Sempra Energy’s once-lucrative joint venture commodities business with the Royal Bank of Scotland, RBS Sempra Commodities, should be dissolved by the end of August, CEO Donald Felsinger said Tuesday while the company reported greatly reduced earnings for the first quarter. The exit from trading and a one-time earnings hit from a settlement with California state entities contributed to the earnings decline.
Sempra reported first quarter profits of $106 million, or 42 cents/share, compared to $316 million, or $1.29/share, in the first quarter last year. The hit to profits came from a $96 million one-time charge related to a $410 million litigation settlement announced at the end of April stemming from California’s 2000-2001 energy crisis, which impacted both Sempra’s independent generation and joint venture trading units.
Both Sempra Generation and the joint venture RBS Sempra unit reported losses in the first quarter — $53 million, compared to $43 million of profits in the first quarter of 2009 for the generation business, and a loss of $5 million, compared to $114 million in net profits from the commodities business in the first quarter of 2009.
In response to questions from financial analysts, Felsinger said Sempra’s initial projection that it would remain in the joint venture trading business through the end of this year has now been accelerated forward based on what he called “progress” made with the international sale of the trading arm to J.P. Morgan and in selling the second half of the business — the North American natural gas and electricity trading book, for which a buyer is still being sought.
“We’re fairly comfortable now with our ability to control the timing so we will be out of this business early in the second half of this year,” said Felsinger, noting that his expectation is “to be out of the business by July or August.” He said Sempra is working as hard as it can in this regard, so by the time it has its second quarter earnings conference call “we will either be out or close to being out.”
In response to separate questions, CFO Mark Snell said Sempra’s projected share of the overall two-part sale of the joint venture trading business is in the $2 billion area.
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