Sempra (SRE) 8-K Results of Operations and Financial Condition

NEWS RELEASE

Media Contact:	Doug Kline
	Sempra Energy
	(877) 340-8875
	dkline@sempra.com
	www.sempra.com
Financial Contacts:	Scott Tomayko/Victor Vilaplana
	Sempra Energy
	(877) 736-7727
	investor@sempra.com

SEMPRA ENERGY REPORTS HIGHER

FIRST-QUARTER 2011 EARNINGS

·

Earnings Per Share Rise 34 Percent, Excluding 2010 Litigation Charge

·

Sempra Generation Receives Approval on 20-Year Contract for Arizona Solar Plant

SAN DIEGO, May 9, 2011 – Sempra Energy (NYSE: SRE) today reported first-quarter 2011 earnings of $258 million, or $1.07 per diluted share, up from 2010 earnings of $106 million, or $0.42 per diluted share.

First-quarter 2010 earnings included an after-tax charge of $96 million, or $0.38 per diluted share, related to a litigation settlement.  Excluding the 2010 litigation charge, Sempra Energy’s first-quarter 2011 earnings per share increased approximately 34 percent from last year.

 “After refocusing our strategy on regulated utilities and contracted energy infrastructure, we are pleased that first-quarter results were strong across all of our business segments,” said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy.

SUBSIDIARY OPERATING RESULTS

San Diego Gas & Electric

First-quarter earnings for San Diego Gas & Electric (SDG&E) increased to $89 million in 2011 from $83 million in 2010.

SDG&E has signed six renewable energy contracts this year, boosting its renewable portfolio capacity by more than 700 megawatts (MW), and increasing its total amount of renewable resources under contract to more than 29 percent of forecasted retail sales by 2015.   The contracts are subject to regulatory approval.

Southern California Gas Co.

Earnings for Southern California Gas Co. (SoCalGas) in the first quarter 2011 were $68 million, compared with $65 million in last year’s first quarter.  

Sempra Generation

Sempra Generation’s first-quarter earnings were $44 million in 2011, compared with a loss of $51 million in 2010.  First-quarter 2010 results included an $84 million after-tax charge related to a litigation settlement.  The improvement in the first quarter 2011 was due to lower operating and maintenance costs.  

Last month, Sempra Generation entered into a 20-year contract to sell SDG&E wind power from the 156-MW first phase of the Energía Sierra Juárez wind project under development in Baja California, Mexico.  The contract is subject to regulatory approval.

Also in April, the California Public Utilities Commission approved Pacific Gas & Electric’s 20-year power-purchase agreement with Sempra Generation for solar power from the first 150-MW phase of Sempra Generation’s Mesquite Solar project in Arizona.  

Sempra Pipelines & Storage

Earnings for Sempra Pipelines & Storage in the first quarter 2011 rose to $54 million from $38 million in the first quarter 2010, due primarily to additional earnings from the Mexican pipeline assets acquired in April 2010 and higher operating results from its utilities in Chile and Peru.

Last month, Sempra Pipelines & Storage completed the acquisition of controlling ownership in Chilquinta Energía and Luz del Sur, two South American utilities that Sempra Pipelines & Storage previously co-owned with a partner.  The purchase price was $875 million.  Sempra Pipelines & Storage now owns 100 percent of Chilquinta Energía and 76 percent of Luz del Sur, with the remaining shares of Luz del Sur held by institutional investors and the general public.

Sempra LNG

Sempra LNG earned $33 million in the first quarter 2011, compared with $32 million in the first quarter 2010.

INTERNET BROADCAST

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT with senior management of the company.  Access is available by logging onto the website at www.sempra.com.  For those unable to log onto the live webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (888) 203-1112 and entering passcode 3265782.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2010 revenues of $9 billion.  The Sempra Energy companies’ nearly 16,000 employees serve about 26 million consumers worldwide.

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This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements can be identified by words like “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” ”will,” “would,” ”could,” “should,” “potential,” “target,” “depends,” or similar expressions, or discussions of strategies, plans or intentions.  Forward-looking statements are not guarantees of performance.  They involve risks, uncertainties and assumptions.  Future results may differ materially from those expressed in the forward-looking statements.  Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, California State Legislature, Federal Energy Regulatory Commission, Nuclear Regulatory Commission, California Energy Commission, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries where the company does business; capital market conditions and inflation, interest and exchange rates; energy markets, including the timing and extent of changes and volatility in commodity prices; the availability of electric power, natural gas and liquefied natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company.  These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the Securities and Exchange Commission.  These reports are available through the EDGAR system free-of-charge on the SEC’s website, www.sec.gov, and on the company’s website atwww.sempra.com.

Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and Sempra Energy Trading are not the same companies as the utility, San Diego Gas & Electric (SDG&E) or Southern California Gas Company (SoCalGas), and Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and RBS Sempra Commodities dba Sempra Energy Solutions and Sempra Energy Trading are not regulated by the California Public Utilities Commission.

SEMPRA ENERGY
Table A
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three months ended March 31,
(Dollars in millions, except per share amounts)	2011	2010
	(unaudited)
REVENUES
Sempra Utilities	$ 1,881	$ 1,912
Sempra Global and parent	553	622
Total revenues	2,434	2,534
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas	(609)	(758)
Cost of electric fuel and purchased power	(171)	(148)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power	(263)	(338)
Other cost of sales	(23)	(25)
Litigation expense	(7)	(168)
Other operation and maintenance	(632)	(576)
Depreciation and amortization	(231)	(210)
Franchise fees and other taxes	(95)	(90)
Equity earnings, before income tax	1	15
Other income, net	43	8
Interest income	3	4
Interest expense	(108)	(109)
Income before income taxes and equity earnings of certain unconsolidated subsidiaries	342	139
Income tax expense	(109)	(58)
Equity earnings, net of income tax	31	19
Net income	264	100
(Earnings) losses attributable to noncontrolling interests	(4)	8
Preferred dividends of subsidiaries	(2)	(2)
Earnings	$ 258	$ 106
Basic earnings per common share	$ 1.07	$ 0.43
Weighted-average number of shares outstanding, basic (thousands)	240,128	246,083
Diluted earnings per common share	$ 1.07	$ 0.42
Weighted-average number of shares outstanding, diluted (thousands)	241,903	250,373
Dividends declared per share of common stock	$ 0.48	$ 0.39

SEMPRA ENERGY
Table B
CONDENSED CONSOLIDATED BALANCE SHEETS
			March 31,	December 31,
(Dollars in millions)			2011	2010(1)
			(unaudited)
Assets
Current assets:
	Cash and cash equivalents		$ 1,219	$ 912
	Restricted cash		318	131
	Accounts receivable		1,058	1,032
	Due from unconsolidated affiliates		17	34
	Income taxes receivable		261	248
	Deferred income taxes		36	75
	Inventories		176	258
	Regulatory assets		73	90
	Fixed-price contracts and other derivatives		97	81
	Settlement receivable related to wildfire litigation		-	300
	Other		171	192
		Total current assets	3,426	3,353
Investments and other assets:
	Restricted cash		-	27
	Regulatory assets arising from pension and other postretirement benefit obligations		885	869
	Regulatory assets arising from wildfire litigation costs		348	364
	Other regulatory assets		932	934
	Nuclear decommissioning trusts		796	769
	Investment in RBS Sempra Commodities LLP		779	787
	Other investments		2,163	2,164
	Goodwill and other intangible assets		537	540
	Sundry		630	600
		Total investments and other assets	7,070	7,054
Property, plant and equipment, net			20,200	19,876
Total assets			$ 30,696	$ 30,283
Liabilities and Equity
Current liabilities:
	Short-term debt		$ 566	$ 158
	Accounts payable		709	864
	Due to unconsolidated affiliates		37	36
	Dividends and interest payable		251	188
	Accrued compensation and benefits		211	311
	Regulatory balancing accounts, net		379	241
	Current portion of long-term debt		89	349
	Fixed-price contracts and other derivatives		91	106
	Customer deposits		131	129
	Reserve for wildfire litigation		489	639
	Other		701	765
		Total current liabilities	3,654	3,786
Long-term debt			9,174	8,980
Deferred credits and other liabilities:
	Customer advances for construction		132	154
	Pension and other postretirement benefit obligations, net of plan assets		1,114	1,105
	Deferred income taxes		1,633	1,561
	Deferred investment tax credits		49	50
	Regulatory liabilities arising from removal obligations		2,671	2,630
	Asset retirement obligations		1,469	1,449
	Other regulatory liabilities		130	138
	Fixed-price contracts and other derivatives		285	290
	Deferred credits and other		903	823
		Total deferred credits and other liabilities	8,386	8,200
Contingently redeemable preferred stock of subsidiary			79	79
Equity:
	Total Sempra Energy shareholders' equity		9,186	9,027
	Preferred stock of subsidiaries		100	100
	Other noncontrolling interests		117	111
		Total equity	9,403	9,238
Total liabilities and equity			$ 30,696	$ 30,283
(1)	Derived from audited financial statements.

