Sempra Energy (SRE)

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Sempra Energy (SRE)

Q2 2010 Earnings Call

August 03, 2010 01:00 pm ET


Steve Davis - VP of IR

Don Felsinger - Chairman & CEO

Neal Schmale - President & COO

Mark Snell - EVP & CFO

Debbie Reed - EVP

Joe Householder - SVP, Controller & CAO


Greg Gordon - Morgan Stanley

Lasan Johong - RBC Capital Markets

Michael Lapides - Goldman Sachs

Winfried Fruehauf - W. Fruehauf Consulting Limited

Faisel Khan - Citi

Vedula Murti - CDP US

Craig Shere - Tuohy Brothers Investment Research

Michael Goldenberg - Luminus Management



Good day, everyone and welcome to Sempra Energy Second Quarter 2010 Earning Results Conference Call. Today’s call is being recorded.

At this time, I’d like to turn the conference to Steve Davis. Please go ahead, sir.

Steve Davis

Good morning and thank you for joining us. I’m Steve Davis, Vice President of Investor Relations. This morning we’ll be discussing Sempra Energy’s second quarter 2010 financial results. A live webcast of this teleconference and slide presentation is available on our website under the Investors 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, Executive Vice President; 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 risks, uncertainties, and assumptions, so future results may differ materially from those expressed on 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 presentations are shown on a diluted basis.

With that, I’ll turn it over to Don, who will begin with slide three.

Don Felsinger

Thanks, Steve. And again, thank you all for joining us. On today's call, I would like to accomplish several things. First, review with you our second quarter financial results and then give you an update on the status of the RBS Sempra Commodities joint venture sales process. And finally, I'll give you an operational update on our utilities and infrastructure businesses.

Now to the financial results, earlier this morning, we reported second quarter earnings of $222 million or $0.89 per share compared with $198 million or $0.80 per share in the same period last year. All of our core operating businesses performed well in the quarter. We have also announced that we'll begin a $500 million share repurchase later in the quarter.

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

Mark Snell

Thanks, Don. At San Diego Gas & Electric, earnings for the second quarter were $75 million compared with earnings of $70 million in the year ago quarter. For the first six months of 2010, SDG&E's earnings were $158 million, compared with $169 million last year. The decrease was primarily due to $11 million of higher liability insurance premiums for wildfire coverage.

At Southern California Gas, the second quarter 2010 earnings were $69 million that's up from $65 million in the second quarter of 2009. For the first half of 2010, SoCalGas's earnings were $134 million, up from $124 million in 2009. The increase was due to improved operating results and a lower effective tax rate on operations that’s offset by $13 million tax charge recorded in the first quarter due to the passage of the healthcare bill.

Now, let's go to slide five. Our Generation business recorded earnings of $48 million in the second quarter, compared with earnings of $33 million in the same quarter of 2009. The increase for the quarter is primarily the result of renewable energy credits from new projects, partially offset by lower earnings due to scheduled plant maintenance on two power plants and from expenditures related to earthquake damage at our Mexicali power plant in Baja, California.

For the first six months of the year, Generation recorded a loss of $5 million compared with earnings of $76 million in the same period in 2009. The decrease was primarily due to an $85 million charge related to a proposed energy crisis litigation settlement. Now, please move to slide six.

Sempra Pipelines and Storage recorded earnings of $39 million in the second quarter of 2010, compared with the loss of $27 million in the same quarter of 2009. The current quarter included $5 million of earnings from the El Paso Pipeline acquisition, which was completed at the end of April. Last year's loss was primarily due to a $64 million asset write-off at our Liberty Gas storage project.

Now turn to slide seven. Sempra LNG had earnings of $13 million in the second quarter of 2010. That compares with the loss of $12 million in the prior year's period. The increase for the quarter was primarily due to higher earnings from operations. You will recall that the Cameron LNG facility became operational and our supply contract with Tangguh Partners for the Energia Costa Azul LNG facility became effective in the second half of 2009.

For the first six months of 2010, Sempra LNG had earnings of $45 million up from a loss of $19 million in 2009. 2010 results benefited from $11 million of earnings recorded in the first quarter related to payment for non-delivery of cargoes.

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