Sempra Energy's 2018 Earnings Rise On Strong Operating Results

- Company Advances Strategy to Align Asset Portfolio with North American Focus

- Common Dividend Raised for 9th Consecutive Year

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.

                       
       

 Three months ended 

 

 

 Years ended 

 
       

 Dec. 31 

 

 Dec. 31 

 
 

(Dollars, except earnings per share, and shares, in millions)

   

2018

 

2017

 

2018

 

2017

 
       

(Unaudited)

         
 

GAAP Earnings (Losses)(1)

   

$           864

 

$  (501)

 

$     924

 

$     256

 
                       
 

Gain on Sale of Certain Sempra Renewables Assets

 

(367)

 

-

 

(367)

 

-

 
                       
 

Impairment of Investment in RBS Sempra Commodities

   

-

 

-

 

65

 

-

 
                       
 

(Adjustment)/Impairment of Non-Utility U.S. Natural Gas Storage Assets

   

(126)

 

-

 

629

 

-

 
                       
 

Impairment of U.S. Wind Equity Method Investments

   

-

 

-

 

145

 

-

 
                       
 

Impacts Associated With Aliso Canyon Litigation

 

-

 

20

 

22

 

20

 
                       
 

Impact From Tax Cuts and Jobs Act of 2017

   

60

 

870

 

85

 

870

 
                       
 

Write-Off of Wildfire Regulatory Asset

   

-

 

-

 

-

 

208

 
                       
 

Adjustments Related to Termoeléctrica de Mexicali (TdM) Held for Sale

 

-

 

-

 

-

 

42

 
                       
 

Recoveries Related to Permanent Releases of Pipeline Capacity

 

-

 

-

 

-

 

(28)

 
                       
 

Adjusted Earnings(1)

   

$           431

 

$    389

 

$ 1,503

 

$ 1,368

 
                       
                       
 

GAAP Diluted Weighted-Average Shares Outstanding

   

296

 

252

 

270

 

252

 
 

GAAP Earnings (Losses) per Diluted Share(1)

   

$         3.03(2)

 

$ (1.99)

 

$    3.42

 

$    1.01

 
                       
 

Adjusted Diluted Weighted-Average Shares Outstanding(1)

   

276

 

253

 

270

 

252

 
 

Adjusted Earnings per Diluted Share(1)

   

$          1.56

 

$   1.54

 

$    5.57

 

$    5.42

 
                       
   

1)

Attributable to common shares. Sempra Energy adjusted earnings and adjusted earnings per share are non-GAAP financial measures.  See Table A for information regarding non-GAAP financial measures and descriptions of adjustments above.

2)

Due to the dilutive effect of the mandatory convertible preferred stock for GAAP earnings, the numerator used to calculate GAAP earnings per share includes an add-back of $36 million of mandatory preferred stock dividends declared in the quarter.

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

                 

CONSOLIDATED STATEMENTS OF OPERATIONS

   
             
   

Three months ended
December 31,

 

Years ended
December 31,

(Dollars in millions, except per share amounts; shares in thousands)

 

2018

 

2017(1)

 

2018

 

2017(1)

   

(unaudited)

       

REVENUES

               

Utilities

 

$

2,798

   

$

2,604

   

$

10,046

   

$

9,776

 

Energy-related businesses

 

423

   

360

   

1,641

   

1,431

 

Total revenues

 

3,221

   

2,964

   

11,687

   

11,207

 
                 

EXPENSES AND OTHER INCOME

               

Utilities:

               

Cost of electric fuel and purchased power

 

(545)

   

(551)

   

(2,323)

   

(2,281)

 

Cost of natural gas

 

(426)

   

(287)

   

(1,208)

   

(1,190)

 

Energy-related businesses:

               

Cost of natural gas, electric fuel and purchased power

 

(98)

   

(113)

   

(355)

   

(339)

 

Other cost of sales

 

(24)

   

(19)

   

(78)

   

(24)

 

Operation and maintenance

 

(916)

   

(868)

   

(3,309)

   

(3,096)

 

Depreciation and amortization

 

(391)

   

(384)

   

(1,549)

   

(1,490)

 

Franchise fees and other taxes

 

