2019 | Annual Report

Shaping the future

Decorative Graphic Decorative Graphic

“There is an energy transition occurring across the globe — and I believe the 21st century will be the Century of Energy.”

Dear fellow shareholders:

Together, we are shaping the future. This is an exciting time to be building new energy infrastructure in North America.

After serving as a driver of change across so many industries throughout the past century, the global energy market has now reached an inflection point. At Sempra Energy, we believe the energy industry will experience significant disruption in the next 20 years. We view this as an opportunity.

By delivering access to safer and more reliable, lower-carbon energy solutions, we have a unique opportunity to shape our company’s future. Our employees are united around a vision to make a difference in the world by delivering energy with purpose, while supporting a high-performing corporate culture that serves all of our stakeholders.

Letter to Shareholders (continued)

Focusing Our Strategy

In 2018, we laid out a strategic plan known as “Vision 2022,” centered on the mission of becoming North America’s premier energy infrastructure company. The past two years have been transformational for us. We sharpened our focus on the most attractive growth markets in North America, simplified our business model and strengthened our balance sheet.

We executed on that strategy by divesting certain non-core assets and reinvesting sales proceeds into our core markets: California, Texas and Mexico, and the liquefied natural gas (LNG) export market.

These markets enable us to focus on the delivery of cleaner and more secure forms of energy to consumers right here in North America as well as abroad. Moreover, we are focusing our role in the energy value chain on transmission and distribution investments that provide attractive risk-adjusted returns and higher value for our stakeholders.

We have accomplished many of our goals and made great progress in our journey to become North America’s premier energy infrastructure company. Over the past year, we have accomplished the following:

  • Completed the sale of our U.S. renewables business and non-utility natural gas storage assets, which has generated approximately $2.5 billion in total proceeds since December 2018;
  • Entered into separate agreements to sell our Peruvian and Chilean businesses in South America for $3.59 billion and $2.23 billion, respectively;*
  • Expanded our footprint in Texas by closing an acquisition that extends Oncor Electric Delivery Company LLC’s (Oncor) transmission system in north, central and west Texas;
  • Received a final decision in San Diego Gas & Electric Company’s (SDG&E) and Southern California Gas Company’s (SoCalGas) 2019 General Rate Cases;
  • Commenced shipping LNG from our Cameron LNG joint venture in Hackberry, La., to global markets;
  • Entered into multiple preliminary agreements that provide the framework for cooperation in the development of potential North American LNG export projects;
  • Commenced commercial operations of the Sur de Texas-Tuxpan marine pipeline, developed by a joint venture between Infraestructura Energética Nova, S.A.B. de C.V. (IEnova), our Mexico subsidiary, and TC Energy Corporation. The pipeline can deliver up to 2.6 billion cubic feet per day of U.S. natural gas to Mexico; and
  • Delivered total shareholder return of 44% in 2019, compared to 31% for the S&P 500 Index and 26% for the S&P 500 Utilities Index, and increased our dividend by 8%, marking the 10th consecutive year we’ve raised our dividend.

Leading the Global Energy Transition

There is an energy transition occurring across the globe — and I believe the 21st century will be the “Century of Energy.” The transition is occurring differently market by market, with lower-carbon alternatives playing an increasingly important role.

Over the next decade, we will continue to make critical investments in smart, new energy infrastructure aimed at helping bring energy choice and security to people around the world.

I am proud that in every market we serve, our energy infrastructure is helping to reduce the carbon footprint of the energy ecosystem.

In California, both of our utilities — SDG&E and SoCalGas — are taking bold steps to reduce greenhouse gas emissions. Approximately 45% of the electricity that SDG&E delivers to homes and businesses comes from solar, wind and other renewable energy sources. In 2019, SoCalGas announced a goal to replace 20% of its traditional natural gas supply with renewable natural gas by 2030. SoCalGas is also focused on developing hydrogen technologies that will help reduce greenhouse gas emissions without sacrificing energy security and reliability.

Oncor is expanding its reach in Texas by connecting the next generation of customers to renewable energy through its approximately 140,000 miles of transmission and distribution lines. Texas leads the U.S. in the production of wind energy and is also among the leading states in solar energy production. Most of the generation added in Texas over the past decade has been fueled by a combination of natural gas, wind and solar energy.

IEnova also continues to make significant progress in the midstream and refined fuels markets, helping Mexico diversify its energy supply and increase both the reach and reliability of the country’s energy ecosystem.

Through our strategically located LNG development projects, we are developing infrastructure that is designed to directly dispatch LNG into Atlantic and Pacific markets to deliver cleaner, more reliable and more affordable energy to the world, while displacing fuel oil and coal in power production.

At Sempra Energy, we are focused on growing in North America while having a global impact. The world is depending on new sources of energy — with many countries needing more secure forms of energy to serve the needs of their growing populations.

