ACQUISITION AND DIVESTITURE ACTIVITY

We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.

ACQUISITIONS

SEMPRA MEXICO

2017 Acquisition

Ductos y Energéticos del Norte, S. de R.L. de C.V.

On November 15, 2017, IEnova completed the asset acquisition of PEMEX’s 50-percent interest in DEN, a joint venture that holds a 50-percent interest in the Los Ramones Norte pipeline through TAG, for a purchase price of $165 million (exclusive of $18 million of cash and cash equivalents acquired), plus the assumption of $96 million of short-term debt. This acquisition increased IEnova’s ownership interest in DEN through IEnova Pipelines from 50 percent to 100 percent, and increased IEnova’s indirect ownership interest in TAG from 25 percent to 50 percent. IEnova Pipelines previously accounted for its 50-percent interest in DEN as an equity method investment. At closing, DEN became a wholly owned, consolidated subsidiary of IEnova Pipelines. DEN will continue to account for its interest in TAG as an equity method investment. This acquisition also included a $66 million intangible asset that represents a favorable O&M agreement, which has an amortization period of 23 years.

2016 Acquisitions

The following table summarizes the total fair value of the 2016 business combinations at Sempra Mexico, described below, and the final purchase price allocations of the assets acquired and liabilities assumed at the dates of acquisition:



PURCHASE PRICE ALLOCATIONS
(Dollars in millions)
	IEnova Pipelines			Ventika
	At September 26, 2016⁽¹⁾			At December 14, 2016⁽²⁾
Fair value of business combination:
Cash consideration (fair value of total consideration)	$	1,144		$	310
Fair value of equity interest in IEnova Pipelines immediately prior to acquisition	1,144			—
Total fair value of business combination	$	2,288		$	310

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	66		$	—
Restricted cash	—			68
Accounts receivable	39			14
Other current assets	6			1
Other intangible assets	—			154
Deferred income taxes	—			36
Regulatory assets	33			—
Property, plant and equipment	1,248			673
Other noncurrent assets	1			3
Short-term debt	—			(125		)
Accounts payable	(11		)	(1		)
Due to unconsolidated affiliates	(3		)	—
Current portion of long-term debt	(49		)	(7		)
Fixed-price contracts and other derivatives, current	(6		)	(4		)
Other current liabilities	(20		)	(8		)
Long-term debt	(315		)	(478		)
Asset retirement obligations	(5		)	(2		)
Deferred income taxes	(127		)	(120		)
Fixed-price contracts and other derivatives, noncurrent	(19		)	(10		)
Other noncurrent liabilities	(11		)	—
Total identifiable net assets	827			194
Goodwill	1,461			116
Total fair value of business combination	$	2,288		$	310

⁽¹⁾

During the fourth quarter of 2016, we received additional information regarding IEnova Pipelines’ deferred income taxes as of the acquisition date, primarily related to basis differences in IEnova Pipelines’ PP&E. As a result, we recorded measurement period adjustments that resulted in a net increase to goodwill of $86 million, an increase in deferred income tax liabilities of $119 million and $33 million of regulatory assets related to deferred income taxes on AFUDC.


⁽²⁾	During the fourth quarter of 2017, we received additional information regarding Ventika’s deferred income taxes as of the acquisition date, primarily related to net operating loss carryforwards. As a result, we recorded a measurement period adjustment that resulted in a decrease to goodwill and an increase in deferred income tax assets of $13 million.

IEnova Pipelines, S. de R.L. de C.V. (formerly known as Gasoductos de Chihuahua, S. de R.L. de C.V., or GdC)

Background and Financing. On September 26, 2016, IEnova completed the acquisition of PEMEX’s 50-percent interest in IEnova Pipelines, which develops and operates energy infrastructure in Mexico, for a purchase price of $1.144 billion (exclusive of $66 million of cash and cash equivalents acquired), plus the assumption of $364 million of long-term debt, increasing IEnova’s ownership interest in IEnova Pipelines to 100 percent. IEnova Pipelines became a consolidated subsidiary of IEnova on this date. Prior to the acquisition date, IEnova owned 50 percent of IEnova Pipelines and accounted for its interest as an equity method investment.

