Morningstar | Sempra Writes Down Planned Asset Divestitures; Reports Second-Quarter Earnings
We are maintaining our $114 per share fair value estimate and stable, narrow moat ratings for Sempra Energy after the company reported second-quarter 2018 ongoing earnings per share of $1.35 compared with $1.10 in the same year-ago period. Management reaffirmed 2018 ongoing earnings guidance of $5.30 to $5.80, consistent with our expectations. We forecast dividend increases of 9% through 2019, then 13% increases in 2020 and 2021 as Cameron comes online.GAAP earnings reflected a $755 million impairment related to its planned sale of its midstream assets and an additional $145 million charge related to the planned sale of its U.S. wind assets. We expect the asset sales to be completed by early 2019 and don't expect them to have a material impact on our fair value estimate.
The addition of Oncor and a foreign currency benefit at its Mexican operations helped second-quarter earnings. Partially offsetting these factors was the lower tax shield on corporate interest expense due to U.S. tax reform and dividends on the company's convertible preferred shares.
We are closely watching the outcome of Sempra's California utilities' 2019 general rate case. The revised filing reflecting the impacts of tax reform includes a request for revenue increases of $172 million at SDG&E and $232 million at SoCalGas. We continue to expect a constructive decision, as we believe the company aligned its capital plan closely with regulatory objective of risk mitigation.
Progress continues on Sempra's potential LNG projects, including Cameron Trains 4 and 5, ECA, and Port Arthur. As these projects are in the very early stages, we don't include these in our fair value estimate. However, successful completion of any of these projects would likely lead us to increase our fair value estimate. Cameron trains 1-3 all are on track to produce LNG by year-end 2019.
Sempra Energy is an energy-services holding company. The company's segments are: San Diego Gas & Electric Company, which provides electric services and natural gas services in Southern California; Southern California Gas Company, which owns and operates a natural gas distribution, transmission and storage system that supplies natural gas in Southern California and portions of central California; Sempra Texas Utilities, which includes Oncor Electric Delivery Company LLC that provides electricity to consumers; Sempra Mexico, which develops, owns and operates, or holds interests in, energy infrastructure in Mexico; and Sempra LNG, which develops projects for the export of liquefied natural gas.
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