Sempra Energy's 2018 Earnings Rise On Strong Operating Results

SAN DIEGO, Feb. 26, 2019 /PRNewswire/ -- Sempra Energy (NYSE: SRE) today reported its 2018 full-year earnings increased to $924 million, or $3.42 per diluted share, from $256 million, or $1.01 per diluted share, in 2017. On an adjusted basis, the company's 2018 earnings were $1.5 billion, or $5.57 per diluted share, up from $1.37 billion, or $5.42 per diluted share, in 2017. 

"Our strong 2018 operational and financial results confirm that we're on track to fulfill our mission to become North America's premier energy infrastructure company," said Jeffrey W. Martin, chairman and CEO of Sempra Energy. "Over the past year, we made significant strides in all aspects of our business. We expanded our Texas regulated utility platform with the acquisition of our majority interest in Oncor. Also, we delivered outstanding safety, reliability and customer service at our California utilities, while advancing our role in North America's liquefied natural gas (LNG) export market. Moreover, we executed our strategy to realign our portfolio to support our core mission. These results are a testament to our team's ability to deliver value to our owners."

In the fourth quarter 2018, Sempra Energy reported earnings of $864 million, or $3.03 per diluted share, compared with a loss of $501 million, or $1.99 per diluted share, in 2017. Sempra Energy's adjusted earnings in the fourth quarter 2018 increased to $431 million, or $1.56 per diluted share, from $389 million, or $1.54 per diluted share in 2017.

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 2018 and 2017.

Last week, Sempra Energy's board of directors approved an approximate 8-percent increase in the company's dividend to $3.87 per common share from $3.58 per common share, on an annualized basis. This marks the ninth consecutive year that the company has raised its common dividend.

OPERATING HIGHLIGHTS

In 2018, Sempra Energy achieved several significant milestones in advancing its mission to become North America's premier energy infrastructure company.

Earlier this month, Sempra Energy announced an agreement to complete the divestiture of its U.S. renewables business by selling its remaining wind operating and development assets. When complete, the sales of the company's U.S. solar, wind and non-utility natural gas storage assets are expected to generate approximately $2.5 billion in cash proceeds for Sempra Energy. The proceeds will be used to support Sempra Energy's focus on North America and strengthen its balance sheet.

Additionally, in January, Sempra Energy announced that it would sell its equity interests in its South American businesses, including Luz del Sur S.A.A. in Peru and Chilquinta Energía S.A. in Chile. While Luz del Sur and Chilquinta Energía have made significant contributions to Sempra Energy over the past two decades and offer exciting future growth opportunities, the planned sale supports Sempra Energy's refocusing of capital investments in North America. Sempra Energy will launch the formal sale process in March.

Sempra Energy also announced several LNG agreements with commercial parties in the fourth quarter 2018 with respect to the company's LNG facilities in development: Port Arthur LNG in Jefferson County, Texas; Cameron LNG Phase 2 in Hackberry, La.; and Energía Costa Azul LNG Phases 1 and 2 in Mexico. The agreements support Sempra Energy's goal to become one of the largest U.S. exporters of LNG, targeting the export of 45 million tons per annum to global markets.

In November 2018, Cameron LNG initiated the commissioning process for the first of three liquefaction trains of Phase 1 of the project. Sempra Energy expects Cameron LNG to begin generating earnings in mid-2019.

Last month, Sempra Energy was added to the Dow Jones Utility Average, a 15-stock, price-weighted index measuring the performance of some of the largest U.S. companies within the utilities sector. Stocks are selected for the index based on reputation, demonstration of sustained financial growth and interest to a large number of investors.

Additionally, in 2018, the Wall Street Journal ranked Sempra Energy as the top company in the utility sector in the Journal's first "Management Top 250" list. 

2019 EARNINGS GUIDANCE

Sempra Energy today affirmed its 2019 adjusted earnings-per-share guidance range of $5.70 to $6.30.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures for Sempra Energy include fourth-quarter and full-year 2018 and 2017 adjusted earnings and adjusted earnings per share and 2019 adjusted earnings-per-share guidance. Additional information regarding these non-GAAP financial measures is in the appendix on Table A of the fourth-quarter 2018 financial tables.

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 2787825.

Sempra Energy's mission is to become North America's premier energy infrastructure company. With 2018 revenues of more than $11.5 billion, 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 are focused on delivering energy with purpose to approximately 40 million consumers worldwide. Sempra Energy has been consistently recognized for its leadership in diversity and inclusion, social responsibility and investment value.

