SCHEDULE I, CONDENSED FINANCIAL INFORMATION OF PARENT

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent

SEMPRA ENERGY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Years ended December 31,
	2017			2016			2015
Interest expense	$	(293	)	$	(277	)	$	(261	)
Operation and maintenance	(87		)	(81		)	(66		)
Other income (expense), net	107			(2		)	7
Income tax benefit	33			181			150
Loss before equity in earnings of subsidiaries	(240		)	(179		)	(170		)
Equity in earnings of subsidiaries, net of income taxes	496			1,549			1,519
Net income/earnings	$	256		$	1,370		$	1,349
Basic earnings per common share	$	1.02		$	5.48		$	5.43
Weighted-average number of shares outstanding (thousands)	251,545			250,217			248,249
Diluted earnings per common share	$	1.01		$	5.46		$	5.37
Weighted-average number of shares outstanding (thousands)	252,300			251,155			250,923

See Notes to Condensed Financial Information of Parent.

SEMPRA ENERGY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Years ended December 31,
	Pretax amount			Income tax benefit (expense)			Net-of-tax amount
2017:
Net income	$	223		$	33		$	256
Other comprehensive income (loss):
Foreign currency translation adjustments	107			—			107
Financial instruments	2			1			3
Pension and other postretirement benefits	20			(8		)	12
Total other comprehensive income	129			(7		)	122
Comprehensive income	$	352		$	26		$	378
2016:
Net income	$	1,189		$	181		$	1,370
Other comprehensive income (loss):
Foreign currency translation adjustments	42			—			42
Financial instruments	(6		)	11			5
Pension and other postretirement benefits	(13		)	4			(9		)
Total other comprehensive income	23			15			38
Comprehensive income	$	1,212		$	196		$	1,408
2015:
Net income	$	1,199		$	150		$	1,349
Other comprehensive income (loss):
Foreign currency translation adjustments	(260		)	—			(260		)
Financial instruments	(80		)	33			(47		)
Pension and other postretirement benefits	(3		)	1			(2		)
Total other comprehensive loss	(343		)	34			(309		)
Comprehensive income	$	856		$	184		$	1,040

See Notes to Condensed Financial Information of Parent.

SEMPRA ENERGY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	December 31, 2017		December 31, 2016
Assets:
Cash and cash equivalents	$	104	$	12
Due from affiliates	83		73
Income taxes receivable	272		—
Other current assets	6		2
Total current assets	465		87
Investments in subsidiaries	17,924		17,329
Due from affiliates	2		—
Deferred income taxes	1,802		2,570
Other assets	656		592
Total assets	$	20,849	$	20,578
Liabilities and shareholders’ equity:
Current portion of long-term debt	$	500	$	600
Due to affiliates	280		359
Income taxes payable	—		153
Other current liabilities	396		374
Total current liabilities	1,176		1,486
Long-term debt	6,198		5,100
Due to affiliates	300		517
Other long-term liabilities	505		524
Commitments and contingencies (Note 4)
Shareholders’ equity	12,670		12,951
Total liabilities and shareholders’ equity	$	20,849	$	20,578

See Notes to Condensed Financial Information of Parent.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Years ended December 31,
	2017			2016(1)			2015(1)
Net cash provided by (used in) operating activities	$	89		$	(3	)	$	95
Expenditures for property, plant and equipment	(11		)	(5		)	(43		)
Purchase of trust assets	—			—			(5		)
Decrease (increase) in loans to affiliates, net	—			457			(457		)
Expenditures for Merger-related transaction costs	(12		)	—			—
Net cash (used in) provided by investing activities	(23		)	452			(505		)
Common stock dividends paid	(755		)	(686		)	(628		)
Issuances of common stock	47			51			52
Repurchases of common stock	(15		)	(56		)	(74		)
Issuances of long-term debt	1,595			499			1,248
Payments on long-term debt	(600		)	(750		)	—
(Decrease) increase in loans from affiliates, net	(239		)	504			(230		)
Tax benefit related to share-based compensation	—			—			52
Other	(7		)	(3		)	(9		)
Net cash provided by (used in) financing activities	26			(441		)	411
Increase in cash and cash equivalents	92			8			1
Cash and cash equivalents, January 1	12			4			3
Cash and cash equivalents, December 31	$	104		$	12		$	4
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued Merger-related transaction costs	$	31		$	—		$	—
Financing of build-to-suit property	—			—			61
Common dividends issued in stock	53			53			55
Dividends declared but not paid	207			189			174

⁽¹⁾  As adjusted for the retrospective adoption of ASU 2016-15, which we discuss in Note 2.

