2015 ANALYST CONFERENCE – Sempra Energy

Sempra Energy · Mar 26, 2015 · 115 slides

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Slides

Debbie Reed Chairman and Chief Executive Officer Growth Strategy Analyst Conference March 26, 2015
Introduction Key Themes Strong visibility and confidence in our 5-year base earnings growth projections Multiple growth drivers across our businesses and competitive advantages in executing on our growth Conservative plan…
2014 Key Accomplishments Financial Projects in 2014 Plan Annual EPS growth of 15% Cameron under construction (GAAP) and 13% (adjusted) Sections of Sonora and Los (1) 5% dividend increase in 2014 Ramones pipelines in service…
Consistently Delivering Superior Total Return Total Return for Periods Ending 12/31/14 Compound Annual Dividend Growth 140% 16% 133% 120% 14% 122% 14% 12% 100% 10% 80% 87% 8% 60% 6% 40% 48% 4% 20% 27% 29% 2% 0% 0% 1…
Sempras Value Proposition Superior returns with utility-like risk profile Projected base earnings CAGR of 11%(1) from 2015 - 2019 Top-Tier Base plan includes projects approved, contracted, or already under construction Expected…
Build-Up of 2019 Base Plan Projected Earnings(1) 2,200 2,000 1,800 High visibility into our long-term growth Total Earnings, U.S. millions 1,600 1,400 International can be illustrated with a build-up of 1,200 2019 base…
Build-Up of 2019 Base Plan: CA Utilities 2,200 SDG&E and SoCalGas Earnings(1) 2,000 Base Plan Assumptions for CA Utilities 1,800 Revenue requirement based on current attrition mechanism Major approved capital programs progress as…
Build-Up of 2019 Base Plan: Sempra USG&P Sempra U.S. Gas & Power Earnings(1) 2,200 Base Plan Assumptions for Natural Gas 2,000 Cameron Trains 1 - 3 fully operational by year-end 2018 1,800 USG&P and provide 300M - 350M of earnings…
Build-Up of 2019 Base Plan: Sempra International 2,200 Sempra International Earnings(1) Base Plan Assumptions for South America 2,000 Sempra International: Revenue growth consistent with historical sales growth 1,800 460M-500M…
High Visibility into 2019 Earnings Projections(1) 2,200 7.00 - 7.50 EPS 2,000 1,800 Build-up of base Total Earnings, U.S. millions 1,600 plan earnings shows 1,400 4.60 - 5.00 EPS International Sempra has contracts in place…
Base Plan Delivers Growth Before 2019 Annual earnings growth rates will vary from year to year Various approved or contracted projects begin contributing earnings in different years throughout the plan period 2015 2016 2017 2018…
Multiple Upside Platforms Key development opportunities reflect growth drivers Opportunities Not in 5-Year Base Plan Opportunities Beyond 2019 LNG and Additional CFE pipelines Additional LNG export facilities Midstream Liquids…
Additional Growth Potential Capturing a portion of the 7B - 8B of development opportunities already identified within our existing business lines and geographies could drive EPS CAGR (2) 7.00 above 11% and / or Base Plan to…
Joe Householder Executive Vice President and Chief Financial Officer Total Return Vehicle Analyst Conference March 26, 2015
Total Return Vehicle (TRV) Update Analysis Completed Conclusions from our Analysis A combination MLP / Corporate structure best aligns with Sempras strategy and should maximize tax efficiencies TRV Our preferred structure…
Quality is the Most Important Consideration Stable cash flow profile through long-term contracts Defining Solid long-term distribution growth TRV Large pipeline of identifiable dropdowns Quality Long-term tax efficiency Proven…
Asset Considerations and Next Steps (1) Ownership Possible Assets What We are Working On / Considerations Currently awaiting a Private Letter Ruling from IRS 100% U.S. LNG Marketing (ECA) Structuring around ECA liquefaction…
Preferred Structure for Possible TRV Our preferred structure uses the MLP model with a corporate subsidiary Public Partners Alignment with strategy Better opportunity for value uplift No entity-level taxes for qualifying Publicly…
