Sempra Energy (SRE)

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Sempra Energy (SRE)

Q3 2010 Earnings Call Transcript

November 9, 2010 1:00 pm ET

Executives

Steve Davis – VP, IR

Don Felsinger – Chairman and CEO

Mark Snell – EVP and CFO

Joe Householder – SVP, Controller and Chief Accounting Officer

Neal Schmale – President and COO

Debra Reed – EVP

Analysts

Lasan Johong – RBC Capital

Paul Patterson – Glenrock Associates

Greg Gordon – Morgan Stanley

Ashar Khan – Visium Asset Management

Craig Shere – Tuohy Brothers Investment Research

Leon Dubov – Catapult

Faisel Khan – Citigroup

Michael Goldenberg – Luminus Management

Michael Lapides – Goldman Sachs

Neil Stein – Levin Capital

Leslie Rich – JPMorgan

Vedula Murti – CDP U.S.

Reza Hatefi – Decade Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Sempra Energy third quarter 2010 results conference call. Today’s call is being recorded. At this time, I would like to turn the conference to Mr. 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 third quarter 2010 financial results. A live webcast of this teleconference and slide presentation is available on our Web site 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, Executive Vice President; and Joe Householder, Senior Vice President and Controller.

You’ll note that slide #2 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 the earnings per share amounts in our presentation are shown on a diluted basis.

With that, I’ll turn it over to Don, who’ll begin with slide #3.

Don Felsinger

Thanks, Steve, and again, thank you all for joining us this morning or this afternoon. On today’s call, I’d like to accomplish several things. First, review with your our third quarter financial results. We’ll then update you on our exit from the RBS Commodities joint venture, and also discuss some items that may impact our 2011 outlook, and then finally I’ll give you an operational update on our utilities and infrastructure business.

Now to the financial results; earlier this morning, we reported third quarter earnings of $131 million or $0.53 per share compared with $372 million or $1.27 per share in the same period last year.

The third quarter results included an after-tax charge of $139 million from the previously announced write-down of our investment in the RBS Sempra Commodities joint venture. Excluding Sempra Commodities, quarterly earnings increased by 10% over the prior year.

Our core businesses continue to perform well, and we are on track to meet our 2010 earnings guidance per share of $3.15 to $3.35 per share excluding the results from Commodities.

I’d also like to mention that we are now in the final stage of exit from our Commodities joint venture. We and RBS agreed to sell the principal assets of the business in three separate transactions. Two of which have already closed. The final sale should close next month and at that time it will essentially be about of a trading business. This was a key goal for us this year.

I’ll remind you that we have a $500 million share repurchase program underway. We were able to start the buyback earlier than anticipated and have already received a large portion of the shares to be retired under the program.

We have said that once we complete this initial $500 million share repurchase and complete our exit from the Commodities joint venture that we would evaluate an additional share repurchase.

Over the course of the past few months, we had the opportunity to hear from new investors about their preferred outcome of an additional share repurchase versus a dividend increase or some combination of the two.

Over the next few months we will complete an annual review of our business with our Board of Directors. As part of this normal planning process, we will evaluate several things including our capital program, earnings growth, credit statistics, dividend payout, and federal tax policy. When completed in the first quarter we will announce any additional share repurchases or changes in our dividend policy at that time.

Now let me turn it back 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. At San Diego Gas & Electric, earnings for the third quarter were $106 million compared with earnings of $108 million in the year ago quarter. For the first nine months of 2010, SDG&E’s earnings were $264 million compared with $277 million last year. The year-to-date results include $16 million of higher wildfire insurance premiums.

At Southern California Gas, third quarter 2010 earnings were $78 million, up from $74 million in the third quarter of 2009. For the first nine months of 2010, earnings for this business were $212 million, up from $198 million in 2009.

Read the rest of this transcript for free on seekingalpha.com