See Notes to Condensed Financial Information of Parent.

BASIS OF PRESENTATION

Sempra Energy accounts for the earnings of its subsidiaries under the equity method in this unconsolidated financial information.

Other Income, Net, on the Condensed Statements of Operations includes

▪ $56 million, $23 million and $3 million of gains on dedicated assets in support of our executive retirement and deferred compensation plans in 2017, 2016 and 2015, respectively; and

▪ $50 million and $(28) million net gains (losses) primarily from the settlement of foreign currency derivatives to hedge Sempra Mexico parent’s exposure to movements in the Mexican peso from its controlling interest in IEnova in 2017 and 2016, respectively.

Additional information on Sempra Energy’s foreign currency derivatives is provided in Note 9 of the Notes to Consolidated Financial Statements.

NEW ACCOUNTING STANDARDS

We describe below recent pronouncements that have had or may have a significant effect on Sempra Energy Parent’s financial condition, results of operations, cash flows or disclosures.

ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”:In addition to the presentation and disclosure requirements for financial instruments, ASU 2016-01 requires entities to measure equity investments, other than those accounted for under the equity method, at fair value and recognize changes in fair value in net income. Entities will no longer be able to use the cost method of accounting for equity securities. However, for equity investments without readily determinable fair values that do not qualify for the practical expedient to estimate fair value using net asset value per share, entities may elect a measurement alternative that will allow those investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes. Entities must record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the standard is adopted, except for equity investments without readily determinable fair values, for which the guidance will be applied prospectively. There is an outstanding FASB exposure draft which clarifies that the prospective transition approach for equity investments without readily determinable fair values is meant only for instances in which the measurement alternative is elected.

For public entities, ASU 2016-01 is effective for fiscal years beginning after December 15, 2017. We adopted ASU 2016-01 on January 1, 2018 and it will not materially affect our financial condition, results of operations or cash flows.

ASU 2016-02, “Leases” and ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”: ASU 2016-02 requires entities to include substantially all leases on the balance sheet by requiring the recognition of right-of-use assets and lease liabilities for all leases. Entities may elect to exclude from the balance sheet those leases with a maximum possible term of less than 12 months. For lessees, a lease is classified as finance or operating, and the asset and liability are initially measured at the present value of the lease payments. For lessors, accounting for leases is largely unchanged from previous provisions of U.S. GAAP, other than certain changes to align lessor accounting to specific changes made to lessee accounting. ASU 2016-02 also requires new qualitative and quantitative disclosures for both lessees and lessors. ASU 2018-01 allows entities to elect a transition practical expedient that would exclude application of ASU 2016-02 to land easements that existed prior to its adoption, if they were not accounted for as leases under previous U.S. GAAP.

For public entities, these ASUs are effective for fiscal years beginning after December 15, 2018, with early adoption permitted, and are effective for interim periods in the year of adoption. ASU 2016-02 requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes practical expedients that may be elected, which would allow entities to continue to account for leases that commence before the effective date of the standard in accordance with previous U.S. GAAP unless the lease is modified, except for the lessee requirement to begin recognizing right-of-use assets and lease liabilities for all operating leases on the balance sheet at the reporting date. We are currently evaluating the effect of the standards on our ongoing financial reporting and plan to adopt the standards on January 1, 2019. As part of our evaluation, we formed a steering committee comprised of members from relevant Sempra Energy business units, are compiling our population of contracts and are preparing our lease accounting assessments. Based on our assessment to date, we have determined that we will elect the practical expedients available under the transition guidance described above. We continue to monitor outstanding issues currently being addressed by the FASB, including guidance under a FASB exposure draft that would allow entities an optional transition method to apply ASU 2016-02 in the period of adoption rather than in the earliest period presented. Conclusions that the FASB reaches on outstanding issues may impact our application of these ASUs.

ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”: ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments. The standard introduces an “expected credit loss” impairment model that requires immediate recognition of estimated credit losses expected to occur over the remaining life of most financial assets measured at amortized cost, including trade and other receivables, loan commitments and financial guarantees. ASU 2016-13 also requires use of an allowance to record estimated credit losses on available-for-sale debt securities and expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the credit losses.

For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the effect of the standard on our ongoing financial reporting and have not yet selected the year in which we will adopt the standard.

ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”:ASU 2016-15 provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows to reduce diversity in practice. Of the eight issues addressed in ASU 2016-15, we were impacted by the following issues:

▪ Issue 1 – debt prepayment or debt extinguishment costs (a negligible amount in each year presented below)

▪ Issue 6 – distributions received from equity method investments

The standard must be adopted retrospectively. We early adopted ASU 2016-15 in the fourth quarter of 2017. Upon adoption of ASU 2016-15, our Condensed Statements of Cash Flows for the years ended December 31, 2016 and 2015 were impacted as follows:

IMPACT FROM ADOPTION OF ASU 2016-15
(Dollars in millions)
	Years ended December 31,
	2016									2015
	As previously reported			Effect of adoption			As adjusted			As previously reported			Effect of adoption			As adjusted
Sempra Energy Condensed Statements of Cash Flows:
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	(178	)	$	175		$	(3	)	$	(255	)	$	350		$	95
Cash flows from investing activities:
Dividends received from subsidiaries(1)	175			(175		)	—			350			(350		)	—
Net cash provided by (used in) investing activities	627			(175		)	452			(155		)	(350		)	(505		)

⁽¹⁾  Prior to adoption of ASU 2016-15, because of its nature as a holding company, Sempra Energy Parent classified dividends received from subsidiaries as an investing cash flow.

ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”: ASU 2017-07 requires the service cost component of net periodic benefit costs to be presented in the same income statement line item as other employee compensation costs arising from services rendered during the period and the other components of net periodic benefit costs to be presented separately outside of operating income. The guidance also allows only the service cost component to be eligible for capitalization. For public entities, ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. Amendments are to be applied retrospectively for presentation of costs and prospectively for capitalization of service costs. The guidance allows a practical expedient that permits use of previously disclosed service costs and other costs from the pension and other postretirement benefit plan note in the comparative periods as appropriate estimates when retrospectively changing the presentation of these costs in the statements of operations. We adopted the standard on January 1, 2018 and elected the practical expedient available under the transition guidance.

In 2018, we expect the adoption of ASU 2017-07 to have the following impact on our Condensed Statements of Operations for the years ended December 31, 2017 and 2016:

EXPECTED IMPACT FROM ADOPTION OF ASU 2017-07
(Dollars in millions)
	Years ended December 31,
	2017						2016
	As reported			Recast			As reported			Recast
Sempra Energy Condensed Statements of Operations:
Operation and maintenance	$	(87	)	$	(80	)	$	(81	)	$	(76	)
Other income (expense), net	107			100			(2		)	(7		)

ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”: ASU 2018-02 contains amendments that allow a reclassification from AOCI to retained earnings for stranded tax effects resulting from the TCJA. Under ASU 2018-02, an entity will be required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from AOCI. The amendments in this update can be applied either as of the beginning of the period of adoption or retrospectively as of the date of enactment of the TCJA and to each period in which the effect of the TCJA is recognized. For public entities, ASU 2018-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods therein, with early adoption permitted. We are currently evaluating the effect of the standard on our financial reporting and have not yet selected the adoption method or the year in which we will adopt the standard.

LONG-TERM DEBT

The following table shows the detail and maturities of long-term debt outstanding:

LONG-TERM DEBT
(Dollars in millions)
	December 31,
	2017			2016
2.3% Notes April 1, 2017	$	—		$	600
6.15% Notes June 15, 2018	500			500
9.8% Notes February 15, 2019	500			500
1.625% Notes October 7, 2019	500			500
2.4% Notes March 15, 2020	500			500
2.85% Notes November 15, 2020	400			400
Notes at variable rates (2.038% at December 31, 2017) March 15, 2021	850			—
2.875% Notes October 1, 2022	500			500
4.05% Notes December 1, 2023	500			500
3.55% Notes June 15, 2024	500			500
3.75% Notes November 15, 2025	350			350
3.25% Notes June 15, 2027	750			—
6% Notes October 15, 2039	750			750
Fair value adjustments for interest rate swaps, net	(1		)	(3		)
Build-to-suit lease	138			137
	6,737			5,734
Current portion of long-term debt	(500		)	(600		)
Unamortized discount on long-term debt	(13		)	(10		)

Unamortized debt issuance costs	(26		)	(24		)
Total long-term debt	$	6,198		$	5,100

Excluding the build-to-suit lease and market value adjustments for interest rate swaps, maturities of long-term debt are $500 million in 2018, $1 billion in 2019, $900 million in 2020, $850 million in 2021, $500 million in 2022 and $2.85 billion thereafter.

Additional information on Sempra Energy’s long-term debt is provided in Note 5 of the Notes to Consolidated Financial Statements.

COMMITMENTS AND CONTINGENCIES

For contingencies and guarantees related to Sempra Energy, refer to Notes 4, 5 and 15 of the Notes to Consolidated Financial Statements.

SUBSEQUENT EVENTS

For subsequent events related to Sempra Energy, refer to Note 18 of the Notes to Consolidated Financial Statements.