Delivering Energy With Purpose

Sempra Energy’s vision to deliver energy with purpose is a key component of our culture, uniting employees through a shared commitment to have a positive impact on the communities we serve and, more broadly, the world. Our industry as a whole must also lead with purpose and explore big ideas as we think about the positive benefits we can create for stakeholders in the future.

I am so proud that our company has the privilege to serve more than 40 million consumers and plays an important role in providing cleaner, more reliable energy to countries all around the world. We have been successful in improving our earnings profile, while also endeavoring to better serve customers and the environment.

What we do truly matters. Our infrastructure connects people to the energy they need to power their lives and we do not take that for granted. The dedication of our more than 20,000 employees to find new and better ways to deliver energy with a relentless focus on safety is something that inspires me every day.

We will continue to be forward-thinking as we deliver energy with purpose, with a focus on creating value for all our stakeholders. And I will continue to challenge our employees and our industry to think bigger and more boldly as we embrace opportunities to make the world an even better place.

Ever forward together,

Signature of Jeffrey Martin
Jeffrey W. Martin
Chairman and Chief Executive Officer

*Subject to adjustments and satisfaction of closing conditions.

Sempra At-A-Glance

45 Mtpa
of LNG projects with one under construction and four in various stages of development
44.2 billion
market cap*
*As of Dec. 31, 2019
20,000
employees
40 million
consumers across the world
10
consecutive years of dividend increases

Powering the World with LNG

Spotlight: Liquefied Natural Gas Export Infrastructure

After driving economic development and improving quality of life across so many communities throughout the past century, the global energy market is now going through a transition period. As more nations shift from higher-emissions fuels to lower-carbon natural gas and renewables, global demand for LNG is expected to dramatically increase. We believe Sempra Energy is uniquely positioned to capitalize on this trend.

Through our five strategically located export projects in various stages of construction or development, our talented commercial and engineering teams are developing infrastructure designed to directly dispatch LNG into Atlantic and Pacific markets to deliver more reliable and affordable energy to the world. Increased exports of LNG can provide a lower-carbon energy alternative to America’s trading partners, while creating jobs at home and reducing our trade deficit.

We believe Sempra Energy is uniquely positioned to capitalize on this change in energy markets.

Sempra LNG and IEnova’s proposed liquefaction project on Mexico’s west coast — Energía Costa Azul LNG Phase 1 and Phase 2 — would connect to natural gas supplies from Texas and help to reduce transit time for U.S. natural gas to reach Asian markets from an average of 21 days to approximately 11 days.

The Cameron LNG liquefaction-export project in Hackberry, La., reached a major milestone this year — the project is now exporting LNG to Asian and European markets. And Port Arthur LNG in Jefferson County, Texas, is one of several mega projects in development around the world. We expect to reach a final investment decision on the Port Arthur LNG project in the third quarter of 2020.

Night photo of liquefaction train
Cameron LNG’s first liquefaction train began commercial operations in August 2019 and is now exporting LNG to customers in the largest world markets. Cameron LNG’s second liquefaction train began commercial operations in February 2020.

We are excited to help support the transformation of America as a recognized leader in energy exports with a goal of developing operating infrastructure that can deliver up to 45 million tonnes per annum (Mtpa) of LNG to world markets, which would make our company one of North America’s largest developers of LNG-export infrastructure projects.

Delivering Energy with Purpose

Spotlight: Resilient Operations and Sustainable Growth

At Sempra Energy, we believe there will be more change to the energy industry in the next 20 years than in the past 100. Leadership, innovation and technology are helping to forge our path forward. It all comes together as part of our strategic commitment to sustainable growth.

At Sempra Energy, sustainability isn’t a new trend. For decades, we have managed our business with a view towards serving the needs of all our stakeholders.

It all starts with safety. Every employee and contractor — from the front office to the front line — is an active part of our comprehensive safety culture. At any time, anyone may “stop the job” to double-check safety. It is a mindset that we practice and reinforce with industry-leading programs. Our safety culture also extends to our 21st century investments in smart, resilient infrastructure that reduces fire risk and improves overall electric and pipeline safety. Together, we are committed to building a safe and more resilient business.

We have also focused on regularly engaging our employees, customers, policy makers and suppliers to understand their needs. One of our core values is “championing people,” which can better position us to identify and manage business risks and opportunities. We believe this commitment to listening and learning furthers a culture of continuous improvement and results in more resilient operations and sustainable growth.

Woman in field
Every day, our employees work to develop new, bold ideas to meet the needs of the customers and communities we serve.

