Sempra Energy (SRE)

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Sempra Energy (SRE)

Q3 2009 Earnings Call

November 09, 2009; 01:00 pm ET


Don Felsinger - Chairman & Chief Executive Officer

Neal Schmale - President & Chief Operating Officer

Mark Snell - Executive Vice President & Chief Financial Officer

Debbie Reed - President & Chief Executive Officer of Utilities

Joe Householder - Senior Vice President & Controller

Jeff Martin - Vice President of Investor Relations


Lasan Johong - RBC Capital Markets

Leon Dubov - Catapult Capital

Leslie Rich - Columbia Management

Adam Wiseman - Luminous

Paul Patterson - Glenrock Associates

Michael Lapides - Goldman Sachs

Charles Sharett - Credit Suisse

Faisel Khan - Citi

John Alley - Decade Capital

Annie Tsao - AllianceBernstein



Good day and welcome to the Sempra Energy third quarter 2009 earnings results conference call. Today’s conference is being recorded. At this time I’d like to turn the conference over to Mr. Jeff Martin; please go ahead, sir.

Jeff Martin

Good morning. I want to thank each of you for joining us. I trust many of you’re probably catching up in the office after returning from EEI, so we appreciate, you take the time for our call. This morning, we’ll be discussing Sempra Energy’s third quarter 2009 financial results. A live Webcast of this teleconference and slide presentation is available on our website under the investor section.

With us today in San Diego are several members of our management team including Don Felsinger, Chairman and Chief Executive Officer; Neal Schmale, President and Chief Operating Officer; Mark Snell, Executive Vice President and Chief Financial Officer; Debbie Reed, President and CEO of our utilities; and Joe Householder, Senior Vice President and Controller.

You’ll note that slide two contains our Safe Harbor statement, please remember that this call contains forward-looking statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of performance. As you know, they involve risk, uncertainties and assumptions so, future results may differ materially from those expressed in our call. These risks, uncertainties and assumptions are described at the bottom of today’s press release and are further discussed in the company’s reports filed with the Securities and Exchange Commission.

It’s important to also note that all of the earnings per share amounts in our presentation today are shown on a diluted basis. Like the format of our prior calls, we’ll first take you through our financial results, followed by an operating update and then conclude with any questions you might have.

With that I’d like to now turn it over to Don who will begin with slide three.

Don Felsinger

Thanks, Jeff and again, thank you all for joining us. Before I discuss the quarter, I want to briefly update you on recent developments with the Royal Bank in Scotland. As many of you are aware, RBS has announced a second restructuring plan that includes the sale of their ownership stake in our commodities joint venture. There are several points worth noting, first I want you all of just remember of this is a core business of Sempra.

It operates in markets that we know and understand. It’s highly profitable and more importantly, we’re committed to being in this business for the long term. Second, as RBS goes about divesting its share, they are committed to providing all required capital and credit support and third the process will be orderly and significantly influenced by our participation.

Our existing agreement doesn’t allow for a sale prior to April of 2012. A quicker sale, which could be advantageous, would require new mutual consent. As a final point I’m certain we’ll manage through this transition away that not only preserves, but creates value for our shareholders and does so in away that gives confidence to both our employees and customers and based on our conversations with RBS’s management, I can tell you that our interests are aligned in that regard.

Now on to the financial results. Earlier this morning, we reported third quarter earnings of $317 million or $1.27 per share, an increase from $308 million or $1.24 per share in the same period last year. It’s important to note that results for the third quarter of last year included a $40 million retroactive benefit from the resolution of General Rate Cases at our California utilities. For the first nine months of 2009, earnings increased to $831 million or $3.37 per share, up from $794 million or $3.13 per share.

You’ll recall that in the second quarter of this year, we recorded a $64 million or $0.26 per share write-off related to the Liberty Gas Storage project. Earnings per share for the first nine months of 2009 without the impact of the onetime write-off of liberty, improved 16% over last year. Now, the reason I want to make this point is because it highlights the strength of our underlying businesses. These strong results keep us on track to meet our 2009 financial goals.

Now, let me hand it over to Mark so, he can take you through some of the details of the financial results, beginning with slide four.

Mark Snell

Thanks, Don. Well at San Diego Gas and Electric, earnings for the third quarter were $108 million, compared with earnings of $123 million in the year ago quarter. Third quarter 2009 results include a $9 million benefit from the resolution of regulatory matters. Third quarter 2008 results include a $33 million retroactive benefit from the resolution of the general rate case and a $12 million benefit from the resolution of tax issues, which were partially offset by $17 million of litigation expense.

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