Our Most Dynamic Resource: Innovation and Ingenuity
1.
2. It’s not
electricity, or
natural gas, or
wind or sun.
It’s not nuclear,
geothermal
or biomass.
Joe Risse Engineering/Construction Program Director
3. What powers
an energy
company is the
most dynamic
and truly
inexhaustible
resource on
the planet:
the ingenuity
that resides in
all of us.
1
Alma Briseno Commercial and Industrial Services Account Executive
4. Far more than
any other
natural asset,
our resource-
fulness in
delivering
energy in ways
that respect
our world is of
truly limitless
potential.
2 Robb Anderson Director of Resource Planning
5. And at no
other time in
history have
we been in
greater need
of realizing
that potential
than we
are right now.
3
Dimas Hernandez Energía Costa Azul Terminal Manager
6. “More than
ever before, our
employees
have embraced
the challenge
of delivering on
our promises.”
4 Donald E. Felsinger Chairman and Chief Executive Officer
7. groundwork for us to expand our exist- While LNG represents an important
Fellow Shareholders,
emerging natural gas supply for the
ing product lines and move into new
United States, Sempra Energy also is
markets — while greatly reducing our
In 2007, we not only exceeded committed to improving the domestic
risk profile. This transaction will enable
our financial goals, but we pipeline system for bringing gas to mar-
us to benefit from continued growth in
also strengthened the foundation ket. We are partners with Kinder
the commodities business while freeing
for our continued growth in Morgan and ConocoPhillips in the
up the company’s balance sheet to
Rockies Express Pipeline, a 1,600-mile
repurchase common shares and increase
the future.
our dividend. pipeline that will deliver natural gas
We generated record income
During the past year, we made
“In my 36 years at this
from continuing operations in 2007 of
considerable progress on our
$1.13 billion, or $4.26 per diluted share,
company, I’ve never been
major infrastructure projects.
up from $1.09 billion, or $4.17 per
When Energía Costa Azul
diluted share, in 2006. Our total share-
more excited about our
comes online in 2008, it will
holder return in 2007 was 13 percent.
be the first liquefied natural
ability to create long-term
gas (LNG) receipt terminal on
These results continue a trend of growth
the west coast of North
value for our shareholders.”
in shareholder value that, in 2007, led
America. The Baja California,
to Sempra Energy® being named for the
Mexico, facility will serve elec-
first time to the “BusinessWeek 50” list
tricity-generating plants, industry and from the Rocky Mountain basins to
of top-performing U.S. companies. The
utilities in northern Mexico and the the northeastern United States. About
company was also recognized in Fortune
U.S. Southwest. half of the project is now operational;
magazine’s “America’s Most Admired
the rest should be completed in 2009.
Companies” list in 2007 and again in 2008,
Our second LNG terminal, Cameron LNG,
ranking No. 2 among electric and gas
Renewable-energy development is
on the Gulf Coast of Louisiana,
utilities in 2008.
a growing focus, and in 2007,
is targeted for completion at the end
Sempra Energy announced its first
of 2008. The Cameron LNG facility is only
But markets continue to change. That is
renewable-energy project, located
35 miles from a major pipeline hub that
why we have focused our investment
in Baja California’s La Rumorosa area.
provides access to nearly two-thirds of
strategy over the last several years on
The project, which will produce wind
all U.S. natural gas markets. In the same
North American natural gas infra-
power for the California market, could
region, our Liberty Gas Storage facility
structure and our California utilities.
be operational by 2011.
will begin operations in 2008, providing
These are the areas where we believe
added flexibility for LNG shippers,
we can produce the most stable
Our two California utilities, San Diego
producers, local industrial end users
financial returns for our shareholders.
Gas & Electric® (SDG&E®) and Southern
and utilities in the market.
