SDG&E buys more fire insurance
Sempra Energy also says profits up 12%, SDG&E up 7%
How Sempra's different businesses fared
Second-quarter results at Sempra's subsidiaries:
- SDG&E had profits of $75 million, up from $70 million.
- Southern California Gas Co. had profits of $69 million, compared with $65 million last year.
- Sempra Generation had profits of $48 million, up from $33 million. While it made money from tax credits, it lost money because the Easter Day earthquake damaged a power plant in Mexicali and other power plants were down for maintenance.
- Sempra Pipelines & Storage had profits of $39 million. Last year it lost $27 million in the same time period after writing off a failed salt cavern.
- Sempra LNG had $13 million in profits, compared to a loss of $12 million a year ago. A major terminal in Louisiana came online last fall. This also included $11 million that Sempra received when its partners diverted gas elsewhere.
- Sempra's commodities operations, which are for sale, broke even because oil and gas prices are stable, and it has been giving big bonuses to traders to keep them from leaving. A year ago it had profits of $199 million.
San Diego Gas & Electric, blamed for three massive wildfires in 2007, has bought more liability insurance, and it's planning to pass the cost on to customers.
"We were able to get more insurance, though it was quite expensive," said Neal Schmale, president and chief operating officer of Sempra Energy, the utility's parent company, in a earnings conference call with analysts Tuesday.
San Diego-based Sempra Energy announced second-quarter profits of $222 million, or 89 cents a share, on revenues of $2.01 billion, this morning.
That's a 12 percent rise over a year earlier, when it announced a second-quarter profit of $198 million, or 80 cents a share.
Analysts polled by Thomson Reuters had forecast earnings of 82 cents on $1.91 billion in revenue.
Sempra is the parent company of San Diego Gas & Electric and Southern California Gas.
With the new insurance, SDG&E now has $950 million in coverage, nearly double what it had at the beginning of the year, Schmale said.
The liability insurance premiums, which cost it $11 million more this year than last, hurt profits at SDG&E, he said.
SDG&E posted a profit of $75 million, a rise of 7.1 percent, on revenue of $688 million. In 2009, SDG&E had second-quarter profits of $70 million on $631 million in revenue.
Schmale said he expects the California Public Utilities Commission to approve passing the additional insurance costs on to customers through rates.
Getting insurance has been a big problem for SDG&E, which expects to exhaust the $1.1 billion in insurance it was carrying at the time of the fires.
The company is using insurance proceeds to pay out settlements from lawsuits with insurance companies, homeowners and others who were hurt or had property damage in the wildfires.
In addition to its utilities, Sempra also has subsidiaries which generate electricity, import liquefied natural gas and operate natural gas pipelines and huge underground storage caverns.
"Our core businesses performed well in the quarter," said Chief Executive Don Felsinger.
The company made a $64 million second-quarter charge to write down assets in its pipelines unit.
It also announced plans to repurchase $500 million in stock in the next few months.
Sempra reported profits of $328 million, or $1.31 per share, for the first half of the year, compared with $514, or $2.09 per share, a year earlier.
In April, Sempra forecast 2010 earnings of $3.15 to $3.40 a share. That was lowered from an earlier forecast of $4.25 to $4.50 because of a $410 million settlement for pair of lawsuits dating back to the California energy crisis of 2000 and 2001.
State officials accused the company of rigging prices and profiteering, something Sempra denied. The settlement included including $270 million to electricity customers in California.
Because of that settlement, it included a $96 million after-tax charge in its first-quarter results this year.
Sempra is in the process of divesting itself of a commodities trading unit it owned as a joint venture with the Royal Bank of Scotland.
In July, JPMorgan Chase paid $1.6 billion for part of the RBS Sempra Commodities joint venture that trade in oil, metals and coal trading worldwide, along with power and gas in Europe and emissions in the United States.
Sempra is getting $1 billion from that sale. It is using half of that money to pay down debt and build new projects, and half to buy back stock.
Sempra and RBS are still looking for buyers for the other half of the business, which trades in power and natural gas in the United States and also sells power in the retail market.
That part of the business is worth about $2 billion.
Sempra shares closed at $51.36, up 1.8 percent or 91 cents on Tuesday.
