2.0.0.10 false INVESTMENTS IN UNCONSOLIDATED ENTITIES 010400 - Disclosure - INVESTMENTS IN UNCONSOLIDATED ENTITIES true false false false 1 usd $ false false 2 Notes to Condensed Consolidated Financial Statements 0 sre_NotesToConsolidatedFinancialStatementsAbstract sre false na duration string No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false No definition available. false 3 Investments in Unconsolidated Entities 1 us-gaap_EquityMethodInvestmentsDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div style="font-size:12pt">NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIESSEMPRA COMMODITIES RBS Sempra Commodities LLP (RBS Sempra Commodities) is a limited liability partnership formed in the United Kingdom to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra Energy. We account for our investment in RBS Sempra Commodities under the equity method, and report our share of partnership earnings in the Sempra Commodities segment. For the three months ended March 31, 2010 and 2009, we had $7 million and $153 million, respectively, of pretax equity earnings from RBS Sempra Commodities. The partnership income that is distributable to us on an annual basis is computed on the partnership's basis of accounting, International Financial Reporting Standards (IFRS), as adopted by the European Union. For the three months ended March 31, 2010, the partnership recorded a loss, on an IFRS basis, of $1 million. In the three months ended March 31, 2009, the distributable income, on an IFRS basis, was $114 million. On April 30, 2010, the partnership made a cash distribution to us of $197 million. In the first quarter 2009, we received cash distributions from the partnership of $305 million. We discuss the equity method investment in RBS Sempra Commodities further in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report. We have indemnified the partnership for certain litigation and tax liabilities related to the businesses purchased by the partnership. We recorded these obligations at a fair value of $5 million on April 1, 2008, the date we formed the partnership. This liability is being amortized over its expected life. In November 2009, RBS announced its intention to divest its interest in RBS Sempra Commodities in connection with a directive from the European Commission to dispose of certain assets. On February 16, 2010, Sempra Energy, RBS and the partnership (Seller Parties) entered into an agreement (the Purchase Agreement) with J.P. Morgan Ventures Energy Corporation (J.P. Morgan Ventures), whereby J.P. Morgan Ventures will purchase the following businesses from the joint venture: <ul><li>the global oil, metals, coal, emissions (other than emissions related to the partnership’s North American power business), plastics, agricultural commodities and concentrates commodities trading and marketing business </li><li>the European power and gas business </li><li>the investor products business </li></ul>The Purchase Agreement does not include RBS Sempra Commodities' North American power and natural gas trading businesses and its retail energy solutions business. These businesses have historically generated 40 to 60 percent of total earnings of the businesses in the partnership, and have averaged more than 50 percent. RBS and Sempra Energy are actively soliciting offers for the sale of these remaining businesses. The transaction is expected to close in summer 2010. J.P. Morgan Ventures will pay an aggregate purchase price equal to the estimated tangible book value at closing of the businesses purchased, generally computed on the basis of IFRS as adopted by the European Union, plus $468 million. Sempra Energy will be entitled to 53-1/3 percent of the aggregate purchase price, and RBS will be entitled to 46-2/3 percent of the aggregate purchase price. We are currently evaluating the effect of the proposed transaction on our investment and share of equity method earnings, which will be impacted by the joint venture’s allocation of goodwill to the transaction, differences between GAAP and IFRS, the application of equity method accounting, and the amendments to the partnership agreement described below. In conjunction with the transaction, JPMorgan Chase & Co. has delivered a guarantee in favor of the Seller Parties to guarantee certain obligations, including the payment obligations, of J.P. Morgan Ventures under the Purchase Agreement. The closing is subject to several conditions, including the following: <ul><li>governmental approvals from the U.K. Financial Services Authority and the U.S. Department of Justice or Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (which approval was received in March 2010), and antitrust approvals from regulators in Canada and in a limited number of other jurisdictions, including the European