The assets involved in the acquisition included three natural gas pipelines, an ethane pipeline, and a liquid petroleum gas pipeline and associated storage terminal. The transaction excluded the Los Ramones Norte pipeline, in which IEnova continued to hold an indirect 25-percent ownership interest through IEnova Pipelines’ interest in DEN until November 2017, as we discuss above.

IEnova paid $1.078 billion in cash ($1.144 billion purchase price less $66 million of cash and cash equivalents acquired), which was funded using interim financing provided by Sempra Global through a $1.15 billion bridge loan to IEnova. Sempra Global funded the majority of the transaction using commercial paper borrowings. As we discuss in Note 1, in October 2016, IEnova completed a private follow-on offering of its common stock in the U.S. and outside of Mexico and a concurrent public common stock offering in Mexico. IEnova used a portion of the net proceeds from the offerings to fully repay the Sempra Global bridge loan.

Purchase Price Allocation. We accounted for this business combination using the acquisition method of accounting whereby the total fair value of the business acquired is allocated to identifiable assets acquired and liabilities assumed based on their respective fair values, with any excess recognized as goodwill at the Sempra Mexico reportable segment. None of the goodwill is expected to be deductible in Mexico or the U.S. for income tax purposes.

Gain on Remeasurement of Equity Method Investment. In the year ended December 31, 2016, we recorded a pretax gain of $617 million ($432 million after-tax) for the excess of the acquisition-date fair value of Sempra Mexico’s previously held equity interest in IEnova Pipelines over the carrying value of that interest, included as Remeasurement of Equity Method Investment on the Sempra Energy Consolidated Statement of Operations. We used a market approach to measure the acquisition-date fair value of IEnova’s equity interest in IEnova Pipelines immediately prior to the business acquisition. We discuss non-recurring fair value measures and the associated accounting impact of the IEnova Pipelines acquisition in Note 10.

Valuation of IEnova Pipelines’ Assets and Liabilities. Based on the nature of the Mexico regulatory environment and the oversight surrounding the establishment and maintenance of rates that IEnova Pipelines charges for services on its assets, IEnova Pipelines applies the guidance under the provisions of U.S. GAAP governing rate-regulated operations. Therefore, when determining the fair value of the acquired assets and liabilities assumed, we considered the effect of regulation on a market participant’s view of the highest and best use of the assets, in particular for the fair value of IEnova Pipelines’ PP&E. Under U.S. GAAP, regulation is viewed as being a characteristic (restriction) of a regulated entity’s PP&E, and the impact of regulation is considered a fundamental input to measuring the fair value of PP&E in a business combination involving a regulated business.

Under this premise, the fair value of the PP&E of a regulated business is generally assumed to be equivalent to carrying value for financial reporting purposes. Management concluded that the carrying value of IEnova Pipelines’ PP&E is representative of fair value.

We applied an income approach, specifically the discounted cash flow method, to measure the fair value of debt and derivatives. We valued debt by discounting future debt payments by a market yield, and we valued derivatives by discounting the future interest payments under the fixed and floating rates using current market data.

For substantially all other assets and liabilities, we determined that historical carrying value approximates fair value due to their short-term nature.

Impact on Operating Results. We incurred acquisition costs of $4 million and $1 million in the years ended December 31, 2016 and 2015, respectively. These costs are included in Operation and Maintenance on the Sempra Energy Consolidated Statements of Operations.

For the year ended December 31, 2016, the Sempra Energy Consolidated Statement of Operations includes $82 million of revenues and $33 million of earnings (after noncontrolling interests) from IEnova Pipelines since the September 26, 2016 date of acquisition.

Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V.

