INVESTMENTS IN UNCONSOLIDATED ENTITIES

3 Months Ended

Mar. 31, 2020

INVESTMENTS IN UNCONSOLIDATED ENTITIES

We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Condensed Consolidated Statements of Operations. See Note 12 for information on equity earnings and losses, both before and net of income tax, by segment. See Note 1 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.

We provide additional information concerning our equity method investments in Notes 5 and 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA TEXAS UTILITIES

Oncor Holdings

We account for our 100% ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Due to the ring-fencing measures, governance mechanisms, and commitments in effect, we do not have the power to direct the significant activities of Oncor Holdings and Oncor. See Note 6 of the Notes to Consolidated Financial Statements in the

Annual Report for additional information related to the restrictions on our ability to direct the significant activities of Oncor Holdings and Oncor.

In the three months ended March 31, 2020, Sempra Energy contributed $70 million to Oncor, and Oncor Holdings distributed to Sempra Energy $73 million in dividends.

In the three months ended March 31, 2019, Sempra Energy contributed $56 million to Oncor, and Oncor Holdings distributed to Sempra Energy $54 million in dividends and $3 million in tax sharing payments.

We provide summarized income statement information for Oncor Holdings in the following table.



SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Operating revenues	$	1,072		$	1,016
Operating expense	(801		)	(775		)
Income from operations	271			241
Interest expense	(101		)	(86		)
Income tax expense	(28		)	(23		)
Net income	129			114
Noncontrolling interest held by TTI	(26		)	(23		)
Earnings attributable to Sempra Energy	103			91

TTHC

As we discuss in Note 5, in February 2020, Sempra Texas Intermediate Holding Company LLC, acquired a 1% interest in TTHC from Hunt Strategic Utility Investment, L.L.C. for $23 million in cash, of which $16 million of the fair value was attributed to our investment in TTHC. TTHC indirectly owns 100% of TTI, which owns 19.75% of Oncor’s outstanding membership interests, resulting in Sempra Energy acquiring an additional indirect 0.1975% interest in Oncor and bringing Sempra Energy’s indirect ownership in Oncor to approximately 80.45%.

SEMPRA MEXICO

IMG JV

IEnova has a 40% interest in IMG JV, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG JV owns and operates the Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the CFE and commenced commercial operations in September 2019.

As we discuss in “Transactions with Affiliates” in Note 1, IEnova has provided IMG JV with a Mexican peso-denominated revolving line of credit to finance construction of the natural gas marine pipeline. Due to significant fluctuation of the Mexican peso and the impact of this fluctuation on the peso-denominated loan, equity earnings from IEnova’s investment in IMG JV were higher in the three months ended March 31, 2020 compared to the same period in 2019, primarily due to $149 million of foreign currency gains in 2020 compared to $10 million of foreign currency losses in 2019, which are offset by corresponding amounts included in Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations.

We provide summarized income statement information for IMG JV in the following table.



SUMMARIZED FINANCIAL INFORMATION – IMG JV
(Dollars in millions)
	Three months ended March 31,
	2020			2019
Operating revenues	$	122		$	—
Operating expenses	(33		)	—
Income from operations	89			—
Other income, net	364			41
Interest expense	(43		)	(46		)
Income tax benefit (expense)	10			(4		)
Net income (loss)/Earnings (losses)	420			(8		)

SEMPRA LNG

In the three months ended March 31, 2019, Sempra LNG invested cash of $25 million in Cameron LNG JV. Prior to commencing commercial operations in August 2019, Sempra LNG capitalized $13 million of interest in the three months ended March 31, 2019 related to its investment in Cameron LNG JV.

RBS SEMPRA COMMODITIES

As we discuss in Note 11, in March 2020, we recorded a charge of $100 million in Equity Earnings on Sempra Energy’s Condensed Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. We recognized a corresponding liability of $25 million in Other Current Liabilities and $75 million in Deferred Credits and Other for our share of estimated losses in excess of the carrying value of our equity method investment.

GUARANTEES

At March 31, 2020, Sempra LNG has provided guarantees aggregating a maximum of $4.0 billion with an aggregate carrying value of $2 million associated with Cameron LNG JV’s debt obligations. We discuss these guarantees in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.