EX-99 2 earningrelease99_1.htm EX. 99.1 SEMPRA ENERGY 4th QTR 2004 EARNINGS RELEASE

Exhibit 99.1

 

 

NEWS RELEASE

Media Contact:

Doug Kline
Sempra Energy
(877) 866-2066
www.sempra.com

   

Financial Contact:

Karen Sedgwick
Sempra Energy
(877) 736-7727

 

SEMPRA ENERGY POSTS 38-PERCENT INCREASE IN
2004 NET INCOME

  • Earnings Per Share Rise 26 Percent to $3.83
  • Commodity-Trading, Electric-Generation Units Pace Growth
  • Company Raises 2005 Earnings-Per-Share Guidance to $3.10 to $3.30
    From $3.00 to $3.20

          SAN DIEGO, Feb. 23, 2005 - Sempra Energy (NYSE: SRE) today reported 2004 earnings of $895 million, or $3.83 per diluted share, up 38 percent over 2003 earnings of $649 million, or $3.03 per diluted share.

          For the fourth quarter 2004, Sempra Energy's earnings were $346 million, or $1.46 per diluted share, an increase of 48 percent over fourth-quarter 2003 earnings of $234 million, or $1.03 per diluted share.

          "This marks the sixth consecutive year of record earnings for Sempra Energy, a period during which we have averaged earnings growth of more than 20 percent annually," said Stephen L. Baum, chairman and chief executive officer. "In 2004, we further strengthened our balance sheet and significantly advanced our liquefied natural gas (LNG) business. Our commodity-trading and electric-generation businesses experienced robust growth and our California utilities continue to excel."

 

-more-

          Yesterday, Sempra Energy's board of directors announced a dividend increase of 16 percent, raising the quarterly dividend on common shares to 29 cents ($1.16 on an annualized basis). The increase was the first change in the company's dividend since 2000.

          Revenues for Sempra Energy in 2004 were $9.4 billion, compared with $7.9 billion in 2003, due to increased power sales and commodity trading. Fourth-quarter 2004 revenues were $2.9 billion, up from $2.1 billion in the year-earlier period.

SUBSIDIARY OPERATING RESULTS

Sempra Utilities

          Net income for Southern California Gas Co. (SoCalGas) increased to $232 million in 2004 from $209 million in 2003, due primarily to lower operating expenses, the favorable settlement of its rate case at the California Public Utilities Commission (CPUC) and a one-time gain from a property sale. Fourth-quarter 2004 net income for SoCalGas was $58 million, versus $61 million in the year-earlier period.

          Net income for San Diego Gas & Electric (SDG&E) in 2004 was $208 million, compared with $334 million in 2003. SDG&E's net income was $68 million in the fourth quarter 2004, compared with $128 million in the same quarter of 2003. In the fourth quarter 2004, SDG&E benefited from the settlement of its rate case at the CPUC. The 2003 results for SDG&E included a $79 million gain recorded in the fourth quarter for the favorable resolution of tax issues and a $65 million gain recorded in the third quarter for a contract settlement with the CPUC.

          In December 2004, the CPUC approved base rates for SDG&E and SoCalGas for a four-year period extending through 2007.

          "The approval of new rate plans for SDG&E and SoCalGas ensures that our utilities will continue to earn a reasonable return as they invest in critical new infrastructure to serve their customers," Baum said.

 

-more-

Sempra Commodities

          In 2004, net income for Sempra Commodities (formerly Sempra Energy Trading) more than doubled to $320 million from $157 million in 2003, due to improved performance in all of its key commodity segments worldwide, including natural gas, petroleum and base metals. Fourth-quarter 2004 net income for Sempra Commodities increased to $171 million from $73 million in the year-earlier period on the strength of its natural gas and power trading.

          "In 2004, Sempra Commodities recorded its best year ever," said Baum. "Quarter after quarter, Sempra Commodities has remained consistently profitable, while carefully managing risk and entering into transactions that convert to cash quickly."

Sempra Generation

          Net income for Sempra Generation (formerly Sempra Energy Resources) rose to $137 million in 2004 from $71 million in the previous year, due primarily to a full year of contributions from the company's new generating fleet in the Pacific Southwest, as well as power plants acquired in Texas.