Background and Financing. On December 14, 2016, IEnova acquired 100 percent of the equity interests in the Ventika wind power generation facilities for cash consideration of $310 million and the assumption of $610 million of existing debt. Ventika is a 252-MW wind farm located in Nuevo Leon, Mexico, that began commercial operations in April 2016. All of Ventika’s generation capacity is contracted under 20-year, U.S. dollar-denominated PPAs with five private off-takers. The acquisition was funded using $50 million of net proceeds from the IEnova equity offerings that we discuss in Note 1, $250 million of borrowings against Sempra Mexico’s revolving credit facility, and $10 million of available cash at IEnova. The acquisition also included $68 million of restricted cash that represents funds set aside for servicing debt, operations, and other costs pursuant to the long-term debt agreements.

Valuation of Ventika’s Assets and Liabilities. The fair values of the tangible and intangible assets acquired and liabilities assumed were recognized based on their preliminary values at the acquisition date. Significant inputs used to measure the fair values of the acquired PP&E, intangible asset, debt, and derivatives are as follows:


▪	PP&E – We applied an income approach using market-based discounted cash flows. We used the pricing included in the existing PPAs, which was determined to reflect current market rates in the Mexican renewable energy market.

▪

Intangible asset – Ventika is the holder of a renewable energy transmission and consumption permit that allows it to transmit its generated power to various locations within Mexico at beneficial rates and reduces the administrative burden to manage transmitting power to off-takers. With recent renewable energy market reforms in Mexico, these transmission and consumption permits are no longer available, resulting in higher tariffs for generators. We applied an income approach based on a cash flow differential approach that measures the fair value of the transmission rights by comparing the operating expenses under the transmission and consumption permit as compared to under the new, higher tariffs. This acquired intangible asset has an amortization period of 19 years, reflecting the remaining life of the transmission and consumption transmission permit at the time of acquisition.


▪	Debt – Using an income approach, we valued debt by discounting future debt payments by a market yield commensurate with the remaining term of the loans.


▪	Derivatives – Using an income approach, we valued derivatives by discounting the future interest payments under the fixed and floating rates using current market data.

Additionally, we recognized deferred income taxes on Ventika’s existing NOLs, and for the difference between the fair values and tax bases of the net assets acquired using the Mexican statutory rate.

For substantially all other assets and liabilities, we determined that historical carrying value approximates fair value due to their short-term nature.

Impact on Operating Results. We incurred acquisition costs of $1 million in the year ended December 31, 2016, which are included in Operation and Maintenance on the Sempra Energy Consolidated Statement of Operations.

For the year ended December 31, 2016, the Sempra Energy Consolidated Statement of Operations includes $4 million of revenues and $3 million of earnings (after noncontrolling interests) from Ventika since the December 14, 2016 date of acquisition.

Unaudited Pro Forma Information

The following table presents unaudited pro forma information for the years ended December 31, 2016 and 2015, combining the historical results of operations of Sempra Energy, IEnova Pipelines and Ventika as though the acquisitions occurred on January 1, 2015. The pro forma information is not necessarily indicative of results that would have been achieved had the businesses been combined during the periods presented or the results that we will experience going forward.



UNAUDITED PRO FORMA INFORMATION – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Years ended December 31,
	2016		2015
Revenues	$	10,463	$	10,473
Net income	1,145		1,938
Earnings	1,058		1,641

The unaudited pro forma information above assumes


▪	the related IEnova equity offerings, discussed above and in Note 1, occurred on January 1, 2015, which results in a change in Sempra Energy’s noncontrolling interest in IEnova from 18.9 percent to 33.6 percent for all periods presented;


▪	the proceeds from the IEnova equity offerings were used to fund the acquisitions, instead of the bridge loan that was provided by Sempra Global to IEnova for the IEnova Pipelines acquisition, therefore interest expense on the commercial paper borrowings supporting the bridge loan is excluded for all periods presented;


▪	interest expense on the borrowings against Sempra Mexico’s revolving credit facility began when Ventika’s commercial operations commenced in April 2016;


▪	equity earnings, net of income tax, from IEnova Pipelines that were previously included in Sempra Energy’s results have been excluded for both periods presented;


▪	the gain related to the remeasurement of our previously held equity interest in IEnova Pipelines has been included in the year ended December 31, 2015, and accordingly, the year ended December 31, 2016 was adjusted to exclude the gain; and


▪	acquisition-related transaction costs have been included in the year ended December 31, 2015, and accordingly, the year ended December 31, 2016 was adjusted to exclude them.