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, 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 risk that we may not be able to recover any such costs in rates from customers in California; actions and the timing of actions, including decisions, new regulations and issuances of authorizations by the California Public Utilities Commission, U.S. Department of Energy, California Department of Conservation's 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, 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; 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; the success of business development efforts, construction projects, 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' ability to fulfill contractual commitments; (v) winning competitively bid infrastructure projects; (vi) disruption caused by the announcement of contemplated acquisitions and/or divestitures or internal structural changes; (vii) the ability to complete contemplated acquisitions and/or divestitures; and (viii) the ability to realize anticipated benefits from any of these efforts once completed; the resolution of civil and criminal litigation and regulatory investigations and proceedings; 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; 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; 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; 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; actions of activist shareholders, which could impact the market price of our securities and disrupt our operations as a result of, among other things, requiring significant time by management and our board of directors; changes in capital markets, energy markets and economic conditions, including the availability of credit; and volatility in currency exchange, interest and inflation rates and commodity prices and our ability to effectively hedge the risk of such volatility; the impact of recent federal tax reform and our ability to mitigate adverse impacts; 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; expropriation of assets by foreign governments and title and other property disputes; the impact at San Diego Gas & Electric (SDG&E) 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; 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. 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 & Midstream, Sempra Renewables, Sempra Mexico, Sempra Texas Utility, 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 & Midstream, Sempra Renewables, Sempra Mexico, Sempra Texas Utility, 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 (LOSSES) (Unaudited)

Sempra Energy Adjusted Earnings and Adjusted Earnings Per Common Share (Adjusted EPS) exclude items (after the effects of income taxes and, if applicable, noncontrolling interests) in 2018 and 2017 as follows:

Three months ended December 31, 2018:

• $367 million gain on the sale of certain Sempra Renewables assets
• $126 million reduction in the impairment of certain non-utility natural gas storage assets in the southeast U.S. at Sempra LNG & Midstream
• $(60) million income tax expense in 2018 to adjust the Tax Cuts and Jobs Act of 2017 (TCJA) provisional amounts recorded in 2017

Three months ended December 31, 2017:

• $(870) million income tax expense from the impact of the TCJA
• $(20) million associated with Aliso Canyon litigation reserves at Southern California Gas Company (SoCalGas)

Year ended December 31, 2018:

• $367 million gain on the sale of certain Sempra Renewables assets
• $(65) million impairment of RBS Sempra Commodities LLP (RBS Sempra Commodities) equity method investment at Parent and Other
• $(629) million impairment of certain non-utility natural gas storage assets at Sempra LNG & Midstream
• $(145) million other-than-temporary impairment of certain U.S. wind equity method investments at Sempra Renewables
• $(22) million impacts associated with Aliso Canyon natural gas storage facility litigation at SoCalGas
• $(85) million income tax expense in 2018 to adjust the TCJA provisional amounts recorded in 2017

Year ended December 31, 2017:

• $(870) million income tax expense from the impact of the TCJA
• $(208) million write-off of wildfire regulatory asset at San Diego Gas & Electric Company (SDG&E)
• $(47) million impairment of Termoeléctrica de Mexicali (TdM) assets that were held for sale until June 2018 at Sempra Mexico
• $(20) million associated with Aliso Canyon litigation reserves at SoCalGas
• $5 million deferred income tax benefit on the TdM assets that were held for sale
• $28 million of recoveries related to 2016 permanent releases of pipeline capacity at Sempra LNG & Midstream

Sempra Energy Adjusted Earnings, Weighted-Average 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 from 2018 to 2017 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 GAAP Earnings (Losses), Weighted-Average Shares Outstanding – GAAP and GAAP Diluted Earnings (Losses) 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 2019 ADJUSTED EPS GUIDANCE RANGE (Unaudited)

Sempra Energy 2019 Adjusted EPS Guidance Range of $5.70 to $6.30 excludes:

• an approximate $35 million after-tax⁽¹⁾ (approximately $50 million pretax) gain, plus working capital and other customary adjustments, related to our agreement to sell the remaining U.S. renewables assets and investments to American Electric Power
• any potential gain from the planned sale, as well as income tax expense related to an expected change in our indefinite reinvestment assertions, resulting from our decision in January 2019 to hold our South American businesses for sale

Sempra Energy 2019 Adjusted EPS Guidance is a non-GAAP financial measure. Because of the significance and nature of the excluded items, management believes that 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. Sempra Energy 2019 Adjusted EPS Guidance should not be considered an alternative to 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. Because the sale process for the planned divestiture of our South American businesses was only recently initiated in January 2019, the terms and structure of any potential sale transaction or transactions are unknown, including terms that would impact income tax expense resulting from an expected change in our assertion regarding indefinite reinvestment of foreign undistributed earnings, including the timing and amounts of repatriation of such earnings.

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SOURCE Sempra Energy

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