Sempra Energy First-Quarter 2004 Earnings More Than Double Energy
Trading, Generation Businesses Record Solid Gains SAN DIEGO, April
29 /PRNewswire-FirstCall/ -- Sempra Energy today reported
first-quarter 2004 earnings of $197 million, or $0.85 per diluted
share, compared with $88 million, or $0.42 per diluted share, in
the first quarter 2003. First-quarter 2004 results included a $24
million loss related to the discontinued operations of Atlantic
Electric & Gas, a U.K.-based retail energy marketer, which was
sold earlier this week. Excluding this item, Sempra Energy's
first-quarter earnings were $221 million, or $0.96 per diluted
share, in 2004. This compared with first-quarter 2003 earnings of
$120 million, or $0.58 per diluted share, which excluded a $3
million loss related to Atlantic Electric & Gas' discontinued
operations, as well as the negative impact of a $29 million
cumulative adjustment related to the implementation of accounting
principle EITF 02-3. EITF 02-3 eliminated mark-to-market accounting
for certain commodity trading assets and liabilities. "Our
first-quarter results reflect the continued execution of our
strategy," said Stephen L. Baum, chairman, president and chief
executive officer of Sempra Energy. "Our energy trading and
generation units, as well as our California utilities, are
producing solid earnings and positive cash flow." Revenues in the
first quarter 2004 were $2.4 billion, up from $1.9 billion in the
same period a year ago, due primarily to increased power deliveries
by Sempra Energy Resources and higher commodity prices. OPERATING
HIGHLIGHTS Sempra Energy Utilities Net income for San Diego Gas
& Electric (SDG&E) increased to $50 million in the first
quarter 2004 from $45 million in the year-ago period. The increase
resulted from higher transmission and distribution revenues,
partially offset by higher operating costs and the elimination of
the incentive rate mechanism for the company's 20-percent interest
in the San Onofre Nuclear Generating Station. During the quarter,
SDG&E received positive preliminary decisions from a California
Public Utilities Commission administrative law judge and the
assigned commissioner supporting the utility's long-term electric
resource plan. Filed in October 2003, the plan provides for the
purchase of a mix of local generation assets, including renewable
energy and a new 550-megawatt power plant being built by Sempra
Energy Resources for SDG&E in Escondido, Calif., as well as
energy-conservation initiatives. Southern California Gas Co.
recorded first-quarter net income of $56 million, compared with $58
million in the first quarter 2003. Sempra Energy Trading Sempra
Energy Trading's net income was $59 million in the first quarter
2004. In the same period last year, the company earned $10 million,
before the cumulative impact of accounting principle EITF 02-3.
Sempra Energy Trading's higher earnings in this year's first
quarter came from strong results in all of the company's product
lines. "Sempra Energy Trading has grown to become the second
largest marketer of physical natural gas in North America and now
has recorded 21 consecutive profitable quarters, excluding the
first-quarter 2003 mandated accounting change," said Baum. "This
customer-focused business continues to benefit from solid risk
management and a diverse portfolio of products." Sempra Energy
Resources First-quarter net income for Sempra Energy Resources rose
to $37 million from $10 million last year, due to increased power
deliveries through the company's portfolio of supply contracts.
During the quarter, Sempra Energy announced a 50-50 joint-venture
agreement with Carlyle/Riverstone, an energy and power-focused
equity fund, to acquire American Electric Power's 632-megawatt,
coal-fired Coleto Creek Power Station and nine other Texas power
plants for $430 million. Sempra Energy expects to obtain project
financing for a substantial portion of the costs of the
acquisition, which is expected to be completed in July 2004. Sempra
Energy Resources will provide asset-management services for the
joint venture, including operation of the plants. Sempra Energy
International and Sempra Energy LNG Sempra Energy International and
Sempra Energy LNG, on a combined basis, earned $17 million in the
first quarter 2004, up from $7 million in the year- earlier period.