          Sempra Generation's fourth-quarter net income was $19 million in 2004, compared with $32 million in 2003, due primarily to litigation reserves.

Sempra Pipelines & Storage

          Sempra Pipelines & Storage (formerly Sempra Energy International) recorded net income of $63 million in 2004, up from $3 million in 2003. Results for 2003 included an impairment charge of $50 million in the third quarter. In 2004, Sempra Pipelines & Storage also benefited from a $5 million gain from reducing its ownership in Luz del Sur, a Peruvian utility, to 38 percent from 44 percent. For the fourth quarter, net income for Sempra Pipelines & Storage increased to $28 million in 2004 from $10 million in 2003, due primarily to favorable resolution of foreign-tax issues.

-more-

Sempra LNG

          Last month, Sempra LNG (formerly Sempra Energy LNG) awarded the engineering and construction contracts for its Energía Costa Azul and Cameron LNG receipt terminals in Baja California, Mexico, and Louisiana. Construction has commenced on the Energía Costa Azul terminal, which is expected to be operational in 2008.

          Also last month, Sempra LNG was awarded a 15-year natural gas contract to supply Mexico's state-owned electric utility, Comisión Federal de Electricidad.

          On Jan. 27, 2005, Sempra LNG announced it had signed a Heads of Agreement (HOA) to provide Tractebel LNG North America LLC with up to one-third of the processing capacity of the Cameron LNG receipt terminal for a period of 20 years, beginning in 2008. The non-binding HOA contemplates finalizing a definitive agreement by June 30, 2005. Additional supply and capacity agreements involving Cameron LNG are being negotiated. The facility is expected to be operational in 2008.

2005 Earnings Outlook

          Sempra Energy today updated its 2005 earnings-per-share guidance to $3.10 to $3.30 from previous guidance of $3.00 to $3.20. The company also announced a capital budget of approximately $1.6 billion for 2005.

Internet Broadcast

          Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. Eastern Time with senior management of the company. Access is available by logging onto the Web site 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 (706) 645-9291 and entering the passcode, 3346152.

          Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2004 revenues of $9.4 billion. The Sempra Energy companies' 13,000 employees serve more than 10 million customers in the United States, Europe, Canada, Mexico, South America and Asia.

###

This presentation contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When the company uses words like "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "would," "should" or similar expressions, or when the company discusses its strategy or plans, the company is making forward-looking statements. 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. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital markets conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; the availability of natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; and other uncertainties, all of which are difficult to predict and many of which are beyond the company's control. These risks and uncertainties are further discussed in the company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov and on the company's Web site, www.sempra.com.






SEMPRA ENERGY

Table A

STATEMENTS OF CONSOLIDATED INCOME

Three months ended

Years ended

December 31,

December 31,

(Dollars in millions, except per share amounts)

2004

 

2003

2004

 

2003

(Unaudited)

Operating revenues

California utilities:

Natural gas

$ 1,348

$ 1,049

$ 4,537

$ 4,010

Electric

412

419

1,658

1,787

Other

1,129

598

3,215

2,090

Total operating revenues

2,889

2,066

9,410

7,887

Operating expenses

California utilities:

Cost of natural gas

849

542

2,593

2,071

Cost of electric fuel and purchased power

151

113

576

541

Other cost of sales

555

318

1,741

1,204

Other operating expenses

774

656

2,371

2,287

Depreciation and amortization

120

160

621

615

Franchise fees and other taxes

65

63

236

230

Total operating expenses

2,514

1,852

8,138

6,948

Operating income

375

214

1,272

939

Other income (expense) - net

46

(12)

104

26

Interest income

11

74

69

104

Interest expense

(88)

(85)

(322)

(308)

Preferred dividends / distributions by subsidiaries

(3)

(2)

(10)

(19)

Income from continuing operations before income taxes

341

189

1,113

742

Income tax expense (benefit)

2

(62)

193

47

Income from continuing operations

339

251

920

695

Income (loss) from discontinued operations, net of tax

7

-

(23)

-

Loss on disposal of discontinued operations, net of tax

-

-

(2)

-

Income before cumulative effect of changes in accounting principles

346

251

895

695

Cumulative effect of changes in accounting principles, net of tax

-

(17)

-

(46)

Net income

$ 346

$ 234

$ 895

$ 649

Basic earnings per share:

