Sempra Energy
SAN DIEGO GAS & ELECTRIC CO (Form: 8-K, Received: 08/04/2017 11:34:12)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
 
 
 
 
FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
Date of Report
 
(Date of earliest event reported):
August 4, 2017

 
SAN DIEGO GAS & ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

 
 
 
 
 
CALIFORNIA
 
1-03779
 
95-1184800
(State or other jurisdiction of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)

 
 
 
8326 CENTURY PARK COURT, SAN DIEGO, CALIFORNIA
 
92123
(Address of principal executive offices)
 
(Zip Code)

 
 
Registrant's telephone number, including area code
(619) 696-2000

 
 
(Former name or former address, if changed since last report.)









 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
[   ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[   ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
[   ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[   ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]







FORM 8-K

Item 2.02 Results of Operations and Financial Condition.
    
The information furnished in this Item 2.02 and in Exhibits 99.1 and 99.2 shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, nor shall it be deemed to be incorporated by reference in any filing of San Diego Gas & Electric Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

On August 4, 2017, Sempra Energy, of which San Diego Gas & Electric Company is a consolidated subsidiary, issued a press release announcing consolidated earnings of $259 million, or $1.03 per diluted share of common stock, for the second quarter of 2017. The press release has been posted on Sempra Energy’s website (www.sempra.com) and a copy is attached as Exhibit 99.1.

Concurrently with the website posting of such press release and as noted therein, Sempra Energy also posted its Statement of Operations Data by Segment for the three months and six months ended June 30, 2017 and 2016. A copy of such information is attached as Exhibit 99.2.

The Sempra Energy financial information contained in the press release includes, on a consolidated basis, information regarding San Diego Gas & Electric Company’s results of operations and financial condition.


Item 9.01 Financial Statements and Exhibits.
  
Exhibits

99.1
August 4, 2017 Sempra Energy News Release (including tables).

99.2
Sempra Energy’s Statement of Operations Data by Segment for the three months and six months ended June 30, 2017 and 2016.








SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
SAN DIEGO GAS & ELECTRIC COMPANY,
 
(Registrant)
 
 
Date: August 4, 2017
By: /s/ Bruce A. Folkmann
 
Bruce A. Folkmann
Vice President, Controller, Chief Financial Officer and Chief Accounting Officer
 




Exhibit 99.1

SEMPRAGRAPHIC2A02.GIF
NEWS RELEASE



Media Contact:                 Doug Kline
Sempra Energy
(877) 340-8875
www.sempra.com         

Financial Contact:           Patrick Billings
Sempra Energy
(877) 736-7727
investor@sempra.com


SEMPRA ENERGY’S SECOND-QUARTER 2017 EARNINGS RISE

Strong Performance Drives Increase in 2017 Earnings Guidance

Company Affirms 2018 Earnings-Per-Share Guidance Range of $5.30 to $5.80

Positive Regulatory Developments Include Approval of Two-Year Cost-of-Capital Extension, Resumption of Injections at Aliso Canyon Natural Gas Storage Facility

SAN DIEGO, Aug. 4, 2017 - Sempra Energy (NYSE: SRE) today reported second-quarter 2017 earnings of $259 million, or $1.03 per diluted share, up from $16 million, or $0.06 per diluted share, in the second-quarter 2016. On an adjusted basis, Sempra Energy’s second-quarter 2017 earnings increased to $276 million, or $1.10 per diluted share, from $200 million, or $0.79 per diluted share, in last year’s second quarter.
“Increased operating earnings in our utility and infrastructure businesses through the first half of the year allow us to raise our 2017 earnings guidance,” said Debra L. Reed, chairman, president and CEO of Sempra Energy. “Strong operating results were coupled with positive regulatory outcomes, including the final regulatory decision in the Cost-of-Capital proceeding, which provides greater visibility to earnings at our California utilities over the next two years. Earlier this week, Southern California Gas Co. was able to resume limited injections at the Aliso Canyon natural gas storage facility after receiving regulatory approval in mid-July. Additionally, our Mexican business continues to expand, taking an important step forward in developing infrastructure for the promising new liquids market in Mexico.”



Sempra Energy’s earnings for the first six months of 2017 were $700 million, or $2.77 per diluted share, compared with $369 million, or $1.47 per diluted share, in the first six months of 2016. Adjusted earnings for the first six months of 2017 were $714 million, or $2.83 per diluted share, compared with $625 million, or $2.48 per diluted share, in the first six months of 2016.
These results reflect certain significant items as described in the following table of GAAP earnings, reconciled to adjusted earnings, for the second quarter and first six months of 2017 and 2016:

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Three months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ended June 30, 
 
 Six months ended June 30, 
 
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
(Unaudited; Dollars, except EPS, and shares, in millions)
 
 
 
 
 
 
 
As Recast
 
Adjustment
for Share-
Based
Comp. (1)
 
As
Originally
Reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Earnings
 
$
259

 
$
16

 
$
700

 
$
369

 
$
(34
)
 
$
335

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses Related to Termoeléctrica de Mexicali (TdM) Held For Sale
 
45

 
2

 
42

 
26

 

