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Sempra Energy Revenue, Net Income Rise as Co. Adjusts Business Model

Sempra Energy, the San Diego-based energy infrastructure company, reported profits of $813 million during the third quarter — nearly triple the profit from the same quarter one year ago.

Total revenue for the recently ended quarter was $2.76 billion, up 7% from $2.57 billion in the third quarter of 2018.

Profit, or net income, in the third quarter of 2018 was $274 million, or 99 cents per share. Earnings per share in the most recent quarter were $2.84.

Excluding one-time items, Sempra said its adjusted net income for the most recent quarter came to $425 million, up from $339 million in the same quarter of 2018.

The business reported its earnings on Nov. 1. Sempra has a conventional fiscal year with the third quarter ending Sept. 30.

A ‘Commitment to Simplify’

“At Sempra Energy, we laid out a plan last year to increasingly focus on core markets where we can produce the best results for our stakeholders,” said Jeff Martin, chairman and CEO of Sempra Energy, in a statement distributed by the company. “With our recently announced agreements to sell our South American businesses, it reflects our ongoing commitment to simplify our strategy. Our year-to-date financial results are a product of that more focused strategy, and the hard work and dedication of all of our employees.”

The company expects to bring in $5.82 billion in cash from its sales of electric utilities in Peru and Chile. Those sales, both to Chinese buyers, are expected to wrap up in the first quarter of 2020. The sum includes debt relief of $500 million in the case of the Peruvian utility, and $200 million in the case of Chile.

Sempra said in mid-October that it plans to use proceeds from the sale of its South American utilities to strengthen its balance sheet and support the growing capital needs of its utilities in California and Texas.

Investing in Oncor

On Nov. 1, Sempra announced it would make additional capital improvements over five years at its Oncor Electric Delivery Co. LLC utility in Texas, to support growth in its service territory. Its capital improvements program will grow 6% from $11.2 billion to $11.9 billion. Approximately $5.9 billion of that sum will be spent in expanding transmission, while $2.1 billion will be spent in expanding distribution.

Oncor is experiencing 2% premise growth and 1.5% load growth.

Sempra acquired a majority stake in Oncor almost two years ago. It closed the $9.45 billion deal in spring 2018.

Operating statistics from Sempra’s recent earnings statement showed the size of Oncor compared to one of Sempra’s legacy utilities, San Diego Gas & Electric Co. Oncor delivered 40.8 billion kilowatt hours of electricity to its Texas customers in the third quarter, while SDG&E delivered roughly one-eighth of that amount, or 4.9 billion kilowatt hours.

The Local View

Sempra also broke out SDG&E’s finances in the report. The local gas and electric utility had adjusted earnings of $197 million on revenue of $1.43 billion in the third quarter.

In California, Sempra said it reached a constructive final decision in its 2019 General Rate Case with the state Public Utilities Commission.

The decision establishes the amounts that SDG&E and another Sempra subsidiary, Southern California Gas Co., can recover from customers in 2019, 2020 and 2021. The commission set a $1.99 billion revenue requirement for SDG&E in 2019 and a $2.77 billion revenue requirement for SoCalGas in 2019. The latter is $166 million less than SoCalGas’ request.

Mexico and LNG Exports

Separately in its Nov. 1 announcements, Sempra said it was continuing to develop its infrastructure in Mexico. In September it began commercial operations of its Sur de Texas-Tuxpan pipeline, a joint venture with TC Energy Corp.

Meanwhile, Sempra continues to develop its liquefied natural gas (LNG) export terminals on the Gulf of Mexico and in northern Baja California. Sempra recently announced it entered advanced negotiations with potential LNG export customers in China and Japan. One potential customer (and partner in expanding its terminals) is Mitsui & Co. Ltd.

Sempra said it was commissioning its second train, or production line, in the first phase of its Cameron plant in Louisiana, which began exporting LNG this year. A third train will follow. All are expected to be working in 2020.

Raising its Guidance

For the first nine months of the year, Sempra said it achieved earnings of $5.74 per common share. For the entirety of 2019, it said it expects earnings of $6.50 to $7.00 per share.

The business on Nov. 1 raised its 2019 adjusted earnings per share forecast from a range of $5.70 to $6.30 to a range of $6.00 to $6.50.

Next year, the company said, it expects earnings per share of $12.78 to $14.26. The figures are high because they include an estimated $6.08 to $6.78 per share gain on the sale of the South American utilities.

The company affirmed its forecast of adjusted earnings per share of $6.70 to $7.50 during the whole of 2020.


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