San Diego Gas & Electric’s (SDG&E) 2Q12 earnings were $95m, up from $71m in the year-ago quarter, due mainly to higher earnings from the Sunrise Powerlink, which was put in service in June, according to Joseph Householder, Sempra Energy (NYSE:SRE) CFO and executive vice president.
SDG&E is a subsidiary of Sempra.
Indeed, Sempra CEO Debra Reed said during the company’s 2Q12 earnings call on Aug. 2, “[The] 117-mile, 500-kV transmission line is a key resource that will bolster our region’s electric reliability, particularly [in] the summer during the extended outage at San Onofre.”
The San Onofre nuclear power plant, which has a generating capacity of about 2,000 MW, is expected to remain out of service for at least a few more months. SDG&E is a part owner of the plant, while Edison International (NYSE:EIX) subsidiary Southern California Edison is the plant’s majority owner and operator.
The line will deliver a significant amount of renewable energy to San Diego and provide more than $100m annually in regional economic benefit, Reed said.
“From a financial perspective, Sunrise will now move out of our construction work-in-progress account and into rate base,” she said. “At year-end, we expect our rate base investment in Sunrise to be about $1.4bn, which reflects the impact of bonus depreciation. As with all transmission and substation investments, Sunrise will earn at the FERC-authorized rate of return on equity.”
She also noted that the company received California Public Utilities Commission approval in the second quarter on the East County, or ECO substation, which she said is a $435m project that will boost electric reliability in the region and help increase the delivery of renewable power to utility customers. Construction should begin later this year, with the project being placed in service by 2014. When placed in service, the investment will be included in SDG&E’s FERC rate base, she added.
Efforts in South America
Reed also discussed growth opportunities in its international business, noting that Sempra has formed a joint venture in Chile with SAESA, a similarly sized distribution company, to develop electric transmission projects.
“The Chilean government has awarded our joint venture two projects as part of a competitive bidding process,” she said. “These projects, which we expect to complete in 2017, will require a total investment of $160m by the [joint venture], and our share can be funded by local debt and cash. The Chilean government has also announced a bid later this year for five additional transmission projects, which provides further opportunities to expand our presence in the transmission sector in Chile.”
Sempra reported 2Q12 earnings of $62m, or 25 cents per diluted share, compared with earnings of $503m, or $2.09 per diluted share, in 2Q11.
2Q12 earnings included a $179m non-cash charge related to a write-down on the company’s investment in the Rockies Express Pipeline. Sempra also said that last year’s second-quarter earnings included a gain of $277m, reflecting the write-up in the value of the company’s original investments in Chile and Peru as a result of the acquisition of a controlling interest in those utilities.
Excluding these unusual items in both years, adjusted second-quarter earnings increased to $241m, or 98 cents per diluted share, in 2012 from $226m, or 94 cents per diluted share, in 2011.
Sempra Energy also said its earnings through the first six months of 2012 were $298m, or $1.21 per diluted share, compared with $757m, or $3.14 per diluted share, in the first six months of 2011. Excluding the Rockies Express Pipeline charge, adjusted earnings for the first six months were $477m, or $1.94 per diluted share, compared with adjusted earnings of $480m, or $1.99 per diluted share, in the same period last year, the company said.