Sempra Shareholder Value Creation A TRV offers the opportunity for long-term value creation through Possible Shareholder Benefits Efficient source of financing Accelerated cash flows Incentive Distribution Rights Provides…
TRV Could Provide Efficient Source of Financing and EPS Growth Hypothetical Illustration for Financing a New 1 Status 2Financed 3Financed Financing a New Project Project Illustration(1) Quo w/o a TRV with a TRV Comparison of a…
Summary We have completed our analysis and prefer a 1 TRV that may include midstream and renewable assets as it best aligns with Sempras strategy Awaiting Private Letter Ruling and resolving 2 structuring issues around potential for…
Appendix
Assumptions for TRV Project Illustration Hypothetical Financing of New Project Illustration New project assumptions Generic Project: 10x EBITDA cost (1,000); 30-year depreciable life Hypothetical company without a TRV assumptions…
Dennis Arriola President & Chief Executive Officer Southern California Gas Company Jeff Martin Chief Executive Officer San Diego Gas & Electric California Utilities Analyst Conference March 26, 2015
Topics Industry Trends Key Measures Utilities Overview Performance Update Key Initiatives 2015 Earnings Rate Base Keys to Success Capital Opportunities Appendix 2
Trends Electric Utilities National Trends Why California is Better Positioned California was an early mover in decarbonizing electricity, thus Increasing environmental lowering the risk of stranded generation investments. Moreover,…
Trends Gas Utilities National Trends Why California is Better Positioned California utilities are continuing to invest in core system Public safety and gas / electric Regulation coordination / integration enhancements and are taking…
California Utilities Key Measures SoCalGas SDG&E Revenue requirement increase of 256M / Revenue requirement increase of 133M / 7% 2016 General 12% over 2015 with focus on safety and over 2015 with focus on safety and reliability…
SDG&E Update 2014 Performance 2015 Priorities Financial Achieve successful regulatory outcomes 507M in earnings Rate reform Operational excellence Net energy metering reform Set new standard for safety performance by General rate…
SDG&E Key Initiative Electric Rate Reform Fair and simple; enables conservation and ensures fixed cost recovery 2014 2015 2018 2019+ Current Structure Proposed Structure(1) Future Structure 2001 Energy Crisis, Reduce Tiers,…
SDG&E 2015 Projections(1) CapEx Rate Base(2) Earnings(3) 1,200 1.1B 8,400 7.6B 7.8B 600 510M 555M AFUDC / 1,000 FERC 7,000 500 Incentives Projects FERC FERC FERC 800 5,600 400 Base CPUC 4,200 CPUC 600 300 Gas Gas 400…
SDG&E 2015 2019 Projected Rate Base Growth 9.8B 10.2B 7.6B 7.8B 5.8B capital program funded within the base plan; example projects include CPUC Electric CPUC Gas FERC Base distribution Base distribution Cleveland National…
SDG&E Changing Composition of Projected Rate Base(1) Investment priorities minimize pressure on electric rates 5 2015 2019 2015 2019 CAGR 7% Capital investments align with 4 10% state policies (prioritizing safety 41% and…
SDG&E Keys to Success Sustain excellence in core business Safety Reliability Customer service Achieve rate reform Continue disciplined capital investment Shape the future electric distribution business model 11
SoCalGas Update 2014 Performance 2015 Priorities Financial Achieve successful general rate case 332M in earnings Increase investment in natural gas system to Operational excellence improve safety and reliability Continued to operate…
SoCalGas Key Initiatives Infrastructure Investment and Establish Natural Gas as a Foundational Fuel Focus Our Strategy Capital program of Continue to invest in the safety and reliability Infrastructure 1.3B in 2015 of our system…
