One on One with Don Felsinger, Chairman and CEO of Sempra Energy
Thursday, November 01, 2007
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SUSIE GHARIB: Sempra Energy posted lower third quarter earnings today, but better than analyst expectations. Excluding special items, the big San Diego utility earned $1.24 a share. That was $0.21 more than estimates. Joining us now for more analysis, Don Felsinger, chairman and CEO of Sempra. Welcome back to NIGHTLY BUSINESS REPORT, Mr. Felsinger.
DONALD FELSINGER, CEO, SEMPRA ENERGY: Good evening, Susie. How are you?
GHARIB: I'm fine, thank you very much. Well, you told analysts today that you were boosting your guidance for 2007 earnings $4 a share which was more than what most analysts were expecting. Where is the extra strength coming from?
FELSINGER: You know, Susie, actually it was coming from all of our businesses. Every one of our business units were operating at the high end of the guidance we gave Wall Street. We took a look at the last two months of this year and felt very comfortable raising our guidance to over $4 a share. So strong quarter is going to be a good year for us. Too bad it is happening in the term of the short rally on Wall Street.
GHARIB: Yes. Now you also are dealing with those wildfires and the effects of that in southern California. What impact will that have on your year-end results?
FELSINGER: Well, that was a real tragedy on the community, but it has really no financial impact on Sempra. We -- we are probably going to spend about the same amount of money that we spent four years ago fighting wildfires which is about $50 million. It's kind of immaterial to our business, but we have the ability here in California to file for a recovery of our incremental rates. We will be doing that and feel very comfortable in the fact we will get that rate relief. No impact on our business. It has mainly been an impact on our employees, our customers and neighbors and friends that have this tragedy happen to them.
GHARIB: What about looking at oil and natural gas prices? Oil approaching $100 a barrel, natural-gas prices at about $8.60. Should they be at these levels?
FELSINGER: They should not. The fundamentals do not support oil and natural gas at these prices. I'll just take natural gas as an example. We have plenty of natural gas in storage. We have had mild weather all this year. We're about to end the hurricane season with no hurricanes. A lot of gas in storage and so, but prices are around $8. They just shouldn't be there. It is not good for the economy. It's not good for our customers. That's why we had been building natural gas infrastructure to get more supplies of natural gas to North America.
GHARIB: And what is the impact of these high prices on Sempra, both as an energy trader and your commodities trading business and as an energy user?
FELSINGER: Well, as an energy user, the high prices get passed on to our customers and that is not a good thing. Because customers, in fact, don't like these high prices as you can understand. We're about to come into the winter heating season and people will see the impact of these higher prices. From the standpoint of our commodities business, the volatility is something that provides business opportunities for us because our large customers like to buy insurance, fix the prices of natural gas so it creates business opportunities. But it's a very unsettling market for both consumers and users.
GHARIB: Now you talked about bringing more natural gas on stream. I know you've got that pipeline in the Colorado Rockies which should be coming on line in 2008 and also that Mexico LNG plant that you told me about many other times that you've been on our program. What impact are these going to have on your earnings looking ahead to 2008/2009?
FELSINGER: When these facilities go into operation next year, they will have a positive impact on earnings. As you just stated, we are building one of the only liquefied natural gas receipt facilities along the west coast here in Baja, California. That facility should do a lot to help stabilize and even lower the price of natural gas going forward. And the same with the Rockies express pipeline, being able to get constrained natural gas out of the Rockies region into the eastern markets where there is a demand for gas, is going to be a good thing for customers there also.
GHARIB: All right. That is all very fascinating. We hope to talk to you more about it in the future. Thank you so much for tonight and coming on our program.
FELSINGER: Thank you.
GHARIB: My guest tonight, Don Felsinger, chairman and CEO of Sempra Energy.