Income from continuing operations

$ 1.47

$ 1.12

$ 4.03

$ 3.29

Discontinued operations, net of tax

0.03

-

(0.11)

-

Cumulative effect of changes in accounting principles, net of tax

-

(0.07)

-

(0.22)

Net income

$ 1.50

$ 1.05

$ 3.92

$ 3.07

Weighted-average number of shares outstanding (thousands)

230,832

223,962

228,271

211,740

Diluted earnings per share:

Income from continuing operations

$ 1.43

$ 1.11

$ 3.93

$ 3.24

Discontinued operations, net of tax

0.03

-

(0.10)

-

Cumulative effect of changes in accounting principles, net of tax

-

(0.08)

-

(0.21)

Net income

$ 1.46

$ 1.03

$ 3.83

$ 3.03

Weighted-average number of shares outstanding (thousands)

237,500

227,214

233,852

214,482

Dividends declared per share of common stock

$ 0.25

$ 0.25

$ 1.00

$ 1.00






SEMPRA ENERGY

Table B

CONSOLIDATED BALANCE SHEETS

December 31,

December 31,

(Dollars in millions)

 

2004

 

2003

Assets

Current assets:

Cash and cash equivalents

$ 419

$ 409

Short-term investments

15

386

Accounts receivable

1,032

874

Due from unconsolidated affiliate

4

-

Deferred income taxes

15

-

Interest receivable

80

62

Trading-related receivables and deposits, net

2,606

2,350

Derivative trading instruments

2,339

1,607

Commodities owned

1,547

1,420

Regulatory assets arising from fixed-price contracts and other derivatives

152

144

Other regulatory assets

103

89

Inventories

172

147

Other

222

158

Current assets of continuing operations

8,706

7,646

Current assets of discontinued operations

70

220

Total current assets

8,776

7,866

Investments and other assets:

Due from unconsolidated affiliates

42

55

Regulatory assets arising from fixed-price contracts and other derivatives

500

650

Other regulatory assets

619

552

Nuclear decommissioning trusts

612

570

Investments

1,164

1,112

Sundry

844

707

Total investments and other assets

3,781

3,646

Property, plant and equipment - net

11,086

10,476

Total assets

$ 23,643

$ 21,988

Liabilities and Shareholders' Equity

Current liabilities:

Short-term debt

$ 405

$ 28

Accounts payable

1,126

788

Due to unconsolidated affiliates

205

1

Income taxes payable

187

336

Deferred income taxes

-

31

Trading-related payables

3,182

2,255

Derivative trading instruments sold, not yet purchased

1,484

1,340

Commodities sold with agreement to repurchase

513

922

Dividends and interest payable

123

136

Regulatory balancing accounts - net

509

424

Fixed-price contracts and other derivatives

157

148

Current portion of long-term debt

398

1,433

Other

776

675

Current liabilities of continuing operations

9,065

8,517

Current liabilities of discontinued operations

17

52

Total current liabilities

9,082

8,569

Long-term debt

4,192

3,841

Deferred credits and other liabilities:

Due to unconsolidated affiliates

162

362

Customer advances for construction

97

89

Postretirement benefits other than pensions

129

131

Deferred income taxes

420

368

Deferred investment tax credits

78

84

Regulatory liabilities arising from cost of removal obligations

2,359

2,238

Regulatory liabilities arising from asset retirement obligations

333

303

Other regulatory liabilities

67

109

Fixed-price contracts and other derivatives

500

680

Asset retirement obligations

326

313

Deferred credits and other

854

832

Total deferred credits and other liabilities

5,325

5,509

Preferred stock of subsidiaries

179

179

Shareholders' equity

4,865

3,890

Total liabilities and shareholders' equity

$ 23,643

$ 21,988






SEMPRA ENERGY

Table C

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

Years ended

December 31,

(Dollars in millions)

 

2004

 

2003

Cash Flows from Operating Activities:

Net income

$ 895

$ 649

Adjustments to reconcile net income to net cash provided by operating

activities:

Discontinued operations, net of tax

25

-

Cumulative effect of changes in accounting principles, net of tax

-

46

Depreciation and amortization

621

615

Deferred income taxes and investment tax credits

13

(118)

Impairment losses

12

101

Other - net

61

99

Net changes in other working capital components

(427)