California Gas Co. (SoCalGas®), continue
Another key part of our strategy centers
to set a high standard of service, supplying
on an agreement that we reached in
reliable and safe energy to more than
July 2007 with The Royal Bank of Scotland
23 million Californians. In 2007, we
(RBS), one of the largest banks in the
completed construction of a new 52-mile
world, to form a joint venture that will
transmission loop around urban San
allow us to expand our commodities-
Diego to improve reliability and access
marketing business significantly while
to new power plants. We also continue
capping our risk. The importance of
to push for timely regulatory approval
this new partnership — in which RBS will
of the Sunrise Powerlink project,
provide all growth capital, working-
which would be the first major new
capital requirements and credit support —
cannot be overstated. Finalized in
(continued on page 6)
April 2008, the partnership lays the
246%
5
8. part of it. The transaction immediately
high-voltage transmission line in nearly
will strengthen our balance sheet and
25 years that connects San Diego to
provide the flexibility to pursue additional
the state’s energy grid. We believe the
growth opportunities in the future.
Sunrise Powerlink is the most effective
In 2008, we also expect to begin realizing
way to improve energy reliability, reduce
earnings contributions from several
costs and meet California’s mandates
of our major infrastructure projects as
for increased renewable energy and
they begin commercial operations.
reductions in greenhouse-gas emissions.
Both lines are a vital part of SDG&E’s
Also, in 2008, we mark the 10-year
long-term energy plan, which encom-
anniversary of Sempra Energy’s found-
passes a balanced mix of energy
ing. We are a very different company
conservation, renewable resources and
today, with a balanced portfolio of regu-
new power plants and transmission lines.
lated utility and competitive energy
businesses, a pipeline of high-quality
As we execute our strategy, we are
development projects and a solid finan-
mindful of the escalating concerns
cial foundation to support our growth.
about global warming and the future
regulation of greenhouse gases.
We have taken an environmentally Our success starts with our employees —
responsible approach in all our busi- the ingenuity they bring to the market-
nesses. Natural gas is the cleanest place and their execution of our strategy.
of all fossil fuels, and we expect it will For this reason, we are featuring in
this report the insights, ideas and stories
play a critical role as a bridge to a
of employees from the Sempra Energy
“greener” future as renewable sources,
companies. More than ever before,
such as solar, wind and biomass,
our employees have embraced the chal-
become a growing part of North America’s
lenge of delivering on our promises.
energy mix. Our power-generating
To our employees, for their sustained
facilities at Sempra Generation and
commitment to excellence, and to
SDG&E employ the latest clean-burning
you, our shareholders, for your ongoing
natural gas technology to keep
support, I offer my heartfelt thanks.
emissions low. Additionally, our utilities
have been recognized nationally for
their leadership in energy efficiency,
and SDG&E is working aggressively
to contract for new renewable resources. Sincerely,
The Sunrise Powerlink will serve as
a key transmission gateway to import
energy from renewable sources into
the San Diego region.
Donald E. Felsinger
I look at the road ahead with great
Chairman and
optimism. In my 36 years at this com-
Chief Executive Officer
pany, I’ve never been more excited
about our ability to create long-term
value for our shareholders. Our joint
venture with RBS is an important
2007 2006 2005
6
10. Cameron LNG is a
liquefied natural
gas receipt terminal
under construction
“What makes in southwest
Louisiana, along the
us good at Calcasieu Channel.
building major 1.5 billion
infrastructure cubic feet per day
of natural gas to
projects is be supplied from
Cameron LNG, with
room for expansion
putting the right
35
people in the miles from a major
right place at pipeline junction that
provides access
the right time.” to 65 percent of U.S.
natural gas markets
2008
construction expected
to be complete
Joe Risse
Engineering/Construction
Program Director,
Cameron LNG
Building Infrastructure
8
11. During the construction phase itself,
We start by partnering with outside
Building Infrastructure
we tend to be perfectionists in what we
experts called owner’s engineers or con-
do. We know when something’s not
sultants, who essentially become an
Coming as he does from right, and we strive to correct it — even
extension of our team. For each project,
a background in power-plant though, in the big picture of things, it
we perform detailed due diligence
development, Joe Risse may seem small. We’re very proud of
to find firms that have the right people
knows big construction. Today, our safety record, too, and that always
with the capabilities and desire to
remains a top priority in every project
align with our specific needs for that
as a program director with
particular job. The reason we use
Sempra LNG, he oversees work
owner’s engineers to the extent that
on the Cameron LNG project “During the construction
we do is that it allows us to remain
on the Louisiana Gulf Coast and flexible as an organization, enabling us
phase itself, we tend
a project team of more than to take advantage of other opportuni-
ties as they arise.