(120)

   

(111)

   

(472)

   

(436)

 

Write-off of wildfire regulatory asset

 

   

   

   

(351)

 

Impairment losses

 

182

   

   

(1,122)

   

(72)

 

Gain on sale of assets

 

514

   

1

   

524

   

3

 

Other (expense) income, net

 

(124)

   

(89)

   

72

   

233

 

Interest income

 

28

   

20

   

104

   

46

 

Interest expense

 

(240)

   

(166)

   

(925)

   

(659)

 

Income before income taxes and equity earnings of unconsolidated entities

 

1,061

   

397

   

1,046

   

1,551

 

Income tax expense

 

(223)

   

(898)

   

(96)

   

(1,276)

 

Equity earnings

 

126

   

50

   

176

   

76

 

Net income (loss)

 

964

   

(451)

   

1,126

   

351

 

Earnings attributable to noncontrolling interests

 

(64)

   

(50)

   

(76)

   

(94)

 

Mandatory convertible preferred stock dividends

 

(36)

   

   

(125)

   

 

Preferred dividends of subsidiary

 

   

   

(1)

   

(1)

 

Earnings (losses) attributable to common shares

 

$

864

   

$

(501)

   

$

924

   

$

256

 
                 

BASIC EARNINGS PER COMMON SHARE

               

Numerator:

               

Earnings (losses) attributable to common shares

 

$

864

   

$

(501)

   

$

924

   

$

256

 

Denominator:

               

Weighted-average shares outstanding, basic

 

274,331

   

251,902

   

268,072

   

251,545

 
                 

Basic earnings (losses) per common share

 

$

3.15

   

$

(1.99)

   

$

3.45

   

$

1.02

 
                 

DILUTED EARNINGS PER COMMON SHARE

               

Numerator:

               

Earnings (losses) attributable to common shares

 

$

864

   

$

(501)

   

$

924

   

$

256

 

Add back dividends for dilutive mandatory convertible preferred stock

 

36

   

N/A

   

N/A

   

N/A

 

Total

 

$

900

   

$

(501)

   

$

924

   

$

256

 

Denominator:

               

Weighted-average shares outstanding, basic

 

274,331

   

251,902

   

268,072

   

251,545

 

Dilutive effect of stock options, RSAs and RSUs

 

905

   

   

919

   

755

 

Dilutive effect of common shares sold forward

 

994

   

   

861

   

 

Dilutive effect of mandatory convertible preferred stock

 

20,199

   

   

   

 

Weighted-average shares outstanding, diluted(2)

 

296,429

   

251,902

   

269,852

   

252,300

 
                 

Diluted earnings (losses) per common share(2)

 

$

3.03

   

$

(1.99)

   

$

3.42

   

$

1.01

 

 

 

(1)

As adjusted for the retrospective adoption of Accounting Standards Update (ASU) 2017-07 and a reclassification to conform to current year presentation.

   

(2)

For the three months ended December 31, 2017, the total weighted-average potentially dilutive securities was 823 shares. However, these securities were not included in the computation of GAAP EPS since to do so would have decreased the loss per share.

 

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)

                                                       
   

Pretax
amount

Income tax
expense
(benefit)(1)

Non-
controlling
interests

Earnings

 

Pretax
amount

Income tax
expense
(benefit)(1)

Non-
controlling
interests

(Losses)
earnings

 

(Dollars in millions, except per share amounts; shares in thousands)

Three months ended December 31, 2018

 

Three months ended December 31, 2017

Sempra Energy GAAP Earnings (Losses)

     

$

864

         

$

(501)

   

Excluded items:

                   

   Gain on sale of certain Sempra Renewables assets

$

(513)

 

$

146

 

$

 

(367)

   

$

 

$

 

$

 

   

   Reduction of impairment of non-utility natural gas storage assets

(183)

 

47

 

10

 

(126)

   

 

 

 

   

   Impact from the TCJA

 

60

 

 

60

   

 

870

 

 

870

   

   Aliso Canyon litigation reserves

 

 

 

   

20

 

 

 

20

   

Sempra Energy Adjusted Earnings

     

$

431

         

$

389

   
                       

Diluted earnings (losses) per common share(2):

