We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Condensed Consolidated Statements of Operations. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and 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) Benefit on the Condensed Consolidated Statement of Operations. Our foreign equity method investees are corporations whose operations are generally taxable on a standalone basis in the countries in which they operate, and we recognize our equity in such income or loss net of investee income tax.

Oncor is a domestic partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra Energy. Rather, only our pretax 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.

We provide additional information concerning our equity method investments in Note 5 above and in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.

We account for our 100-percent ownership interest in Oncor Holdings as an equity method investment. Due to the 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. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.

Sempra Energy contributed cash of $1,236 million and $117 million to Oncor in the nine months ended September 30, 2019 and 2018, respectively. The 2019 contributions include $1,067 million to fund Oncor’s May 2019 acquisition of interests in InfraREIT and certain acquisition-related expenses, which we discuss in Note 5. In the nine months ended September 30, 2019 and 2018, Oncor Holdings distributed to Sempra Energy $162 million and $9 million, respectively, in dividends and $9 million and $15 million, respectively, in tax sharing payments.



SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended September 30,						Nine months ended September 30, 2019			March 9 - September 30, 2018
	2019			2018
Operating revenues	$	1,211		$	1,095		$	3,268		$	2,352
Operating expense	(787		)	(748		)	(2,319		)	(1,663		)
Income from operations	424			347			949			689
Interest expense	(97		)	(89		)	(276		)	(198		)
Income tax expense	(53		)	(53		)	(106		)	(105		)
Net income	261			191			511			351
Noncontrolling interest held by TTI	(52		)	(38		)	(102		)	(70		)
Earnings attributable to Sempra Energy	209			153			409			281

As we discuss in Note 5, on May 16, 2019, we acquired an indirect, 50-percent interest in Sharyland Holdings for $102 million (subject to customary closing adjustments), which we account for as an equity method investment.

As we discuss in Note 5, Sempra Renewables recorded an other-than-temporary impairment on certain of its wind equity method investments totaling $200 million in June 2018. In April 2019, Sempra Renewables completed the sale of its remaining wind assets and investments.

Sempra LNG capitalized $32 million and $34 million of interest in the nine months ended September 30, 2019 and 2018, respectively, related to its investment in Cameron LNG JV. In August 2019, the first of three trains of the Cameron LNG liquefaction project commenced commercial operation under the JV’s tolling agreements. In the nine months ended September 30, 2019 and 2018, Sempra LNG invested cash of $77 million and $149 million, respectively, in this unconsolidated JV.

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 Condensed Consolidated Statement of Operations. We discuss matters related to RBS Sempra Commodities further in Note 11.

At September 30, 2019, we had outstanding guarantees aggregating a maximum of $3.9 billion. The related carrying value of these guarantees was fully amortized at September 30, 2019. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.