The recently announced sales of its assets in a joint venture (JV) trading operation helped Sempra Energy to achieve one of its key goals for 2010 -- exiting the commodities trading business -- and the jettisoning of the money-losing segment, along with $1.8-1.9 billion in proceeds that the San Diego-based company expects from the sale, foreshadow brighter days ahead, according to CEO Donald Felsinger.
Sempra reported 3Q2010 earnings of $131 million (53 cents/share), down 58% compared with $317 million ($1.27) in 3Q2009. Those results included a previously announced $139 million after-tax charge from the writedown of the company's investment in the RBS Sempra Commodities JV and a commodity operations earnings loss of $134 million in 3Q2010, compared with earnings of $75 million in 3Q2009. Sempra's 3Q2010 earnings would have been $265 million without the Sempra Commodities losses, up about 10% from $242 million in the previous year period, Felsinger said.
"The solid results from our core businesses in the third quarter keep us on track to meet our 2010 earnings guidance," he said during a conference call with analysts Tuesday. Sempra reaffirmed its 2010 earnings per share guidance of $3.15-3.40, excluding results from Sempra Commodities.
Last month Sempra and the Royal Bank of Scotland (RBS) said they had sold "most" of the remaining assets in their JV to JP Morgan Ventures Energy Corp., a unit of JP Morgan Chase & Co. (see Daily GPI, Oct. 8). The deal, together with previously announced sales (see Daily GPI, Sept. 21), would effectively complete the divestiture of the last principal assets of RBS Sempra Commodities, the partners said. Last week Sempra and RBS completed the sale of the San Diego-based Sempra Energy Solutions unit of RBS Sempra Commodities to Hong Kong-based Noble Group Ltd. (see Power Market Today, Nov. 2); the sale of North American natural gas and power assets is expected to close Dec. 1.
In February JP Morgan bought the joint venture's European and Asian operations for $1.7 billion. The sale of the foreign holdings was announced as a prelude to the disposition of the other major part of the business, North American natural gas and power trading (see Daily GPI, Feb. 17).
Sempra officials previously said Sempra faced a year of flat earnings before its ongoing businesses -- all of which are expected to keep growing -- produce an overall increase in profits. Segment earnings in 3Q2010 were mixed, with Sempra Generation faring best; the unit reported earnings of $56 million compared with $43 million in 3Q2009. The increase was due primarily to renewable energy tax credits from investment in the Copper Mountain Solar project in Nevada.
San Diego Gas & Electric reported 3Q2010 earnings of $106 million compared with $108 million in 3Q2009; Southern California Gas Co. reported 3Q2010 earnings of $78 million compared with $74 million in 3Q2009.
On the natural gas side, Sempra Pipelines & Storage reported 3Q2010 earnings of $43 million compared with $54 million in 3Q2009. During 3Q2010 Sempra Pipelines & Storage commenced operations of the first of two storage caverns under development at its Mississippi Hub natural gas storage facility in Simpson County, MS (see Daily GPI, Aug. 30). Last month the unit began service in Cavern 4 at its Bay Gas Storage facility in Alabama (see Daily GPI, Oct. 6).
Sempra LNG reported 3Q2010 earnings of $5 million compared with breakeven in 3Q2009.
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