Most of Sempra Mexico’s operations, including IEnova Pipelines and Ventika, use the U.S. dollar as their functional currency.

SEMPRA RENEWABLES

On July 10, 2017, Sempra Renewables paid $124 million in cash for an asset acquisition of a portfolio of four solar projects located in Fresno County, California, that were under construction. We placed three of the four projects into service in the fourth quarter of 2017 and expect to place the fourth project into service in the first half of 2018. When fully constructed, the portfolio will be capable of producing up to 200 MW of solar power. The solar projects are fully contracted under four long-term PPAs, with an average contract term of 18 years.

In July 2016, Sempra Renewables acquired a 100-percent interest in a 100-MW wind farm in Huron County, Michigan, with a 15-year PPA, for a total purchase price of $22 million. Sempra Renewables paid $18 million in cash on the acquisition date and paid the remaining $4 million in cash on achievement of certain construction milestones in the fourth quarter of 2016. We placed this wind farm into service in November 2017.

In March 2015, Sempra Renewables invested $8 million to acquire a 100-percent interest in a 78-MW wind development project in Stearns County, Minnesota. The wind farm has a 20-year PPA with a load serving entity and began commercial operation in December 2016.

PENDING ACQUISITION

SEMPRA ENERGY

Energy Future Holdings Corp.

On August 21, 2017, Sempra Energy entered into an Agreement and Plan of Merger, as supplemented by a Waiver Agreement dated October 3, 2017 and an amendment dated February 15, 2018 (together referred to as the Merger Agreement), with Energy Future Holdings Corp., the indirect owner of 80.03 percent of Oncor Electric Delivery Company LLC. Oncor is a regulated electric distribution and transmission business that operates the largest distribution and transmission system in Texas. Following closing, this acquisition will expand our regulated earnings base, while serving as a platform for future growth in the Texas energy market and U.S. Gulf Coast region. Under the Merger Agreement, we will pay the Merger Consideration of $9.45 billion in cash.

Pursuant to the Merger Agreement and subject to the satisfaction of certain closing conditions described below, EFH will be merged with an indirect subsidiary of Sempra Energy, with EFH continuing as the surviving company and an indirect, wholly owned subsidiary of Sempra Energy (the Merger), as follows:



The foregoing is a simplified ownership structure that does not show all the subsidiaries of, or other equity interests owned by, these entities.

TTI, an investment vehicle indirectly owned by third parties unaffiliated with EFH or Sempra Energy, owns 19.75 percent of Oncor’s outstanding membership interests, and certain current and former directors and officers of Oncor indirectly beneficially own 0.22 percent of Oncor’s outstanding membership interests through their ownership of Class B membership interests in OMI. On October 3, 2017, Sempra Energy provided written confirmation to Oncor Holdings and Oncor that, contemporaneously with the closing of the Merger, equivalent value (approximately $25.9 million) will be provided in exchange for the Class B membership interests in OMI for cash or, if mutually agreed by the parties, alternative benefit and/or incentive plans. The consummation of the Merger is not conditioned on the acquisition of the interest in OMI, and there has been no formal agreement by us or the owners of these interests to accept the terms of our written confirmation.