SoCalGas 2015 Projections(1) CapEx Rate Base(2) Earnings(3) 1,500 4,800 420 1.3B 4.2B 4.4B 360M 395M Other AFUDC / 1,250 4,000 Projects 350 Incentives AMI Projects 1,000 3,200 280 PSEP 750 2,400 210 GRC GRC 500 1,600 140…
SoCalGas 2015 2019 Projected Rate Base Growth 7.0B 7.4B 4.2B 4.4B 6.0B capital program funded within the base plan; examples include Projects and Product Offerings Base business Aliso Canyon compressor replacement PSEP Storage…
SoCalGas Seasonalization of Core Gas Revenues (1) 2014 As Reported (U.S. millions) Q1 Q2 Q3 Q4 Total Operating Revenues 1,085 917 855 998 3,855 Earnings 78 80 98 76 332 2014 Pro Forma Seasonally Adjusted (U.S. millions) Q1 Q2 Q3 Q4…
SoCalGas Keys to Success Sustain excellence in core business Safety Manage employee and public safety risks Execute our capital plan Reliability Customer Maintain our focus on minimizing Service costs to customers Regulatory…
California Utilities Development Opportunities Opportunities Not in 5-Year Base Plan Opportunities Beyond 2019 900M 1,000M North - South Pipeline Pipeline infrastructure to ensure gas safety and Master meter mobile home park-post…
Appendix
California Utilities Base Capital Plan SoCalGas SDG&E 2015 2019 Plan CapEx of 6.0B 2015 2019 Plan CapEx of 5.8B Other AMI 6% 5% FERC Projects 18% CPUC Electric Base 36% PSEP 26% FERC Base 16% Base Business CPUC…
Mark Snell President, Sempra Energy International and U.S. Gas & Power Analyst Conference March 26, 2015
International and U.S. Gas & Power Strategy Businesses in multiple sectors / geographies create additional platforms for growth Partnerships within Sempra International and Sempra USG&P increase deal flow and create new areas of…
Topics Business Overview and Base Plan Assets / Projects Key Market Conditions Drivers of Development Opportunities Our Competitive Advantage Development Opportunities Not in Base Plan 3
IEnova
IEnova Company Overview IEnova develops, constructs, owns and operates energy infrastructure in Mexico IEnova is one of the largest private energy companies in Mexico and is the only energy company listed on the Mexican stock…
Highlights of our Business Development 2011 LPG storage terminal, Guadalajara 1995 and 1996 ESJ initial contract with New gas regulation in SDG&E for 155 MW (in Mexico development) 2003 Gas distribution permit for 625 MW TDM(1) power…
Base Plan Assets(1) 1) See appendix for further project detail. 7
Increasing Role of Natural Gas National Infrastructure Program Mexican Electricity Generation by Energy Source 2000 vs. 2013 (% share of total primary energy used in generation)(2) calls for 9,200 MWs of new power generation capacity…
Drivers of Development Opportunities Growth Drivers Our Competitive Advantage and Strategy Governments National Infrastructure 20-year history in the country Program calls for 300B of 600 people based in Mexico City investment in…
Development Opportunities CFE Pipeline Bids(1) 11 billion of estimated remaining investment in new pipelines by 2018 Projects Not Yet Awarded Capex (U.S. million) COD Awarded In Process / Announced 5. San Isidro Samalayuca 100 2017…
Development Opportunities Sonora and TDM Sonora pipeline open season TDM interconnection to CFE Running an open season to Moving forward with interconnection potentially add additional capacity on to La Rosita substation in Baja…
Development Opportunities ECA Liquefaction Existing regas facility located in Ensenada, near the California border Facility is fully contracted for regas under long-term, take- or-pay, dollar-denominated contracts ECA can be the…
Summary of Development Opportunities Opportunities Not in 5-Year Base Plan Opportunities Beyond 2019 CFE natural gas pipeline bids (11B in total) ECA liquefaction Expansion of ESJ wind project (1,000 MW) Infrastructure to bring…
Sempra South America
South America Business Overview Largest electric utility in Peru with more than one million meters in Lima Ownership increased to 84% in 2014; local pension funds hold a significant amount of free float Luz del Sur Santa Teresa…
