2.2.0.7 false INVESTMENTS IN UNCONSOLIDATED ENTITIES 010400 - Disclosure - INVESTMENTS IN UNCONSOLIDATED ENTITIES true false false false 1 USD false false Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ 2 Notes to Consolidated Financial Statements [Abstract] 0 sre_NotesToConsolidatedFinancialStatementsAbstract sre false na duration 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 xbrli:stringItemType string No definition available. false 3 Investments in Unconsolidated Entities 1 us-gaap_EquityMethodInvestmentsDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIESSEMPRA ENERGY AND SDG&EAvailable-for-Sale SecuritiesIn June 2009, SDG&E remarketed $176 million of its industrial development bonds at a fixed rate of 5.875 percent, maturing in 2034. Prior to SDG&E's remarketing, SDG&E purchased $152 million of the bonds from Sempra Energy. We discuss these bonds further in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.SEMPRA COMMODITIESRBS 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. Excluding the impairment charge discussed below, for the three months and nine months ended September 30, 2010, we recorded pretax equity earnings of $24 million and $15 million, respectively, from RBS Sempra Commodities. Pretax equity earnings from RBS Sempra Commodities were $105 million and $384 million for the three months and nine months ended September 30, 2009, respectively. 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 and nine months ended September 30, 2010, our share of distributable income, on an IFRS basis, was $22 million and $53 million, respectively. In the three months and nine months ended September 30, 2009, our share of distributable income, on an IFRS basis, was $60 million and $276 million, respectively. In the second quarter of 2010, we received the remaining distribution of 2009 partnership income of $198 million. In the first nine months of 2009, we received cash distributions from the partnership of $407 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. In November 2009, our partner in the joint venture, The Royal Bank of Scotland (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. In February 2010, Sempra Energy, RBS and the partnership entered into an agreement with J.P. Morgan Ventures Energy Corporation (J.P. Morgan Ventures), a unit of J.P. Morgan Chase & Co. (JP Morgan), for J.P. Morgan Ventures to purchase the global metals and oil businesses and the European natural gas and power business from the joint venture. This transaction was completed on July 1, 2010, and we received the majority of the proceeds in early July 2010 and the remainder in September 2010. The purchase price was $1.6 billion, and our share of the proceeds was approximately $1 billion, including distributions of 2009 partnership income attributable to the businesses sold, which were $134 million of the $198 million in distributions we received in April 2010. This sale to J.P. Morgan Ventures did not include RBS Sempra Commodities' North American power and natural gas trading businesses and its retail energy solutions business. In September 2010, Noble Group Ltd. (Noble Group) agreed to acquire the U.S. retail commodity marketing business of the RBS Sempra Commodities joint venture for $318 million in cash, plus assumption of all debt, and the transaction closed on November 1, 2010. In October 2010, J.P. Morgan Ventures agreed to purchase, subject to regulatory approval, most of the remaining assets of RBS Sempra Commodities for approximately $220 million. The assets to be sold include the joint venture's wholesale natural gas and power trading agreements, as well as over-the-counter and exchange-traded transactions, with counterparties across North America. The counterparties include natural gas producers, pipeline and storage providers, power plants, regasification facilities, utilities and municipal customers. The sale is expected to close before year-end and will complete the divestiture of the remaining principal assets of RBS Sempra Commodities.We expect our share of the proceeds from the sales of all of the partnership businesses and related cash distributions to total $1.8 billion to $1.9 billion. This includes approximately $1.3 billion expected from the announced transactions, plus $500 million to $600 million consisting primarily of cash and accounts receivable, as well as net margin that is expected to be collected as customers are transferred to JP Morgan. The transfer of all accounts to JP Morgan will be done as soon as possible following closing, but is expected to continue into 2011. Projected cash distributions from RBS Sempra Commodities are net of expected transition costs and are not expected to fully recover the goodwill included in the carrying value of our investment in the partnership. Accordingly, we recorded a pretax non-cash charge of $305 million ($139 million after-tax) for the