 
26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Recoveries) Losses Related to Permanent Releases of Pipeline Capacity
 
(28
)
 
123

 
(28
)
 
123

 

 
123

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax Repairs Adjustments Related to General Rate Case (GRC)
 

 
80

 

 
80

 

 
80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retroactive Q1-16 GRC Benefit
 

 
(21
)
 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss Related to Rockies Express Pipeline
 

 

 

 
27

 

 
27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (2)
 
$
276

 
$
200

 
$
714

 
$
625

 
$
(34
)
 
$
591

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted-average shares outstanding
 
253

 
252

 
253

 
252

 
252

 
252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP EPS
 
$
1.03

 
$
0.06

 
$
2.77

 
$
1.47

 
$
(0.14
)
 
$
1.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EPS (2)
 
$
1.10

 
$
0.79

 
$
2.83

 
$
2.48

 
$
(0.14
)
 
$
2.35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Reflects adoption of Accounting Standards Update 2016-09 as of Jan. 1, 2016. For more information, refer to Sempra Energy's Form 10-Q.
(2) Sempra Energy adjusted earnings and adjusted EPS are non-GAAP financial measures. See Table A in the appendix for information regarding non-GAAP financial measures and descriptions of adjustments above.
 








SEMPRA UTILITIES
On July 13, the California Public Utilities Commission (CPUC) issued a final ruling approving a two-year extension through 2019 for San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) to file their next applications in the Cost-of-Capital proceeding at the CPUC. The CPUC decision, which is consistent with the Cost-of-Capital assumptions provided for SDG&E and SoCalGas in the five-year financial plan at Sempra Energy’s 2017 Analyst Conference, adopts an authorized return on equity of 10.2 percent and 10.05 percent for SDG&E and SoCalGas, respectively, through 2019.

San Diego Gas & Electric     
Second-quarter 2017 earnings for SDG&E were $149 million, compared with $100 million in the second quarter 2016, due primarily to higher CPUC base margin and lower operating costs. In last year’s second quarter, due to the final 2016-18 General Rate Case decision, SDG&E recorded a $31 million after-tax refund to ratepayers of benefits from tax repairs deductions, offset by a $9 million after-tax retroactive benefit for first-quarter 2016 earnings.
For the first six months of 2017, SDG&E’s earnings were $304 million, compared with $236 million in the same period last year.

Southern California Gas Co.
In the second quarter 2017, SoCalGas had earnings of $58 million, compared with a net loss of $1 million in last year’s second quarter, due primarily to an after-tax impairment of $13 million in the second quarter 2016 based on the CPUC’s decision related to the proposed North-South pipeline project. Additionally, in last year’s second quarter, due to the final 2016-18 General Rate Case decision, SoCalGas recorded a $49 million after-tax refund to ratepayers of benefits from tax repairs deductions, offset by a $12 million after-tax retroactive benefit for first-quarter 2016 earnings.
In the first half of 2017, SoCalGas’ earnings were $261 million, up from $198 million in the first half of 2016.
On July 31, SoCalGas resumed limited injections at the Aliso Canyon natural gas storage facility after receiving regulatory approval earlier in the month from the CPUC and California’s Division of Oil, Gas, and Geothermal Resources (DOGGR). The regulatory agencies certified that SoCalGas had met the conditions of the state’s rigorous safety review.

Sempra South American Utilities
In the second quarter 2017, Sempra South American Utilities had earnings of $45 million, compared with $43 million in the second quarter 2016.
For the first six months of 2017, earnings for Sempra South American Utilities were $92 million, compared with $81 million in the first six months last year.

SEMPRA INFRASTRUCTURE
Sempra Mexico
Sempra Mexico recorded a net loss of $9 million in the second quarter 2017, compared with earnings of $57 million in the second quarter 2016, due primarily to a $47 million impairment the company recorded on the



Termoélectrica de Mexicali power plant, which is being held for sale, as well as unfavorable foreign-currency and inflation effects.
For the first six months of 2017, Sempra Mexico had earnings of $39 million, compared with $75 million in the same period last year.
Yesterday, Mexican subsidiary IEnova announced several U.S.-dollar-denominated, long-term capacity agreements with Valero to develop three new liquids terminals - in Mexico City, Puebla and the Port of Veracruz. These projects represent IEnova’s first ventures in Mexico’s emerging $10 billion liquids market.

Sempra Renewables
Second-quarter 2017 earnings for Sempra Renewables were $23 million, up from $12 million in 2016, due primarily to higher earnings for solar assets placed into service during 2016.
In the first half of 2017, earnings for Sempra Renewables were $34 million, compared with $26 million in the first half of 2016.

Sempra LNG & Midstream
In the second quarter 2017, Sempra LNG & Midstream recorded earnings of $27 million, compared with a net loss of $149 million in the second quarter 2016. Sempra LNG & Midstream recorded a $28 million after-tax recovery in 2017 related to last year’s permanent releases of pipeline capacity, compared with a related $123 million after-tax loss in 2016.
For the first six months of 2017, Sempra LNG & Midstream recorded earnings of $28 million, compared with a net loss of $181 million in the first six months of 2016.
The company announced today that, based on several factors, it believes it is reasonable to expect that the Cameron LNG liquefaction-export project’s first liquefaction train could be delayed into 2019, with the other two trains following throughout 2019 and with no earnings expected in 2018. Despite the revisions in the schedule, the company does not expect any material impact on the long-term economics of the project and anticipates earnings from the project of $300 million to $350 million in 2020.

