On September 26, 2016, IEnova completed the acquisition of PEMEX’s 50-percent interest in IEnova Pipelines for a purchase price of $1.144 billion (exclusive of $66 million of cash and cash equivalents acquired), plus the assumption of $364 million of long-term debt, increasing IEnova’s ownership interest in IEnova Pipelines to 100 percent. IEnova Pipelines became a consolidated subsidiary of IEnova on this date. Prior to the acquisition date, IEnova owned 50 percent of IEnova Pipelines and accounted for its interest as an equity method investment. In September 2016, we recorded a pretax gain of $617 million ($432 million after-tax) for the excess of the acquisition-date fair value of Sempra Mexico’s previously held equity interest in IEnova Pipelines over the carrying value of that interest, included as Remeasurement of Equity Method Investment on the Sempra Energy Condensed Consolidated Statement of Operations.

We accounted for this business combination using the acquisition method of accounting. We allocated the $1.078 billion in cash paid ($1.144 billion purchase price less $66 million of cash and cash equivalents acquired) to the identifiable assets acquired and liabilities assumed based on their respective fair values, with the excess recognized as goodwill at the Sempra Mexico reportable segment. There were no measurement period adjustments related to this acquisition during the nine months ended September 30, 2017, and we consider the purchase price allocation to be final.

On December 14, 2016, IEnova acquired 100 percent of the equity interests in Ventika, a 252-MW wind farm. At September 30, 2017, the purchase price allocation for the Ventika acquisition remains preliminary and subject to completion. Adjustments to the fair value estimates related to the Ventika acquisition may occur as various valuations and assessments are finalized, primarily related to tax assets, liabilities and other attributes. We discuss the preliminary purchase price allocation and overall Ventika acquisition in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report.

On July 10, 2017, Sempra Renewables paid $124 million in cash for an asset acquisition of a solar project located near Fresno, California, which is currently under construction. We expect to place the project into service in phases during the fourth quarter of 2017 and the first half of 2018 and, when fully constructed, it will be capable of producing up to 200 MW of solar power. The solar project is fully contracted under four long-term PPAs, with an average contract term of 18 years.

In July 2016, Sempra Renewables acquired a 100-percent interest in a 100-MW wind farm in Huron County, Michigan, with a 15-year power purchase agreement, for a total purchase price of $22 million. Sempra Renewables paid $18 million in cash on the acquisition date and paid the remaining $4 million in cash on achievement of certain construction milestones in the fourth quarter of 2016. We expect to place this wind farm into service in the fourth quarter of 2017.

On August 21, 2017, Sempra Energy entered into an Agreement and Plan of Merger, as supplemented by a Waiver Agreement dated October 3, 2017 (together referred to as the Merger Agreement), with Energy Future Holdings Corp., the indirect owner of 80.03 percent of Oncor Electric Delivery Company LLC. Oncor is a regulated electric distribution and transmission business that operates the largest distribution and transmission system in Texas. Following closing, this acquisition will expand our regulated earnings base, while serving as a platform for future growth in the Texas energy market and U.S. Gulf Coast region. Under the Merger Agreement, we will pay total consideration of $9.45 billion, subject to possible adjustment as we describe below.

TTI, an investment vehicle indirectly owned by third parties unaffiliated with EFH and Sempra Energy, owns 19.75 percent of Oncor’s outstanding membership interests, and certain current and former directors and officers of Oncor indirectly beneficially own 0.22 percent of Oncor’s outstanding membership interests through their ownership of Class B membership interests in OMI. On October 3, 2017, Sempra Energy provided written confirmation to Oncor Holdings and Oncor that, contemporaneously with the closing of the Merger, equivalent value (approximately $25.9 million) will be provided in exchange for the Class B membership interests in OMI for

Merger Consideration and Financing. Under the Merger Agreement, Sempra Energy will pay total Merger consideration of $9.45 billion in cash, subject to possible adjustment based on the timing of dividends paid by Oncor to Oncor Holdings and the consummation of the Merger (the Merger Consideration). We do not expect any purchase price adjustment to be material.

We currently intend to initially finance the Merger Consideration of $9.45 billion, as well as associated transaction costs, with the net proceeds from debt and equity issuances, and could also likely utilize revolving credit facilities, commercial paper and/or cash on hand. We expect to ultimately fund approximately 65 percent of the total Merger Consideration with the net proceeds from sales of Sempra Energy common stock and, possibly, other equity securities and approximately 35 percent with the net proceeds from issuances of Sempra Energy debt securities. Some of these equity issuances will likely occur following the Merger to repay outstanding indebtedness, including indebtedness we expect to incur to finance the Merger Consideration and associated transaction costs.

We have incurred transaction costs of $23 million as of September 30, 2017. These costs are included in Sundry on the Sempra Energy Condensed Consolidated Balance Sheet, and will be charged against related gross proceeds of equity offerings, debt offerings and/or included in the basis of EFH’s equity method investment in Oncor Holdings upon consummation of the Merger. If the Merger does not occur, these transaction costs will be expensed.