800 contractors and employees. to be perfectionists in
Once completed in late 2008,
what we do.”
These experts have the knowledge we
Cameron LNG will be Sempra need to help us put together detailed
Energy’s largest LNG project. specifications, schedules and budgets,
we undertake. In fact, in January 2008,
and then aid in our extensive search
“As with all Sempra projects, the Cameron LNG project surpassed
process to find qualifying contractors,
Cameron LNG starts and ends with 2.5 million labor hours worked without
which, for any large project, is always
managing risk. We do that here by having a lost-time incident.
one of the biggest challenges. Once
very good people — highly experienced a contractor is selected, we are commit-
engineers and project managers — work- One of the more satisfying aspects of
ted to managing the relationship in
ing with the project developers early in my job is the ‘cross-pollination’ we have
a mutually rewarding way throughout
the planning stage, where they offer among different projects, whereby
the course of the project, with
invaluable insight on even the smallest something we learn at one job site is
performance-testing requirements,
details of getting the largest projects passed on to teams at another, often
guarantees and bonus incentives, as
built and running. This includes people resulting in significant process and
well as a structured plan for payments,
from cross-functional teams like technical improvements. For example,
milestones and progress measure-
engineering and operations to accounting, the engineers at Sempra LNG’s other
ments — all in support of our project goals.
permitting and regulatory affairs. LNG receipt terminal, Energía Costa Azul,
reported that they were having prob-
We are successful in completing these lems with a specialized cryogenic valve;
projects because we place an unwaver- we were able to intercept the problem
ing focus on project scope, right and correct it in time to minimize its impact
from the start. If you have that focus here at Cameron LNG.
from the project’s development
phase, you are more apt to build in the In the end, it helps to keep sight of both
right schedule and budget. the big picture and the little one, too.
In the crush of details in a typical day,
I’ll sometimes step back and think
about what we’re doing here at Cameron
LNG, which is constructing an
important component of an international
energy system that is tied, at one end,
to gas resources on the opposite side
of the world, and at the other end to a
family living in a small town in the
midwestern United States. Our terminal
will supply clean-burning natural gas
to light homes and power business and
industry as we move toward a new
energy future.”
4.5 million cubic yards of Used to create over
soil removed during the dredging 100 acres of new wetlands.
process at the terminal.
9
12. Energía Costa Azul
is an LNG receipt
terminal on the north-
“I’m most proud west coast of Baja
California, Mexico.
The facility will be
of the care we’ve operational in 2008.
taken to actively 5,000
and diligently total protected plants
relocated to the nursery
protect marine at Energía Costa Azul
life and native 5
estimated number of
vegetation.” years after which the
replanted habitats will
be self-sufficient
700,000
individual marine
organisms within the
jetty area relocated to
protected areas
Dimas Hernandez
Terminal Manager,
Energía Costa Azul
Preserving the Environment
10
13. protect affected sea life is probably
In conjunction with the Mexican
Preserving the Environment
the best example of this, and one of the
environmental agency, SEMARNAT, we
identified the native plants on more most important achievements in the
There’s not much about the than 70 acres of land surrounding the entire program. Before construction
operations at the Energía Costa construction site and mapped their started, we moved about 700,000 sea
Azul receipt terminal that exact locations. These plants included urchins, sea cucumbers and sea snails out
Dimas Hernandez does not touch the Ferocactus viridescens, a species of the construction area to adjacent
under special conservation status in sea banks, where they are continuing to
in some way. As terminal man-
Costa Azul, and the Agave shawii, which live and reproduce. We also created
ager, he has a broad range of
a program to teach the
operational responsibilities.
“When the LNG terminal is local fishing community
And yet the careful protection how to harvest the sea
completed, we will re-plant the
of the native environment urchins in a more
responsible manner that
around the facility has always
native vegetation in the exact protects and propagates
been one of his top priorities
location it was taken from and the species over time.
in the development of the project.
identify special conservation The Energía Costa Azul
“Right from the beginning of terminal represents a
zones to protect the continued
this project, we were guided by an long-term commitment
extreme sensitivity to the environment. to active environmental
growth of its habitats.”