2017 EARNINGS GUIDANCE
Today, Sempra Energy raised its GAAP 2017 earnings-per-share guidance range to $4.95 to $5.25 and its adjusted 2017 earnings-per-share guidance range to $5 to $5.30, both from the previous earnings-per-share range of $4.85 to $5.25. The company also affirmed its previous 2018 earnings-per-share guidance range of $5.30 to $5.80.

INTERNET BROADCAST
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 12 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 4175144.

NON-GAAP FINANCIAL MEASURES



     Non-GAAP financial measures include Sempra Energy’s 2017 adjusted earnings guidance, and adjusted earnings and adjusted earnings per share for both the second quarter and first six months of 2017 and 2016. Information regarding these non-GAAP financial measures is in the appendix on Table A of the second-quarter financial tables.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2016 revenues of more than $10 billion. The Sempra Energy companies' more than 16,000 employees serve approximately 32 million consumers worldwide.
###
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," "plans," "estimates," "projects," "forecasts," "contemplates," "assumes," "depends," "should," "could," "would," "will," "confident," "may," “can,” "potential," "possible," "proposed," "target," "pursue," "outlook," "maintain," or similar expressions or discussions of guidance, strategies, plans, goals, opportunities, projections, initiatives, objectives 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. 
Factors, among others, that could cause actual results and future actions to differ materially from those described in forward-looking statements include: actions and the timing of actions, including decisions, new regulations, and issuances of permits and other authorizations by the California Public Utilities Commission, U.S. Department of Energy, California Division of Oil, Gas, and Geothermal Resources, Federal Energy Regulatory Commission, U.S. Environmental Protection Agency, Pipeline and Hazardous Materials Safety Administration, Los Angeles County Department of Public Health, states, cities and counties, and other regulatory and governmental bodies in the United States and other countries in which we operate; the timing and success of business development efforts and construction projects, including risks in obtaining or maintaining permits and other authorizations on a timely basis, risks in completing construction projects on schedule and on budget, and risks in obtaining the consent and participation of partners; the resolution of civil and criminal litigation and regulatory investigations; deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers; modifications of settlements; delays in, or disallowance or denial of, regulatory agency authorizations to recover costs in rates from customers (including with respect to regulatory assets associated with the San Onofre Nuclear Generating Station facility and 2007 wildfires) or regulatory agency approval for projects required to enhance safety and reliability; the availability of electric power, natural gas and liquefied natural gas, and natural gas pipeline and storage capacity, including disruptions caused by failures in the transmission grid, moratoriums or limitations on the withdrawal or injection of natural gas from or into storage facilities, and equipment failures; changes in energy markets; volatility in commodity prices; moves to reduce or eliminate reliance on natural gas; the impact on the value of our investment in natural gas storage and related assets from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for storage services; risks posed by actions of third parties who control the operations of our investments, and risks that our partners or counterparties will be unable or unwilling to fulfill their contractual commitments; weather conditions, natural disasters, accidents, equipment failures, computer system outages, explosions, terrorist attacks and other events that disrupt our operations, damage our facilities and systems, cause the release of greenhouse gases, radioactive materials and harmful emissions, cause wildfires and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance (including costs in excess of applicable policy limits) or may be disputed by insurers; cybersecurity threats to the energy grid, storage and pipeline infrastructure, the information and systems used to operate our businesses and the confidentiality of our proprietary information and the personal information of our customers and employees; capital markets and economic conditions, including the availability of credit and the liquidity of our investments; fluctuations in inflation, interest and currency exchange rates and our ability to effectively hedge the risk of such fluctuations; changes in the tax code as a result of potential federal tax reform, such as the elimination of the deduction for interest and non-deductibility of all, or a portion of, the cost of imported materials, equipment and commodities; changes in foreign and domestic trade policies and laws, including border tariffs, revisions to favorable international trade agreements, and changes that make our exports less competitive or otherwise restrict our ability to export; the ability to win competitively bid infrastructure projects against a number of strong and aggressive competitors; expropriation of assets by foreign governments and title and other property disputes; the impact on reliability of San Diego Gas & Electric Company's (SDG&E) electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources; the impact on competitive customer rates due to the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through SDG&E's electric transmission and distribution system and from possible departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation or other forms of distributed and local power generation, and the potential risk of nonrecovery for stranded assets and contractual obligations; and other uncertainties, some of which may be difficult to predict and are beyond our control.
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 at www.sempra.com. Investors should not rely unduly on any forward-looking statements.  These forward-looking statements speak only as of the date hereof, and the company undertakes no obligation to update or revise these forecasts or projections or other forward-looking statements, whether as a result of new information, future events or otherwise.
Sempra South American Utilities, Sempra Infrastructure, Sempra LNG & Midstream, Sempra Renewables, Sempra Mexico and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same as the California Utilities, San Diego Gas & Electric Company (SDG&E) or Southern California Gas Company (SoCalGas), and are not regulated by the California Public Utilities Commission.