The increase stemmed from improved results from the company's South
American operations and an $8 million contribution from the
favorable buy-out of a future obligation related to the proposed
Cameron LNG project. Sempra Energy LNG announced plans last week to
develop a new liquefied natural gas (LNG) receipt terminal near
Port Arthur, Texas, with a daily processing capacity of 1.5 billion
cubic feet of natural gas. The company initiated the regulatory
review process for the terminal with the Federal Energy Regulatory
Commission April 21, 2004. The terminal could begin operations as
early as 2009. The Port Arthur project joins two other Sempra LNG
receipt terminals under development in North America: Energia Costa
Azul in Baja California, Mexico, and Cameron LNG near Lake Charles,
La. Both of these projects are expected to commence construction
later this year and begin operations in late 2007. 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 Sempra Energy. Access is available by
logging onto the Web site at http://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
(800) 642-1687 and entering passcode number 7021323. Sempra Energy,
based in San Diego, is a Fortune 500 energy services holding
company with 2003 revenues of $7.9 billion. The Sempra Energy
companies' nearly 13,000 employees serve more than 10 million
customers in the United States, Europe, Canada, Mexico, South
America and Asia. This press release contains statements that are
not historical fact and constitute forward-looking statements
within the meaning of the Private Securities Legislation 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:
national, international, regional and local 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 and the Federal Energy Regulatory Commission; capital
market conditions, inflation rates and interest rates; energy and
trading markets, including the timing and extent of changes in
commodity prices; weather conditions; business, regulatory and
legal decisions; the pace 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, http://www.sec.gov/ and on the company's Web site,
http://www.sempra.com/. Sempra Energy Solutions, Sempra Energy
Trading, Sempra Energy International, Sempra Energy LNG and Sempra
Energy Resources are not the same companies as the utilities, San
Diego Gas & Electric and Southern California Gas Co., and are
not regulated by the California Public Utilities Commission. SEMPRA
ENERGY Table A STATEMENT OF CONSOLIDATED INCOME (Unaudited)
Quarters ended March 31, (Dollars in millions,except per share
amounts) 2004 2003 Operating revenues California utilities: Natural
gas $1,333 $1,162 Electric 381 395 Other 646 366 Total operating
revenues 2,360 1,923 Operating expenses California utilities: Cost
of natural gas 824 677 Cost of electric fuel and purchased power
127 163 Other cost of sales 327 219 Other operating expenses 521
445 Depreciation and amortization 165 148 Franchise fees and other
taxes 64 56 Total operating expenses 2,028 1,708 Operating income
332 215 Other income (loss) - net 5 (2) Interest income 23 12
Interest expense (80) (74) Preferred dividends / distributions by
subsidiaries (2) (7) Income from continuing operations before
income taxes 278 144 Income tax expense 57 24 Income from
continuing operations 221 120 Loss from discontinued operations,
net of tax (24) (3) Income before cumulative effect of change in
accounting principle 197 117 Cumulative effect of change in
accounting principle, net of tax -- (29) Net income $197 $88
Weighted-average number of shares outstanding (thousands): Basic
228,055 206,393 Diluted 231,136 207,823 Income from continuing
operations per share of common stock Basic $0.97 $0.58 Diluted
$0.96 $0.58 Income before cumulative effect of change in accounting
principle per share of common stock Basic $0.86 $0.57 Diluted $0.85
$0.56 Net income per share of common stock Basic $0.86 $0.43
Diluted $0.85 $0.42 Dividends declared per common share $0.25 $0.25