                   
 

Sempra Energy GAAP Earnings (Losses)

     

$

900(3)

         

$

(501)

   
 

Weighted-average shares outstanding, diluted – GAAP

     

296,429

         

251,902

   
 

Sempra Energy GAAP EPS

     

$

3.03(3)

         

$

(1.99)

   
                       
 

Sempra Energy Adjusted Earnings

     

$

431

         

$

389

   
 

Weighted-average shares outstanding, diluted – Adjusted

     

276,230(4)

         

252,725(5)

   
 

Sempra Energy Adjusted EPS

     

$

1.56(4)

         

$

1.54(5)

   
                     
                     
   

Year ended December 31, 2018

 

Year ended December 31, 2017

Sempra Energy GAAP Earnings

     

$

924

         

$

256

   

Excluded items:

                   

   Gain on sale of certain Sempra Renewables assets

$

(513)

 

$

146

 

$

 

(367)

   

$

 

$

 

$

 

   

   Impairment of investment in RBS Sempra Commodities

65

 

 

 

65

   

 

 

 

   

   Impairment of non-utility natural gas storage assets

1,117

 

(452)

 

(36)

 

629

   

 

 

 

   

   Impairment of U.S. wind equity method investments

200

 

(55)

 

 

145

   

 

 

 

   

   Impacts associated with Aliso Canyon litigation

1

 

21

 

 

22

   

 

 

 

   

   Impact from the TCJA

 

85

 

 

85

   

 

870

 

 

870

   

   Write-off of wildfire regulatory asset

 

 

 

   

351

 

(143)

 

 

208

   

   Impairment of TdM assets held for sale

 

 

 

   

71

 

 

(24)

 

47

   

   Aliso Canyon litigation reserves

 

 

 

   

20

 

 

 

20

   

   Deferred income tax benefit associated with TdM

 

 

 

   

 

(8)

 

3

 

(5)

   

   Recoveries related to 2016 permanent release of pipeline capacity

 

 

 

   

(47)

 

19

 

 

(28)

   

Sempra Energy Adjusted Earnings

     

$

1,503

         

$

1,368

   
                       

Diluted earnings per common share:

                   

   Sempra Energy GAAP EPS

     

$

3.42

         

$

1.01

   

   Sempra Energy Adjusted EPS

     

$

5.57

         

$

5.42

   

Weighted-average shares outstanding, diluted

     

269,852

         

252,300

   

 

 

(1)

Except for adjustments that are solely income tax and tax related to outside basis differences, income taxes were primarily calculated based on applicable statutory tax rates. Income taxes associated with TdM were calculated based on the applicable statutory tax rate, including translation from historic to current exchange rates. An income tax benefit of $12 million associated with the 2017 TdM impairment has been fully reserved.

   

(2)

For the three months ended December 31, 2018, the assumed conversion of the mandatory convertible preferred stock is dilutive for GAAP earnings, but antidilutive for the lower adjusted earnings.

   

(3)

Due to the dilutive effect of the mandatory convertible preferred stock, the numerator used to calculate GAAP EPS includes an add-back of $36 million of mandatory convertible preferred stock dividends declared in that quarter.

   

(4)

Due to the antidilutive effect of the mandatory convertible preferred stock, the denominator used to calculate Adjusted EPS excludes 20,199 shares of mandatory convertible preferred stock.

   

(5)

The denominator used to calculate Adjusted EPS includes 823 shares of potentially dilutive securities, which were excluded from GAAP EPS because to include them would have decreased the loss per share.

 

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.

(1)

Income taxes were estimated based on statutory tax rates.

