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Sempra Energy Management Discusses Q2 2012 Results - Earnings Call Transcript

With that, I will turn it over to Debbie.

Debra L. Reed

Thanks, Rick, and thanks to all of you for joining us today. You may have noticed a new name in the list of introductions Rick just made, so let me introduce Trevor Mihalik, our new Controller and Chief Accounting Officer. He has extensive industry experience in the energy business and also a strong accounting background, and he is going to make a great addition to the already strong management team that we have here at Sempra. I'd also like to mention that Bruce Folkmann, who has been our Acting Controller since October of last year, will become the Vice President and Controller of our U.S. Gas & Power business starting next week.

On today's call, we'll review our second quarter financial results and then we'll give you a regulatory and operational update on our businesses.

Let's begin with our financial results. Earlier this morning, we recorded second quarter earnings of $62 million or $0.25 per share, excluding a $179 million non-cash charge related to our investment in the Rockies Express Pipeline, or REX. Adjusted earnings for the second quarter of 2012 were $241 million or $0.98 per share. In the second quarter of 2011, we recorded adjusted earnings of $226 million or $0.94 per share, which excluded the $277 million remeasurement gain we booked when we completed our acquisition of South American Utilities.

As many of you are aware, Kinder Morgan, a 50% owner of REX, is in the process of selling its interest in the pipeline as a result of its merger with El Paso. The REX pipeline is contracted through late 2019. The current market conditions for the pipeline are weak due to low gas prices and low basis differential. The sale by Kinder Morgan, coupled with the weak market conditions, led us to determine it was appropriate to record an impairment at this time. Joe will provide more details on this a little later in the call.

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