Before breaking ground on construc- stewardship. We have
tion, we worked with Mexico’s National implemented a compre-
Institute of Anthropology and History hensive environmental-protection
is found only along the Pacific coast
to prepare for the possibility that items program that encompasses the local earth
of Baja California. We carefully
of archeological significance might be and marine ecosystems. Additionally,
transplanted each and every plant and
uncovered. And indeed, during the as part of normal facility operations, we
its surrounding ecosystem — 5,000
course of our work, we discovered ancient in all — to a special nursery created to continually remind our employees of
bones, seashells and tools — all of the important role we play in protecting
simulate the exact environment
which were carefully excavated by the the environment.
they lived in. During construction, we’ve
institute and taken to a location not only protected these plants, but
where they could be safely preserved We take our environmental stewardship
also propagated the species. When the
and studied. very seriously. Yes, we are bringing
LNG terminal is completed, we will
a new, clean source of critically needed
re-plant the native vegetation in the exact
energy to the region. But more impor-
location it was taken from and identify
tantly, we are doing it in a responsible
special conservation zones to protect the
way that will preserve the local habitat
continued growth of its habitats. Not
for my grandchildren and their children,
only that, we have implemented
well into the future.”
educational programs in local schools
to teach children the importance
of appreciating and preserving these
native plants.
We also were extremely diligent in our
approach to minimizing the impact of
the project on marine life — both plants
and animals. The action we took to
Benefits of the project for the region
during construction:
3,114
Jobs
jobs were created
at the peak
of construction.
Local
$324 million
Purchases
in the purchase of products
and services has been spent
in Mexico.*
* as of 2/29/08
11
14. Planning for the Future
SDG&E’s long-term
energy plan provides
a balance of infra-
structure, resources
and conservation
programs to meet the
“No single energy region’s energy needs.
resource will 20,000
number of new cus-
be the key to tomers added to
SDG&E’s system
delivering power. each year
The trick is to 487
targeted megawatts
find just the right of reduced energy
consumption through
balance of conservation by
2016 – the equivalent
of the production
all of them.” capabilities of one major
power plant
2020
California’s deadline
to reduce green-
house gas emissions
to 1990 levels
Robb Anderson
Director of Resource Planning,
SDG&E
Photo taken with permission from the Campo Kumeyaay Nation.
12
15. The variety of locations of our balanced
Our energy-efficiency and demand-
Planning for the Future
mix of energy sources calls for a net-
response programs help customers
work of transmission lines to transport
conserve energy. And, thanks to tech-
As one of the key people the power to customers, often from
nology, in the near future
charged with developing San we will be able to offer
Diego’s long-term energy
“Our goal always is to have
customers new tools such
plan, Robb Anderson sees his as our smart meter pro-
adequate capacity to
gram. Smart meters provide
job as finding ways to fit
a secure two-way commu-
together the pieces of a puzzle:
move the power to wherever
nications channel with our
integrating the resources of customers that will provide
our customers are.”
SDG&E with the state of California’s those customers with
energy policies. The goal is to near-real-time energy use
facilities hundreds of miles away. Our
information. These initiatives not only
provide the company’s utility
proposed Sunrise Powerlink transmis-
help reduce greenhouse gases,
customers with safe and reliable
sion line would add a second major
but also help customers manage their
energy at reasonable costs. electric ‘superhighway’ to our region
costs and save energy, while at the
and offer a new, reliable pathway for
same time lessening the potential for
“The fact is, as Southern
renewable energy being produced east
power interruptions.
California continues to grow, energy
of San Diego. In addition to gaining
demand here — and throughout the
access to renewable-energy sources,
As California has mandated that utilities
United States — is also growing. That’s
SDG&E’s transmission network is
supply 20 percent of their energy
why, as the organization responsible
built around responding to demand
from renewable sources by 2010, we are
for long-term energy planning for San
growth. Our goal always is to have
moving aggressively to meet this
Diego, we must look ahead and deter-
adequate capacity to move the power to
goal. We are contracting for wind and
mine how to meet future demand and
wherever our customers are. To this
biomass power from existing and
keep the lights on.
end, we have been actively upgrading
planned projects in San Diego County,
our system, with projects such as
as well as geothermal, solar and
After the unsuccessful attempt at
the recently completed Otay-Metro
wind energy being developed to the east.
deregulation earlier this decade,
Powerloop, which provides dependable
Finally, we rely on power-purchase
California returned SDG&E and the
transmission of power in and around
agreements and our own generating
state’s other electric utilities to
the San Diego area.
plants — such as the Palomar Energy
their traditional role of planning for
Center, which came online in 2006 — to
their customers’ energy needs.