Union </li><li>if necessary, the obtaining of a license from the Swiss Federal Market Supervisory Authority </li><li>a condition to the obligation of the Seller Parties to close the transaction that JPMorgan Chase & Co. not experience a ratings downgrade below the level specified in the Purchase Agreement </li><li>entering into certain related agreements, including an agreement pursuant to which the partnership will provide transition services to the purchased businesses following the closing </li></ul>In connection with the transaction under the Purchase Agreement, we and RBS entered into a letter agreement to negotiate, prior to closing of the transaction, definitive documentation to amend certain provisions of the Limited Liability Partnership Agreement dated April 1, 2008 between Sempra Energy and RBS (Partnership Agreement) to, among other things: <ul><li>consider the distribution of excess cash of the partnership to us and RBS </li><li>eliminate each partner’s preferred return (currently 15 percent per year) and to move to a 50/50 sharing of net income, if and when our invested capital is reduced to $950 million or less by the return of capital to the partners </li><li>terminate the restrictions on the partners’ ability to transfer their partnership interests prior to April 2012 (but not the partners’ right of first offer and other rights, including our tag-along right with respect to the transfer of that interest or the requirement that any transferee be reasonably acceptable to us) </li></ul>The letter agreement also provides for negotiating the framework for the entertaining of bids for the remaining part of the partnership’s business. The following table shows summarized financial information for RBS Sempra Commodities (on a GAAP basis):<table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="235" align="left"> </td><td width="208" align="center" colspan="4" style="border-bottom: 1px solid #000000;" height="14">Three months ended March 31,</td></tr><tr><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="235">(Dollars in millions)</td><td width="95" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2010 </td><td width="113" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14">2009 </td></tr><tr><td height="16" style="border-top: 1px solid #000000;" align="left" width="235">Gross revenues and fee income</td><td height="16" style="border-top: 1px solid #000000;" align="left" width="26">$</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="69"> 206 </td><td height="16" style="border-top: 1px solid #000000;" align="left" width="26">$</td><td height="16" style="border-top: 1px solid #000000;" align="right" width="87"> 509 </td></tr><tr><td height="16" width="235" align="left">Gross profit</td><td height="16" width="26" align="left"> </td><td height="16" width="69" align="right"> 198 </td><td height="16" width="26" align="left"> </td><td height="16" width="87" align="right"> 486 </td></tr><tr><td height="16" width="235" align="left">Income from continuing operations</td><td height="16" width="26" align="left"> </td><td height="16" width="69" align="right"> 10 </td><td height="16" width="26" align="left"> </td><td height="16" width="87" align="right"> 236 </td></tr><tr><td height="16" style="border-bottom: 3px solid #C0C0C0;" align="left" width="235">Partnership net income </td><td height="16" style="border-bottom: 3px solid #C0C0C0;" align="left" width="26"> </td><td height="16" style="border-bottom: 3px solid #C0C0C0;" align="right" width="69"> 10 </td><td height="16" style="border-bottom: 3px solid #C0C0C0;" align="left" width="26"> </td><td height="16" style="border-bottom: 3px solid #C0C0C0;" align="right" width="87"> 236 </td></tr></table>We provide information regarding the Sempra Commodities segment in Note 11.SEMPRA PIPELINES & STORAGE In the three months ended March 31, 2010, Sempra Pipelines & Storage contributed $65 million to Rockies Express, a joint venture to own and operate the Rockies Express Pipeline, which was the last contribution required for the construction phase of the project. Sempra Pipelines & Storage contributed $25 million in the first quarter of 2009. We discuss this investment in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report. </div> NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIESSEMPRA COMMODITIESRBS Sempra Commodities LLP (RBS Sempra Commodities) is a limited liability partnership formed false false false Equity investment disclosure, or group of investments for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20% of the voting stock and the investment is accounted for using the equity method, and the reasons why it is. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 18 -Paragraph 20 false false 1 2 false UnKnown UnKnown UnKnown false true