ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2020

ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.

ACQUISITION

Sempra Texas Utilities

TTHC

In February 2020, Sempra Texas Intermediate Holding Company LLC acquired an additional indirect 0.1975% interest in Oncor through its acquisition of a 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C., including notes receivable due from TTHC with an aggregate outstanding balance of approximately $6 million, for a total purchase price of approximately $23 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to approximately 80.45%. TTHC indirectly owns 100% of TTI, which owns 19.75% of Oncor’s outstanding membership interests. At the acquisition date, we determined the fair value of the notes receivable was $7 million based on a discounted cash flow model, and attributed $16 million to the investment in TTHC. We account for our investment in TTHC as an equity method investment, which we discuss further in Note 6.

DIVESTITURE

Sempra LNG

In February 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas), which we classified as held for sale at December 31, 2018, to an affiliate of ArcLight Capital Partners and received cash proceeds of $322 million, net of transaction costs. In January 2019, Sempra LNG completed the sale of other non-utility assets for $5 million.

DISCONTINUED OPERATIONS

In January 2019, our board of directors approved a plan to sell our South American businesses. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, as the planned sales represent a strategic shift that will have a major effect on our operations and financial results. We do not plan to have significant continuing involvement in or be able to exercise significant influence on the operating or financial policies of these operations after they are sold. Accordingly, the results of operations, financial position and cash flows for these businesses have been presented as discontinued operations for all periods presented.

Discontinued operations that were previously in the Sempra South American Utilities segment include our 100% interest in Chilquinta Energía in Chile, our 83.6% interest in Luz del Sur in Peru and our interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties.

On April 24, 2020, we completed the sale of our equity interests in our Peruvian businesses, including our 83.6% interest in Luz del Sur and its interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for an aggregate base purchase price of $3.59 billion, subject to post-closing adjustments.

On October 12, 2019, we entered into a Purchase and Sale Agreement with State Grid International Development Limited to sell our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, for an aggregate base purchase price of $2.23 billion, subject to customary adjustments for working capital and changes in net indebtedness and other adjustments. Chilquinta Energía also agreed to purchase the remaining 50% interest in Eletrans from Sociedad Austral de Electricidad S.A., contingent on the sale of our Chilean businesses to State Grid International Development Limited. This acquisition by Chilquinta Energía, which we do not expect would have a significant economic impact on the sale of our Chilean businesses (including the net proceeds we receive from the sale), would result in State Grid International Development Limited acquiring 100% of Eletrans. The sale of our Chilean businesses is subject to various conditions to closing, including certain Chinese regulatory approvals, but is not subject to Chilquinta Energía purchasing the remaining 50% interest in Eletrans. We expect the sale to close in the second quarter of 2020.

Summarized results from discontinued operations were as follows:



DISCONTINUED OPERATIONS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Revenues	$	400		$	421
Cost of sales	(253		)	(265		)
Operating expenses	(46		)	(45		)
Interest and other	—			(3		)
Income before income taxes and equity earnings	101			108
Income tax expense	(21		)	(151		)
Equity earnings	—			1
Income (loss) from discontinued operations, net of income tax	80			(42		)
Earnings attributable to noncontrolling interests	(8		)	(9		)
Earnings (losses) from discontinued operations attributable to common shares	$	72		$	(51	)

The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale in discontinued operations.



ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions)
	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	180	$	74
Restricted cash⁽¹⁾	1		1
Accounts receivable, net	316		303
Due from unconsolidated affiliates	2		2
Inventories	36		36
Other current assets	31		29
Current assets	$	566	$	445

Due from unconsolidated affiliates	$	60	$	54
Goodwill and other intangible assets	748		801
Property, plant and equipment, net	2,517		2,618
Other noncurrent assets	39		40
Noncurrent assets	$	3,364	$	3,513

Short-term debt	$	158	$	52
Accounts payable	192		201
Current portion of long-term debt and finance leases	82		85
Other current liabilities	106		106
Current liabilities	$	538	$	444

Long-term debt and finance leases	$	663	$	702
Deferred income taxes	282		284
Other noncurrent liabilities	61		66
Noncurrent liabilities	$	1,006	$	1,052


⁽¹⁾	Primarily represents funds held in accordance with Peruvian tax law.

At March 31, 2020 and December 31, 2019, $693 million and $551 million, respectively, of cumulative foreign currency translation losses related to our South American businesses are included in AOCI.