Our 20,000 employees take pride in the recognition Sempra Energy has received as a leader in sustainable growth. Our honors in 2019 include:

  • A– grade from CDP (formerly the Climate Disclosure Project) compared to the North America regional average of C.
  • A grade from Morgan Stanley Capital International (MSCI) and recognition as an “ESG leader” in corporate governance, toxic emissions and waste, and carbon emissions.
  • Fortune Magazine’s World’s Most Admired Companies for 2020.
  • Forbes’ America’s Best Employers for Diversity.
  • Newsweek’s America’s Most Responsible Companies.
  • Investor’s Business Daily’s Best ESG Companies.
  • Barron’s Top 100 Most Sustainable Companies in America.

Additionally, Sempra Energy is the only North American utility holding company to be included in the Dow Jones Sustainability World Index.

Together, our employees deliver energy with purpose, with an ever-present focus on shaping a more sustainable future.

Developing Energy Infrastructure for the Future

Spotlight: Transmission and Distribution

Sempra Energy and its subsidiaries are developing smart, new energy infrastructure that is needed to meet the future energy demands of tens of millions of consumers. The company has focused its role in the energy value chain on transmission and distribution investments that we believe provide attractive risk-adjusted returns. And importantly, the investments we make are helping to reshape each market we serve by delivering lower-carbon energy choices to fuel homes and businesses.

Texas

In Texas, Oncor is playing a key role in helping to deliver the rapidly increasing supply of wind and solar energy to the state’s growing population. Oncor’s grid is an integral part of the market served by the Electric Reliability Council of Texas, Inc., which has helped Texas grow to be the number one state in the U.S. for wind generation. As Sempra Energy advances its mission to be North America’s premier energy infrastructure company, we will continue to invest in the critical energy infrastructure needed to support the Texas economy.

Person in foreground with powerlines in background
Oncor is investing in new technologies to create a safer, smarter and more reliable grid to serve 10 million Texans.

California

In California, our utilities connect millions of customers to wind, solar and renewable natural gas. Approximately 45% of the energy delivered to SDG&E customers comes from renewable energy sources. Also, SoCalGas announced a vision to be the cleanest natural gas utility in North America, with a goal of replacing 20% of the natural gas it delivers to core customers with renewable natural gas by 2030.

Mexico

In Mexico, natural gas, wind and solar are providing alternatives to fuel oil. IEnova is building crucial infrastructure to increase energy reliability and accessibility and help the country reach its ambitious clean energy goals.

LNG

And worldwide, LNG from the Cameron LNG liquefaction-export facility provides an alternative to fuel oil and coal. Many countries need access to more secure forms of energy to address the needs of their growing populations. Sempra Energy is pursuing the development of five strategically located LNG projects in North America with a goal of developing operating infrastructure that can deliver up to 45 Mtpa of LNG to the largest world markets.

All of these initiatives are aimed at enabling a lower-carbon future, a fundamental part of our mission and culture.

About Sempra

Sempra Energy’s mission is to be North America’s premier energy infrastructure company. The San Diego-based company is the utility holding company with the largest U.S. customer base. Sempra Energy’s employees are guided by the company’s values — doing the right thing, championing people and shaping the future — while carrying out a vision to deliver energy with purpose to the communities they serve. Sempra Energy has been consistently recognized for its leadership in diversity and inclusion, and sustainability, and was named to Fortune Magazine’s “World’s Most Admired Companies” list for 2020.

Fortune World's most admired companies 2020

Sempra LNG

Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America.

Southern California Gas Company

SoCalGas is the largest natural gas distribution utility in the U.S., delivering affordable, reliable and clean gas service to approximately 22 million consumers.

IEnova

IEnova develops, owns and operates energy infrastructure in Mexico, and is one of the largest private energy companies in the country.

San Diego Gas & Electric

SDG&E is an innovative San Diego-based energy company that provides clean, safe and reliable energy to approximately 3.7 million consumers.

Oncor Electric Delivery Company LLC*

Oncor, based in Dallas, Texas, operates the largest transmission and distribution system in the state, providing safe and reliable service to approximately 10 million Texans.

Sempra South American Utilities**

Chilquinta Energía in Chile and Luz del Sur in Peru invest in electric generation and transmission to provide service to about 6.9 million consumers.

Financial Highlights

Comparative Total Returns

Line graph of Comparative Total Returns

Consolidated Data

In millions, except per-share amounts 2017(1) 2018(1) 2019
(1) Amounts have been retrospectively adjusted for discontinued operations.
(2) Adjusted earnings and adjusted EPS are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). See pages A-1 and A-2 for an explanation and reconciliation of these non-GAAP financial measures.
Revenues $9,640 $10,102 $10,829
Earnings $256 $924 $2,055
Adjusted Earnings(2) $1,368 $1,503 $1,911
Earnings Per Common Share (EPS):
Basic $1.02 $3.45 $7.40
Diluted $1.01 $3.42 $7.29
Adjusted Diluted(2) $5.42 $5.57 $6.78
Diluted Weighted-Average Number of Common Shares Outstanding 252.3 269.9 282.0
Total Assets $50,454 $60,638 $65,665
Dividends Declared Per Common Share $3.29 $3.58 $3.87
Debt-to-Total Capitalization Ratio 55% 56% 54%
Book Value Per Common Share $50.40 $54.35 $60.58