(154)

Changes in other assets

(200)

(71)

Changes in other liabilities

(21)

(26)

Net cash provided by continuing operations

979

1,141

Net cash used in discontinued operations

(30)

-

Net cash provided by operating activities

949

1,141

Cash Flows from Investing Activities:

Expenditures for property, plant and equipment

(1,083)

(1,049)

Investments in and acquisitions of subsidiaries, net of cash acquired

(74)

(202)

Proceeds from disposal of discontinued operations

157

-

Net proceeds from sale of assets

372

(1)

29

Dividends received from unconsolidated affiliates

59

72

Affiliate loans

-

(99)

Other - net

10

1

Net cash used in investing activities

(559)

(1,248)

Cash Flows from Financing Activities:

Common dividends paid

(195)

(182)

Issuances of common stock

110

505

Repurchases of common stock

(5)

(7)

Issuances of long-term debt

997

900

Payments on long-term debt

(1,670)

(601)

Increase (decrease) in short-term debt - net

397

(518)

Other - net

(14)

(8)

Net cash (used in) provided by financing activities

(380)

89

Increase (decrease) in cash and cash equivalents

10

(18)

(2)

Cash and cash equivalents, January 1

409

427

Cash and cash equivalents, December 31

$ 419

$ 409

(1)

Primarily proceeds from the sale of U.S. Treasury obligations which previously securitized the Mesquite synthetic lease.

(2)

Change from $(23) as reported in prior year reflects reclassification of restricted cash.






SEMPRA ENERGY

Table D

BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)

Three months ended

Years ended

December 31,

 

December 31,

(Dollars in millions)

2004

 

2003

 

2004

 

2003

Net Income

California Utilities:

San Diego Gas & Electric

$ 68

$ 128

$ 208

$ 334

Southern California Gas

58

61

232

209

Total California Utilities

126

189

440

543

Sempra Global:

Sempra Commodities

171

73

320

157

Sempra Generation

19

32

137

71

Sempra Pipelines & Storage

28

10

63

3

(3)

Sempra LNG

(8)

(2)

(8)

(2)

Total Sempra Global

210

113

512

229

Sempra Financial

10

9

36

41

Parent & Other

(7)

(60)

(4)

(68)

(118)

(4)

Continuing Operations

339

251

920

695

Discontinued Operations (1)

7

-

(25)

-

Cumulative Effect of Changes in Accounting Principles

-

(17)

(2)

-

(46)

(2)

Consolidated Net Income

$ 346

$ 234

$ 895

$ 649

(1)

Reflects Atlantic Electric & Gas and for the three months ended December 31, 2004 includes $7 related to favorable tax adjustment.

(2)

The effects were ($29) at Sempra Commodities, $9 at Sempra Generation and ($26) at Parent & Other, respectively. The effects at Sempra Generation and Parent & Other were recorded in the three months ended December 31, 2003.

(3)

Includes ($50) write-down of the carrying value of assets of Frontier Energy.

(4)

Includes the ($21) impairment of the carrying value of assets of AEG at Parent & Other.

Three months ended

Years ended

December 31,

December 31,

(Dollars in millions)

2004

 

2003

2004

 

2003

Capital Expenditures and Investments:

California Utilities:

San Diego Gas & Electric

$ 131

$ 159

$ 414

$ 444

Southern California Gas

77

101

311

318

Total California Utilities

208

260

725

762

Sempra Global:

Sempra Generation

41

69

194

300

Sempra Commodities

28

31

131

51

Sempra Pipelines & Storage

4

13

22

50

Sempra LNG

20

23

55

51

Total Sempra Global

93

136

402

452

Parent & Other

4

9

30

37

Consolidated Capital Expenditures and Investments

$ 305

$ 405

$ 1,157

$ 1,251






SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended

Years Ended

December 31,

December 31,

CALIFORNIA UTILITIES

2004

 

2003

2004

 

2003

Revenues (Dollars in millions)

SDG&E (excludes intercompany sales)

$ 599

$ 557

$ 2,248

$ 2,292

SoCalGas (excludes intercompany sales)

$ 1,161

$ 911

$ 3,947

$ 3,505

Gas Sales (Bcf)

125

115

413

394

Transportation and Exchange (Bcf)

