Although its previous high-flying trading and international operations were down, San Diego-based Sempra Energy rode its California utility, energy services and power sales operations to increased profits in the second quarter, reporting on Tuesday net income of $147 million, or 71 cents/diluted share, compared with $137 million, or 66 cents/diluted share for the second quarter of last year.

A great portion of the earnings came from Sempra’s two large utilities — Southern California Gas Co. ($51 million, compared to $47 million a year earlier) and San Diego Gas and Electric Co. ($51 million, compared to $37 million in the same quarter in 2002). Sempra noted, however, that the increase for SDG&E was due “primarily” to a $25 million after-tax benefit from favorable resolution of tax issues from prior years, and partially offset by increased depreciation expense. The combination utility’s second-quarter 2001 results included a $7 million after-tax benefit from incentive awards, the timing of which varies.

Sempra Energy Trading results were down — $21 million for the second quarter 2002, compared to $69 million for last year’s second quarter; similarly international operations had net income of $9 million for the quarter, compared with $14 million during the same period last year. But Sempra Energy Solutions, an energy services unit serving the large commercial/industrial sector, more than doubled its second quarter results ($5 million vs. $2 million in the second quarter last year); and Sempra Energy Resources, a merchant energy provider, had net income of $34 million, compared to a loss of $9 million for the second quarter, 2002. The latter turnaround was attributed almost entirely to the company’s currently disputed wholesale electricity supply contract with California’s state power buying agency, the Department of Water Resources (DWR).

Overall, Sempra CEO Stephen Baum said he was “pleased” that the company is continuing to deliver “solid financial results quarter after quarter,” and is demonstrating “consistency in meeting financial targets.” He called the current times “challenging” for the entire trading sector, noting he is pleased that year-to-date, Sempra’s trading unit has delivered $63 million in net income (not quite what it earned in the second quarter of 2001).

Baum called the trading operation “a key part of our balanced portfolio of businesses,” and characterized the 10-year, $6.6 billion wholesale power deal with DWR as “part of the solution to California’s energy crisis.”

The company “reaffirmed” its earnings-per-share targets of $2.65 for 2002 and $2.90 for 2003. “Despite the current uncertainty in the energy industry, companies like Sempra Energy with solid track records of meeting earnings targets, strong and transparent balance sheets and investment-grade credit ratings ultimately will be properly valued by the market,” Baum said in Sempra’s formal earnings announcement.

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