We have to plan for tomorrow. Figuring
produce reliable electricity through
The utilities also have been directed
out how to fit all the pieces of the plan
the use of clean-burning natural gas.
to reduce greenhouse gases and
together is the real challenge. But it’s
increase the use of renewable energy.
also the most satisfying part of my job.”
At SDG&E, our plan for meeting our
customers’ needs and the state’s goals
consists of five main elements:
energy efficiency, demand response,
renewable energy, and new electric
generation and transmission.
2009
5% Demand Response
SDG&E is implementing customer
programs to reduce power
power demand demand during periods of peak
reduction
usage by 5 percent from 2009
through 2016, which reflects the
goals set by the California Public
Utilities Commission.
2016
13
16. Conserving Energy
Over the last 15 years,
SoCalGas has
“I love to educate invested heavily in
energy efficiency.
customers on $465 million
how conserving invested in energy
efficiency
natural resources
228 million+
is not just a matter Therms of natural gas
saved by customers
of responsibility,
416,000
it’s also estimated number of
good business.” homes that could
be supplied for a year
from this savings
Alma Briseno
Commercial and Industrial Services
Account Executive,
SoCalGas
14
17. The energy evaluation we do for these The best thing about my job? I get to
Conserving Energy
customers is comprehensive, inspecting learn about so many different indus-
all equipment from boilers and furnaces tries. In addition to co-generation and
With her background in industrial right down to space heaters. We also steam processing, I’m becoming an
engineering and business spend a lot of time talking to the on-site expert in everything from metal plating
administration, Alma Briseno facility managers, as well as financial to tortilla manufacturing! And if I can
has the perfect resume for executives and even the business help my customers save money, keep
owners, to get a big-picture look at how their businesses in California and help
consulting with SoCalGas’ com-
efficiently their systems work. protect the environment, it’s extremely
mercial and industrial customers.
gratifying for me. We share the same
She gives presentations to Invariably, we find ways for customers earth, after all. It makes me feel that
corporate executives, inspects to use their energy more efficiently I’ve made a real difference.
boilers in small factories and and save money. We may recommend
insulating tanks and pipes, or we At SoCalGas we also practice what we
does virtually everything in
may suggest replacing older equipment preach. At all of our field operations
between to help her customers
offices, safety and energy conservation
with newer, more efficient models —
save on their energy costs. which can earn the customer a rebate in are the highest priorities. Each of us
the form of a direct cash payment. holds one another accountable. At one
“The first service we provide
We may even direct
for our customers is a free energy audit.
“We find ways for customers
them to different types
Because even our customers who are
of technologies, including
tuned in to energy conservation often
to use their energy more
renewable sources,
don’t know where to start.
such as micro-turbine
efficiently and save money.”
co-generation systems.
Sometimes we identify customers who
could benefit based on some issue they
Education is key for all of our customers, of the offices where I work, my col-
may be having, for example with air-
so we also offer help with long-term leagues are always saying, ‘Alma,
quality regulators. Or, the customer may
project plans, which we are involved in don’t forget to turn off the lights.’
have participated in one of our audits
right from the beginning. Here, we
in the past. But, most often, we get leads
help companies map out strategies for The thing is, I never forget.”
from our service technicians out in the
saving energy, including performing
field, who work directly on our customers’
cost analysis with economic paybacks
equipment on a daily basis.
over a period of months or even
years, with money-saving incentives from
us along the way.
We also have a variety of assistance
programs that help customers
pay their bills in times of difficulty.
From structured payment plans to
flexible payment arrangements,
our goal is to minimize our customers’
energy concerns.