Merger Consideration and Financing

Under the Merger Agreement, Sempra Energy will pay Merger Consideration of $9.45 billion in cash. We intend to initially finance the Merger Consideration of $9.45 billion, as well as associated transaction costs, with the net proceeds from debt and equity issuances, including proceeds from the common stock, mandatory convertible preferred stock and debt offerings completed in January 2018, which we discuss in Note 18, and initial additional financing consisting of up to $2.7 billion aggregate principal amount of commercial paper, although we may reduce the amount of commercial paper by borrowings under our revolving credit facilities and cash from operations. We expect to ultimately fund approximately 65 percent of the Merger Consideration, along with the associated transaction costs, with the net proceeds from sales of Sempra Energy common stock and other equity securities and approximately 35 percent with the net proceeds from issuances of Sempra Energy debt securities. However, we may use cash from operations and proceeds from asset sales in place of some of the equity financing. Some of the equity issuances will likely occur following the Merger, including common stock to be sold pursuant to the forward sale agreements entered into in connection with the common stock offering discussed in Note 18, to repay outstanding indebtedness, including indebtedness we incur to initially finance the Merger Consideration and associated transaction costs. The total amount of equity we ultimately issue may be reduced by cash from operations and proceeds from asset sales.

In addition, we have agreed that, within 60 days of the Merger, we will contribute our proportionate share of the aggregate investment in Oncor in an amount necessary for Oncor to achieve a capital structure consisting of 57.5 percent long-term debt and 42.5 percent equity, as calculated for regulatory purposes.

We have incurred transaction costs of $43 million as of December 31, 2017. These costs are included in Sundry on the Sempra Energy Consolidated Balance Sheet, and will be charged against related gross proceeds of equity offerings, debt offerings and/or included in the basis of EFH’s equity method investment in Oncor Holdings upon consummation of the Merger. If the Merger does not occur, the transaction costs that would be included in the basis of EFH’s equity method investment in Oncor Holdings will be expensed.

Ring-Fencing

In April 2014, EFH and the substantial majority of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court. The bankruptcy does not include Oncor Holdings or Oncor. Certain existing “ring-fencing” measures, governance mechanisms and restrictions will remain in effect following the Merger, which are intended to enhance Oncor Holdings’ and Oncor’s separateness from their owners and to mitigate the risk that these entities would be negatively impacted by the bankruptcy of, or other adverse financial developments affecting, EFH or its other subsidiaries or the owners of EFH. In accordance with the ring-fencing measures and commitments made by Sempra Energy as part of the Joint Application to the PUCT for regulatory approval of the Merger, and the Stipulation with key stakeholders entered into in connection with that proceeding, Sempra Energy and Oncor will be subject to certain restrictions following the Merger. Sempra Energy will not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and restrictions will limit our ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions. These limitations include limited representation on the Oncor Holdings and Oncor boards of directors. Following consummation of the Merger, if the Stipulation is approved by the PUCT, the board of directors of Oncor is expected to consist of thirteen members and be constituted as follows:

▪

seven members will be independent directors in all material respects under the rules of the New York Stock Exchange in relation to Sempra Energy and its subsidiaries and affiliated entities and any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings (and those directors must have no material relationship with Sempra Energy or its affiliates or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings at the time of the Merger or within the previous ten years) (“independent directors”);


▪	two members will be designated by Sempra Energy;


▪	two members will be appointed by TTI. If Sempra Energy acquires TTI’s interest in Oncor, the two board positions on the Oncor board of directors that TTI is entitled to appoint shall be eliminated, and the size of the Oncor board of directors will be reduced by two; and

▪

two members will be current or former officers of Oncor (the Oncor Officer Directors). In order for a current or former officer of Oncor to be eligible to serve as an Oncor Officer Director, such officer cannot have worked for Sempra Energy or any of its affiliates (excluding Oncor Holdings and Oncor) or any other entity with a direct or indirect ownership interest in Oncor or Oncor Holdings in the ten years prior to such officer being employed by Oncor. Oncor Holdings, at the direction of EFIH (a subsidiary of EFH, which will be a wholly owned indirect subsidiary of, and controlled by, Sempra Energy following the Merger), will have the right to nominate and/or seek the removal of the Oncor Officer Directors, with such nomination or removal subject to approval by a majority of the Oncor board of directors.

