Good day, ladies and gentlemen, and welcome to Sempra Energy Third Quarter Earnings Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Rick Vaccari. Please go ahead, sir.

Good morning, and thank you for joining us. Today, we'll be discussing Sempra Energy's third quarter 2013 financial results. A live webcast of this teleconference and slide presentation is available on our website under the Investors section. With us today in San Diego are several members of our management team: Debbie Reed, Chairman and Chief Executive Officer; Mark Snell, President; Joe Householder, Executive Vice President and Chief Financial Officer; Martha Wyrsch, Executive Vice President and General Counsel; and Trevor Mihalik, Controller and Chief Accounting Officer. Before starting, I would like to remind everyone that we will be discussing forward-looking statements on this call within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the company's 10-K and most recent 10-Q. It's important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis and that we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call and to Table A in our third quarter 2013 earnings press release for a reconciliation to GAAP measures. I'd also like to note that the forward-looking statements contained in this presentation speak only as of today, November 5, 2013, and the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to Slide 3, and let me hand the call over to Debbie.

Thanks, Rick, and thanks to all of you for joining us today. Let me begin with our 2013 earnings guidance. We currently expect full year earnings to fall within our guidance range of $4.30 to $4.60 per share. Last week, however, Mexican tax reform moved forward in Congress and we expect it to be enacted this year. The deferred tax impact of this reform would negatively affect fourth quarter 2013 earnings by about $0.05 per share. Prior to the reform, we expected earnings for the year to be near the midpoint of our guidance range. Joe will discuss this issue in more detail a little later on the call. Moving to the quarter. I'm pleased with our performance, and most notably, progress continued on our many infrastructure projects. These projects, which I will update you on shortly, should drive our long-term growth outlook of 6% to 8%. Based on the projects we have underway, I am confident that our company is well positioned for the strong growth profile we outlined in our analyst presentation. Before moving on to our financial results, I want to make note of some key management changes that we announced during the quarter. In early September, Martha Wyrsch joined Sempra as Executive Vice President and General Counsel. Many of you know Martha from her time at Duke Energy, Spectra Energy and Vestas. In addition to prior experience as General Counsel, she brings a wealth of industry knowledge and experience to our management team. As you know, we take great pride in the strength of our team and depth of our leadership bench. We also moved people within our organization as part of our plans to develop future leaders. In September, we announced several changes to the management teams at our business units that will take effect next year. Most of these individuals, you already know. At SDG&E, Jeff Martin will become CEO and Steve Davis will take over as President and Chief Operating Officer. Jeff will replace Jessie Knight, who will come back to Sempra as our Executive Vice President of External Affairs. Steve will take over for Mike Niggli, who is retiring after a 42-year career in the energy industry. At SoCalGas, Dennis Arriola will become CEO, replacing Ann Smith, who will retire after more than 3 decades with the company. Bret Lane will replace Dennis as Chief Operating Officer at SoCalGas. And finally, Patti Wagner will replace Jeff as President and CEO of Sempra U.S. Gas & Power. This team brings the strong leadership, financial, operating and technical skills necessary to deliver on our long-term growth plans. Now let me hand things to Joe to discuss the financial results in more detail starting with Slide 4. Joe?

Thank you, Debbie. Earlier this morning, we reported third quarter earnings of $296 million or $1.19 per share. This compares to earnings of $268 million or $1.09 per share in the same quarter last year, which included a $60 million impairment charge on our investment in the Rockies Express Pipeline. On an adjusted basis, earnings for the third quarter of 2012, after excluding the impairment charge, were $328 million. You can see from the statement of operations that tax expense was very low last year. The third quarter of 2012 included a $33 million tax benefit at SDG&E related to the prior period effect of adopting a new method for deducting repairs. Excluding this from 2012 would essentially result in relatively flat adjusted earnings between the third quarters of 2012 and 2013. It is also important to note that in 2013, we overcame the effect of the dilution from the IEnova IPO, as well as the $63 million tax impact recorded in the first quarter of this year related to our cash repatriation plan. Excluding the impact of these 2 items and the low tax expense in 2012 that I just mentioned, our core business has performed very well year-to-date. Now let's go through the segment results in more detail, beginning with SDG&E on Slide 5. At San Diego Gas & Electric, earnings for the third quarter of 2013 were $129 million. SDG&E's earnings were lower due to a $46 million increase in income tax expense compared to 2012. This was primarily driven by the impact of the tax treatment change I just mentioned and was also impacted by $7 million of higher tax expense from unfavorable adjustments for prior years' tax issues and the remainder from a higher effective tax rate in 2013 as compared to 2012. This quarter,…

