桑普拉能源 (SRE) 2009 Q2 法說會逐字稿

Good day and welcome to the Sempra Energy second quarter 2009 earnings results conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Jeff Martin. Please go ahead, sir.

Good morning. I want to take a quick moment and thank each of you for joining us. A live webcast of this teleconference and slide presentation is available on our website under the investor section. With us today in San Diego are several members of our management team, including Don Felsinger, our Chairman and Chief Executive Officer; Neal Schmale, President and Chief Operating Officer; Mark Snell, Executive Vice President and Chief Financial Officer; Debbie Reed, President and CEO of our Utilities; and Joe Householder, Senior Vice President and Controller.

You'll note that slide two contains our Safe Harbor statement. Please remember that this call contains forward-looking statements 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 not guarantees of performance. As you know, they involve risk, uncertainties and assumptions, future results may differ materially from those expressed on our call. Thee risks, uncertainties, and assumptions are described at the bottom of today's press release and are further discussed in the Company's reports filed with the Securities and Exchange Commission.

It's important to also note that all of the earnings per share amounts in our presentation are shown on a diluted basis and now with that I'd like to turn it over to Don who will begin with slide three.

Thanks, Jeff. Good morning to all of you and thank you for joining us. Earlier this morning we reported second quarter earnings of $198 million or $0.80 per share compared with $244 million or $0.98 per share in the same period last year. It's important to note that our second quarter results includes negative impact of a $64 million or $0.26 per share write-off related to the Liberty Gas storage project. For the first six months of 2009, earnings increased to $514 million or $2.09 per share up from $486 million or $1.90 per share.

Our results for the first six months of 2009, without the impact of the one-time write-off were up 19% over last year, a very strong performance in the midst of a difficult economic climate. The combination of our strong first half results and several new revenue drivers, starting up in the second half of the year has allowed us to reaffirm our previously announced guidance range of $4.35 per share to $4.60 per share. It's important to keep in mind that the guidance we provided in March of this year didn't include the negative impact of the Liberty write down. We feel the increased expectations we have for other areas of the business should mitigate the impact of the $64 million write-off. Now let me hand it over to Mark Snell so he can take you through details of the financial results beginning with slide four.

Thanks, Don. At San Diego Gas and Electric earnings for the second quarter were $70 million. Up from earnings of $61 million in the year-ago quarter. Second quarter 2009 results benefited from $18 million of higher operating margins. Second quarter 2008 results also benefited from $8 million of regulatory awards. At Southern California Gas second quarter 2009 earnings were $65 million, an increase from $56 million in the second quarter 2008. The improvement was primarily due to higher operating margins.

Before we move on, I'd like to update you on a couple items related to the wildfire litigation at San Diego Gas and Electric. Since our last call SDG&E reached an agreement with numerous homeowner insurance company plaintiffs settling a portion of the wildfire claims. Under the agreement SDG&E . will pay the insurance companies $740 million to settle approximately $1.3 billion of claims. Discussions are continuing with the remaining homeowner insurance companies for settlements on substantially the same terms. We currently have $940 million reserved for these exposures offset by a like amount of insurance receivables.

In addition to the claims of the homeowner insurance carriers, there are a variety of other claims that may take several years to be fully resolved. We do not have sufficient information to estimate the amount of exposure to these remaining claims. Therefore, no reserves or offsetting insurance receivables have been recorded.

Now let's go to slide five. Sempra commodities earnings in the second quarter of 2009 were $85 million compared with $130 million in the prior year's quarter. Second quarter 2008 results benefited from a $67 million gain on the sale of the business to the joint venture, with RBS. That was partially offset by $30 million in charges for litigation and tax matters. For the first half of the year, commodity earnings have increased to $199 million up from $189 million in the first half of 2008. The first half of 2008 included the net benefit of the one-time items I just mentioned as well as Sempra Energy's 100% ownership of the commodities business in the first quarter.