Oncor Holdings will also continue to have a majority of independent directors following the consummation of the Merger. Thus, Oncor Holdings and Oncor will continue to be managed independently (i.e., ring-fenced). Upon consummation of the acquisition, we will consolidate EFH, and EFH will continue to account for its ownership interest in Oncor Holdings as an equity method investment.

Settlement Agreement Regarding Joint Application

In December 2017 and January 2018, Sempra Energy and Oncor entered into a comprehensive Stipulation with 10 intervening parties, including the Staff of the PUCT, reflecting the parties’ settlement of all issues in the PUCT proceeding regarding the Joint Application. Pursuant to the Stipulation, the parties have agreed that Sempra Energy’s acquisition of EFH is in the public interest and will bring substantial benefits.

The Stipulation includes regulatory commitments by Sempra Energy, most of which are similar to the regulatory commitments made by Sempra Energy as part of the Joint Application and are consistent with the “ring-fencing” measures currently in place. Sempra Energy and Oncor are entitled to seek modifications of the PUCT order to be entered in the proceedings regarding the Joint Application, which modifications would be subject to PUCT approval.

On January 5, 2018, Oncor, Sempra Energy and the Staff of the PUCT jointly filed with the PUCT, requesting that the PUCT approve the Merger consistent with the Stipulation. As of January 31, 2018, all 10 intervening parties including the Staff of the PUCT, had agreed to the Stipulation.

Closing Conditions

The Merger is subject to customary closing conditions, including the approval of the Bankruptcy Court, the PUCT, the Vermont Department of Financial Regulation, and the FERC, among others, as well as receipt of a private letter ruling from the IRS and the issuance of certain tax opinions regarding the Merger.

On September 6, 2017, the Bankruptcy Court approved EFH’s and EFIH’s entry into the Merger Agreement. Under the terms of the Merger Agreement, a $190 million termination fee would be owed to Sempra Energy if EFH or EFIH terminates the Merger Agreement in certain circumstances and consummates an alternative proposal with a third party.

On October 5, 2017, Sempra Energy and Oncor filed a joint application with the PUCT and an application with the FERC seeking approval of the Merger. On October 12, 2017, the ALJ in the PUCT proceeding issued an order deeming the joint application sufficient. On October 16, 2017, the PUCT set a procedural schedule to complete a review of Sempra Energy’s and Oncor’s change-in-control request within 180 days of the filing of the joint application on October 5, 2017.

On November 2, 2017, EFH received a supplemental private letter ruling from the IRS that provides that the Merger will not affect the tax-free treatment of the 2016 Vistra (formerly TCEH Corp.) spinoff from EFH. This ruling satisfies the closing condition described above.

On November 29, 2017, Sempra Energy received the necessary approval from the Vermont Department of Financial Regulation.

On December 11, 2017, the FERC issued an order authorizing the Merger, subject to customary conditions.

On February 26, 2018, the Bankruptcy Court held a hearing to consider confirmation of EFH’s plan of reorganization and final approval of the Merger. At the conclusion of the hearing, the Bankruptcy Court ruled that it will confirm the plan of reorganization and approve the Merger and that it will promptly enter an order reflecting such ruling.

We currently expect the Merger will close in the first half of 2018, although there can be no assurance that the Merger will be completed on that timetable, or at all.

ASSETS HELD FOR SALE

We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next 12 months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs.

SEMPRA MEXICO

Termoeléctrica de Mexicali

In February 2016, management approved a plan to market and sell Sempra Mexico’s TdM, a 625-MW natural gas-fired power plant located in Mexicali, Baja California, Mexico. As a result, we stopped depreciating the plant and classified it as held for sale.

In connection with the sales process, in late September 2016 and early July 2017, Sempra Mexico received market information indicating that the fair value of TdM was less than its carrying value. After performing analysis of the information, Sempra Mexico reduced the carrying value of TdM by recognizing noncash impairment charges of $131 million ($111 million after-tax) in the third quarter of 2016 and $71 million in the second quarter of 2017, recorded in Impairment Losses on Sempra Energy’s Consolidated Statements of Operations. We discuss non-recurring fair value measures and the associated accounting impact on TdM in Note 10.

