ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2021

ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITION

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

Sempra Mexico

ESJ

On March 19, 2021, IEnova completed the acquisition of Saavi Energía’s 50% equity interest in ESJ for a purchase price of approximately $65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in debt (including $94 million owed from ESJ to IEnova that eliminates upon consolidation). IEnova previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased IEnova’s ownership interest in ESJ from 50% to 100%. We accounted for this asset acquisition using a cost accumulation model whereby the cost of the acquisition and carrying value of our previously held interest in ESJ ($34 million) were allocated to assets acquired ($458 million) and liabilities assumed ($345 million) based on their relative fair values. ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. IEnova recorded a $198 million intangible asset for the relative fair value of the PPA that will be amortized over a period of 14 years against revenues. ESJ is constructing a

second wind power generation facility with a nameplate capacity of 108 MW that we expect will be completed in late 2021 or in the first quarter of 2022.

DISCONTINUED OPERATIONS

In January 2019, our board of directors approved a plan to sell our South American businesses. We present these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses as discontinued operations.

Discontinued operations that were previously in the Sempra South American Utilities segment include our former 100% interest in Chilquinta Energía in Chile, our former 83.6% interest in Luz del Sur in Peru and our former 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. As we discuss in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report, we completed the sales of our South American businesses 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

Revenues		$	400
Cost of sales		(253)

Operating expenses		(46)

Income before income taxes		101
Income tax expense		(21)

Income from discontinued operations, net of income tax		80
Earnings attributable to noncontrolling interests		(8)
Earnings from discontinued operations attributable to Sempra Energy		$	72