While the commodity's business as a whole continues to post good results, the price and volatility of natural gas and power which actually represents our two largest business lines have been relatively flat. Low natural gas prices, coupled with exceptionally low basis differentials across the country have reduced the number of profitable trading opportunities. Since the third quarter is traditionally a slow quarter for trading, we don't expect much improvement until the fourth quarter. However, our oil and metals businesses continue to do well

Now let's move onto slide six. Here we show how income is allocated at the joint venture for the quarter and the first half of the year. A couple of highlights. First the joint venture had income of $142 million during the quarter. After applying the income allocation methodology, the distributable income to Sempra was $102 million. Adjusting to US GAAP and for the impact of taxes, Sempra's joint venture equity earnings for the quarter were $87 million compared with $93 million in the same quarter of '08.

For the first six months of 2009, the joint venture had income of $296 million and Sempra's equity earnings were $203 million. These results reflect the stabilizing effect of how profits are allocated in the joint venture, and this has removed much of the volatility of our earnings. In periods with low joint venture earnings we receive a higher overall percentage of the allocated profits and in time periods with higher joint venture earnings, we receive a lower overall percentage of the profits.

Now let's move to slide seven. Second quarter earnings for our generation business were $33 million, up from $23 million in the same quarter in 2008. Second quarter 2009, was impacted by $8 million of lower earnings from operations as a result of lower market prices. Second quarter 2008 earnings included $20 million in mark to mark losses on forward contracts.

Now let's move to slide eight. Sempra pipelines and storage recorded a loss of $27 million in the second quarter of 2009, compared with earnings of $24 million for the same quarter last year. The loss in 2009 includes a $64 million impact of the write-off related to the Liberty Gas storage project that Don mentioned earlier. Second quarter 2009 results benefited from about $6 million of higher earnings from our Mexican pipeline operations.

Now please turn to slide nine. This slide provides a summary of our business unit results. I'd like to highlight a couple of things here. Sempra L&G recorded a loss of $12 million in the second quarter of 2009 compared with a loss of $28 million in the prior year. The improvement was primarily due to the new revenues from our contract with Shell offset by start up costs, ongoing operating expenses and pipeline fees paid to Sempra pipelines and storage. We also had $9 million in lower mark to market losses on a marketing agreement with RBS Sempra commodities. As well as lower Mexican taxes. At parent and other we recorded a loss of $16 million in the second quarter, compared with a lot of $22 million in the same quarter in 2008. The improvement was primarily due to higher tax expense in the second quarter of 2008.

Now turn to slide ten. We're pleased with our results for the quarter and the first half of the year. Excluding the impact of the Liberty Storage write-off. Results were up by 7% from the second quarter of last year and 19% over the first half of 2008. We've also had strong operating cash flow, led by $375 million in cash, we've already received this year from RBS Sempra commodities. These cash dividends from the joint venture are helping to fund our infrastructure build out program which in turn will deliver consistent earnings in cash flow for years into the future. With over $800 million in cash on our balance sheet and $3.6 billion available under our credit line we have a very strong liquidity position. Also during the quarter I'd like to point out we issued over $1 billion of new debt at rates between 6 and 6.5%. With that, I'll turn it back over to Don who will begin with slide

Now let me update you on some of our business activities. I'll start with our utilities. Regarding the Sunrise Power Link transmission project the California Public Utility Commission recently reaffirmed the December 2008 decision approving the project.

During the quarter, we continued preconstruction activities and expect to start construction next summer on this $1.9 billion project in order to have it in place in the second half of 2012. We've already received approvals from the CPUC and Bureau of Land Management and expect a final major approval from the U.S. Forest Service later next year.

Turning to our Smart Meter programs, at SDG&E we've now installed more than 50,000 meters and at year-end we expect to have over 200,000 meters installed with the goal of completing the installation program by year-end 2011. At SoCalGas, we filed with the CPUC for a program to install 6 million gas meters by 2016 and we expect to receive a final decision from the Commission in the later part of this year. On the generation side of our utility business we'll be putting a new peaking plant into service next month. The 48 megawatt Miramar II facility which will be collocated with another peaker that SDG&E owns and operates. The addition of this plant will help meet higher summer power demand.

