We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. In these cases, our pro rata shares of the entities’ net assets are included in Investment in Oncor Holdings or Other Investments on the Consolidated Balance Sheets. We evaluate the carrying value of unconsolidated entities for impairment under the U.S. GAAP provisions for equity method investments.

We adjust each investment for our share of each investee’s earnings or losses, dividends, and OCI. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Consolidated Statements of Operations. See Note 8 for information regarding the pretax income or loss used to calculate our ETR.

Our equity method investments include various domestic and foreign entities. Our domestic equity method investees are typically partnerships that are pass-through entities for income tax purposes and therefore they do not record income tax. Sempra Energy’s income tax on earnings from these equity method investees, other than Oncor Holdings as we discuss below, is included in Income Tax Expense on the Consolidated Statements of Operations.

Oncor is a partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra Energy. Rather, only our equity earnings from our investment in Oncor Holdings (a disregarded entity for tax purposes) are included in our consolidated income tax return. A tax sharing agreement with TTI, Oncor Holdings and Oncor provides for the calculation of an income tax liability substantially as if Oncor Holdings and Oncor were taxed as corporations, and requires tax payments determined on that basis. While partnerships are not subject to income taxes, in consideration of the tax sharing agreement and Oncor being subject to the provisions of U.S. GAAP governing rate-regulated operations, Oncor recognizes amounts determined under cost-based regulatory rate-setting processes (with such costs including income taxes), as if it were taxed as a corporation. As a result, since Oncor Holdings consolidates Oncor, we recognize equity earnings from our investment in Oncor Holdings net of its recorded income tax.

operations are taxable on a stand-alone basis in the countries in which they operate, and we recognize our equity in such income or losses net of investee income tax. We may be subject to additional taxes related to these foreign investments, such as taxes on cash dividends or other cash distributions, which are recorded in Income Tax Expense on the Consolidated Statements of Operations.



EQUITY METHOD AND OTHER INVESTMENT BALANCES
(Dollars in millions)
	Percent ownership
	December 31,				December 31,
	2018		2017		2018		2017
Sempra Texas Utility:
Oncor Holdings⁽¹⁾	100	%	—	%	$	9,652	$	—
Sempra South American Utilities:
Eletrans	50		50		$	17	$	16
Sempra Mexico:
Energía Sierra Juárez⁽²⁾	50		50		43		39
IMG⁽³⁾	40		40		328		221
TAG⁽⁴⁾	50		50		376		364
Sempra Renewables:
Wind:
Auwahi Wind	50		50		38		42
Broken Bow 2 Wind	—		50		—		32
Cedar Creek 2 Wind	50		50		69		72
Flat Ridge 2 Wind⁽⁵⁾	50		50		82		255
Fowler Ridge 2 Wind	50		50		45		44
Mehoopany Wind⁽⁶⁾	50		50		57		89
Solar:
California solar partnership	—		50		—		107
Copper Mountain Solar 2	—		50		—		35
Copper Mountain Solar 3	—		50		—		44
Mesquite Solar 1	—		50		—		81
Other					—		12
Sempra LNG & Midstream:
Cameron LNG JV⁽⁷⁾	50.2		50.2		1,271		997
Parent and other:
RBS Sempra Commodities	49		49		—		67
Total equity method investments					2,326		2,517
Other					11		10
Total other investments					$	2,337	$	2,527



EARNINGS (LOSSES) FROM EQUITY METHOD INVESTMENTS
(Dollars in millions)
	Years ended December 31,
	2018			2017			2016
Earnings (losses) recorded before income tax⁽¹⁾:
Sempra Renewables:
Wind:
Auwahi Wind	$	3		$	5		$	4
Broken Bow 2 Wind	(2		)	(2		)	(2		)
Cedar Creek 2 Wind	(1		)	(2		)	(2		)
Flat Ridge 2 Wind⁽²⁾	(178		)	(13		)	(7		)
Fowler Ridge 2 Wind	3			4			4
Mehoopany Wind⁽²⁾	(30		)	(1		)	—
Solar:
California solar partnership	8			7			7
Copper Mountain Solar 2	5			5			6
Copper Mountain Solar 3	8			8			8
Mesquite Solar 1	18			18			17
Other	(3		)	—			(1		)
Sempra LNG & Midstream:
Cameron LNG JV	—			5			(2		)
Rockies Express Pipeline	—			—			(26		)
Parent and other:
RBS Sempra Commodities⁽²⁾	(67		)	—			—
	(236		)	34			6
Earnings (losses) recorded net of income tax:
Sempra Texas Utility:
Oncor Holdings	371			—			—
Sempra South American Utilities:
Eletrans	1			4			3
Sempra Mexico:
DEN	—			(13		)	5
Energía Sierra Juárez	2			—			6
IEnova Pipelines	—			—			64
IMG	29			45			—
TAG	9			6			—
	412			42			78
Total	$	176		$	76		$	84

