURCE Sempra Energy

Related Links

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