Please go to the next slide. Now I'll move to some of the projects we have under development at our infrastructure businesses. At Sempra Generation in April we announced a 48 megawatt solar expansion project that will be located adjacent to our existing El Dorado solar facility, earlier this week we announced we signed a 20-year agreement with semi gas and electric where they purchased all the power generated by the plant. We expect to start construction later this year and to complete the projects in 2011.

Let's continue with slide 13. Now for a quick update on the Rockies Express Pipeline where we have a 25% ownership interest. On June 29, a major milestone was reached where REX East began service to the Lebanon hub in Ohio with a current capacity of 1.6 billion cubic feet per day. Construction on the eastern-most portion of the line continues and completion of the line to Clairington, Ohio as well as increasing capacity of 1.8 billion cubic feet per day is expected late this year.

Now go to slide 14. At our Cameron LNG receipt terminal, we've completed construction and commercial operations began this week. We're now earning revenue under our contract with Eni which is for 40% of the terminal's capacity. The associated Cameron pipeline is also complete and generating revenue from a contract with Eni. We are now the only Company to own and operate LNG receipt terminals serving both the Pacific and Gulf Coast of North America.

Before I move on, I'd like to also give you more color on the Liberty Gas Storage project at pipelines and storage. As many of you know, Liberty Gas Storage is a project in Louisiana for soft cavern national gas facilities. Sempra Pipelines and Storage owns 75% of Liberty and we have a partner that owns the remaining 25%. As we have discussed in past quarters, we've experienced sub service issues at the northern facility. This quarter we reported a $64 million write-off after determining that this portion of the project will not provide future economic benefit. We are still moving forward with the development of an additional 17 billion cubic feet of capacity in our southern location in Cameron Parish.

Please now go to slide 15. What I'd like to do now is remind you of some of the key events that are happening at LNG and pipelines and storage businesses. As many of you know, we've been investing heavily in our natural gas infrastructure businesses over the last five years. Many of the projects that we've been developing are now coming online and providing new sources of revenue. We're now seeing the benefit of new revenue from REX East service to Lebanon. And from the start of a long term capacity contract with Eni on the Cameron pipeline. Cameron LNG has just started operations and we're now earning revenue under the Eni contract. In June, we announced an agreement with the RasGas liquefaction project and cutter to bring LNG to the the Cameron terminal. And we could receive cargoes into our terminal from RasGas. through the end of 2010. In addition, at our Tangguh terminal, revenues under our contract with the Tangguh LNG project will begin later this quarter. Finally, in the fourth quarter the REX East pipeline should be complied as well as a nitrogen facility that we're building at the Tangguh LNG terminal which will also provide additional income.

Please now move to the last slide. What I'd like to do here is conclude by saying I'm pleased with our second quarter and first half results. Even after the impact of the write-off of Liberty Storage assets, we're still on track to meet our financial goals for the year. I think what I just said, says a lot about our business model and growth platform we put together. This is a great time at Sempra where we have several major infrastructure projects coming online delivering incremental cash flow and earnings and at the same time, we're ramping up investment in our California Utility businesses on the front end of the largest capital program that SDG&E and SoCalGas have ever undertaken. These utility investments also have the benefit of delivering earnings immediately and will provide cash flow well into the future.

Let me end by stating that this is truly an exciting time at Sempra and set the stage for strong growth in future years. With that let me now open up the call and take any questions that you may have

(Operator Instructions) We'll go first to Leslie Rich with Columbia Management.

The Copper Mountain solar project, what's the CapEx involved in that? And when would that start? Are you starting construction in 2010 or that's under way now?

I think our plan is we file the contract -- Leslie, I apologize, we have just filed that contract with the CPUC and we expect to get approval from them sometime the end of this year. I'll have Neal go through and talk about the capital requirements.

We, on these solar projects we haven't typically estimated the exact -- or disclosed the exact capital cost of these particular projects fundamentally for competitive reasons. But the cost of this will be very very consistent with what we spent on the first ten megawatts. That we, that we put in place last year.

Is it already in your CapEx forecast?

Yes.

Okay. And then in terms of Cameron, do you, I guess the agreement with Eni, is that they can send both their, if they feel like it, do you have a sense of what kind of volumes to expect in for the rest of the year?

