Sempra Doubles Cost Estimate for Biggest U.S. Gas Leakby
First-quarter earnings fell, missing analyst estimates
California says blackout risk if storage facility stays shut
Sempra Energy more than doubled its estimate for the cost of a historic natural gas leak to $665 million and announced first-quarter earnings that missed expectations.
Earnings excluding some items fell to $370 million or $1.47 a share, from $428 million or $1.71 a share a year earlier, according to a statement Wednesday. That missed the $1.66 a share average of 11 analyst estimates compiled by Bloomberg.
Sempra has been unable to seek new rates for its utilities as investigations into the leak continue, a delay that weakened earnings, according to Stacy Nemeroff, an analyst for Bloomberg Intelligence.
"The delay did have an impact on Sempra’s first quarter earnings since neither of its California utilities can implement rate increases until a decision has been made," she said.
The company expects the final decision on rates "will be consistent with the settlement agreements” its utilities filed last fall, Chief Executive Officer Debra L. Reed said in the statement. “Based on this expectation, we believe we are on track to meet our new, revised adjusted earnings guidance for 2016.”
The company cut its forecast range for 2016 earnings per share to between $4.60 and $5 from $4.80 to $5.20 to reflect the pending sale of its stake in the Rockies Express Pipeline.
Sempra said raising its leak cost estimates didn’t have an material impact on its quarterly earnings and that the company has recorded $660 million for insurance recoveries.
The latest reckoning comes as Sempra’s Southern California Gas utility faces a regulatory probe and misdemeanor charges stemming from a nearly four-month leak from a broken well at its Aliso Canyon storage field near Los Angeles. The well spewed the equivalent of a year’s worth of greenhouse-gas emissions from more than 500,000 cars, forcing thousands to temporarily relocate. It was the biggest gas leak in U.S. history, according to the National Oceanic and Atmospheric Administration and the University of California at Davis.
In February, Sempra estimated the cost of the Aliso Canyon leak to be at least $330 million. The company has said it has insurance coverage in excess of $1 billion to cover expenses related to the leak.
Sempra is working to return the storage facility to service by late summer after conducting state-mandated well inspections. State agencies have said there is a risk of blackouts this summer in Southern California if Aliso Canyon is unavailable to supply gas to power generators.