three months and nine months ended September 30, 2010 to reduce our investment in RBS Sempra Commodities. This charge is included in Equity Earnings (Losses) from RBS Sempra Commodities LLP on the Condensed Consolidated Statements of Operations. The fair value of our investment in RBS Sempra Commodities was significantly impacted by unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements, which we discuss below in Note 8. The inputs included estimated future cash distributions expected from the partnership, excluding the impact of costs anticipated for transactions that have not closed as of September 30, 2010. The investment balance of $825 million at September 30, 2010 reflects our portion of the partnership's earnings, distributions received from the partnership and the non-cash charge to bring the investment to fair value.The following table shows summarized financial information for RBS Sempra Commodities (on a GAAP basis):<div><table style="border-collapse:collapse;margin-top:20px;"><tr style="height: 14px"><td style="width: 235px; text-align:left;border-color:#000000;min-width:235px;"> </td><td colspan="4" style="width: 208px; border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:208px;">Three months ended September 30,</td><td colspan="4" style="width: 201px; border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:201px;">Nine months ended September 30,</td></tr><tr style="height: 14px"><td style="width: 235px; border-bottom-style:solid;border-bottom-width:1px;text-align:left;border-color:#000000;min-width:235px;">(Dollars in millions)</td><td colspan="2" style="width: 95px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:95px;">2010</td><td colspan="2" style="width: 113px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:113px;">2009</td><td colspan="2" style="width: 98px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:98px;">2010</td><td colspan="2" style="width: 103px; border-top-style:solid;border-top-width:1px;border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:103px;">2009</td></tr><tr style="height: 16px"><td style="width: 235px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:235px;">Gross revenues and fee income</td><td style="width: 26px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:26px;">$</td><td style="width: 69px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:69px;"> 72</td><td style="width: 26px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:26px;">$</td><td style="width: 87px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:87px;"> 291</td><td style="width: 22px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:22px;">$</td><td style="width: 76px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:76px;"> 466</td><td style="width: 24px; border-top-style:solid;border-top-width:1px;text-align:left;border-color:#000000;min-width:24px;">$</td><td style="width: 79px; border-top-style:solid;border-top-width:1px;text-align:right;border-color:#000000;min-width:79px;"> 1,167</td></tr><tr style="height: 16px"><td style="width: 235px; text-align:left;border-color:#000000;min-width:235px;">Gross profit</td><td style="width: 26px; text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 69px; text-align:right;border-color:#000000;min-width:69px;"> 74</td><td style="width: 26px; text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 87px; text-align:right;border-color:#000000;min-width:87px;"> 268</td><td style="width: 22px; text-align:left;border-color:#000000;min-width:22px;"> </td><td style="width: 76px; text-align:right;border-color:#000000;min-width:76px;"> 446</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;"> </td><td style="width: 79px; text-align:right;border-color:#000000;min-width:79px;"> 1,096</td></tr><tr style="height: 16px"><td style="width: 235px; text-align:left;border-color:#000000;min-width:235px;">Income (loss) from continuing operations</td><td style="width: 26px; text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 69px; text-align:right;border-color:#000000;min-width:69px;"> (7)</td><td style="width: 26px; text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 87px; text-align:right;border-color:#000000;min-width:87px;"> 115</td><td style="width: 22px; text-align:left;border-color:#000000;min-width:22px;"> </td><td style="width: 76px; text-align:right;border-color:#000000;min-width:76px;"> (20)</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;"> </td><td style="width: 79px; text-align:right;border-color:#000000;min-width:79px;"> 504</td></tr><tr style="height: 16px"><td style="width: 235px; border-bottom-style:solid;border-bottom-width:3px;text-align:left;border-color:#000000;min-width:235px;">Partnership net income (loss)</td><td style="width: 26px; border-bottom-style:solid;border-bottom-width:3px;text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 