Thanks, Joe. Turning to our utilities in California. The SONGS dispute resolution process between Southern California Edison and Mitsubishi Heavy Industries has ended and will now move to binding arbitration. Edison is taking to hold MHI liable for damages, which are estimated to be in excess of $4 billion due to the defective steam generators that were installed at the plant. SDG&E has also filed a lawsuit against MHI to protect its legal rights in the matter. The CPUC regulatory proceedings on SONGS continue and we expect to see a proposed decision on the first phase, which deals with defining the cost related to the outage by the end of this year. Subsequent phases of the investigation will likely be resolved over the next few years. Parties have been encouraged by the commission to engage in settlement discussion to find a mutually agreeable and comprehensive solution. Moving on to rate reform. Last month, Governor Brown signed Assembly Bill 327 into law. This important piece of legislation will go into effect on January 1, 2014, and gives the CPUC the flexibility to implement fair and reasonable reforms of the State's residential electric rates and net energy metering program. Additionally, the law grants to CPUC the authority to implement a monthly fixed charge of up to $10 per residential customer as of January 1, 2015. It also allows the CPUC to establish default time-of-use residential rate on or after January 1, 2018. Returning authority to the CPUC to address long-term rate structure issues in California is a very positive step to overall rate reform. The CPUC is expected to issue a ruling on next step as part of its residential rate reform OIR but will likely address AB-327 implementation through various proceedings, many of which are currently underway. With respect to SDG&E's…

[Operator Instructions] We'll take our first question from Faisel Khan with Citi.

I was wondering if you guys could talk a little bit about the potential investments you may be looking at in California to relieve some of the congestion and retirement issues with SONGS coming out of service and how large some of these investments could be. And I just have a follow-up on the LNG side.

Sure, I'd be happy to tell you what we're looking at right now. In terms of quantification, we're still working on that, but I can kind of go through what the needs are, Faisel. In looking at SONGS replacement, I would say that there are 2 areas of focus. One is on the electric side, but the other is on the natural gas side. And both of those will require reinforcement. On the electric side, we will be improving the electric transmission system to provide voltage support, and SDG&E will be doing the construction of that. That's already been allocated by the ISO to -- for SDG&E to give an estimate for doing that. We will also be looking at new electric transmission. And that electric transmission for the state is something that the ISO is working on now and is likely to be competitively bid. And so ourselves and others would have the opportunity to bid on that. And that is expected to be several billion dollars’ worth of work. And then on the natural gas infrastructure side, we've been working with the ISO, because with the gas needs from both the SONGS retirement and once through cooling that goes into place that there is going to be some need to reinforce the gas system to provide for more gas fire generation and basin. And so both SoCalGas and then SDG&E are also looking at that. And we would anticipate laying out a plan with the ISO to the CPUC within the next year on the gas system enhancement.

Okay, fair enough. And then just on the LNG project cost. The $2 billion of financing cost, can you just give us an idea what the underlying cost of capital is in that $2 billion number? It seems a little bit high, but I'm just trying to figure out how to calculate it.

Yes. You're taking the $6 billion to $7 billion and you're subtracting that from the $9 billion to $10 billion, is that where you're coming up with the $2 billion?

Yes. I mean, I think you guys talked about it in your Slide 2, $2 billion of financing cost.

Yes, let me have Joe kind of go through where we -- first of all, where we are on financing and then how that kind of plays out. And some of it is reserves that we have to do.

Faisel, it's Joe. Yes, what Debbie said is correct, that we have required reserves and costs around the financing program. But as she mentioned, it's going very well. We have a term sheet and Kate Collier, the Treasurer, and others on the team. And our partners have been going around to visit with the large financial institutions in Japan and New York, and are in -- trying to get the rating agencies to rate the project, which should have a very strong credit rating. But this money all really relates to sort of capitalized interest and the required reserves that the financing is going to require so that they can make their debt service payments.

So the required reserves, is that -- you say it's half that $2 billion?

I don't think we've said how much exactly it is.

We'll take our next question from Naaz Khumawala with Wolfe Research.

Just a couple questions. One is on the FERC ROE, when you guys said it's around 10%. That's so -- I think, Debbie, you mentioned that there's no -- you currently have no incentives on there. Are you going to ask for incentives or should I just assume it's 10% on the FERC rate base?

Yes, I mean, what we're looking at is for new projects that we would have the ability to ask for incentives for new projects that we would do, and we would look at requesting incentives for new projects. For the existing projects, when we put the formulaic rate in place that we've had for a number of years, the condition was that we would not ask for incentives for any of the projects that were under that formulaic rate, so that's how I think you might want to look at. And how FERC deals with incentive requests for new projects, we can't forecast how that will come out.