SoCalGas is the nation’s largest natu-
ral gas distribution utility, serving
20.3 million consumers throughout
central and Southern California.
Los
Angeles
San Diego
15
18. Energy for Others. Sempra Energy
While the Foundation’s larger annual
Creating Community
employees help out in other ways, too,
giving represents a variety of worthy
Partnerships
including initiatives such as Energy
partnerships, the company is proud
for Others, an in-company non-profit
to help the individuals and families —
One of the most important areas group that facilitates support of
neighbors, colleagues and friends — who
of Sempra Energy’s work is the community-based charitable organiza-
lost their homes in the fires. Sempra
company’s ongoing commitment tions. With its own employee-elected
Energy is glad to play some small part
board of directors and local advisors,
in helping them to rebuild not only their
to programs that benefit the
the organization grants funds to a wide
homes, but their lives.
communities in which the com-
variety of deserving local organizations,
pany does business. with 100 percent of all employee
Coastal Cleanup. As an organization
contributions going to the charities.
committed to the protection of the
The Sempra Energy Foundation. environment, in 2007, Sempra Energy
The Foundation was conceived to invest Helping others is a way of life at
once again was a sponsor of the annual
not only in creative ideas for advance- Sempra Energy, and the company is proud
California Coastal Cleanup Day — the
ment in the energy field, but also to of the efforts made by employees to
largest effort of its kind in the world.
provide support for people and commu- reach out to those who show promise or
In September, more than 800 Sempra
nities in need. The California wildfires need a helping hand.
Energy employees, family members
of October 2007 served as the catalyst and friends gathered to help clean up
for the Foundation’s first act of trash at over a dozen beach and river
giving: a $5 million fund for those directly sites throughout Southern California
impacted by the devastation. and Baja California. Team Sempra did
such a good job that its work was reward-
ed with the first annual “Cleanup
Champion” award. The company was
Top: SDG&E employ-
honored to be a sponsor in helping to
ees work to restore
make the world a little cleaner.
power in the Rancho
Bernardo neighbor-
hood of San Diego
after the October
2007 wildfires. Right:
A Sempra Energy
employee and her
family pick up trash
on a San Diego area
beach during the 2007
California Coastal
Cleanup Day. Bottom:
Sempra Energy
employees participate
in a local Multiple
Sclerosis walk through
the company’s Energy
for Others program.
Creating Community
Partnerships
16
19. Based in San Diego, Sempra Energy is an energy company with 2007 revenues of more than $11 billion. With 13,500 employees
worldwide, Sempra Energy companies develop energy infrastructure, operate utilities and provide related products and
services to more than 29 million consumers around the world. Sempra Energy common shares trade on the New York Stock
Exchange (NYSE) under the symbol “SRE.” Additional information is available on the Web at www.sempra.com.
RBS Sempra Commodities LLP
Sempra Generation develops,
San Diego Gas & Electric is
owns and operates power plants was created by a joint venture
a regulated public utility that
serving wholesale electricity between Sempra Energy and
has been supplying natural
markets in North America. These The Royal Bank of Scotland in
gas and electric service to the
natural gas-powered plants April 2008. The marketing
San Diego region since 1881.
are among the cleanest and and trading joint venture serves
SDG&E serves 3.4 million
most advanced in the United customers in natural gas,
consumers in communities
States. The company is also power, oil and oil products, coal,
from Orange County to the
developing renewable-energy base metals, plastics and other
Mexican border.
generation projects. energy and metals products.
Southern California Gas Co. Sempra LNG develops, builds
has been delivering natural and operates liquefied natural
gas to its customers in cen- gas receipt terminals in North
tral and Southern California America. The company’s
for nearly 140 years. It’s two receipt terminals under
the nation’s largest natural construction will have the
gas distribution utility, serv- capacity to process up to a total
ing 20.3 million consumers. of 2.5 billion cubic feet per day
of natural gas. Sempra LNG
also has a third facility that is
fully permitted.
Sempra Pipelines & Storage
develops, builds and operates
natural gas pipelines and
storage facilities in Latin
America and the United
States. The company and its
affiliates operate and/or own
more than 1,200 miles of
pipelines and are developing
an additional 800 miles to
help meet North America’s
growing demand for energy.