SEMPRA ENERGY
Table A
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three months ended
June 30,
 
Six months ended
June 30,
(Dollars in millions, except per share amounts)
2017
 
2016 (1)
 
2017
 
2016 (1)
 
(unaudited)
REVENUES
 
 
 
 
 
 
 
Utilities
$
2,197

 
$
1,994

 
$
4,895

 
$
4,436

Energy-related businesses
336

 
162

 
669

 
342

Total revenues
2,533


2,156


5,564


4,778

 
 
 
 
 
 
 
 
EXPENSES AND OTHER INCOME
 
 
 
 
 
 
 
Utilities:
 
 
 
 
 
 
 
Cost of electric fuel and purchased power
(553
)
 
(561
)
 
(1,080
)
 
(1,076
)
Cost of natural gas
(228
)
 
(183
)
 
(713
)
 
(494
)
Energy-related businesses:
 
 
 
 
 
 
 
Cost of natural gas, electric fuel and purchased power
(62
)
 
(62
)
 
(129
)
 
(118
)
Other cost of sales
38

 
(226
)
 
16

 
(261
)
Operation and maintenance
(731
)
 
(706
)
 
(1,445
)
 
(1,406
)
Depreciation and amortization
(368
)
 
(314
)
 
(728
)
 
(642
)
Franchise fees and other taxes
(101
)
 
(96
)
 
(211
)
 
(207
)
Impairment losses
(71
)
 
(21
)
 
(71
)
 
(22
)
Equity earnings (losses), before income tax
18

 
14

 
21

 
(8
)
Other income, net
91

 
23

 
260

 
72

Interest income
8

 
6

 
14

 
12

Interest expense
(159
)
 
(142
)
 
(328
)
 
(285
)
Income (loss) before income taxes and equity earnings (losses) of certain unconsolidated subsidiaries
415


(112
)

1,170


343

Income tax (expense) benefit
(167
)
 
106

 
(462
)
 
(2
)
Equity earnings (losses), net of income tax

 
33

 
(8
)
 
50

Net income
248


27


700


391

Losses (earnings) attributable to noncontrolling interests
12

 
(10
)
 
1

 
(21
)
Preferred dividends of subsidiary
(1
)
 
(1
)
 
(1
)
 
(1
)
Earnings
$
259


$
16


$
700


$
369

 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.03

 
$
0.06

 
$
2.79

 
$
1.48

Weighted-average number of shares outstanding, basic (thousands)
251,447

 
250,096

 
251,290

 
249,915

 
 
 
 
 
 
 
 
Diluted earnings per common share
$
1.03

 
$
0.06

 
$
2.77

 
$
1.47

Weighted-average number of shares outstanding, diluted (thousands)
252,822

 
252,036

 
252,609

 
251,775

 
 
 
 
 
 
 
 
Dividends declared per share of common stock
$
0.83

 
$
0.75

 
$
1.65

 
$
1.51

 
 
 
 
 
 
 
 
(1)
As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.






SEMPRA ENERGY
Table A (Continued)
RECONCILIATION OF SEMPRA ENERGY ADJUSTED EARNINGS TO SEMPRA ENERGY GAAP EARNINGS (Unaudited)
Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share exclude items (after the effects of taxes and, if applicable, noncontrolling interests) in 2017 and 2016 as follows:
Three months ended June 30, 2017:
$(47) million impairment of Sempra Mexico’s Termoeléctrica de Mexicali (TdM) assets held for sale
$2 million deferred income tax benefit on the TdM assets held for sale
$28 million of recoveries related to 2016 permanent release of pipeline capacity
Three months ended June 30, 2016:
$(123) million losses from the permanent release of pipeline capacity at Sempra LNG & Midstream
$(80) million adjustments related to tax repairs deductions reallocated to ratepayers as a result of the 2016 General Rate Case Final Decision (2016 GRC FD) at the California Utilities
$21 million incremental revenue increases for the first quarter of 2016 from the retroactive application of the 2016 GRC FD at the California Utilities
$(2) million deferred income tax expense on the TdM assets held for sale
Six months ended June 30, 2017:
$(47) million impairment of TdM assets held for sale
$5 million deferred income tax benefit on the TdM assets held for sale
$28 million of recoveries related to 2016 permanent release of pipeline capacity
Six months ended June 30, 2016:
$(123) million losses from the permanent release of pipeline capacity at Sempra LNG & Midstream
$(80) million adjustments related to tax repairs deductions reallocated to ratepayers as a result of the 2016 GRC FD at the California Utilities
$(27) million impairment charge related to Sempra LNG & Midstream's investment in Rockies Express Pipeline LLC (Rockies Express)
$(26) million deferred income tax expense on the TdM assets held for sale
Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and/or nature of the excluded items, management believes that these non-GAAP financial measures provide a meaningful comparison of the performance of Sempra Energy’s business operations from 2017 to 2016 and to future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles for historical periods these non-GAAP financial measures to Sempra Energy Earnings and Diluted Earnings Per Common Share, which we consider to be the most directly comparable financial measures calculated in accordance with GAAP.
 