 

SEMPRA ENERGY

Table B

             

CONSOLIDATED BALANCE SHEETS

       

(Dollars in millions)

December 31, 2018

 

December 31, 2017

       

Assets

     

Current assets:

     

   Cash and cash equivalents

$

190

   

$

288

 

   Restricted cash

35

   

62

 

   Accounts receivable, net

1,850

   

1,584

 

   Due from unconsolidated affiliates

39

   

37

 

   Income taxes receivable

68

   

110

 

   Inventories

296

   

307

 

   Regulatory assets

138

   

325

 

   Greenhouse gas allowances

59

   

299

 

   Assets held for sale

713

   

127

 

   Other

257

   

202

 

      Total current assets

3,645

   

3,341

 
       

Other assets:

     

   Restricted cash

21

   

14

 

   Due from unconsolidated affiliates

688

   

598

 

   Regulatory assets

1,589

   

1,517

 

   Nuclear decommissioning trusts

974

   

1,033

 

   Investment in Oncor Holdings

9,652

   

 

   Other investments

2,337

   

2,527

 

   Goodwill

2,373

   

2,397

 

   Other intangible assets

272

   

596

 

   Dedicated assets in support of certain benefit plans

416

   

455

 

   Insurance receivable for Aliso Canyon costs

461

   

418

 

   Deferred income taxes

151

   

170

 

   Greenhouse gas allowances

289

   

93

 

   Sundry

974

   

792

 

      Total other assets

20,197

   

10,610

 

Property, plant and equipment, net

36,796

   

36,503

 

Total assets

$

60,638

   

$

50,454

 

 

SEMPRA ENERGY

Table B (Continued)

             

CONSOLIDATED BALANCE SHEETS

       

(Dollars in millions)

December 31, 2018

 

December 31, 2017

       

Liabilities and Equity

     

Current liabilities:

     

   Short-term debt

$

2,079

   

$

1,540

 

   Accounts payable

1,474

   

1,523

 

   Due to unconsolidated affiliates

10

   

7

 

   Dividends and interest payable

499

   

342

 

   Accrued compensation and benefits

469

   

439

 

   Regulatory liabilities

105

   

109

 

   Current portion of long-term debt

1,673

   

1,427

 

   Reserve for Aliso Canyon costs

160

   

84

 

   Greenhouse gas obligations

59

   

299

 

   Liabilities held for sale

25

   

49

 

   Other

970

   

816

 

   Total current liabilities

7,523

   

6,635

 

Long-term debt

21,611

   

16,445

 
       

Deferred credits and other liabilities:

     

   Due to unconsolidated affiliates

37

   

35

 

   Pension and other postretirement benefit plan obligations, net of plan assets

1,161

   

1,148

 

   Deferred income taxes

2,571

   

2,767

 

   Deferred investment tax credits

24

   

28

 

   Regulatory liabilities

4,016

   

3,922

 

   Asset retirement obligations

2,787

   

2,732

 

   Greenhouse gas obligations

131

   

 

   Deferred credits and other

1,529

   

1,602

 

   Total deferred credits and other liabilities

12,256

   

12,234

 

Equity:

     

   Sempra Energy shareholders' equity

17,138

   

12,670

 

   Preferred stock of subsidiary

20

   

20

 

   Other noncontrolling interests

2,090

   

2,450

 

   Total equity

19,248

   

15,140

 

Total liabilities and equity

$

60,638

   

$

50,454

 

 

SEMPRA ENERGY

Table C

           

CONSOLIDATED STATEMENTS OF CASH FLOWS

           
     

Years ended December 31,

(Dollars in millions)

 

2018

 

2017

     

Cash Flows from Operating Activities

     

Net income

 

$

1,126

   

$

351

 

Adjustments to reconcile net income to net cash provided by operating activities:

       

   Depreciation and amortization

 

1,549

   

1,490

 

   Deferred income taxes and investment tax credits

 

(182)

   

1,160

 

   Write-off of wildfire regulatory asset

 

   

351

 

   Impairment losses

 

1,122

   

72

 

   Gain on sale of assets

 

(524)

   

(3)

 

   Equity earnings, net

 

(176)

   

(76)

 

   Share-based compensation expense

 

83

   

82

 

   Fixed-price contracts and other derivatives

 

(10)

   

7

 

   Other

 

315

   

67

 

Net change in other working capital components

 

173

   

57

 

Insurance receivable for Aliso Canyon costs

 

(43)

   

188

 

Changes in other noncurrent assets and liabilities, net

 

14

   

(121)

 

   Net cash provided by operating activities

 

3,447

   

3,625

 
         

Cash Flows from Investing Activities

       

Expenditures for property, plant and equipment

 

(3,784)

   

(3,949)

 