You're talking about the contract, the capacity contract that Eni has at Cameron?

I'm sorry, no I'm not. I'm talking about RasGas.

RasGas has the option of bringing their gas to our terminal. How much they bring will be a function of worldwide market. We're fairly optimistic, Leslie, when you look at what's going on in the world. Incremental supplies coming online. Net net will have to end up in North America. And this is all upside to that plan.

Okay, great, thank you.

We'll go next to Becca Followill with Tudor, Pickering, Holt.

Don, you can call me Leslie if you want.

You're both very smart and attractive.

Oh, yes, yes. Two questions for you. One, just to clarify, your previous guidance, did it include taking a write down on Liberty? Did you expect that in your original guidance?

We did not.

Okay, so this is effectively raising guidance. I'm putting words in your mouth, but, and the second is on can you talk a little about lots of noise with the CFTC regulating commodities market. How you guys think this could shake out and how it impacts the JV?

There's obviously a very rigorous debate going on. I think the objective of Congress, is to try and regulate or put a stop to a lot speculative trading going on. When we think about our business model we really do a lot of physical delivery of commodities plus hedging activities for customers that need to hedge their supplies or hedge their purchases. I sense that something's going to happen this year. I think the impact on our business isn't going to be as impactful as it could be when those people are just strictly out there doing stream trading. Let me ask Mark to give some color on his perspectives on this.

Well, I think this is something obviously we've been following pretty closely. The closer you follow it, the more you realize that the amount of agreement is not really that close on a lot of these issues. I think a couple things will happen which is, there is definitely a movement to increase the amount of capital that counter parties have with respect to the kinds of trading. There'll be a movement to put as much of the trading action, that includes commodities as well as other financial derivatives on exchanges which will create margining requirements.

I think the push from the commodities traders, and us in particular is that there's a recognition that these markets were effectively set up for end users, i.e. producers and power plants and those kinds of companies that use these markets to hedge their output or to hedge their raw materials. I think from that perspective, I believe that business will probably -- they will get some kind of exemptions from the margining requirements so they can continue to do that. That's really what's core to our business.

With a lot of these, we see these as real benefits, our merger with RBS and the joint venture. I think having the kind of capital that a commercial bank has behind the business will be the kind of thing that people will have to have. And I think for the, dealing with the customers, they'll, our ability to extend credit to those kinds of end users will be critical to keep the market functioning. I think all in all, I mean, we pretty much support the activities around more transparency and the elimination of systemic risk and we just were trying to protect our customers in this legislative battle that's going on. Generally speaking, we feel this is probably going to come out to be fine for us.

Thank you.

Thanks, Becca.

Our next question comes from the (inaudible) with RBC Capital Markets.

Good morning, or good afternoon.

--LNG and the commodities business. You have mentioned that you do see LNG coming to the US in the second half of '09. Wanted to see if you had any color as to how much you see, what the timing looks like, and what the ramp of that acceleration may look like?

Well, I would go back to my other, my earlier comment. Strictly an observation from my standpoint that with the global economy like it is, when you kind of add up the increases and decreases outside North America, it's a net zero. Any LNG that would ramp up this year would end up coming into North America. Now, the ramp up of that is what's in question, whether we end up at the end of this year, getting another 4 BCF or another 6 BCF of supply is really a function of how quickly people commission their plants and get these plants into operation and start making deliveries. When I come back again, our model is based upon having long-term contracts, which we do at -- for the majority of our capacity in Mexico and in Louisiana and anything that happens with spot cargo's coming into either facility's an upside for us. It's not in our plan.

Okay, very good, thank you. I have one additional question too. You had mentioned in your comments that third quarter is typically a slower quarter for the commodities JV and you expect to see some improvement in the fourth quarter. Wanted to see if you had any further color you could share with us about kind of what you forecast through the rest of this year? I know that's difficult to do.

I just say that we've owned this business for almost 12 years now and it seems like the last part of summer is always a slow town in the commodities business. When you look at our performance for the last ten to twelve years, the third quarter has always been one of our lowest earning quarters. That's the comment is the fact that we expect that nothing's changed in the marketplace. A lot of people go on vacation, not a lot of business gets conducted and we just see the impact of that reflected in our financials. I don't think it says anything else about the market.

