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To help fund our $11 billion capital-expenditure plan, we sold our Texas power plants and other non-core assets in 2006 for more than $1.4 billion, generating an after-tax gain of more than $550 million.
In the wake of these sales, Sempra Generation’s focus is on the efficient operation of its natural gas-fired power plants in Nevada, Arizona, California and Mexico that produce more than 2,600 MW of clean, reliable power for western U.S. markets.
Sempra Commodities continues to be a key contributor to our financial success. While many competitors exited the commodities-marketing sector earlier this decade, we stood firm in our belief that these services are critical for our customers. Today, Sempra Commodities is the largest non-producing natural gas marketer in North America. Since we acquired it in 1997, Sempra Commodities has achieved 32 consecutive quarters of profitability and contributed more than $1.9 billion to Sempra Energy’s net income.
This past summer marked the eighth anniversary of Sempra Energy’s formation. In our brief history, we have experienced dramatic growth, expanding from our Southern California roots into a highly successful global enterprise. Since 1998, our net income has increased nearly fivefold and our share price and revenues have more than doubled. Our average annual total return through the end of 2006 for the eight-year period was more than 15 percent, surpassing both the S&P 500 (up 3 percent) and S&P 500 Utilities (up 6 percent) indices.
By no means has our road to success been without challenges, but we’ve overcome those and, at the end of the day, emerged as a stronger, more focused company.
While I reflect on the past eight years with much pride, I look forward with even more optimism — this is an exciting time for Sempra Energy. We have built one of the few successful integrated energy companies with equally healthy regulated utilities and competitive energy businesses. Our California utilities are growing, adding important energy infrastructure and supplies to meet the increasing demands of our customers, while maintaining an unwavering commitment to delivering safe, reliable energy services. On the competitive side, by the end of this decade when several of our current projects are complete, we will have built one of the largest natural gas infrastructure and marketing businesses in the industry — poised to meet North America’s critical market needs.
None of our past or future success would be possible without the dedicated efforts of our 14,000 employees worldwide and the ongoing support from you, our shareholders. I and my fellow employees remain committed to delivering superior, long-term returns on your investment, while continuing to meet the energy needs of our customers.
Sincerely,
Donald E. Felsinger
Chairman and
Chief Executive Officer