As we discuss in Note 5, on March 9, 2018, we completed the acquisition of an indirect, 100-percent interest in Oncor Holdings, which owns an 80.25-percent interest in Oncor. Due to ring-fencing measures, governance mechanisms and commitments in effect following the Merger, we do not have the power to direct the significant activities of Oncor Holdings and Oncor, which we discuss in the following paragraph. Consequently, we account for our investment in Oncor Holdings under the equity method, which comprises our Sempra Texas Utility reportable segment.

As we discuss in Note 5, reorganized EFH (renamed Sempra Texas Holdings Corp.) was merged with an indirect subsidiary of Sempra Energy, and its assets and liabilities relating to non-Oncor operations have been subsumed into our parent organization. Certain ring-fencing measures, existing governance mechanisms and commitments remain in effect following the Merger, which are intended to enhance Oncor Holdings’ and Oncor’s separateness from their 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. Sempra Energy does not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and commitments limit our 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, as Oncor Holdings and Oncor will continue to have a majority of independent directors. Thus, Oncor Holdings and Oncor will continue to be managed independently (i.e., ring-fenced). As such, we account for our 100-percent ownership interest in Oncor Holdings as an equity method investment.

We recognized equity earnings, net of income tax, of $371 million for the period since the acquisition date through December 31, 2018. We contributed $230 million in cash, commensurate with our ownership interest, to Oncor in 2018 in accordance with the terms of the Merger Agreement, which enabled Oncor to achieve its required capital structure calculated for regulatory purposes.



SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	March 9 - December 31, 2018
Gross revenues	$	3,347
Operating expense	(2,434		)
Income from operations	913
Interest expense	(285		)
Income tax expense	(119		)
Net income	455
Noncontrolling interest held by TTI	(94		)
Earnings attributable to Sempra Energy⁽¹⁾	360

	At December 31, 2018
Current assets	$	772
Noncurrent assets	21,980
Current liabilities	2,217
Noncurrent liabilities	11,756

On September 26, 2016, IEnova completed the acquisition of the remaining 50-percent interest in IEnova Pipelines and IEnova Pipelines became a consolidated subsidiary. Prior to the acquisition date, IEnova owned 50 percent of IEnova Pipelines and accounted for its interest as an equity method investment. As of the acquisition date, IEnova accounted for IEnova Pipelines’ 50-percent interest in DEN as an equity method investment.

In June 2016, IMG, a JV between IEnova and a subsidiary of TransCanada, was awarded the right to build, own and operate the Sur de Texas-Tuxpan natural gas marine pipeline by the CFE. IEnova has a 40-percent interest in the project and accounts for its interest as an equity method investment, and TransCanada owns the remaining 60-percent interest. The marine pipeline is fully contracted under a 25-year natural gas transportation service contract with the CFE. We expect the project to be completed in the second quarter of 2019. In 2018, 2017 and 2016, Sempra Mexico invested cash of $80 million, $72 million and $100 million, respectively, in the IMG JV.

On June 25, 2018, our board of directors approved a plan to sell all wind assets and investments and solar assets and investments, including our wholly owned facilities, JV and tax equity investments and projects in development in our Sempra Renewables reportable segment, all of which are located in the U.S. In December 2018, Sempra Renewables completed the sale of all its operating solar assets, including its solar equity method investments, and one wind equity method investment to a subsidiary of Con Ed. In February 2019, Sempra Renewables entered into an agreement to sell its remaining wind assets and investments. We expect to complete the sale in the second quarter of 2019. We discuss the completed sale with Con Ed and plan of sale for the remaining assets in Note 5.

Because of our expectation of a shorter holding period as a result of this plan of sale, we evaluated the recoverability of the carrying amounts of our wind and solar equity method investments and concluded there is an other-than-temporary impairment on certain of our wind equity method investments totaling $200 million, which is included in Equity Earnings on Sempra Energy’s Consolidated Statement of Operations for the year ended December 31, 2018. Our wind investments totaling $291 million at December 31, 2018, which are also included in the plan of sale, continue to be classified as Other Investments on Sempra Energy’s Consolidated Balance Sheet. We discuss non-recurring fair value measures in Note 12.

