Energy Trading, Production Gains Boost Sempra’s Profit

Big gains in energy trading and electricity production boosted Sempra Energy’s profit by 9.5% in the third quarter, but a weather-related drop in electricity use caused a 91% decline in net income at power merchant Calpine Corp.

The stocks of both companies rose in the wake of their earnings reports Thursday. Sempra added 45 cents to close at $35.16 a share and Calpine jumped 34 cents, or 14%, to $2.77. Both companies are traded on the New York Stock Exchange

San Diego-based Sempra, which operates two of Southern California’s largest utilities, said its net income increased to $231 million, or 98 cents a share, in the quarter ended Sept. 30, up from $211 million, or $1, in the third quarter of 2003. With more shares outstanding in the 2004 quarter, the per-share earnings figure came in below that of 2003’s third quarter. Third-quarter sales rose to $2.2 billion, up 5.2%.

The results were better than the average estimate of 81 cents a share among analysts polled by Thomson First Call.

Sempra on Thursday raised its earnings estimate for 2004 to $3.15 to $3.25 a share, up from an earlier projection of $2.90 to $3.10.

“I thought they were very good results,” said A.G. Edwards & Sons analyst Michael Heim, who rates Sempra a “buy” and doesn’t own any of the shares, although his firm has done banking business with the company. “This was a very, very good quarter for trading.”

Net income doubled for the quarter to $44 million at Sempra’s Energy Trading company amid rising prices worldwide for oil and other petroleum products.

Sempra Energy Resources, a power producer, posted a profit of $64 million, a jump of 94% over net income of $33 million in last year’s third quarter. Much of that increase was attributed to better-than-expected results at the company’s newly purchased power plants in Texas, according to Stephen L. Baum, Sempra’s chairman and chief executive.

Earnings at the company’s utilities, Southern California Gas Co. and San Diego Gas & Electric Co., fell 26% to $128 million from $173 million in the third quarter of 2003. The drop came from SDG&E;, where profit fell by half to $60 million compared with that of the year-earlier period, which was boosted by a $65-million gain on a contract settlement.

“This was a solid quarter for Sempra Energy, and we are on course for record net income and earnings per share this year,” Baum said in a conference call with analysts.

San Jose-based Calpine posted net income of $22.3 million, or 5 cents a share, for the quarter ended Sept. 30, down from $237.8 million, or 51 cents, for the same quarter in 2003. Revenue fell to $2.56 billion, a nearly 4% decline.

The quarterly results included several special items, among them an after-tax gain of $62.6 million from asset sales.

Analysts surveyed by Thomson First Call had predicted earnings of 17 cents a share on average, but the estimates ranged from a loss of 5 cents a share to earnings of 42 cents.

Calpine Chief Executive Peter Cartwright attributed the steep decline to a cooler-than-expected summer, which translated into less energy use and lower revenue. In addition, higher prices for the natural gas needed to run its power plants eroded profit, the company said.

Calpine has been chipping away at a debt load that remains a cause for concern among analysts but also is raising the stakes by investing in new power plants at a time when some companies are fleeing the business.

“I think it was a solid quarter, given the difficult operating environment,” said Harris Nesbitt analyst Michael Worms, who rates Calpine “outperform” and owns some shares. Harris Nesbitt has done banking business with Calpine. “It was kind of in line with what we had expected.”