139

130

550

540

Total Deliveries (Bcf)

264

245

963

934

Total Gas Customers (Thousands)

6,297

6,210

Electric Sales (Millions of kWhs)

3,993

3,817

15,799

15,040

Direct Access (Millions of kWhs)

881

866

3,441

3,322

Total Deliveries (Millions of kWhs)

4,874

4,683

19,240

18,362

Total Electric Customers (Thousands)

1,319

1,296

SEMPRA GENERATION

 

 

 

 

 

 

 

Power Sold (Millions of kWhs)

5,943

3,787

20,739

11,251

SEMPRA PIPELINES & STORAGE

(Represents 100% of these subsidiaries, although only the Mexican subsidiaries are 100% owned by Sempra Energy).

Natural Gas Sales (Bcf)

Argentina

60

58

251

232

Mexico

9

10

42

40

Chile

1

1

3

3

Natural Gas Customers (Thousands)

Argentina

1,449

1,404

Mexico

97

95

Chile

37

37

Electric Sales (Millions of kWhs)

Peru

1,024

1,023

4,044

4,032

Chile

475

453

1,959

1,832

Electric Customers (Thousands)

Peru

748

732

Chile

508

496






SEMPRA ENERGY

Table E (Continued)

SEMPRA COMMODITIES

 

 

 

 

 

Three months ended

Years ended

December 31,

December 31,

Trading Margin* (Dollars in millions)

2004

2003

2004

2003

Geographical:

North America

$ 300

$ 120

$ 689

$ 439

Europe/Asia

165

75

338

172

Total

$ 465

$ 195

$ 1,027

$ 611

Product Line:

Gas

$ 234

$ 29

$ 314

$ 146

Power

85

36

166

137

Oil - Crude & Products

69

51

265

128

Metals

54

49

179

96

Other

23

30

103

104

Total

$ 465

$ 195

$ 1,027

$ 611

* Trading margin consists of net trading revenues less related costs (primarily brokerage, transportation and storage) plus or minus

net interest income/expense.

Physical Statistics

 

 

 

 

 

Natural Gas (BcF/Day)

11.9

13.0

13.0

13.3

Electric (Billions of kWhs)

108.1

102.6

373.7

324.4

Oil & Liquid Products (Millions Bbls/Day)

2.1

2.0

2.1

1.7

Fair

Market Value

December 31,

Scheduled Maturity (in months)

Net Unrealized Revenue (Dollars in millions)

2004

0 - 12

13 - 24

25 - 36

> 36

Sources of Over-the-Counter (OTC) Fair Value:

Prices actively quoted

$ 844

$ 788

$ 12

$ 10

$ 34

Prices provided by other external sources

23

(14)

-

-

37

Prices based on models and other valuation methods

(21)

(20)

-

-

(1)

Total OTC Fair Value (1)

$ 846

$ 754

$ 12

$ 10

$ 70

Maturity of OTC Fair Value

Percentage

100.0%

89.1%

1.4%

1.2%

8.3%

Cumulative Percentages

 

89.1%

90.5%

91.7%

100.0%

 

 

 

 

 

 

Exchange Contracts (2)

$ 347

$ 337

$ 21

$ 8

$ (19)

Total Net Unrealized Revenue

$ 1,193

(1) The present value of unrealized revenue to be received or (paid) from outstanding OTC contracts

(2) Cash received associated with open Exchange Contracts

December 31,

December 31,

Credit Quality of Unrealized Trading Assets (net of margin)

2004

2003

Commodity Exchanges

10%

8%

Investment Grade

66%

68%

Below Investment Grade

24%

24%

100%

100%

Three months ended

Years ended

December 31,

December 31,

Risk Adjusted Performance Indicators

2004

2003

2004

2003

VaR at 95% (Dollars in millions) (1)

$ 11.2

$ 4.4

$ 7.9

$ 6.5

VaR at 99% (Dollars in millions) (2)

$ 15.7

$ 6.3

$ 11.2

$ 9.2

Risk Adjusted Return on Capital (RAROC) (3)

34%

38%

38%

23%

(1) Average Daily Value-at-Risk for the period using a 95% confidence level

(2) Average Daily Value-at-Risk for the period using a 99% confidence level

(3) Average Daily Trading Margin/Average Daily VaR at 95% confidence level