Cameron LNG JV was formed in October 2014 among Sempra Energy and three project partners. The Cameron LNG existing regasification terminal that was contributed to Cameron LNG JV included two marine berths and three LNG storage tanks, and facilities capable of processing 1.5 Bcf of natural gas per day. The current liquefaction project, which is utilizing Cameron LNG JV’s existing facilities, is comprised of three liquefaction trains and is being designed to have a nameplate capacity of 13.9 Mtpa of LNG, with an expected export capability of 12 Mtpa of LNG, or approximately 1.7 Bcf per day. We account for our investment in Cameron LNG JV under the equity method.

Sempra LNG & Midstream capitalized interest of $47 million in each of 2018, 2017 and 2016, related to this equity method investment that has not commenced planned principal operations. In 2018 and 2017, Sempra LNG & Midstream invested cash of $228 million and $1 million, respectively, in Cameron LNG JV.

General. In August 2014, Cameron LNG JV entered into finance documents (collectively, Loan Facility Agreements) for senior secured financing in an initial aggregate principal amount of up to $7.4 billion under three debt facilities provided by the Japan Bank for International Cooperation (JBIC) and 29 international commercial banks, some of which will benefit from insurance coverage provided by Nippon Export and Investment Insurance (NEXI).

The Cameron LNG JV Loan Facility Agreements and related finance documents provide senior secured term loans with a maturity date of July 15, 2030. The proceeds of the loans are being used for financing the cost of development and construction of the three-train Cameron LNG project. The Loan Facility Agreements and related finance documents contain customary representations and affirmative and negative covenants for project finance facilities of this kind with the lenders of the type participating in the Cameron LNG JV financing.

Interest. The weighted-average all-in cost of the loans outstanding under all the Loan Facility Agreements (and based on certain assumptions as to timing of drawdown) is 1.59 percent per annum over LIBOR prior to financial completion of the project and 1.78 percent per annum over LIBOR following financial completion of the project. The Loan Facility Agreements require Cameron LNG JV to hedge 50 percent of outstanding borrowings to fix the interest rate, beginning in 2016. The hedges are to remain in place until the debt principal has been amortized by 50 percent. In November 2014, Cameron LNG JV entered into floating-to-fixed interest rate swaps for approximately $3.7 billion notional amount, resulting in an effective fixed rate of 3.19 percent for the LIBOR component of the interest rate on the loans. In June 2015, Cameron LNG JV entered into additional floating-to-fixed interest rate swaps effective starting in 2020, for approximately $1.5 billion notional amount, resulting in an effective fixed rate of 3.32 percent for the LIBOR component of the interest rate on the loans.

Guarantees. In August 2014, Sempra Energy entered into agreements for the benefit of all of Cameron LNG JV’s creditors under the Loan Facility Agreements and related finance documents. Pursuant to these agreements, Sempra Energy has severally guaranteed 50.2 percent of Cameron LNG JV’s obligations under the Loan Facility Agreements and related finance documents, or a maximum amount of $3.9 billion. Guarantees for the remaining 49.8 percent of Cameron LNG JV’s senior secured financing have been provided by the other project owners. Sempra Energy’s agreements and guarantees will terminate upon financial completion of the three-train Cameron LNG project, which is subject to satisfaction of certain conditions, including all three trains achieving commercial operations and meeting certain operational performance tests. We expect the project to achieve financial completion and the guarantees to be terminated approximately nine months after all three trains achieve commercial operation. Sempra Energy recorded a liability of $82 million in October 2014, with an associated carrying value of $9 million at December 31, 2018, for the fair value of its obligations associated with the Loan Facility Agreements and related finance documents, which constitute guarantees. This liability is being reduced on a straight-line basis over the duration of the guarantees by recognizing equity earnings from Cameron LNG JV, included in Equity Earnings.

In August 2014, Sempra Energy and the other project owners entered into a transfer restrictions agreement with Société Générale, as intercreditor agent for the lenders under the Loan Facility Agreements. Pursuant to the transfer restriction agreement, Sempra Energy agreed to certain restrictions on its ability to dispose of Sempra Energy’s indirect fully diluted economic and beneficial ownership interests in Cameron LNG JV. These restrictions vary over time. Prior to financial completion of the three-train Cameron LNG project, Sempra Energy must retain 37.65 percent of such interest in Cameron LNG JV. Starting six months after financial completion of the three-train Cameron LNG project, Sempra Energy must retain at least 10 percent of the indirect fully diluted economic and beneficial ownership interest in Cameron LNG JV. In addition, at all times, a Sempra Energy controlled (but not necessarily wholly owned) subsidiary must directly own 50.2 percent of the membership interests of the Cameron LNG JV.