 
Pretax amount
Income tax (benefit) expense (1)
Non-controlling interests
Earnings
 
Pretax amount
Income tax expense (benefit) (1)
Non-controlling interests
Earnings
 
(Dollars in millions, except per share amounts)
Three months ended June 30, 2017
 
Three months ended June 30, 2016(2)
 
Sempra Energy GAAP Earnings
 
 
 
$
259

 
 
 
 
$
16

 
Excluded items:
 
 
 
 
 
 
 
 
 
 
Impairment of TdM assets held for sale
$
71

$

$
(24
)
47

 
$

$

$


 
Deferred income tax (benefit) expense associated with TdM

(3
)
1

(2
)
 

3

(1
)
2

 
Recoveries related to 2016 permanent release of pipeline capacity
(47
)
19


(28
)
 




 
Permanent release of pipeline capacity




 
206

(83
)

123

 
SDG&E tax repairs adjustments related to 2016 GRC FD




 
52

(21
)

31

 
SoCalGas tax repairs adjustments related to 2016 GRC FD




 
83

(34
)

49

 
SDG&E retroactive impact of 2016 GRC FD for Q1 2016




 
(15
)
6


(9
)
 
SoCalGas retroactive impact of 2016 GRC FD for Q1 2016




 
(20
)
8


(12
)
 
Sempra Energy Adjusted Earnings
 
 


$
276

 
 
 
 
$
200

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share:
 
 
 
 
 
 
 
 
 
 
Sempra Energy GAAP Earnings
 
 
 
$
1.03

 
 
 
 
$
0.06

 
Sempra Energy Adjusted Earnings
 
 
 
$
1.10

 
 
 
 
$
0.79

 
Weighted-average number of shares outstanding, diluted (thousands)
 
 
 
252,822

 
 
 
 
252,036

 
 
 
Six months ended June 30, 2017
 
Six months ended June 30, 2016(2)
 
Sempra Energy GAAP Earnings
 
 
 
$
700

 
 
 
 
$
369

 
Excluded items:
 
 
 
 
 
 
 
 
 
 
Impairment of TdM assets held for sale
$
71

$

$
(24
)
47

 
$

$

$


 
Deferred income tax (benefit) expense associated with TdM

(8
)
3

(5
)
 

32

(6
)
26

 
Recoveries related to 2016 permanent release of pipeline capacity
(47
)
19


(28
)
 




 
Permanent release of pipeline capacity




 
206

(83
)

123

 
SDG&E tax repairs adjustments related to 2016 GRC FD




 
52

(21
)

31

 
SoCalGas tax repairs adjustments related to 2016 GRC FD




 
83

(34
)

49

 
Impairment of investment in Rockies Express




 
44

(17
)

27

 
Sempra Energy Adjusted Earnings
 
 
 
$
714

 
 
 
 
$
625

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share:
 
 
 
 
 
 
 
 
 
 
   Sempra Energy GAAP Earnings
 
 
 
$
2.77

 
 
 
 
$
1.47

 
   Sempra Energy Adjusted Earnings
 
 
 
$
2.83

 
 
 
 
$
2.48

 
Weighted-average number of shares outstanding, diluted (thousands)
 
 
 
252,609

 
 
 
 
251,775

 
(1)
Income taxes were calculated based on applicable statutory tax rates, except for adjustments that are solely income tax. Income taxes associated with TdM were calculated based on the applicable statutory tax rate, including translation from historic to current exchange rates. An income tax benefit of $12 million associated with the 2017 TdM impairment has been fully reserved.
 
(2)
Reflects the adoption of ASU 2016-09 as of January 1, 2016.
 





SEMPRA ENERGY
Table A (Continued)
RECONCILIATION OF SEMPRA ENERGY 2017 ADJUSTED EARNINGS-PER-SHARE GUIDANCE RANGE TO SEMPRA ENERGY 2017 GAAP EARNINGS-PER-SHARE GUIDANCE RANGE (Unaudited)

Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance Range of $5.00 to $5.30 excludes items (after the effects of taxes and, if applicable, noncontrolling interests) as follows:
$(47) million impairment of Sempra Mexico’s TdM assets held for sale
$5 million deferred income tax benefit on the TdM assets held for sale
$28 million of recoveries related to 2016 permanent release of pipeline capacity

Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance is a non-GAAP financial measure. Because of the significance and/or nature of the excluded items, management believes this non-GAAP financial measure provides additional clarity into the ongoing results of the business and the comparability of such results to prior and future periods and also as a base for projected earnings-per-share compound annual growth rate. Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance should not be considered an alternative to Earnings-Per-Share Guidance determined in accordance with GAAP. The table below reconciles Sempra Energy 2017 Adjusted Earnings-Per-Share Guidance Range to Sempra Energy 2017 GAAP Earnings-Per-Share Guidance Range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.
 