Very good, thank you very much, I appreciate it. No further questions.

Thanks, Ellen.

We'll go next to Michael Lapides with Goldman Sachs.

Question for you. Given what's happened in the demand for electricity down in the southeastern corridor of the US, can you talk about how this impacts the potential need in the next five to six years or so for natural gas storage projects and whether that has any impact on your spending plans for Mississippi Hub and Bay Gas?

Well, Michael, it's, there's no doubt that we're in a time period right now where, where gas demand is, is off for several factors. The economy, the amount of gas used for electric generation, industrial requirements for natural gas. Our philosophy going forward with these storage projects is before we spend incremental capital, is we take a look at the market and see what the market's willing to contract for. If the market's willing to buy gas storage, then we move forward. We'll continue to test the market but our sense is that people look to see a lot of volatility, seasonality in the market place and that's why storage comes into play, so even though consumption and demand overall may be down, just the seasonal variations are enough, people want to have more storage.

Okay, and can you update us in terms of timing and which of the projects down in that region, in terms of major storage projects? Any changes at all to kind of what you disclosed in your 10-K or maybe it was the disclosure right around the time you did the Energy South deal?

Let me do this, let me have Neal walk you through what we have down there. The development status, what's under contract and so on.

That would be great, thank you.

Just, just by way of summary, we have, in the Gulf Coast area, we have, we're developing three projects. When they're all done, would have a total capacity around 74 billion cubic feet. Those three projects are Bay Gas where there's 11.4 BCF currently operating and that's fully contracted. There's 5 BCF at Bay Gas. Which is under construction. Be in service, late 2010 and of that 3.2 BCF is contracted.

Now the potential ultimate capacity at Bay Gas is 27 BCF, okay? That's Bay Gas. Mississippi Hub, the second one has 15 BCF under construction. 4 BCF is contracted and we expect the first cavern in service in late 2010 and there the potential ultimate capacity is 30 BCF. And then, finally Liberty South, the other portion of Liberty, there we expect to develop another 17 BCF by 2013.

Got you. And last question. So it seems that there's a decent chunk of both Bay Gas and Mississippi Hub that's uncontracted. Strikes me as a little different than maybe your prior strategies of rarely breaking ground on something until you've got it more than 50, 60% contract?

I don't really think we've changed the strategy much at all. Remember these caverns are developed a little bit at a time and we contract as we go forward. I think what you're seeing there is, is very consistent with what we've done in the past. They're not developed in big chunks at one time.

Okay, thank you.

Thanks, Michael.

Our next question comes from Annie Tsao with AllianceBernstein.

Good afternoon. If you look at, if you look at the commodity margin and if you look at the break down in the margin, you see a tremendous, like mostly driven by power and gas in the quarter. The weakness is from power and gas, is there any way you can quantify how much is from demand and how much is really from the prices?

Annie, I think there's a couple things going on here. One, first off, let's recognize the year-ago quarter was a record quarter. So it is much, much higher than what we'd normally experience. But that said, it is absolutely true, that we have probably some of the lowest gas prices and lower, and lowest power prices kind of across the country we've had in a long, long time. And that's in sharp contrast to some of the highest prices we had a year-ago. So that's, that has taken the value of volatility really out of those markets.

The other thing too, and this isn't so evident by just looking at the out right prices, but I think for the physical traders like us, which are you know, think of us as really kind of, almost like logistics experts. We make our business in the gas and power business by getting gas and power to end users through a network of pipeline capacity and transmission and things that we control or own and we're kind of logistics experts in that respect. Unfortunately for us right now, basis differentials across the country are about as low as they've ever been. California traditionally trades at a steep discount to Henry Hub is actually even with Henry or $0.01 or $0.02 above. All of those factors that led to the power and gas business being a tough trading environment currently. That won't last forever. Frankly, it'll probably change as we approach the fourth quarter. I think we could see some differences there. And the market will return more back to normal. But right now it's a tough environment.