Events of Default. Cameron LNG JV’s Loan Facility Agreements and related finance documents contain events of default customary for such financings, including events of default for: failure to pay principal and interest on the due date; insolvency of Cameron LNG JV; abandonment of the project; expropriation; unenforceability or termination of the finance documents; and a failure to achieve financial completion of the project by a financial completion deadline date of September 30, 2021 (with up to an additional 365 days extension beyond such date permitted in cases of force majeure). A delay in construction that results in a failure to achieve financial completion of the project by this financial completion deadline date would therefore result in an event of default under Cameron LNG JV’s financing and a potential demand on Sempra Energy’s guarantees.

Security. To support Cameron LNG JV’s obligations under the Loan Facility Agreements and related finance documents, Cameron LNG JV has granted security over all of its assets, subject to customary exceptions, and all equity interests in Cameron LNG JV have been pledged to HSBC Bank USA, National Association, as security trustee for the benefit of all of Cameron LNG JV’s creditors. As a result, an enforcement action by the lenders taken in accordance with the finance documents could result in the exercise of such security interests by the lenders and the loss of ownership interests in Cameron LNG JV by Sempra Energy and the other project partners.

The security trustee under Cameron LNG JV’s financing can demand that a payment be made by Sempra Energy under its guarantees of Sempra Energy’s 50.2-percent share of senior debt obligations due and payable either on the date such amounts were due from Cameron LNG JV (taking into account cure periods) in the event of a failure by Cameron LNG JV to pay such senior debt obligations when they become due or within 10 business days in the event of an acceleration of senior debt obligations under the terms of the finance documents. If an event of default occurs under the Sempra Energy completion agreement, the security trustee can demand that Sempra Energy purchase its 50.2-percent share of all then outstanding senior debt obligations within five business days (other than in the case of a bankruptcy default, which is automatic).

RBS Sempra Commodities is a United Kingdom limited liability partnership formed by Sempra Energy and RBS in 2008 to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra Energy. We and RBS sold substantially all of the partnership’s businesses and assets in four separate transactions completed in 2010 and 2011. Since 2011, our investment balance has reflected our share of the remaining partnership assets, including amounts retained by the partnership to help offset unanticipated future general and administrative costs necessary to complete the dissolution of the partnership and the distribution of the partnership’s remaining assets, if any. We account for our investment in RBS Sempra Commodities under the equity method.

In September 2018, we fully impaired our remaining equity method investment in RBS Sempra Commodities by recording a charge of $65 million in Equity Earnings on Sempra Energy’s Consolidated Statement of Operations. We discuss matters related to RBS Sempra Commodities further in “Other Litigation” in Note 16.

We present summarized financial information below, aggregated for all other equity method investments (excluding Oncor Holdings) for the periods in which we were invested in the entities. The amounts below represent the results of operations and aggregate financial position of 100 percent of each of Sempra Energy’s other equity method investments.



SUMMARIZED FINANCIAL INFORMATION – OTHER EQUITY METHOD INVESTMENTS
(Dollars in millions)
	Years ended December 31,
	2018⁽¹⁾			2017⁽²⁾			2016⁽³⁾
Gross revenues	$	727		$	846		$	1,079
Operating expense	(614		)	(590		)	(726		)
Income from operations	113			256			353
Interest expense	(330		)	(217		)	(127		)
Net (loss) income/(Losses) earnings⁽⁴⁾	(33		)	116			252



	At December 31,
	2018⁽¹⁾		2017⁽²⁾
Current assets	$	625	$	974
Noncurrent assets	14,803		14,087
Current liabilities	813		797
Noncurrent liabilities	10,226		9,809

Project financing at wind JVs generally requires the JV partners, for each partner’s interest, to return cash to the projects in the event that the projects do not meet certain cash flow criteria or in the event that the projects’ debt service and O&M reserve accounts are not maintained at specific thresholds. In some cases, the JV partners have provided guarantees to the lenders in lieu of the projects’ funding the reserve account requirements. We recorded liabilities for the fair value of certain of our obligations associated with these guarantees, and the liabilities are being amortized over their expected lives. The outstanding loans at our wind JVs are not guaranteed by the partners, but are secured by project assets.

IEnova has an indirect 40-percent ownership interest and TransCanada has an indirect 60-percent ownership interest in IMG. IEnova and TransCanada have each provided guarantees to third parties associated with construction of IMG’s Sur de Texas –Tuxpan natural gas marine pipeline. IEnova expects the construction giving rise to these guarantees to be completed in the second quarter of 2019.