 
 
Full-Year 2017
Sempra Energy GAAP Earnings-Per-Share Guidance Range
 
$
4.95

to
$
5.25

Excluded items ( 1) :
 
 
 
 
 
Impairment of TdM assets held for sale
0.18

 
0.18

 
Deferred income tax benefit associated with TdM
(0.02
)
 
(0.02
)
 
Recoveries related to 2016 permanent release of pipeline capacity
(0.11
)
 
(0.11
)
Sempra Energy Adjusted Earnings-Per-Share Guidance Range
 
$
5.00

to
$
5.30

Weighted-average number of shares outstanding, diluted (thousands)
 
 
 
254,000

(1)
The effects of taxes and noncontrolling interests for excluded items are provided above in the reconciliation of Sempra Energy GAAP Earnings to Sempra Energy Adjusted Earnings.
 
 
 

 
 






SEMPRA ENERGY
Table B
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
(Dollars in millions)
June 30,
2017
 
December 31,
2016
(1)
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
223

 
$
349

Restricted cash
70

 
66

Accounts receivable, net
1,304

 
1,554

Due from unconsolidated affiliates
26

 
26

Income taxes receivable
110

 
43

Inventories
239

 
258

Regulatory balancing accounts – undercollected
261

 
259

Fixed-price contracts and other derivatives
186

 
83

Assets held for sale
109

 
201

Other
239

 
271

Total current assets
2,767

 
3,110

 
 
 
 
Other assets:
 
 
 
Restricted cash
17

 
10

Due from unconsolidated affiliates
373

 
201

Regulatory assets
3,569

 
3,414

Nuclear decommissioning trusts
1,029

 
1,026

Investments
2,134

 
2,097

Goodwill
2,379

 
2,364

Other intangible assets
541

 
548

Dedicated assets in support of certain benefit plans
427

 
430

Insurance receivable for Aliso Canyon costs
554

 
606

Deferred income taxes
166

 
234

Sundry
859

 
815

Total other assets
12,048

 
11,745

Property, plant and equipment, net
34,561

 
32,931

Total assets
$
49,376

 
$
47,786

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
1,826

 
$
1,779

Accounts payable
1,167

 
1,476

Due to unconsolidated affiliates
11

 
11

Dividends and interest payable
339

 
319

Accrued compensation and benefits
314

 
409

Regulatory balancing accounts – overcollected
204

 
122

Current portion of long-term debt
1,287

 
913

Fixed-price contracts and other derivatives
109

 
83

Customer deposits
158

 
158

Reserve for Aliso Canyon costs
63

 
53

Liabilities held for sale
47

 
47

Other
538

 
557

Total current liabilities
6,063

 
5,927

Long-term debt
15,000

 
14,429

 
 
 
 
Deferred credits and other liabilities:
 
 
 
Customer advances for construction
146

 
152

Pension and other postretirement benefit plan obligations, net of plan assets
1,240

 
1,208

Deferred income taxes
4,191

 
3,745

Deferred investment tax credits
27

 
28

Regulatory liabilities arising from removal obligations
2,746

 
2,697

Asset retirement obligations
2,469

 
2,431

Fixed-price contracts and other derivatives
330

 
405

Deferred credits and other
1,559

 
1,523

Total deferred credits and other liabilities
12,708

 
12,189

Equity:
 
 
 
Total Sempra Energy shareholders  equity
13,332

 
12,951

Preferred stock of subsidiary
20

 
20

Other noncontrolling interests
2,253

 
2,270

Total equity
15,605

 
15,241

Total liabilities and equity
$
49,376

 
$
47,786

 
 
 
 
(1)
Derived from audited financial statements.





SEMPRA ENERGY
Table C
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30,
(Dollars in millions)
 
2017
 
2016 (1)
 
 
(unaudited)
Cash Flows from Operating Activities
 
 
 
 
Net income
 
$
700

 
$
391

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
728

 
642

Deferred income taxes and investment tax credits
 
411

 
(76
)
Impairment losses
 
71

 
22

Equity earnings, net
 
(13
)
 
(42
)
Fixed-price contracts and other derivatives
 
(142
)
 
41

Other
 
(19
)
 
45

Net change in other working capital components
 
138

 
167

Insurance receivable for Aliso Canyon costs
 
52

 
(354
)
Changes in other assets
 
(88
)
 
(67
)
Changes in other liabilities
 
51

 
147

Net cash provided by operating activities
 
1,889

 
916

 
 
 
 
 
Cash Flows from Investing Activities
 
 
 
 
Expenditures for property, plant and equipment
 
(1,802
)
 
(2,006
)
Expenditures for investments
 
(97
)
 
(46
)
Proceeds from sale of assets
 
4

 
443

Distributions from investments
 
18

 
12

Purchases of nuclear decommissioning and other trust assets
 
(823
)
 
(206
)
Proceeds from sales by nuclear decommissioning and other trusts
 
823

 
204

Increases in restricted cash
 
(194
)
 
(32
)
Decreases in restricted cash
 
185

 
44

Advances to unconsolidated affiliates
 
(183
)
 
(9
)
Repayments of advances to unconsolidated affiliates
 
2

 
9

Other
 

 
(6
)
Net cash used in investing activities
 
(2,067
)
 
(1,593
)
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
Common dividends paid
 
(368
)
 
(335
)
Preferred dividends paid by subsidiary
 
(1
)
 
(1
)
Issuances of common stock
 
28

 
29

Repurchases of common stock
 
(14
)
 
(54
)
Issuances of debt (maturities greater than 90 days)
 
1,932

 
1,384

Payments on debt (maturities greater than 90 days)
 
(1,006
)
 
(986
)
(Decrease) increase in short-term debt, net
 
(493
)
 
865

Net distributions to noncontrolling interests
 
(25
)
 
(10
)
Other
 
(9
)
 
(10
)
Net cash provided by financing activities
 
44

 
882

 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
8

 
8

 
 
 
 
 
(Decrease) increase in cash and cash equivalents
 
(126
)
 
213

Cash and cash equivalents, January 1
 
349

 
403

Cash and cash equivalents, June 30
 
$
223

 
$
616

 
 
(1)
As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.







