Sempra Energy (SRE)

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Sempra Energy (SRE)

Q4 2009 Earnings Call

February 25, 2010 1:00 pm ET


Jeff Martin – VP IR

Don Felsinger – CEO

Mark Snell – EVP & CFO

Debbie Reed - President & CEO Utilities

Neal Schmale - President & COO


Greg Sheer – Tuohy Brothers Investment Research

Barry Klein – Citi

Paul Patterson - Glenrock Associates

Andrew Levi – First New York

Leslie Rich - Columbia Management

Lasan Johong - RBC Capital Markets

Unspecified Analyst – CDP US

Michael Goldenberg – Luminous

Michael Lapides - Goldman Sachs

Leon Dubov - Catapult Capital

Jessi Loudon – Zimmer Lucas

Unspecified Analyst

Rudy Tolentino – Morgan Stanley

John Alley - Decade Capital

Mike Bolt – Wells Fargo



Good day and welcome to the Sempra Energy fourth 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 would like to thank each of you for joining us, we know this is a busy time for everyone. This morning we’ll be discussing Sempra Energy’s 2009 financial results. A live webcast of this teleconference and slide presentation is available on our website under the investor section.

Here in Sand Diego we have 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 note that all of the earnings per share amounts in our presentation today are shown on a diluted basis. And now with that I’d like to turn it over to Don who will begin with slide three.

Don Felsinger

Thanks and again thank you all for joining us. On today’s call I would like to accomplish several things. First review with you our 2009 financial results. I’ll then discuss our sale to JPMorgan of a portion of our commodities business, and provide some additional color with respect to our next steps and then finally I’ll give you an operational update of our utilities and infrastructure businesses.

Now the financial results, earlier this morning we reported fourth quarter earnings of $288 million or $1.16 per share compared with $319 million or $1.30 per share in the same period last year. For the full year 2009 earnings increased to $1.12 billion or $4.52 per share up from $1.1 billion or $4.43 per share.

Earnings per share for 2009 without the impact of a $0.26 per share write-off earlier this year improved 8% over last year’s results. Last week when we announced the sale of a portion of the commodities joint venture we provided guidance for 2010 of $4.25 to $4.50 per share. This guidance assumes the sale of the metals, oil, and European energy business close by mid year and a full year earnings contribution from the commodity joint venture of $150 million to $250 million.

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, [inaudible] for gas and electric earnings for the fourth quarter were $67 million compared with earnings of $81 million in the year ago quarter. The decrease was primarily due to $9 million of reduced incentive awards and $4 million of higher wildfire related insurance expense in the fourth quarter of 2009.

Full year 2009 earnings increased to $344 million from $339 million in the previous year. At Southern California Gas fourth quarter 2009 earnings were $75 million, up from $54 million in the fourth quarter of 2008. The increase was due to $10 million of higher margin and $7 million of lower litigation expense in the fourth quarter of 2009.

For the full year 2009 SoCal earnings were $273 million up from $244 million in 2008. The 12% increase in earnings for the year was due to continued strong operating performance. Now let’s go to slide five, Sempra Commodities earnings in the fourth quarter of 2009 were $71 million compared to $164 million in last year’s fourth quarter. The last quarter of 2008 benefited from great performance across all of our product lines.

This year the business performed modestly in the fourth quarter of 2009, that was led by oil and metals. Power also performed well but results in the gas book were weak due to low volatility and a flat basis differential during the final quarter of the year. The quarter was also impacted by retention costs and higher foreign taxes within the joint venture.

For the full year 2009 commodity earnings of $345 million were in line with 2008 results. Now let’s move to slide six. Here we show how income is allocated at the joint venture for the last quarter and for the full year of 2009, a couple of highlights.

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