69px; border-bottom-style:solid;border-bottom-width:3px;text-align:right;border-color:#000000;min-width:69px;"> (7)</td><td style="width: 26px; border-bottom-style:solid;border-bottom-width:3px;text-align:left;border-color:#000000;min-width:26px;"> </td><td style="width: 87px; border-bottom-style:solid;border-bottom-width:3px;text-align:right;border-color:#000000;min-width:87px;"> 115</td><td style="width: 22px; border-bottom-style:solid;border-bottom-width:3px;text-align:left;border-color:#000000;min-width:22px;"> </td><td style="width: 76px; border-bottom-style:solid;border-bottom-width:3px;text-align:right;border-color:#000000;min-width:76px;"> (20)</td><td style="width: 24px; border-bottom-style:solid;border-bottom-width:3px;text-align:left;border-color:#000000;min-width:24px;"> </td><td style="width: 79px; border-bottom-style:solid;border-bottom-width:3px;text-align:right;border-color:#000000;min-width:79px;"> 504</td></tr></table></div>We provide information regarding the Sempra Commodities segment in Note 11.SEMPRA PIPELINES & STORAGEIn the first quarter 2010, Sempra Pipelines & Storage contributed $65 million to Rockies Express, a joint venture to own and operate the Rockies Express Pipeline, to complete the construction phase of the project. Sempra Pipelines & Storage contributed $315 million and $527 million in the three months and nine months ended September 30, 2009, respectively. We discuss this investment in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.Sempra Pipelines & Storage owns 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. The Argentine economic decline and government responses (including Argentina's unilateral, retroactive abrogation of utility agreements early in 2002) continue to adversely affect the operations of these Argentine utilities. In 2002, Sempra Pipelines & Storage initiated arbitration proceedings at the International Center for the Settlement of Investment Disputes (ICSID) under the 1994 Bilateral Investment Treaty between the United States and Argentina for recovery of the diminution of the value of its investments that has resulted from Argentine governmental actions. In September 2007, the tribunal awarded us compensation of $172 million, which included interest up to the award date. In January 2008, Argentina filed an action at the ICSID seeking to annul the award. In June 2010, the Annulment Committee granted Argentina's petition for annulment of the award. This action did not impact our earnings, as we did not record the original award pending assurance of collectability. On November 3, 2010, Sempra Pipelines & Storage resubmitted arbitration proceedings against Argentina before the ICSID on the same and similar grounds as the 2002 filing.In a separate but related proceeding related to our political risk insurance policy, we negotiated a $48 million settlement that was collected in September 2010. The proceeds from the settlement are reported in Other Income, Net, on the Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2010.We continue to actively pursue the sale of our investments in the two Argentine companies. In September 2010, we concluded that, although the ICSID claim had been annulled as discussed above, rate increases sought in Argentina would continue to be delayed. We believe this continued uncertainty has impacted the fair value of our net investment in the two Argentine companies, and recorded a non-cash impairment charge of $24 million, which is reported in Equity Earnings (Losses), Net of Income Tax, on the Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2010. The Sodigas Pampeana and Sodigas Sur fair value was significantly impacted by unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements, which we discuss below in Note 8. The inputs included discount rates and estimated future cash flows. Such cash flows considered the value of those businesses with positive cash flows, the value of the non-operating assets, and the probability-weighted value of anticipated rate increases, considering both the timing and magnitude of such increases.SEMPRA GENERATIONSempra Generation and BP Wind Energy currently hold 50-percent ownership interests in Fowler Ridge II Wind Farm LLC (Fowler Ridge), a joint venture which operates a 200-MW wind farm project located in Benton County, Indiana. As of December 2009, Sempra Generation had invested $235 million in the joint venture. In August 2010, Sempra Generation received a $180 million return of capital from Fowler Ridge. We discuss this further in Note 6 below and provide additional information in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.   NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIESSEMPRA ENERGY AND SDG&EAvailable-for-Sale SecuritiesIn June 2009, SDG&E remarketed $176 million of its false false false us-types:textBlockItemType textblock 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 1 2 false UnKnown UnKnown UnKnown false true