Base Plan Projects Luz del Sur (Peru) 100 MW Santa Teresa Hydro I: 150M to be complete in Q2-2015 Contracted with Luz del Sur free customers, interruptible energy to be sold in the market Four substations / transmission project:…
Energy Demand Growth GDP long-term growth higher than that of developed countries Peru Chile USA Projected energy demand growth driven BBB+ AA- AA+ by low per capita energy consumption Sovereign Rating(1) Stable Stable Stable…
Drivers of Development Opportunities Growth Drivers Our Competitive Advantage and Strategy Growing economies with sound More than 16 years in Chile and Peru macroeconomic policies Outstanding local management with strong…
Development Opportunities in Peru Peru Opportunities Not in 5-Year Base Plan 280 MW Santa Teresa Hydro II plant 400 MW hydro plant in Arequipa region 200 MW Garibaldi hydro plant 230 MW South Pacific gas fired plant 19…
Development Opportunities in Chile Chile Opportunities Not in 5-Year Base Plan Potential partnership with ENAP(1) for gas fired generation linked to LNG supply Government transmission bid for construction and operation of 160 km…
Sempra U.S. Gas & Power
Base Plan Assets 5 1) Reflects 100% project capacity; Sempras expected / actual ownership is 50%. 2) Sempra ownership interest in REX pipeline is 25%. 3) Cameron LNG regasification facility is currently in development phase for…
Base Plan Adjusted(1) EBITDA(2) and Contract Life 2015 Projected 2019 Projected Remaining Contracted Assets (U.S. millions) Adjusted(1) Adjusted(1) Contract Life(3) Capacity EBITDA(2) EBITDA(2) Wind 20 years 580 MW(4) Renewables…
Drivers of Renewable Development Opportunities 400 Historical Levelized Cost of Public Policy and Cost Declines Electricity (LCOE)(1) Continued cost declines expected 300 Solar PV LCOE /MWh CA Governor seeking state mandate of…
Drivers of Natural Gas Development Opportunities Growing U.S. LNG production and change in gas flows LNG exports and energy- intensive industrial projects in Gulf increase demand for gas infrastructure Growing gas exports to…
Development Project Opportunities Opportunities Not in 5-Year Base Plan Expansion opportunities of 730 MW(1) at existing wind and solar sites Port Arthur Pipeline Header System Additional natural gas and NGL pipelines for LNG…
Appendix
Rockies Express Pipeline East-to-West Flows Contracted/ Amount in Expected In- Contract(s) Volume Route Term Indicative Rate 2015 5-Yr Service Date (/Dth) Plan Seneca Processing 0.25 Bcf/d = 6 mos Plant to NGPL 0.60 Bcf/d = 7…
Sempra Mexico Base Plan Project Summary(1) Sempras Share Ultimate Length of Expected Contract of Planned Name Ownership Pipeline Design Capacity Full COD Term (yrs) CapEx Interest (miles) (U.S. in millions) IN DEVELOPMENT /…
Octvio Simes President, Sempra LNG LNG Operations Analyst Conference March 26, 2015
Cameron LNG Update
Cameron LNG Management Team Farhad Ahrabi +25 years at BG Farid Bogani Rick Sirven John OLeary +30 years at +30 years at +30 years at Shell & Woodside ConocoPhillips ExxonMobil 3
Cameron LNG Trains 1 3 Financing 7.4B in financing secured 2.5B by JBIC (1) 4.9B by 29 other institutions 2.0B is covered by NEXI(2) Investment grade credit ratings delivered favorable terms Weighted average all-in cost of…
Cameron LNG Trains 1 3 Milestones Start d April 2012 Regulatory Phase FERC d Application Dec-2012 FERC d DEIS Jan-2014 FERC d FEIS Apr-2014 FERCd Order Jun-2014 FERC d Authority to Construct (ATC) Jul-2014 Final d…
Cameron LNG Trains 1 3 Construction Progress Cumulative Progress Construction Phase Weighting Dec-2014 Jan-2015 Feb-2015 Engineering 9% 21% 24% 29% Procurement 46% 11% 11% 16% Construction 44% 1% 1% 1% Commissioning 1% 0% 0% 0%…
Global Supply and Demand Outlook
LNG Supply and Demand Outlook High oil prices created race to commercialize LNG; low oil prices now spurring project cancellations and delays in high cost projects Projects under development exceed near-term demand as a result 600…