SEMPRA ENERGY Table B CONSOLIDATED BALANCE SHEETS (Unaudited)
Balance at March 31, December 31, (Dollars in millions) 2004 2003
Assets Current assets: Cash and cash equivalents $653 $432
Short-term investments -- 363 Accounts receivable 852 1,002
Interest receivable 65 62 Trading assets 4,997 5,250 Regulatory
assets arising from fixed-price contracts and other derivatives 145
144 Other regulatory assets 93 89 Inventories 67 147 Other 155 157
Current assets of continuing operations 7,027 7,646 Current assets
of discontinued operations 245 220 Total current assets 7,272 7,866
Investments and other assets: Due from affiliates 51 55 Regulatory
assets arising from fixed-price contracts and other derivatives 612
650 Other regulatory assets 531 554 Nuclear decommissioning trusts
584 570 Investments 1,109 1,114 Sundry 699 706 Total investments
and other assets 3,586 3,649 Property, plant and equipment - net
10,550 10,474 Total assets $21,408 $21,989 Liabilities and
Shareholders' Equity Current liabilities: Short-term debt $139 $28
Accounts payable 706 843 Income taxes payable 142 47 Deferred
income taxes 78 88 Trading liabilities 4,401 4,457 Dividends and
interest payable 128 136 Regulatory balancing accounts - net 527
424 Fixed-price contracts and other derivatives 153 148 Current
portion of long-term debt 610 1,433 Other 771 704 Current
liabilities of continuing operations 7,655 8,308 Current
liabilities of discontinued operations 45 52 Total current
liabilities 7,700 8,360 Long-term debt 3,822 3,841 Other
liabilities: Due to affiliates 362 362 Customer advances for
construction 81 89 Postretirement benefits other than pensions 123
131 Deferred income taxes 193 257 Deferred investment tax credits
82 84 Regulatory liabilities arising from cost of removal
obligations 2,268 2,238 Regulatory liabilities arising from asset
retirement obligations 299 281 Other regulatory liabilities 108 108
Fixed-price contracts and other derivatives 612 680 Asset
retirement obligations 315 313 Deferred credits and other 1,176
1,176 Total deferred credits and other liabilities 5,619 5,719
Preferred stock of subsidiaries 179 179 Shareholders' equity 4,088
3,890 Total liabilities and shareholders' equity $21,408 $21,989
SEMPRA ENERGY Table C CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS (Unaudited) Quarters ended March 31, (Dollars in millions)
2004 2003 Cash Flows from Operating Activities: Net income $197 $88
Adjustments to reconcile net income to net cash provided by
operating activities: Loss from discontinued operations 24 3
Cumulative effect of change in accounting principle -- 29
Depreciation and amortization 165 148 Deferred income taxes and
investment tax credits (22) (32) Other - net 16 23 Net changes in
other working capital components 427 431 Changes in other assets
(12) (5) Changes in other liabilities (13) 6 Net cash provided by
operating activities 782 691 Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (219) (193) Net
proceeds from sale of short-term investments 363 (1) -- Investments
and acquisitions of subsidiaries, net of cash acquired (7) (80)
Dividends received from affiliates 10 -- Loans to affiliate -- (46)
Other - net 2 -- Net cash provided by (used in) investing
activities 149 (319) Cash Flows from Financing Activities: Common
dividends paid (57) (52) Issuances of common stock 55 19
Repurchases of common stock (2) (3) Issuances of long-term debt 21
400 Payments on long-term debt (857) (224) Increase (decrease) in
short-term debt - net 134 (158) Other - net (2) (6) Net cash used
in financing activities (708) (24) Increase in cash from continuing
operations 223 348 Cash used in discontinued operations (2) --
Increase in cash and cash equivalents 221 348 Cash and cash
equivalents, January 1 432 455 Cash and cash equivalents, March 31
$653 $803 (1) Proceeds from the sale of U.S. Treasury obligations
which previously securitized the Mesquite synthetic lease. SEMPRA
ENERGY Table D BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES
& INVESTMENTS (Unaudited) Quarters ended March 31, (Dollars in
millions) 2004 2003 Net Income California Utilities: San Diego Gas
& Electric $50 $45 Southern California Gas 56 58 Total
California Utilities 106 103 Global Enterprises: Trading 59 10
Resources 37 10 International / LNG 17 7 Solutions (4) -- Total
Global Enterprises 109 27 Financial 10 11 Parent & Other (4)
(21) Continuing Operations 221 120 Discontinued Operations (1) (24)
(3) Cumulative Effect of Change in Accounting Principle -- (29) (2)
Consolidated Net Income $197 $88 (1) Reflects Atlantic Electric
& Gas. (2) The effects to Trading and Solutions were ($28) and
($1), respectively. Quarters ended March 31, (Dollars in millions)
2004 2003 Capital Expenditures and Investments California
Utilities: San Diego Gas & Electric $69 $89 Southern California
Gas 62 58 Total California Utilities 131 147 Global Enterprises:
Resources 15 84 Trading 46 7 International/LNG 27 26 Total Global
Enterprises 88 117 Parent & Other 7 9 Consolidated Capital
Expenditures and Investments $226 $273 SEMPRA ENERGY Table E OTHER
OPERATING STATISTICS (Unaudited) Quarters ended March 31,
CALIFORNIA UTILITIES 2004 2003 Revenues (Dollars in millions)
SDG&E (excludes intercompany sales) $575 $559 SoCalGas
(excludes intercompany sales) $1,139 $998 Gas Sales (Bcf) 140 125
Transportation and Exchange (Bcf) 158 134 Total Deliveries (Bcf)
298 259 Total Gas Customers (Thousands) 6,231 6,146 Electric Sales
(Millions of kWhs) 3,812 3,609 Direct Access (Millions of kWhs) 729
806 Total Deliveries (Millions of kWhs) 4,541 4,415 Total Electric
Customers (Thousands) 1,301 1,284 RESOURCES Power Sold (Millions of
kWhs) 4,477 1,403 SOLUTIONS Revenues (Dollars in millions) $30 $42
INTERNATIONAL (Represents 100% of these subsidiaries, although only
the Mexican subsidiaries are 100% owned by Sempra Energy). Natural
Gas Sales (Bcf) Argentina 51 42 Mexico 10 9 Chile 1 1 Natural Gas
Customers (Thousands) Argentina 1,414 1,367 Mexico 101 85 Chile 37
36 Electric Sales (Millions of kWhs) Peru 1,007 1,018 Chile 508 481
Electric Customers (Thousands) Peru 736 721 Chile 499 487 TRADING
Quarters ended March 31, Trading Margin (Dollars in millions) 2004
2003 Geographical: North America $113 $62 Europe/Asia 84 22 Total
$197 $84 Product Line: Gas $41 $30 Power 38 (2) Oil - Crude &
Products 41 32 Metals 58 7 Other 19 17 Total $197 $84 Physical
Statistics Natural Gas (BCF/Day) 13.7 13.5 Electric (Billions of
kWhs) 92.9 66.1 Oil & Liquid Products (Millions Bbls/Day) 2.0
1.4 Fair Net Unrealized Market Value Revenue (Dollars March 31,
Scheduled Maturity (in months) in millions) 2004 0 - 12 13 - 24 25
- 36 > 36 Sources of Over-the-Counter (OTC) Fair Value: Prices
actively quoted $295 $223 $36 $(4) $40 Prices provided by other
external sources 8 (6) -- -- 14 Prices based on models and other
valuation methods 24 8 2 -- 14 Total OTC Fair Value (1) 327 225 38
(4) 68 Maturity of OTC Fair Value Percentage 100.0% 68.8% 11.6%
-1.2% 20.8% Cumulative Percentages 68.8% 80.4% 79.2% 100.0%
Exchange Contracts (2) 134 $68 $58 $15 $(7) Total Net Unrealized
Revenue $461 (1) The present value of unrealized revenue to be
received or (paid) from outstanding OTC contracts (2) Cash received
associated with open Exchange Contracts Credit Quality of
Unrealized Trading Assets (net of margin) March 31, December 31,
September 30, June 30, March 31, 2004 2003 2003 2003 2003 Commodity
Exchanges 6% 8% 8% 6% 7% Investment Grade 63% 70% 66% 71% 62% Below
Investment Grade 31% 22% 26% 23% 31% Quarters ended March 31, Risk
Adjusted Performance Indicators 2004 2003 VaR at 95% (Dollars in
millions) (1) $5.7 $10.0 VaR at 99% (Dollars in millions) (2) $8.1
$14.1 Risk Adjusted Return on Capital (RAROC) (3) 41% 12% (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 DATASOURCE: Sempra Energy CONTACT: media,
Doug Kline, +1-877-866-2066, or financial, Dennis Arriola or Karen
Sedgwick, +1-877-736-7727, all of Sempra Energy Web site:
http://www.sempra.com/
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