Ring-Fencing. In April 2014, EFH and the substantial majority of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The bankruptcy does not include Oncor Holdings or Oncor. Certain existing “ring-fencing” measures, governance mechanisms and restrictions will remain in effect following the Merger, which are intended to enhance Oncor Holdings’ and Oncor’s separateness from its owners and to mitigate the risk that these entities would be negatively impacted by the bankruptcy of, or other adverse financial developments affecting, EFH or its other subsidiaries or the owners of EFH. In accordance with the ring-fencing measures and commitments made by Sempra Energy as part of the application to the PUCT for regulatory approval of the Merger, Sempra Energy will be subject to certain restrictions following the Merger. Sempra Energy will not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and restrictions will limit Sempra Energy’s ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions. These limitations include limited representation on the Oncor Holdings and Oncor boards of directors. Following consummation of the Merger, the board of directors of Oncor is expected to consist of thirteen members and be constituted as follows:

Oncor Holdings will also continue to have a majority of independent directors following the consummation of the Merger. Thus, Oncor Holdings and Oncor will continue to be managed independently (i.e., ring-fenced). Upon consummation of the acquisition, we will consolidate EFH and EFH will continue to account for its ownership in Oncor Holdings as an equity method investment.

Closing Conditions. The transaction is subject to customary closing conditions, including the approval of the U.S Bankruptcy Court for the District of Delaware, the PUCT, the Vermont Department of Financial Regulation, and the FERC, among others, as well as receipt of a private letter ruling from the IRS and the issuance of certain tax opinions regarding the transaction.

On September 6, 2017, the U.S. Bankruptcy Court for the District of Delaware approved EFH’s and EFIH’s entry into the Merger Agreement. Under the terms of the Merger Agreement, a $190 million termination fee would be owed to Sempra Energy if EFH or EFIH terminates the Merger Agreement in certain circumstances and consummates an alternative proposal with a third party.

On October 5, 2017, Sempra Energy and Oncor filed a joint application with the PUCT and an application with the FERC seeking approval of the Merger. On October 12, 2017, the ALJ in the PUCT proceeding issued an order deeming the joint application sufficient. On October 16, 2017, the PUCT set a procedural schedule to complete a review of Sempra Energy’s and Oncor’s change-in-control request within 180 days of the filing of the joint application on October 5, 2017.

IEnova and PEMEX are partners in DEN, a joint venture that holds an interest in the Los Ramones Norte pipeline. On October 6, 2017, IEnova entered into an agreement to purchase PEMEX’s 50-percent interest in DEN for total consideration of approximately $231 million, subject to customary closing adjustments and including the repayment of approximately $81 million of outstanding debt owed by DEN to PEMEX. This acquisition will increase IEnova’s ownership interest in DEN through IEnova Pipelines from 50 percent to 100 percent, and increase IEnova’s indirect ownership interest in the Los Ramones Norte pipeline from 25 percent to 50 percent. The transaction is subject to satisfactory completion of Mexican antitrust review and other customary closing conditions, and we expect it to close in the fourth quarter of 2017. The cash consideration will be funded through IEnova’s revolving credit facility.

We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next 12 months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs.

In February 2016, management approved a plan to market and sell Sempra Mexico’s TdM, a 625-MW natural gas-fired power plant located in Mexicali, Baja California, Mexico, as we discuss in Note 3 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, we stopped depreciating the plant and classified it as held for sale.

In connection with the sales process, in late September 2016 and early July 2017, Sempra Mexico received market information indicating that the fair value of TdM was less than its carrying value. After performing analysis of the information, Sempra Mexico reduced the carrying value of TdM by recognizing noncash impairment charges of $131 million ($111 million after-tax) in the third quarter of 2016 and $71 million in the second quarter of 2017, recorded in Other Impairment Losses on Sempra Energy’s Condensed Consolidated Statements of Operations. We discuss non-recurring fair value measures and the associated accounting impact on TdM in Note 8 herein and in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report.

In connection with TdM’s classification as held for sale, we recognized $32 million in income tax expense in the first half of 2016 for a deferred Mexican income tax liability related to the excess of carrying value over the tax basis. As a result of reducing the carrying value of TdM in the third quarter of 2016, we reduced the deferred Mexican income tax liability by $31 million. There was no such tax expense or tax benefit in the third quarter of 2017 and an $8 million tax benefit for the nine months ended September 30, 2017 as a result of further reduction in TdM’s carrying value in the second quarter of 2017. As the Mexican income tax on this outside basis difference is based on current carrying value, foreign exchange rates and inflation, such amount could change in future periods until the date of sale. We continue to actively pursue the sale of TdM, which we expect to be completed in the first half of 2018.



ASSETS HELD FOR SALE AT SEPTEMBER 30, 2017
(Dollars in millions)
	Termoeléctrica de Mexicali
Inventories	$	10
Other current assets	25
Property, plant and equipment, net	55
Other noncurrent assets	27
Total assets held for sale	$	117

Accounts payable	$	5
Other current liabilities	5
Asset retirement obligations	5
Other noncurrent liabilities	32
Total liabilities held for sale	$	47

In September 2016, Sempra LNG & Midstream completed the sale of EnergySouth, the parent company of Mobile Gas and Willmut Gas, to Spire Inc., formerly The Laclede Group, Inc., for cash proceeds of $318 million, net of $2 million cash sold, with the buyer assuming debt of $67 million. We recognized a pretax gain on the sale of $130 million ($78 million after-tax) in the three months and nine months ended September 30, 2016, in Gain on Sale of Assets on Sempra Energy’s Condensed Consolidated Statements of Operations. On September 12, 2016, Sempra LNG & Midstream deconsolidated EnergySouth.



DECONSOLIDATION OF SUBSIDIARY
(Dollars in millions)
	EnergySouth Inc.
Proceeds from sale, net of transaction costs	$	304
Cash	(2		)
Other current assets	(17		)
Property, plant and equipment, net	(199		)
Other noncurrent assets	(137		)
Current liabilities	25
Long-term debt	67
Other noncurrent liabilities	89
Gain on sale	$	130