Expenditures for investments and acquisitions, net of cash and
cash equivalents acquired

 

(10,376)

   

(270)

 

Proceeds from sale of assets, net of cash and restricted cash sold

 

1,593

   

17

 

Distributions from investments

 

10

   

26

 

Purchases of nuclear decommissioning trust assets

 

(890)

   

(1,314)

 

Proceeds from sales by nuclear decommissioning trust assets

 

890

   

1,314

 

Advances to unconsolidated affiliates

 

(102)

   

(531)

 

Repayments of advances to unconsolidated affiliates

 

71

   

9

 

Other

 

31

   

(2)

 

   Net cash used in investing activities

 

(12,557)

   

(4,700)

 
         

Cash Flows from Financing Activities

       

Common dividends paid

 

(877)

   

(755)

 

Preferred dividends paid

 

(89)

   

 

Preferred dividends paid by subsidiary

 

(1)

   

(1)

 

Issuances of mandatory convertible preferred stock, net of $42 in offering costs in 2018

 

2,258

   

 

Issuances of common stock, net of $41 in offering costs in 2018

 

2,272

   

47

 

Repurchases of common stock

 

(21)

   

(15)

 

Issuances of debt (maturities greater than 90 days)

 

9,174

   

4,509

 

Payments on debt (maturities greater than 90 days)

 

(3,510)

   

(2,800)

 

Decrease in short-term debt, net

 

(124)

   

(36)

 

Advances from unconsolidated affiliates

 

   

35

 

Proceeds from sale of noncontrolling interests, net of $1 and $3 in offering costs, respectively

 

90

   

196

 

Net distributions to noncontrolling interests

 

(43)

   

(130)

 

Settlement of cross-currency swaps

 

(33)

   

 

Other

 

(90)

   

(43)

 

   Net cash provided by financing activities

 

9,006

   

1,007

 
         

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(14)

   

7

 
         

Decrease in cash, cash equivalents and restricted cash

 

(118)

   

(61)

 

Cash, cash equivalents and restricted cash, January 1

 

364

   

425

 

Cash, cash equivalents and restricted cash, December 31

 

$

246

   

$

364

 

 

SEMPRA ENERGY

Table D

               

SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES, INVESTMENTS AND ACQUISITIONS

               
 

Three months ended
December 31,

 

Years ended
December 31,

(Dollars in millions)

2018

 

2017

 

2018

 

2017

 

    (unaudited)

       

Earnings (Losses)

             

   San Diego Gas & Electric

$

148

   

$

131

   

$

669

   

$

407

 

   Southern California Gas

156

   

128

   

400

   

396

 

   Sempra Texas Utility

88

   

   

371

   

 

   Sempra South American Utilities

59

   

52

   

199

   

186

 

   Sempra Mexico

76

   

64

   

237

   

169

 

   Sempra Renewables

382

   

203

   

328

   

252

 

   Sempra LNG & Midstream

147

   

126

   

(617)

   

150

 

   Parent and other

(192)

   

(1,205)

   

(663)

   

(1,304)

 

   Total

$

864

   

$

(501)

   

$

924

   

$

256

 
               
               
 

Three months ended
December 31,

 

Years ended
December 31,

(Dollars in millions)

2018

 

2017

 

2018

 

2017

 

    (unaudited)

       

Capital Expenditures, Investments and Acquisitions

             

   San Diego Gas & Electric

$

348

   

$

433

   

$

1,542

   

$

1,555

 

   Southern California Gas

411

   

334

   

1,538

   

1,367

 

   Sempra Texas Utility

179

   

   

9,457

   

 

   Sempra South American Utilities

287

   

106

   

448

   

245

 

   Sempra Mexico

148

   

202

   

468

   

467

 

   Sempra Renewables

10

   

136

   

56

   

497

 

   Sempra LNG & Midstream

104

   

15

   

306

   

68

 

   Parent and other

(63)

   

3

   

345

   

20

 

   Capital Expenditures, Investments and Acquisitions

$

1,424

   

$

1,229

   

$

14,160

   

$

4,219

 

 

SEMPRA ENERGY

Table E

 

OTHER OPERATING STATISTICS (Unaudited)

 
 