Okay, so it's going to go from the 10.3% to the 10% based on, I guess, what you are seeing right now?

We're at -- our current is 11.3%.

Sorry, I thought it was 10.3% plus 100, but I guess I'm mistaken.

Yes, we're currently at 11.3%.

Okay, 11.3% to 10%. Great. And then on like the Broken Bow project and Los Ramones II, when you guys at the Analyst Day gave your 6% to 8% growth rate, when you talked about potential other projects that would be in addition to the growth rate, are these types of -- the wind and the new pipe, is that in addition to or is that inclusive in the 6% to 8%?

Let me kind of go through what are some of the projects that are -- were not identified in the 6% to 8%. And as we said at the analyst conference, that there were some -- based on the projects in the 6% to 8%, they may be sized differently than they were. They may have some time changes and all. So it's not as clear as this is a 6% to 8%, and then here's the 9% to 11%. But I would say we've made significant progress on new projects since we saw you at the Analyst Day. And let me just go through some of the things that we're looking at now. Los Ramones II, I talked about that. We're looking at a minimum of 25% of that project. So $250 million, $300 million of investment there as the -- on the low side. We have 2 Chilean transmission projects that we have agreements on that came after the Analyst Day and that we will own 50% of those projects, and the total is $80 million. So we'll have 50% of that. And those are scheduled for completion in the 2017, 2018 timeframe. We also have the Broken Bow project that we talked about. We have some SONGS replacement needs that Faisel just asked about in the last question, and we're going through the process of trying to quantify some of those right now. And then there are some other projects obviously we're working on that we will announce when we can confirm that we've received those projects. And then finally, the PUC came out with a ruling on battery storage, and that was incremental to any of the plans. But I believe that all of that is likely to be in the later years of the plan based upon what we're looking at right now. And these projects will either -- PSEP, as an example, that could vary from what we had in our plan that we filed 2 years ago because we've identified some additional records that would reduce the mileage on that. But at the same time, the timeframe to get the work done and the cost estimates for doing that have likely gone up. So we're likely to have to file an update on that. And so these projects will either add to or supplement some of the 6% to 8% growth. What I would say bottom line is with everything we have going, I have great confidence that we can achieve that 6% to 8% growth and possibly more.

We'll take our next question from Matt Tucker with KeyBanc Capital Markets.

You pointed out that the pace of approvals by the DOE, the non-FTA approvals, have been improving. I think it was down to about a month between the last 2 approvals. But it's been almost 2 months now since the last one, and you pointed out that we had the government shutdown during that time. But is this latest delay causing any concern for you folks? And have you heard anything from your discussions with stakeholders or decision makers over the last couple of months that makes you more or less optimistic about getting the license this year?

I think everything we're hearing is quite constructive, and that if you kind of look at how long it took them to approve the prior project is something like 35 days, and if you add the government shutdown time to the 35 days, then hopefully, we'll see something coming out within the next week or so on Freeport. And then if they keep to that pace, we do believe that we would be in the -- would be next up in the approval queue. We would be #1 then after Freeport expansion and expect to get that by the end of this year if they kept up that type of schedule. I would say that Secretary Moniz just traveled to Japan. And I think the thing that is very clear is that the Japanese have made a strong case for the need of getting these projects moved forward quickly because of their need to have deliveries in the 2017, 2018 period. And that -- we had read and it's been reported to us that Moniz was quite constructive on keeping this kind of pace of 1 to 2 months approval on the project when he was in Japan.

That's helpful. Just kind of following up on the last question. When you think back to the Analyst Day and you gave us kind of the 2 long-term EPS growth scenarios, 6% to 8%, including projects in your base capital plan, and an 8% to 10% with some opportunities not in the plan. As you just pointed out, there have been at least a couple, if not more, of those other development opportunities that now seem to be getting pulled into the plan. So I guess, can you just put -- help us put into context of the 2 different growth rates you described? And are we starting to get towards the upper end of the base range or the lower end of that high range or crossing over, if you could just help us? And if -- put in context a little bit more.

I would just repeat the statement. I think we have great confidence and visibility to the 6% to 8%. And that when we give you our outlook at our analyst conference next year, we'll lay out for the 5 years again. But you can look at those charts we gave you and see that we have made progress. So we'll go through all of that when we can update all of our numbers at our analyst conference.

That's helpful. Can you just remind us, as a last question, what the initial range of anticipated FERC rates, you are thinking of was?