SEMPRA ENERGY
Table C
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		Three months ended March 31,
(Dollars in millions)		2011	2010
		(unaudited)
Cash Flows from Operating Activities:
Net income		$ 264	$ 100
Adjustments to reconcile net income to net cash provided
by operating activities:
	Depreciation and amortization	231	210
	Deferred income taxes and investment tax credits	88	61
	Equity earnings	(32)	(34)
	Fixed-price contracts and other derivatives	(9)	-
	Other	(13)	7
Net change in other working capital components		286	534
Changes in other assets		(5)	18
Changes in other liabilities		(5)	(8)
	Net cash provided by operating activities	805	888
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment		(607)	(446)
Expenditures for investments		(4)	(74)
Distributions from investments		21	24
Purchases of nuclear decommissioning and other trust assets		(45)	(44)
Proceeds from sales by nuclear decommissioning and other trusts		46	46
Decrease in restricted cash		160	14
Increase in restricted cash		(320)	(23)
Other		(7)	7
	Net cash used in investing activities	(756)	(496)
Cash Flows from Financing Activities:
Common dividends paid		(94)	(86)
Preferred dividends paid by subsidiaries		(2)	(2)
Issuances of common stock		15	14
Repurchases of common stock		(18)	(2)
Issuances of debt (maturities greater than 90 days)		803	12
Payments on debt (maturities greater than 90 days)		(260)	(507)
(Decrease) increase in short-term debt, net		(192)	294
Other		6	(3)
	Net cash provided by (used in) financing activities	258	(280)
Increase in cash and cash equivalents		307	112
Cash and cash equivalents, January 1		912	110
Cash and cash equivalents, March 31		$ 1,219	$ 222

SEMPRA ENERGY
Table D
BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS
	Three months ended March 31,
(Dollars in millions)	2011	2010
	(unaudited)
Earnings (Losses)
San Diego Gas & Electric	$ 89	$ 83
Southern California Gas	68	65
Sempra Generation	44	(51)
Sempra Pipelines & Storage	54	38
Sempra LNG	33	32
Parent & Other	(30)	(61)
Earnings	$ 258	$ 106
	Three months ended March 31,
(Dollars in millions)	2011	2010
	(unaudited)
Capital Expenditures and Investments
San Diego Gas & Electric	$ 348	$ 290
Southern California Gas	168	114
Sempra Generation	52	4
Sempra Pipelines & Storage	40	110
Sempra LNG	3	2
Consolidated Capital Expenditures and Investments	$ 611	$ 520

SEMPRA ENERGY
Table E
OTHER OPERATING STATISTICS (Unaudited)
		Three months ended March 31,
SEMPRA UTILITIES			2011		2010
Revenues (Dollars in millions)
	SDG&E (excludes intercompany sales)	$	838	$	741
	SoCalGas (excludes intercompany sales)	$	1,043	$	1,171
Gas Sales (bcf)			138		132
Transportation (bcf)			123		117
Total Deliveries (bcf)			261		249
Total Gas Customers (Thousands)			6,639		6,614
Electric Sales (Millions of kWhs)			4,145		4,055
Direct Access (Millions of kWhs)			786		720
Total Deliveries (Millions of kWhs)			4,931		4,775
Total Electric Customers (Thousands)			1,388		1,380
SEMPRA GENERATION
Power Sold (Millions of kWhs)			4,123		4,952
SEMPRA PIPELINES & STORAGE
(Represents 100% of the distribution operations of these subsidiaries, although subsidiaries in Argentina, Chile and Peru are not 100% owned by Sempra Energy. These subsidiaries are not consolidated within Sempra Energy and the related investments are accounted for under the equity method).
Natural Gas Sales (bcf)
	Argentina		70		64
	Mexico		6		6
	Mobile Gas		10		10
Natural Gas Customers (Thousands)
	Argentina		1,766		1,717
	Mexico		89		91
	Mobile Gas		92		92
Electric Sales (Millions of kWhs)
	Peru		1,594		1,479
	Chile		680		600
Electric Customers (Thousands)
	Peru		899		870
	Chile		598		582