Three months ended
December 31,

 

Years ended or at
December 31,

UTILITIES

2018

 

2017

 

2018

 

2017

               

SDG&E and SoCalGas

             

Gas sales (Bcf)(1)

93

   

88

   

337

   

341

 

Transportation (Bcf)(1)

134

   

150

   

581

   

638

 

Total deliveries (Bcf)(1)

227

   

238

   

918

   

979

 
               

Total gas customer meters (thousands)

       

6,885

   

6,846

 
               

SDG&E

             

Electric sales (millions of kWhs)(1)

3,643

   

3,845

   

15,125

   

15,617

 

Direct Access and Community Choice Aggregation (millions of kWhs)

947

   

864

   

3,628

   

3,394

 

Total deliveries (millions of kWhs)(1)

4,590

   

4,709

   

18,753

   

19,011

 
               

Total electric customer meters (thousands)

       

1,459

   

1,446

 
               

Oncor(2)

             

Total deliveries (millions of kWhs)

29,800

   

   

107,276

   

 

Total electric customer meters (thousands)

       

3,621

   

 
               

Ecogas

             

Natural gas sales (Bcf)

   

7

   

7

   

29

 

Natural gas customer meters (thousands)

       

123

   

120

 
               

Chilquinta Energía

             

Electric Sales (Millions of kWhs)

739

   

735

   

2,948

   

2,936

 

Tolling (Millions of kWhs)

85

   

27

   

303

   

98

 

Total Deliveries (Millions of kWhs)

824

   

762

   

3,251

   

3,034

 
               

Electric customer meters (thousands)

       

722

   

704

 
               

Luz del Sur

             

  Electric Sales (Millions of kWhs)

1,661

   

1,678

   

6,760

   

6,999

 

  Tolling (Millions of kWhs)

649

   

539

   

2,385

   

1,922

 

  Total Deliveries (Millions of kWhs)

2,310

   

2,217

   

9,145

   

8,921

 
               

Electric customer meters (thousands)

       

1,134

   

1,102

 
               

ENERGY-RELATED BUSINESSES

             
               

Power generated and sold (millions of kWhs)

             

   Sempra Mexico(3)

1,404

   

1,305

   

5,250

   

4,337

 

   Sempra Renewables(4)

1,036

   

1,075

   

4,799

   

4,175

 

 

 

(1)

Includes intercompany sales.

   

(2)

Includes 100 percent of the electric deliveries and customer meters of Oncor Electric Delivery Company LLC (Oncor), in which we hold an 80.25-percent interest through our March 2018 acquisition of our equity method investment in Oncor Electric Delivery Holdings Company LLC (Oncor Holdings). Total deliveries for the year ended December 31, 2018 only include volumes from the March 9, 2018 acquisition date.

   

(3)

Includes power generated and sold at the TdM natural gas-fired power plant and the Ventika wind power generation facilities. Also includes 50 percent of total power generated and sold at the Energía Sierra Juárez wind power generation facility, in which Sempra Energy has a 50-percent ownership interest. Energía Sierra Juárez is not consolidated within Sempra Energy, and the related investment is accounted for under the equity method.

   

(4)

We include 50 percent of total power generated and sold related to U.S. solar and wind projects in which Sempra Energy has a 50-percent ownership. These subsidiaries are not consolidated within Sempra Energy, and the related investments are accounted for under the equity method. On June 25, 2018, our board of directors approved a plan to sell all U.S. wind and solar assets and investments. For assets and investments sold in December 2018, we include their power generated and sold up to the date of the sale.

 

 

SEMPRA ENERGY

Table F (Unaudited)

STATEMENT OF OPERATIONS DATA BY SEGMENT

                                     

Three months ended December 31, 2018

     

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra
Texas
Utility

 

Sempra
South
American
Utilities

 

Sempra
Mexico

 

Sempra
Renewables

 

Sempra
LNG &
Midstream

 

Consolidating
Adjustments,
Parent &
Other

   

Total

                                       

Revenues

$

1,163

   

$

1,262

   

$

   

$

395

   

$

348

   

$

21

   

$

142

   

$

(110)

     

$

3,221

 

Cost of sales and other expenses

(737)