Well, we don't ever do a public forecast. But I mean, we kind of monitor and set our plans based upon kind of what is coming out from FERC. So as I said, we're looking to be slight -- in the low end of the kind of range that we had anticipated going in. So we don't give any kinds of ranges. They are factored in though when we give you the guidance ranges, and that's why we give you by business unit guidance ranges so that there's some flexibility as to where some of these things might come out that we don't know the outcome of.

We'll take our next question from Rajeev Lalwani with Morgan Stanley.

The first question I had was just on where you stood on forming an MLP for Cameron and whether or not you think you have enough assets that would kind of get you started there until Cameron comes online, and then I have a follow-up.

Somehow, we anticipated this question. So I'm going to have Mark talk about that. Mark?

Rajeev, obviously, as we get Cameron moving, we are looking at this MLP opportunity. We think it would be a great asset to anchor an MLP for us. And I think, really, the question is as we look out at it is when will it start cash flowing and when would be the most opportune time to do that. So I think as an anchored -- as sort of the anchored tenant of our MLP, I think we're looking probably around, as we approach the first cash flows from the business, which should probably be 2016 or '17.

I would just add on this, too, is that when we look at -- just like what we did with IEnova, when we look at forming an MLP, when we look at doing an IPO, we really feel that it's absolutely critical to have a growth strategy and to have clarity on how you grow beyond the initial dropdown of the assets. And I would hope that with our highly successful IPO of IEnova that you see, we're not hesitant to consider these types of financial structures, but -- that we try to time that when they align with our business interest. And with IEnova, I think that was a great example. We knew the Mexican reform was coming. We had some projects we thought we could show some clear growth on. We launched the IPO, and the stock is up something like 51%. So that's the type of transaction we like to do around here. So I would hope you would have some confidence that we'll look at all of these kinds of structures in light of that.

Okay. And then just a follow-up, probably, a question for Joe. But in terms of your cash position at the end of the third quarter, you had about $1 billion or so. Can you just talk about the large number there and expectations of using it going forward?

Sure, Rajeev, absolutely. And I mentioned this a little bit on the last call. A lot of that actually is cash from the IEnova IPO. There's about $500 billion in Mexico that's being used as we talk building the Sonora pipeline. We expect to use that over the course of the next several months, and then, possibly go back and raise some more debt to finish the pipeline off next year. As we've mentioned before, we have about $350 million in Chile in the holding company above the Chilean utility. And we are looking and have some active projects going on right now that we haven't talked about and we will once we have a chance to firm it up and be able to talk about that. So we're actively working to use that money. And about $167 million of it was at SDG&E because we did an offering, a bond offering at SDG&E. And part of that was used to redeem the preferred stock in October. So the cash is pretty well spoken for.

We'll go next to Neel Mitra with Tudor, Pickering. Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: First question is on Los Ramones II. Could you kind of explain the progression from not bidding in to eventually getting a 25% or more stake in the project, and what's changed and maybe how that affects your outlook for investment in Mexico going forward?

Sure. We'd be happy to. I'm going to ask Mark to comment on that.

Okay. Neel, good question. Well, first on the reason that we didn't bid is, I think, the -- when the proposal was put out, we looked at it and we really didn't feel like there was enough time being allowed for us to do an effective bid. And while we did lobby to try to get extensions, that didn't happen. And PEMEX went forward with the bid. And so we've decided that because we didn't feel like we had enough time to do a fulsome bid and really have a number that we felt very comfortable with, we decided not to bid. As a result, I think partly because of the timing and other issues, the bids that came in didn't meet their expectations, nor did they conform with the bid instructions, and so they were rejected. Or the one bid they did get in was rejected, then they went back and talked to the potential bidders and worked out a program to really get this pipeline done on time and meet their -- and help meet their expectations. And they came back to us, I think, because we have a, a long history with PEMEX of doing projects with them. We have a joint venture in place that has been very, very successful. And I think they felt very comfortable in dealing with us and making sure that if we did commit to something that we can make sure that it would happen on time and within the kind of monetary restrictions that they were looking for. And so as a result, we've been able to -- we're negotiating with them to get this project done. We'll have at least 25%. And we expect that they have sort of a regulated rate of return. Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Great. And on the second question, you mentioned once-through cooling as a reason as to why transmission might need to be built. How committed do you think the state is with the existing schedule for shutdowns for gas plants that have that problem right now? And do you think maybe they'd push out that schedule in light of SONGS and some of the reliability issues that they didn't anticipate for that?

I will just tell you on past history, when it comes to environmental issues in California, I have not seen them generally delayed. So the ISO is very actively planning for the restrictions on once-through cooling and looking at the needs that come from SONGS and from some potential low growth over time. So the way we look at it is that, that is going to be happening. And if it's like everything else in California on the environmental front, it doesn't appear too likely to be delayed.

