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By any measure, 2006 was a successful year for Sempra Energy. We achieved record earnings and outpaced the major indices in total shareholder return, while continuing to focus our resources where we can create long-term shareholder value.
Our net income for 2006 was $1.4 billion, up 53 percent from $920 million in 2005. Our earnings per diluted share were $5.38, an increase of 47 percent over 2005. Our total return to shareholders in 2006 was 28 percent.
Early in 2006, we decided to channel new investments in two primary areas: our California utilities and North American natural gas infrastructure. We have earmarked about $11 billion over five years to expand the energy-delivery systems of San Diego Gas & Electric® (SDG&E®) and Southern California Gas Co. (SoCalGas®) and to build new liquefied natural gas (LNG) receipt terminals, natural gas pipelines and storage facilities through our Sempra Global businesses.
This is the most ambitious capital-spending plan in our history, nearly double expenditures in prior years. The plan is rooted in our market view that North America is facing a long-term, severe supply-demand imbalance in natural gas. Quite simply, North America is consuming more natural gas than it can produce, creating a situation that parallels what happened in the U.S. oil market in the 1970s.
We have moved quickly to address the market shortages. Natural gas supplies are plentiful in other parts of the world. This gas will be cooled and condensed as LNG, then shipped long distances, regasified and pumped into the North American pipeline system. In 2001, Sempra LNG began development and permitting of our first receipt terminal, Energía Costa Azul in Baja California, Mexico. Construction is well underway on Energía Costa Azul and a second terminal, Cameron LNG, in Louisiana. Construction on both terminals will be completed in 2008, and by the end of the decade, Sempra LNG will be among the largest processors of LNG in North America.
Our understanding of market fundamentals also led us to partner in the development and construction of the Rockies Express Pipeline through our Sempra Pipelines & Storage subsidiary. The 1,600-mile project, which is the largest new natural gas pipeline built in the United States in the past 20 years, will connect supply basins in the Rocky Mountain region to premium markets in the eastern United States. The pipeline already is fully subscribed and on target for completion in 2009.
As the North American natural gas markets adapt to additional supplies — both foreign and domestic — new feeder pipelines and storage facilities will be required, so we are developing these types of projects as well.
California needs to add new electric generation, electric transmission and natural gas infrastructure to keep up with its population growth and economic expansion, and SDG&E and SoCalGas are leading the way. In early 2006, SDG&E put into service the Palomar Energy Center, a 550-megawatt (MW) power plant in Escondido, Calif., that is the first major new natural gas-fired generating plant in the San Diego region in more than three decades.
SDG&E also has several new transmission projects underway. The largest of these is the proposed Sunrise Powerlink, which will help boost system reliability and open a gateway to bring new supplies of renewable energy — solar and wind power — to SDG&E customers. This project is required for SDG&E to meet its goal of procuring 20 percent of its electricity from renewable sources by 2010.