   

(882)

   

   

(293)

   

(175)

   

(26)

   

(122)

   

106

     

(2,129)

 

Depreciation and amortization

(179)

   

(142)

   

   

(15)

   

(44)

   

   

(2)

   

(9)

     

(391)

 

Write-off and reduction in impairment losses

   

   

   

   

   

   

183

   

(1)

     

182

 

Gain (loss) on sale of assets

   

1

   

   

1

   

(1)

   

513

   

   

     

514

 

Other (expense) income, net

(21)

   

(34)

   

   

10

   

(63)

   

1

   

   

(17)

     

(124)

 

Income (loss) before interest and tax(1)

226

   

205

   

   

98

   

65

   

509

   

201

   

(31)

     

1,273

 

Net interest (expense) income

(59)

   

(32)

   

   

2

   

(13)

   

2

   

10

   

(122)

     

(212)

 

Income tax (expense) benefit

(22)

   

(17)

   

   

(31)

   

41

   

(138)

   

(53)

   

(3)

     

(223)

 

Equity earnings (losses), net

   

   

88

   

   

38

   

1

   

(1)

   

     

126

 

Losses (earnings) attributable to noncontrolling interests

3

   

   

   

(10)

   

(55)

   

8

   

(10)

   

     

(64)

 

Preferred dividends

   

   

   

   

   

   

   

(36)

     

(36)

 

Earnings (losses)

$

148

   

$

156

   

$

88

   

$

59

   

$

76

   

$

382

   

$

147

   

$

(192)

     

$

864

 
                                       

Three months ended December 31, 2017

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra
Texas
Utility

 

Sempra
South
American
Utilities

 

Sempra
Mexico

 

Sempra
Renewables

 

Sempra
LNG &
Midstream

 

Consolidating
Adjustments,
Parent &
Other

   

Total

                                       

Revenues

$

1,125

   

$

1,090

   

$

   

$

398

   

$

323

   

$

20

   

$

134

   

$

(126)

     

$

2,964

 

Cost of sales and other expenses(2)

(698)

   

(729)

   

   

(312)

   

(165)

   

(19)

   

(136)

   

111

     

(1,948)

 

Depreciation and amortization

(171)

   

(131)

   

   

(14)

   

(42)

   

(10)

   

(11)

   

(5)

     

(384)

 

Other income (expense), net(2)

9

   

(20)

   

   

6

   

(85)

   

1

   

1

   

(1)

     

(89)

 

Income (loss) before interest and tax(1)(3)

265

   

210

   

   

78

   

31

   

(8)

   

(12)

   

(21)

     

543

 

Net interest (expense) income

(52)

   

(25)

   

   

3

   

(13)

   

(1)

   

3

   

(61)

     

(146)

 

Income tax (expense) benefit

(83)

   

(57)

   

   

(23)

   

51

   

201

   

136

   

(1,123)

     

(898)

 

Equity earnings (losses), net(3)

   

   

   

2

   

45

   

4

   

(1)

   

     

50

 

Losses (earnings) attributable to noncontrolling interests

1

   

   

   

(8)

   

(50)

   

7

   

   

     

(50)

 

Earnings (losses)

$

131

   

$

128

   

$

   

$

52

   

$

64

   

$

203

   

$

126

   

$

(1,205)

     

$

(501)

 

 

 

(1)

Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments' performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

   

(2)

As adjusted for the retrospective adoption of ASU 2017-07.

   

(3)

As adjusted for a reclassification to conform to current year presentation.

 

 

SEMPRA ENERGY

Table F (Unaudited)

                                       

STATEMENT OF OPERATIONS DATA BY SEGMENT

                                       

Year ended December 31, 2018

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra
Texas
Utility

 

Sempra
South
American
Utilities

 

Sempra
Mexico

 

Sempra
Renewables

 

Sempra
LNG &
Midstream

 

Consolidating
Adjustments,
Parent &
Other

   

Total

                                       

Revenues

$

4,568

   

$

3,962

   

$

   

$

1,585

   

$

1,376

   

$

124

   

$

472

   

$

(400)

     

$

11,687

 

Cost of sales and other expenses

(2,870)

   

(2,816)

