Q4 2016 Real-Time Call Brief

Highlights

This morning we reported full-year 2016 earnings of $5.46 per share or $5.05 per share on an adjusted basis.

Our 2016 adjusted earnings include a net $0.11 per share benefit related to several additional items.

We are pleased to announce we are raising our 2017 earnings guidance to a range of $4.85 to $5.25 per share, up from our previous guidance of $4.80 to $5.20 per share.

Consistent with this, our board approved a 9% increase in the 2017 dividend to $3.29 per share last week.

As you'll recall, we're targeting 8% to 9% annual dividend increases over the next several years.

The agreement sets SDG&E's and SoCalGas' authorized return on equity to 10.2% and 10.05%, respectively through 2019.

The debt true-up impacts earnings at the utilities by about $36 million per year, which we had already assumed in our financial plans.

Our new 2017 guidance is $4.85 to $5.25 per share.

Our new range is up from the previous guidance of $4.80 to $5.20, provided at last year's Analyst Conference.

Earlier this morning, we reported fourth quarter earnings of $379 million or $1.51 per share.

On an adjusted basis, we reported fourth quarter earnings of $383 million or $1.52 per share.

Full-year 2016 earnings were $1.370 billion or $5.46 per share. This compares favorably to 2015 earnings of $1.349 billion or $5.37 per share.

On an adjusted basis, 2016 earnings were $5.05 per share.

Please note that the change in our planned repatriation resulted in a reversal in 2016 of a $20 million tax charge taken in 2015.

The other main drivers of the year-over-year comparison are as follows; $9 million of net higher earnings at the California utilities, offset by $14 million lower favorable impact from the resolution of prior year's taxes at parent and $25 million lower favorable impact from foreign currency and inflation effects at Sempra Mexico and the South American utilities.

At our California utilities, which represent almost 80% of our 2016 adjusted earnings, we don't expect any significant impact.

There are also opportunities to offset any potential reduced rate base from 100% expensing with additional capital spending.

When you consider the potential impact to our EPS five years from now, we expect there's a potential range of a negative 5% to 6% to a positive 5% to 6%.

The low end assumes 20% corporate tax rate, 100% expensing of capital, immediate non-deductibility of interest, and a potential to use some foreign cash to reduce U.S. debt.

We've also looked at additional scenarios, which we believe are more likely and involve some form of mitigation resulting in a range of negative 1% to 3%.