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Sempra Energy Reports 38% Hike in '04 Net Income; 4Q Up 48%

Following strong performance in energy trading and wholesale power generation, San Diego-based Sempra Energy Wednesday reported 38% and 48% increases in net income for 2004 overall and for the fourth quarter last year, respectively.

Sempra reported full-year net income of $895 million, or $3.83/diluted share, and fourth quarter net income of $346 million, or $1.46/diluted share. Revenues for Sempra in 2004 were $9.4 billion, compared with $7.9 billion in 2003, with the company reporting that "increased power sales and commodity trading" were the major drivers of the $1.5 billion increase year-over-year. In the fourth quarter, revenues were $2.9 billion, compared with $2.1 billion in the last quarter of 2003.

Ironically, Sempra reported that earnings from its core California utility business were down overall. San Diego Gas and Electric Co. reported lower earnings for the year and for the fourth quarter ($208 million and $68 million, respectively, compared with $334 million and $128 million for 2003). Southern California Gas Co. net income increased in 2004 to $232 million, compared with $209 million in 2003, but its fourth quarter results declined slightly compared to the same quarter in 2003 ($58 million versus $61 million in the last quarter of 2003). Two one-time positive recordings totaling $144 million in 2003 inflated SDG&E's net income in that year, particularly in the third and fourth quarters.

A state regulatory decision on the utilities' rates last December extending through 2007 should ensure that the utilities "continue to earn a reasonable return as they invest in critical new infrastructure to serve their customers," said Sempra CEO Steve Baum, who announced last year he will retire in January 2006.

"This marks the sixth consecutive year of record earnings for Sempra Energy, a period during which we have averaged earnings growth of more than 20% annually," said Baum, who assumed the CEO position with Sempra in mid-2000, two years after the company was formed by a merger of Enova Corp. and Pacific Enterprises. "In 2004, we further strengthened our balance sheet and significantly advanced our liquefied natural gas (LNG) business. Our commodity trading and electric generation businesses experienced robust growth and our California utilities continue to excel."

Sempra Commodities, the newly named energy trading unit, doubled its net income in 2004 compared to 2003 ($320 million versus $157 million) and for the fourth quarter ($171 million compared with $73 million). Similarly, Sempra Generation, the non-utility electric power plant unit, reported $137 million for net income last year overall, compared with $71 million in 2003; however, it slipped in the fourth quarter with $19 million in net income, compared with $32 million in the last quarter of 2003. The 4Q drop was primarily due to "litigation reserves," Sempra said.

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