   

   

(1,218)

   

(628)

   

(94)

   

(446)

   

327

     

(7,745)

 

Depreciation and amortization

(688)

   

(556)

   

   

(58)

   

(175)

   

(27)

   

(26)

   

(19)

     

(1,549)

 

Write-off and impairment losses

   

   

   

   

(4)

   

   

(1,117)

   

(1)

     

(1,122)

 

Gain (loss) on sale of assets

   

1

   

   

11

   

(1)

   

513

   

   

     

524

 

Other income (expense), net

56

   

15

   

   

14

   

1

   

1

   

   

(15)

     

72

 

Income (loss) before interest and tax(1)

1,066

   

606

   

   

334

   

569

   

517

   

(1,117)

   

(108)

     

1,867

 

Net interest (expense) income

(217)

   

(113)

   

   

(9)

   

(55)

   

(7)

   

28

   

(448)

     

(821)

 

Income tax (expense) benefit

(173)

   

(92)

   

   

(95)

   

(185)

   

(71)

   

435

   

85

     

(96)

 

Equity earnings (losses), net

   

   

371

   

1

   

40

   

(169)

   

   

(67)

     

176

 

(Earnings) losses attributable to noncontrolling interests

(7)

   

   

   

(32)

   

(132)

   

58

   

37

   

     

(76)

 

Preferred dividends

   

(1)

   

   

   

   

   

   

(125)

     

(126)

 

Earnings (losses)

$

669

   

$

400

   

$

371

   

$

199

   

$

237

   

$

328

   

$

(617)

   

$

(663)

     

$

924

 
                                     

Year ended December 31, 2017

(Dollars in millions)

SDG&E

 

SoCalGas

 

Sempra
Texas
Utility

 

Sempra
South
American
Utilities

 

Sempra
Mexico

 

Sempra
Renewables

 

Sempra
LNG &
Midstream

 

Consolidating
Adjustments,
Parent &
Other

   

Total

                                       

Revenues

$

4,476

   

$

3,785

   

$

   

$

1,567

   

$

1,196

   

$

94

   

$

540

   

$

(451)

     

$

11,207

 

Cost of sales and other expenses(2)

(2,746)

   

(2,643)

   

   

(1,227)

   

(568)

   

(76)

   

(489)

   

386

     

(7,363)

 

Depreciation and amortization

(670)

   

(515)

   

   

(54)

   

(156)

   

(38)

   

(42)

   

(15)

     

(1,490)

 

Write-off and impairment losses

(351)

   

   

   

   

(72)

   

   

   

     

(423)

 

Other income (expense), net(2)

70

   

31

   

   

13

   

105

   

2

   

3

   

9

     

233

 

Income (loss) before interest and tax(1)(3)

779

   

658

   

   

299

   

505

   

(18)

   

12

   

(71)

     

2,164

 

Net interest (expense) income

(203)

   

(101)

   

   

(10)

   

(74)

   

(8)

   

17

   

(234)

     

(613)

 

Income tax (expense) benefit

(155)

   

(160)

   

   

(80)

   

(227)

   

226

   

119

   

(999)

     

(1,276)

 

Equity earnings (losses), net(3)

   

   

   

4

   

38

   

29

   

5

   

     

76

 

(Earnings) losses attributable to noncontrolling interests

(14)

   

   

   

(27)

   

(73)

   

23

   

(3)

   

     

(94)

 

Preferred dividends

   

(1)

   

   

   

   

   

   

     

(1)

 

Earnings (losses)

$

407

   

$

396

   

$

   

$

186

   

$

169

   

$

252

   

$

150

   

$

(1,304)

     

$

256

 

 

 

(1)

Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments' performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

   

(2)

As adjusted for the retrospective adoption of ASU 2017-07.

   

(3)

As adjusted for a reclassification to conform to current year presentation.

 

 

[SRE-F]

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SOURCE Sempra Energy

Media Contact: Amber Albrecht, Sempra Energy, (877) 340-8875, www.sempra.com; or Financial Contact: Patrick Billings, Sempra Energy, (877) 736-7727, investor@sempra.com

Category

Sempra Energy , Financial News , Sempra LNG & Midstream