SEMPRA ENERGY
Table D
 
 
 
 
 
 
 
 
SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES AND INVESTMENTS
 
 
 
 
 
 
 
 
 
Three months ended
June 30,
 
Six months ended
June 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016 (1)
 
    (unaudited)
Earnings (Losses)
 
 
 
 
 
 
 
Sempra Utilities:
 
 
 
 
 
 
 
San Diego Gas & Electric
$
149

 
$
100

 
$
304

 
$
236

Southern California Gas
58

 
(1
)
 
261

 
198

Sempra South American Utilities
45

 
43

 
92

 
81

Sempra Infrastructure:
 
 
 
 
 
 
 
Sempra Mexico
(9
)
 
57

 
39

 
75

Sempra Renewables
23

 
12

 
34

 
26

Sempra LNG & Midstream
27

 
(149
)
 
28

 
(181
)
Parent and other
(34
)
 
(46
)
 
(58
)
 
(66
)
Earnings
$
259

 
$
16

 
$
700

 
$
369

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
June 30,
 
Six months ended
June 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
 
    (unaudited)
Capital Expenditures and Investments
 
 
 
 
 
 
 
Sempra Utilities:
 
 
 
 
 
 
 
San Diego Gas & Electric
$
345

 
$
273

 
$
763

 
$
602

Southern California Gas
325

 
310

 
682

 
650

Sempra South American Utilities
34

 
39

 
77

 
82

Sempra Infrastructure:
 
 
 
 
 
 
 
Sempra Mexico
87

 
100

 
227

 
140

Sempra Renewables
31

 
279

 
100

 
478

Sempra LNG & Midstream
22

 
45

 
37

 
92

Parent and other
4

 
5

 
13

 
8

Consolidated Capital Expenditures and Investments
$
848

 
$
1,051

 
$
1,899

 
$
2,052

 
 
 
 
 
 
 
 
(1)
As adjusted for the adoption of ASU 2016-09 as of January 1, 2016.
 






SEMPRA ENERGY
Table E
 
OTHER OPERATING STATISTICS (Unaudited)
 
 
Three months ended
June 30,
 
Six months ended
June 30,
UTILITIES
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
SDG&E and SoCalGas
 
 
 
 
 
 
 
Gas Sales (Bcf) (1)
71

 
73

 
197

 
186

Transportation (Bcf) (1)
148

 
144

 
304

 
292

Total Deliveries (Bcf) (1)
219

 
217

 
501

 
478

 
 
 
 
 
 
 
 
Total Gas Customers (Thousands)
 
 
 
 
6,825

 
6,789

 
 
 
 
 
 
 
 
Electric Sales (Millions of kWhs) (1)
3,565

 
3,512

 
7,329

 
7,285

Direct Access (Millions of kWhs)
786

 
772

 
1,573

 
1,606

Total Deliveries (Millions of kWhs) (1)
4,351

 
4,284

 
8,902

 
8,891

 
 
 
 
 
 
 
 
Total Electric Customers (Thousands)
 
 
 
 
1,438

 
1,429

 
 
 
 
 
 
 
 
Other Utilities
 
 
 
 
 
 
 
Natural Gas Sales (Bcf)
 
 
 
 
 
 
 
Sempra Mexico
7

 
7

 
15

 
15

Mobile Gas (2) (3)

 
11

 

 
24

Willmut Gas (3)

 
1

 

 
2

Natural Gas Customers (Thousands)
 
 
 
 
 
 
 
Sempra Mexico
 
 
 
 
120

 
116

Mobile Gas (2) (3)
 
 
 
 

 
85

Willmut Gas (3)
 
 
 
 

 
19

Electric Sales (Millions of kWhs)
 
 
 
 
 
 
 
Peru
1,780

 
1,887

 
3,674

 
3,836

Chile
691

 
682

 
1,502

 
1,481

Electric Customers (Thousands)
 
 
 
 
 
 
 
Peru
 
 
 
 
1,086

 
1,065

Chile
 
 
 
 
696

 
679

 
 
 
 
 
 
 
 
ENERGY-RELATED BUSINESSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sempra Infrastructure
 
 
 
 
 
 
 
Power Sold (Millions of kWhs)
 
 
 
 
 
 
 
Sempra Mexico (4)
650

 
665

 
1,705

 
1,245

Sempra Renewables (5)
1,192

 
725

 
2,206

 
1,492

Sempra LNG & Midstream
229

 
243

 
494

 
464

 
 