Global LNG Demand Forecast 5% 9% near- to Global LNG Demand 600 mid-term annual growth Europe 500 Forecast Slowing to 3% 4% Other annual growth by 400 2025 2035 Mtpa 300 Majority of demand forecasts are consistent 200…
Low Oil Price Impact Oil price decline unlikely to Global Sectorial LNG Demand adversely affect LNG demand 600 Transport Relatively little existing oil-fired 500 Other generation capacity Forecast Res/Comm Few proposals to build…
LNG vs. Indigenous and Piped Gas Timing of local gas developments Asia-Pacific does not affect projects Natural Gas Supply and Demand contemplating FID in 2016 2018 1000 LNG demand forecasts assume 900 Forecast LNG Net LNG…
LNG vs. Coal LNG has the opportunity to take Asia-Pacific Electricity Generation Fuel market share away from coal 2,000 LNG demand forecasts already account for a very large coal market share increase Forecast LNG equivalent,…
Potential LNG Demand Response to Competing Fuels More stringent 700 environmental policies LNG Demand Volume will create downward Coal pressure on coals 600 demand outlook, and in turn, raise LNGs demand outlook 500 Low oil…
Supply Scenario Low oil price and U.S. projects leading to rationalization, leaving fewer tangible options for long-term incremental supply Cameron is low cost leader among projects under construction and development 2,000 U.S. /…
U.S. Gulf Coast Projects are Low Cost 16 Competitive advantages of U.S. supply 14 Low cost feed gas DES Price (/MMBtu)(1) 12 Existing infrastructure 10 8 Mature gas market 6 Construction and labor resource 4 availability…
Declining U.S. Feed Gas Cost Natural Gas Prospect of high demand from NYMEX 6-Year Forward Strip (1) LNG exports has not raised price 9 projections for gas U.S. Liquefaction 8 Announced Forecasts for U.S. gas prices continue to…
U.S. Gas Infrastructure Adapting to Load Change 17 17
LNG Development Opportunities
Our Competitive Advantage Camerons no regrets design Pipelines to producers ECAs West Coast location Direct interface with gas Port Arthur location storage Ability to load largest Multi-commodity terminal LNG carriers development…
Price Advantage All three development initiatives are estimated to be on the low end of the cost curve 2,000 Expected cost range for U.S. / tpa(1)(2) Sempra LNG projects 1,000 0 Source: Wood Mackenzie Outlook,…
Providing the LNG Market with Real Options Project opportunities create partnership optimality Customer A Customer B Customer C Portfolio End-User Hybrid Customer Optionality Sales Purchase SPA/Toll Flexibility Agreement (SPA)…
Cameron Expansion Opportunity Trains 4 and 5 Sempra LNG Marketing has rights to subscribe to 50% of expansion capacity Expansion could be operational in 2019 / 2021 with lenders and others consents and approvals Brownfield: utilizing…
Port Arthur LNG Opportunity Sempra LNG previously permitted regas terminal and crude import terminal at Port Arthur Opportunity for co-facilities Development study completed in 2014 U.S. DOE FTA permit application and FERC…
ECA Liquefaction Opportunity Trains 1 and 2 Add liquefaction capability to existing facilities Will only proceed if opportunity is better than current business Working with existing customers, Pemex, and possibly others on…
Sempra LNG Summary and Conclusions Cameron Trains 1 3 Progress LNG Operations Outlook Construction and Cameron Joint Strong demand for LNG Venture progressing well worldwide Expected first year of full U.S. projects well placed to…
Joe Householder Executive Vice President and Chief Financial Officer Financial Analyst Conference March 26, 2015
Base Plan Projections 2015(1) 2016 2019 (U.S., except EPS, and shares in millions) Low High Low High Low High SDG&E(2) 510 - 555 540 - 585 600 - 650 SoCalGas (2) 360 - 395 360 - 395 415 - 455 U.S. Gas & Power 80 - 100 90 - 110 470 - 510…