I think one of the things that's most important, as you look at our trading results is that we have a pretty diversified group now. And the good thing is, is that while we have been lower in gas and power, we've done exceptionally well in oil and in metals and we continue to see those as strong businesses through the end of the year.

So it's helped us balance our portfolio and then I guess the last point is just again, with the joint venture, because of the way the income sharing is, our shareholders aren't really seeing the full impact of the volatility around the trading earnings any longer. Because like I said in my prepared notes, which was if we make less money, we get a higher percentage of the income and if we make more money, we get a lower percentage. I think you're going to continue to see fairly consistent trading results.

Annie, I think it goes back, if you look at the last 48 quarters of earnings, we've had a different mix of some type of product and geographic diversity that have helped contribute to earnings. As Mark said, what we have going forward now is not only the product diversity and geographic diversity, we now have a profit sharing plan with RBS Sempra Commodities that basically gives us a level of protection going forward.

Anything that benefit you from the stimulus package that you can--?

We are looking at some things in the utility that we haven't made a decision to go forward on. Things like electric vehicles or that sort, but Debbie, anything you want to talk about in the stimulus package?

I would make a couple of comments. The things that we're looking at under the stimulus package are really all incremental to what we have in our plan. And so, the rate base that we're investing to Smart Meters and all, we're not going to apply for stimulus dollars for those kinds of things. What we're doing using that platform as an opportunity to go for stimulus dollars to add on in areas like smart grid and tying in all of the electric vehicles to that smart grid. Being able to manage distributed gen using that smart grid and then looking at some of the communication networks that also will get us to the full usage. And some of the things we're putting in with our smart meters which are the home area networks. So all the stimulus that we're looking at really would be incremental to what we had in our plan.

Thank you.

Thanks, Annie.

Our next question comes from the Mark Rogers with Gagnon Securities.

Thank you, my question's regarding the Smart Grid rollout. Are you guys dual sourcing your smart meters? If so, what was the split of the 50,000 meters shipped to date? And then I have a follow-up.

Our meters are being provided by iTron for the SDG&E project. I would say that we put 50,000 in. We're expecting to put 200,000 to $ 300,000 in by the end of this year. It's going along really really well. On the SoCalGas side, we have a pending application before the CPUC and we haven't determined any of our vendors on that.

Okay and the 50,000 meters that are installed to date, what are your customers seeing right now with respect to their usage changing?

The first meters that are going in, we haven't started the Smart Meter billing yet. That will happen in around September of this year. Wat we're seeing though, is we've done a lot of orientation meetings with customers before and our customers are saying if they haven't received it, when can we get this? We are really interested in having the access to the information that would be provided by these meters. So there's been great acceptance. It's really gone extremely smoothly with our first 50,000.

Great, thank you very much.

Thanks, Mark

Our next question comes from the Michael Bolte with Wells Fargo.

Hi guys. I was wondering if you could tell me was the total regulatory capital at the commodities JV was in Q2?

Yes, it's about, it's a little over $2 billion.

I've seen a big rebound in commodity prices, is it like for the rest of the year, similar levels be reasonable?

I think it's safe pretty to assume that it would stay at about that level. The only thing that -- you hit that nail right on the head. The only thing that would change that is if we have a huge rebound in commodity prices.

Okay, thank you very much.

Thanks, Michael.

We'll take our next question come Ashar Khan with Incremental.

Good afternoon. I wanted to check, Don you mentioned even with the write-off you're fine with the forecast. Which segment is performing better? Than expectations?

It's basically our utilities. Have much higher margin than what we had over this time period last year.

Okay, so you expect, based on what you provided us at the analyst conference that utilities are going to do better than those numbers? Is that what -- what's the year telling you?

That's what I believe. Debbie and I have a disagreement over this, but, yes, I think the utilities will do better than what we had forecast.

Okay, thank you very much.

Thanks.

(Operator Instructions) And there appear to be no -- we do have a question with Faisel Khan with Citi.

How are you doing? I thought I'd queued up in the Q&A, but I guess I didn't. On the cash balances you guys have for the quarter about $800 million can you just give us an idea of how that cash balance is going to move throughout the course of the year and how that could be or would be applied to some of your utility projects?