Corporate Information

  • Transfer Agent

    American Stock Transfer & Trust Company, LLC
    Attn: Sempra Energy
    6201 15th Avenue
    Brooklyn, NY 11219
    Telephone: 877-773-6772
    Email: help@astfinancial.com
    Hearing Impaired (TTY): 866-703-9077 or 718-921-8386
    Internet: www.astfinancial.com

  • Shareholder Services

    Investors with general questions regarding Sempra Energy or Southern California Gas Company securities should contact the company at:

    Sempra Energy
    Shareholder Services
    488 8th Avenue
    San Diego, CA 92101
    Telephone: 877-736-7727
    Email: investor@sempra.com
    Internet: Sempra.com

  • News and Information

    Sempra Energy’s Annual Report on Form 10-K filed with the Securities and Exchange Commission which includes as exhibits the certifications filed by Sempra Energy’s chief executive officer and chief financial officer under the Sarbanes-Oxley Act of 2002, is available to shareholders at no charge by writing to the company’s Shareholder Services Department. This information, as well as our Corporate Governance Guidelines, Code of Business Conduct and Ethics for Board of Directors and Senior Officers and standing board committee charters, are also available on the company’s website at Sempra.com

  • Investor Relations

    Security analysts, portfolio managers and other members of the financial community should contact:

    Adam D. Pierce
    Lindsay Gartner
    Directors – Investor Relations
    Telephone: 619-696-2901

  • Stock Exchange Listings

    Sempra Energy Common Stock:
    Ticker Symbol: SRE
    New York Stock Exchange

    Sempra Energy Preferred Stocks:
    Ticker Symbol: SREPRA
    New York Stock Exchange

    Ticker Symbol: SREPRB
    New York Stock Exchange

    Sempra Energy Subordinated Notes:
    Ticker Symbol: SREA
    New York Stock Exchange

  • Direct Common Stock Investment Plan

    Sempra Energy offers a Direct Common Stock Investment Plan as a simple, convenient and affordable way to invest in the company. Cash dividends from a participant’s account can be reinvested automatically in full or in part (but not less than 10% of each dividend) to purchase additional shares, or participants may choose to receive all or a portion of their cash dividends electronically or by check. Participation in the plan requires an initial investment of as little as $500. The plan allows additional cash investments of a minimum of $25 up to a maximum of $150,000 per calendar year. Brokerage commissions incurred in the purchase of shares will be paid by Sempra Energy. The plan is offered only by means of a prospectus, which can be obtained by calling the plan administrator, American Stock Transfer & Trust Company, LLC, at 877‑773‑6772, or through the Internet at www.astfinancial.com.

  • Information Regarding Forward-Looking Statements

    We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. Future results may differ materially from those expressed in the forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.

    In this report, forward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “target,” “pursue,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, goals, vision, mission, opportunities, projections or intentions.

    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: California wildfires and the risk that we may be found liable for damages regardless of fault and the risk that we may not be able to recover any such costs from insurance, the Wildfire Fund or in rates from customers; decisions, investigations, regulations, issuances of permits and other authorizations, renewal of franchises, and other actions by the Comisión Federal de Electricidad, California Public Utilities Commission, U.S. Department of Energy, Public Utility Commission of Texas, regulatory and governmental bodies and jurisdictions in the U.S. and other countries in which we operate; the success of business development efforts, construction projects and major acquisitions and divestitures, including risks in (i) the ability to make a final investment decision and completing construction projects on schedule and budget; (ii) obtaining the consent of partners; (iii) counterparties’ financial or other ability to fulfill contractual commitments; (iv) the ability to complete contemplated acquisitions and/or divestitures; and (v) 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 to place those ratings on negative outlook and our ability to borrow at favorable interest rates; moves to reduce or eliminate reliance on natural gas; weather, natural disasters, accidents, equipment failures, computer system outages and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to 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; 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 of foreign governments and state-owned entities to honor the terms of contracts, and property disputes; the impact at San Diego Gas & Electric Company on competitive customer rates and reliability due to the growth in distributed power generation and from departing retail load resulting from customers transferring to Direct Access, Community Choice Aggregation or other forms of distributed power generation and the 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 and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director; 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 trade policies, laws and regulations, including 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; the impact of changes to federal and state tax laws and our ability to mitigate adverse impacts; and other uncertainties, some of which may be difficult to predict and are beyond our control.

    We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties, and other factors that affect our business as described herein and in other reports that we file with the Securities and Exchange Commission.