(1)
Includes intercompany sales.
(2)
Includes transportation.
(3)
On September 12, 2016, Sempra LNG & Midstream completed the sale of the parent company of Mobile Gas and Willmut Gas.
(4)
Includes power sold at the Termoeléctrica de Mexicali natural gas-fired power plant and in 2017, at the Ventika wind power generation facilities acquired in December 2016. Also includes 50 percent of total power sold at the Energía Sierra Juárez wind power generation facility, in which Sempra Energy has a 50-percent ownership interest. Energía Sierra Juárez is not consolidated within Sempra Energy, and the related investment is accounted for under the equity method.
(5)
Includes 50 percent of total power sold related to solar and wind projects in which Sempra Energy has a 50-percent ownership. These subsidiaries are not consolidated within Sempra Energy, and the related investments are accounted for under the equity method.





 
         SEMPRA ENERGY
           Table F (Unaudited)
STATEMENTS OF OPERATIONS DATA BY SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
SDG&E
 
SoCalGas
 
Sempra South American Utilities
 
Sempra Mexico
 
Sempra Renewables
 
Sempra LNG & Midstream
 
Consolidating Adjustments, Parent & Other
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
1,058

 
$
770

 
$
381

 
$
273

 
$
26

 
$
122

 
$
(97
)
 
 
$
2,533

Cost of sales and other expenses
(651
)
 
(549
)
 
(294
)
 
(130
)
 
(20
)
 
(71
)
 
78

 
 
(1,637
)
Depreciation and amortization
(166
)
 
(126
)
 
(13
)
 
(37
)
 
(10
)
 
(11
)
 
(5
)
 
 
(368
)
Impairment loss

 

 

 
(71
)
 

 

 

 
 
(71
)
Equity earnings, before income tax

 

 

 

 
16

 
2

 

 
 
18

Other income, net
15

 
9

 
2

 
60

 
1

 

 
4

 
 
91

Income (loss) before interest and tax (1)
256

 
104

 
76

 
95

 
13

 
42

 
(20
)
 
 
566

Net interest (expense) income (2)
(49
)
 
(27
)
 
(5
)
 
(17
)
 
(2
)
 
3

 
(55
)
 
 
(152
)
Income tax (expense) benefit
(54
)
 
(19
)
 
(20
)
 
(102
)
 
5

 
(18
)
 
41

 
 
(167
)
(Earnings) losses attributable to noncontrolling interests
(4
)
 

 
(6
)
 
15

 
7

 

 

 
 
12

Earnings (losses)
$
149

 
$
58

 
$
45

 
$
(9
)
 
$
23

 
$
27

 
$
(34
)
 
 
$
259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
SDG&E
 
SoCalGas
 
Sempra South American Utilities
 
Sempra Mexico
 
Sempra Renewables
 
Sempra LNG & Midstream
 
Consolidating Adjustments, Parent & Other
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
992

 
$
617

 
$
385

 
$
147

 
$
6

 
$
90

 
$
(81
)
 
 
$
2,156

Cost of sales and other expenses
(664
)
 
(495
)
 
(306
)
 
(86
)
 
(13
)
 
(336
)
 
66

 
 
(1,834
)
Depreciation and amortization
(158
)
 
(112
)
 
(14
)
 
(15
)
 
(2
)
 
(12
)
 
(1
)
 
 
(314
)
Impairment loss

 
(21
)
 

 

 

 

 

 
 
(21
)
Equity earnings, before income tax

 

 

 

 
11

 
3

 

 
 
14

Other income (expense), net
13

 
6

 
5

 
(15
)
 
1

 
1

 
12

 
 
23

Income (loss) before interest and tax (1)
183

 
(5
)
 
70

 
31

 
3

 
(254
)
 
(4
)
 
 
24

Net interest (expense) income (2)
(48
)
 
(25
)
 
(6
)
 
(3
)
 

 
7

 
(62
)
 
 
(137
)
Income tax (expense) benefit
(48
)
 
29

 
(15
)
 
12

 
9

 
99

 
20

 
 
106

Equity earnings, net of income tax

 

 

 
33

 

 

 

 
 
33

Losses (earnings) attributable to noncontrolling interests
13

 

 
(6
)
 
(16
)
 

 
(1
)
 

 
 
(10
)
Earnings (losses)
$
100

 
$
(1
)
 
$
43

 
$
57

 
$
12

 
$
(149
)
 
$
(46
)
 
 
$
16

 
 
(1)
Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments’ performance because it can be used to evaluate the effectiveness of our operations exclusive of
 
interest and income tax, neither of which is directly relevant to the efficiency of those operations.
(2)
Includes interest income, interest expense and preferred dividends of subsidiary.
 
 
 






         SEMPRA ENERGY
           Table F (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENTS OF OPERATIONS DATA BY SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
SDG&E
 
SoCalGas
 
Sempra South American Utilities
 
Sempra Mexico
 
Sempra Renewables
 
Sempra LNG & Midstream
 
Consolidating Adjustments, Parent & Other
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
2,115

 
$
2,011

 
$
793

 
$
537

 
$
48