Sempra Energy's earnings nearly tripled in the third quarter, strongly boosted by one-time gains from the sale of power plants and an oil exploration company.
The San Diego-based owner of utilities and unregulated energy companies reported yesterday that net income rose to $653 million, or $2.49 a share, from $221 million, or 86 cents a share, a year ago.
About half the increase in earnings – some $331 million – was attributed to the disposition of the power plants and the oil exploration company, all of which were located in Texas.
Excluding the asset sales, Sempra's earnings were $322 million, or $1.27 a share. The company exceeded the earnings estimate of 96 cents a share, the average of nine analysts surveyed by Thomson Financial.
Overall, Sempra's non-utility businesses reported a $177 million increase in earnings for the quarter to $376 million.
The company's utility businesses – which include San Diego Gas & Electric Co. and Southern California Gas Co. – saw earnings fall by $7 million to $131 million, compared with same quarter last year.
While Sempra's quarterly earnings soared, revenue slipped a bit to $2.69 billion, down from $2.71 billion last year.
Broken down by unit, Sempra's commodity trading business saw third quarter net income slide to $105 million, down from $161 million last year, when earnings were affected by one-time events that resulted in a $40 million gain.
The company said most areas of commodity trading were strong except for petroleum, where profits were lower.
In a conference call with analysts, Sempra Chief Executive Donald Felsinger said he could foresee a time when the commodity business could grow so large that the company might need a partner to manage the risk and fully exploit the opportunity.
He said, however, that was unlikely to occur before 2008.
SDG&E earnings, meanwhile, fell to $70 million from $102 million in the same period last year, when they benefited from a $39 million one-time gain from the resolution of a tax issue.
Earnings at SoCal Gas rose to $61 million from $36 million in the previous year when it took a $53 million reserve for litigation settlement. That reserve was partly offset last year by an $18 million gain from the resolution of a tax issue.
Sempra Generation, a business unit that sells electricity in the wholesale market, reported earnings of $265 million, up from $24 million. The increase was primarily due to a gain of $211 million from the sale of the Texas power plants.
Net income from Sempra's pipelines and storage subsidiary was $19 million, unchanged from last year.
Sempra's LNG unit, which is building liquefied natural gas receiving terminals, reported a net loss of $13 million, compared with a loss of $5 million for the period last year.
Interest in expanding the company's LNG receiving terminal under construction in Baja California has cooled, Felsinger told analysts, because progress has slowed in building facilities overseas that would liquify gas for shipment to the terminal.
“Longer-term, we are still very bullish,” he told analysts.
Felsinger also reiterated Sempra's plan to focus on its core natural gas infrastructure businesses and its California utilities, while divesting non-core assets. The infrastructure businesses include pipelines and LNG terminals.
The company raised its forecast for annual earnings excluding asset sales by about 10 cents a share, to a range of $3.50 to $3.70 a share.
“The sale of the assets was really the headline gainer,” said Paul Justice, an analyst at Morningstar Investment Service in Chicago. “The underlying business was also very impressive.”
Michael Heim, a vice president of A.G. Edwards & Sons in St. Louis, said it was “just another terrific quarter for the company.”
He added that the company's cash position of $1.5 billion and its assertion it wouldn't have to sell stock to finance its ambitious capital expenditure plans were reassuring.
Sempra's shares closed at $53.18, up 6 cents, in heavy trading yesterday on the New York Stock Exchange.
Bloomberg News contributed to this report.
Craig Rose: (619) 293-1814; craig.rose@uniontrib.com