In connection with TdM’s classification as held for sale, we recognized an $8 million income tax benefit in 2017 and an $8 million income tax expense in 2016, for a deferred Mexican income tax liability related to the excess of carrying value over the tax basis. As the Mexican income tax on this outside basis difference is based on current carrying value, foreign exchange rates and inflation, such amount could change in future periods until the date of sale. We continue to actively pursue the sale of TdM, which we expect to be completed in 2018.

At December 31, 2017, the carrying amounts of the major classes of assets and related liabilities held for sale associated with TdM are as follows:



ASSETS HELD FOR SALE AT DECEMBER 31, 2017
(Dollars in millions)
	TdM
Inventories	$	10
Other current assets	59
Property, plant and equipment, net	56
Other noncurrent assets	2
Total assets held for sale	$	127

Accounts payable	$	5
Other current liabilities	38
Asset retirement obligations	5
Other noncurrent liabilities	1
Total liabilities held for sale	$	49

DIVESTITURES

SEMPRA RENEWABLES

Rosamond Solar

In December 2015, Sempra Renewables sold its 100-percent interest in Rosamond Solar, a development project located in Antelope Valley, California for $26 million in cash. Upon completion of the sale that was comprised of $18 million of net PP&E, Sempra Renewables recognized a pretax gain of $8 million ($5 million after-tax), which is included in Gain on Sale of Assets on our Consolidated Statement of Operations.

SEMPRA LNG & MIDSTREAM

EnergySouth Inc.

In September 2016, Sempra LNG & Midstream completed the sale of EnergySouth, the parent company of Mobile Gas and Willmut Gas, to Spire Inc. (formerly The Laclede Group, Inc.) for cash proceeds of $318 million, net of $2 million cash sold, with the buyer assuming debt of $67 million. We recognized a pretax gain on the sale of $130 million ($78 million after-tax) in the year ended December 31, 2016, in Gain on Sale of Assets on Sempra Energy’s Consolidated Statement of Operations. On September 12, 2016, Sempra LNG & Midstream deconsolidated EnergySouth.

The following table summarizes the deconsolidation:



DECONSOLIDATION OF SUBSIDIARY
(Dollars in millions)
	EnergySouth
Proceeds from sale, net of transaction costs	$	304
Cash	(2		)
Other current assets	(17		)
Property, plant and equipment, net	(199		)
Goodwill	(72		)
Other noncurrent assets	(65		)
Current liabilities	25
Long-term debt	67
Other noncurrent liabilities	89
Gain on sale	$	130

Investment in Rockies Express

In March 2016, Sempra LNG & Midstream entered into an agreement to sell its 25-percent interest in Rockies Express to a subsidiary of Tallgrass Development, LP for cash consideration of $440 million, subject to adjustment at closing. The transaction closed in May 2016 for total cash proceeds of $443 million.

At the date of the agreement, the carrying value of Sempra LNG & Midstream’s investment in Rockies Express was $484 million. Following the execution of the agreement, Sempra LNG & Midstream measured the fair value of its equity method investment at $440 million, and recognized a $44 million ($27 million after-tax) impairment in Equity Earnings, Before Income Tax, on the Sempra Energy Consolidated Statement of Operations. We discuss non-recurring fair value measures and the associated accounting impact on our investment in Rockies Express in Note 10.

We discuss Sempra LNG & Midstream’s 2016 permanent release of pipeline capacity that it held with Rockies Express and others in Note 15.

Mesquite Power Plant

In April 2015, Sempra LNG & Midstream sold the remaining 625-MW block of the Mesquite Power plant that was classified as held for sale at December 31, 2014, together with a related power sales contract, for net cash proceeds of $347 million. We recognized a pretax gain on the sale of $61 million ($36 million after-tax), included in Gain on Sale of Assets on our Consolidated Statement of Operations.