Faisel, that $800 million, the vast majority of that is cash at SoCalGas. The biggest thing is, is frankly gas prices, we're still injecting for the upcoming season and the gas prices are just a lot cheaper than they were last year. So we're sitting on a little more cash than we're used to.

Could that be kind of a permanent return of working capital to you guys?

Well, let's let it play out and see where that goes. We have a lot of big capital projects at the utilities so it may delay some borrowings and other things if it sticks around, but it's -- I think right now we're, our cash flow plans are such that we won't be having big dividends coming back from the utilities yet.

Okay, got you. Just on the writedowns, to understand the after tax and pretax, $64 million was the writedown after tax but $132 million pretax.

That's correct.

It's a little bit higher tax--?

The free tax was for the entire project.

Yes. Faisel, the pretax amount you saw on the earnings statement?

Right.

That's, that's for -- what are you saying, Joe?

Faisel, this is Joe. The 132 is 100% of Liberty. We only own 75%. Really 99 of that is ours. But 33 is added back down below on that line that says earnings losses attributable to noncontrolling interest. Lines of $33 million is in that 12. See the whole 33. There's the , Calpine plant at SDG&E that's also down in that line. So it's a little

That makes sense. On the the power link mine, have you ordered all the major components for that mine yet? All the major capital equipment and, and materials kind of been ordered or?

We'll have Debbie give you an update of where we stand both with the pre construction activities and purchasing.

Good morning, Faisel, or afternoon for you. What we've done is we looked at locking in the long lead time equipment for that project. We have a budget that's been approved by the CPUC of about $1.9 billion and to the extent that we have long lead time equipment that we can lock in, and especially if we can lock it in at amounts less than budgeted. We're moving forward with doing that. We're doing preconstruction activities which includes the land acquisition, all the permitting. Then we're waiting for just the final permit or the final approval from the National Forest Service which we expect towards the end of this year and we'll begin full out construction in the middle of next year.

Got you. And one last question, I think it was on your prepared remarks on the wildfire litigation, I got a little confused with some of the numbers. What's the net liability outside of the insurance, insurance claims and everything else to, to Sempra?

Let me just, I don't know that we have an exact number, but let me just say that we had positive developments this past quarter. When we, one, were able to reach settlement with the insurance company for some of the homeowners for about $0.57 or $0.58 on the $1 and we got the judge to deny Class Action status. Those are two good things. The fact that we are able to settle with some of the insurance companies for a significant piece of the claim we think going forward with the homeowners, the $940 million reserve that we have at this time appears to be accurate with the information that we have.

Going forward, with the remaining claims that are out there, the non-homeowners and these would be like governmental entities, firefighters, others, we aren't able to determine an exact number, but when we look at the fact that we have additional insurance coverage that we will not expend, the fact that we have a claim against Cox Cable and at the end of the process if we end up needing to have additional recovery, we don't have insurance, we would apply to the commission for a leave. We feel good about where we are at this point in time. Obviously this has several more years to play out, but we like where we are.

Okay, got you. Great thanks for the time guys.

We now have a follow-up question from Mark Rogers with Gagnon Securities..

One more question on the Smart Meter program. You're still at 2.3 million end points for your total program. That's roughly 1 million a year between 2010 and 2011, is that correct?

Yes, we would expect to be at about 200,000 to 300,000 installed this year and then do the rest of them over the next two years through 2011 at SDG&E. And then assuming approval by the CPUC for SoCalGas Smart Meters, that's 6 million endpoints for the gas side only and we'd begin installation of those meters around 2012 and complete those by about 2016.

The 2.3 million gas and electric, what's the split on gas and what's the split on electric for San Diego Gas and Electric?

1.4 million electric and about 900,000 gas.

Thank you very much.

There are no further questions in the queue. I'll turn the call back to you Mr. Felsinger for any additional remarks.

Thanks to all of you for taking time to join us on this second quarter call. As always, if you have any follow-on questions, get ahold of Jeff, Glen or Scott. You guys all have a great day. Thanks

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.