Reporting framework and boundary
This report meets the requirements of a core-level G4 report according to the Global Reporting Initiative (GRI). Our detailed GRI G4 content index can be found in the Full report section.
This report covers all businesses and facilities where we have operational control. Additionally, it covers the Cameron LNG facility – a facility that we do not control but that we project will have a significant impact on our earnings. Other exceptions or additions are noted.
Data collection and verification, content review
We gather the majority of the data included in this report using a data-collection system. This system collects and aggregates performance data and supporting documents from each of our four principal subsidiaries as well as our corporate headquarters.
Greenhouse gas emissions for 2014 were verified as follows: SDG&E, by GHD Services, Inc.; SoCalGas, by Lloyd’s Register Quality Assurance, Inc.; and Termoeléctrica de Mexicali, by Cameron-Cole, LLC. The verification process for 2015 greenhouse gas emissions will be completed later in 2016.
The EHS&T Committee of Sempra Energy’s board of directors also reviewed this report prior to its publication.
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We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
In this report, when we use words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “intends,” “assumes,” “depends,” “should,” “could,” “would,” “will,” “confident,” “may,” “potential,” “possible,” “proposed,” “target,” “pursue,” “goals,” “outlook,” “maintain,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, opportunities, projections, initiatives, objectives or intentions, we are making forward-looking statements.
Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include:
- local, regional, national and international economic, competitive, political, legislative, legal and regulatory conditions, decisions and developments;
- actions and the timing of actions, including general rate case decisions, new regulations, issuances of permits to construct, operate, and maintain facilities and equipment and to use land, franchise agreements and licenses for operation, by the California Public Utilities Commission, California State Legislature, U.S. Department of Energy, California Division of Oil, Gas, and Geothermal Resources, Federal Energy Regulatory Commission, Nuclear Regulatory Commission, California Energy Commission, U.S. Environmental Protection Agency, Pipeline and Hazardous Materials Safety Administration, California Air Resources Board, South Coast Air Quality Management District, Mexican Competition Commission, cities and counties, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
- the timing and success of business development efforts and construction, maintenance and capital projects, including risks in obtaining, maintaining or extending permits, licenses, certificates and other authorizations on a timely basis and risks in obtaining adequate and competitive financing for such projects;
- the resolution of civil and criminal litigation and regulatory investigations;
- deviations from regulatory precedent or practice that result in a reallocation of benefits or burdens among shareholders and ratepayers, and delays in regulatory agency authorization to recover costs in rates from customers;
- the availability of electric power, natural gas and liquefied natural gas, and natural gas pipeline and storage capacity, including disruptions caused by failures in the North American transmission grid, moratoriums on the ability to withdraw natural gas from or inject natural gas into storage facilities, pipeline explosions and equipment failures;
- energy markets; the timing and extent of changes and volatility in commodity prices; and the impact on the value of our natural gas storage and related assets and our investments from low natural gas prices, low volatility of natural gas prices and the inability to procure favorable long-term contracts for natural gas storage services;
- risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest, and risks that our partners or counter-parties will be unable (due to liquidity issues, bankruptcy or otherwise) or unwilling to fulfill their contractual commitments;
- capital markets conditions, including the availability of credit and the liquidity of our investments, and inflation, interest and currency exchange rates;
- cybersecurity threats to the energy grid, natural gas storage and pipeline infrastructure, the information and systems used to operate our businesses and the confidentiality of our proprietary information and the personal information of our customers and employees; terrorist attacks that threaten system operations and critical infrastructure; and wars;
- the ability to win competitively bid infrastructure projects against a number of strong competitors willing to aggressively bid for these projects;
- weather conditions, natural disasters, catastrophic accidents, equipment failures and other events that may disrupt our operations, damage our facilities and systems, cause the release of greenhouse gasses, radioactive materials and harmful emissions, and subject us to third-party liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance or may be disputed by insurers;
- disallowance of regulatory assets associated with, or decommissioning costs of, the San Onofre Nuclear Generating Station facility due to increased regulatory oversight, including motions to modify settlements;
- expropriation of assets by foreign governments and title and other property disputes;
- the impact on reliability of San Diego Gas & Electric Company’s (SDG&E) electric transmission and distribution system due to increased amount and variability of power supply from renewable energy sources and increased reliance on natural gas and natural gas transmission systems;
- the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through SDG&E’s electric transmission and distribution system;
- the inability or determination not to enter into long-term supply and sales agreements or long-term firm capacity agreements due to insufficient market interest, unattractive pricing or other factors; and
- other uncertainties, all of which are difficult to predict and many of which are beyond our control.
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described herein and in our most recent Annual Report on Form 10-K and other reports that we file with the Securities and Exchange Commission.
Supplemental reconciliation of Sempra Energy GAAP earnings to Sempra Energy adjusted earnings (unaudited)
Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share exclude the following: in 2015, a $36 million gain on the sale of the remaining block of the Mesquite Power plant and $10 million of liquefied natural gas (LNG) liquefaction development expenses, and in 2013, $77 million retroactive impact of the 2012 General Rate Case (GRC) for the full-year 2012. Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share also exclude the following amounts related to San Diego Gas & Electric Company’s (SDG&E) San Onofre Nuclear Generating Station (SONGS): in 2013, a $119 million plant closure loss from the early retirement of SONGS; in 2014, a $21 million charge to adjust the total plant closure loss; and in 2015, a $15 million reduction to the total plant closure loss, primarily due to the California Public Utilities Commission approval of SDG&E’s compliance filing for authorized recovery of its investment in SONGS.
Sempra Energy Adjusted Earnings and Adjusted Earnings Per Share are non-GAAP financial measures (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and nature of these items, management believes that these non-GAAP financial measures provide a more meaningful comparison of the performance of Sempra Energy’s business operations from 2015 to prior and future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles for historical periods these non-GAAP financial measures to Sempra Energy Earnings and Diluted Earnings Per Common Share, which we consider to be the most directly comparable financial measures calculated in accordance with GAAP.
Years ended December 31st
|Reconciliation of Sempra Energy Earnings to Sempra Energy Adjusted Earnings|
(Dollars in millions, except per share amounts)
|Sempra Energy GAAP Earnings||$1,349||$1,161||$1,001|
|Gain on sale of Mesquite Power block 2||(36)||–||–|
|Plant closure (adjustment) loss||(15)||21||119|
|LNG liquefaction development expenses||10||–||–|
|Retroactive impact of 2012 GRC for full-year 2012||–||–||(77)|
|Sempra Energy Adjusted Earnings||$1,308||$1,182||$1,043|
|Diluted earnings per common share:|
|Sempra Energy GAAP Earnings||$5.37||$4.63||$4.01|
|Sempra Energy Adjusted Earnings||$5.21||$4.71||$4.18|
|Weighted-average number of shares outstanding, diluted (thousands)||$250,923||$250,655||$249,332|