We'll take our next question from Mark Barnett with Morningstar Equity Research.

A couple of -- you answered a lot specifics earlier. And I am wondering, maybe on a more general level, when you look at the potential for a reform bill, based on what you've seen and what the government's really looking to incentivize, what do you think the most kind of relevant items you expect to be addressed in the high -- kind of highest probability stuff that we'd see?

Yes, I'll take a first crack at that, and then I'll ask Mark to add to it. I mean, we look at reform and a lot of the reform deals with the oil side of the business, clearly. And we do have some interest at Sempra and possibly going into the gathering and processing. And one of the things that they're looking at under the reform is trying to get more participants in offshore and in some of the leasehold areas, so that PEMEX can have their investments go in and more of the conventional plays and bring in some of the oil from the conventional plays to the market, but I think there's good opportunities for us to expand out of natural gas. We're doing that right now with PEMEX in the area of ethane. We're building an ethane pipeline. And so we see a lot of gas opportunities obviously with the reform. They're trying to convert all of the power plants in the state from fuel oil to natural gas, and so we see continued construction of pipelines occurring, but I would not limit it to that as kind of how we look at the future for Sempra. Mark, do you want to?

Yes, I would just say too, that I think one important thing to note is, is that with or without reforms, we're very well positioned in Mexico to continue to build out energy infrastructure. And I think the reforms, to the extent that they come, will only enhance our ability to do -- to continue to do that, because they'll bring on -- more fields will be brought on. There'll be more need for pipelines. There'll be more need for treatment facilities. There'll be more needs for the kinds of things that are in our wheelhouse. But as that's happening and as there's more and more emphasis in Mexico on the fact that they need to divert more monies into E&P, there's going to be those opportunities for us to continue to fund their infrastructure needs. And so we -- no matter how this comes out, we think, even without reform, we have a pretty bright future there. And with perform, it gets even better because there will just be more activity. So we're pretty excited about it.

That's very interesting. And I guess, one last question on Mexico. With the proposed tax reform that you are -- have already sort of addressed with the deferred tax issue, but is this fairly firm at this point? Are there any incremental changes that might actually -- you mentioned on a look-forward basis it's not a serious issue given the small size of the change, but is there anything that might be meaningful for energy assets in general?

I'll have Joe address that. I think just last week, Congress moved it forward. And we think that this is going to pass this year. And that's why we wanted to give you the heads-up on this call. But I'll have Joe address kind of the future view.

Sure. When this -- when the energy reform was proposed and the economic and tax reform, part and parcel, they need to work together a little bit because the energy reform affects PEMEX cash flow and then they need a tax reform to drive more revenue. So a lot of the tax reform was driven around individual tax reforms, so they increased rates in the individual level. And for corporations, they just changed a few things. We've taken a look at all of that. The one thing they did -- the current tax rate in Mexico is 30% on corporation. It was supposed to go down to 29% and then 28%. And so our deferred taxes into the future were booked at those rates, and we're just having to bring them back to the 30%. But it's a small effect on future earnings. We don't see any other major effects on us. There were some other small wrinkles, but we do expect it to go forward. The Congress has essentially approved it, and we expect it to go forward by year end.

[Operator Instructions] We'll take our next question from Ashar Khan with Visium.

My questions have been answered.

And we'll take our next question from Vedula Murti with CTI(sic) [CDP] Capital.

Just to follow up on the MLP question. I'm just curious, given the timeline that you laid out for Cameron and everything like that, given your other assets, I'm curious how you, right now -- clearly, that's a long time in terms of changing around in terms of cost of capital. How do you think about the differential cost of capital now with the possibility of like a transactional type of opportunity, kind of like what you saw with CenterPoint deciding to try to accelerate their development of assets through merger with OGE's Enogex and what we also saw in the E&P space with Devon Energy rather than doing an IPO of a fairly smallish MLP to do a merger as well or a transaction to accelerate scope and scale.

Well, let me just say that, we are very seriously looking at the whole MLP issue and what are the right options for structuring an MLP that would provide the kind of long-term growth that we want in our space. There's nothing that we would preclude doing. But we would also -- I mean, we feel really good about the value of the assets that we would have to go into an MLP. And then when you have something like Cameron that basically we take an existing plan and we put that in as our equity contribution, and then we earn $300 million to $350 million a year off of that, we want to be sure that anything that we do is in the long-term interest of our shareholders. And so I don't feel any desperation to try to move it up. If we found a good partner where we felt we could create greater long-term value and an MLP, we would be very open to that.

At this time, we have no further questions in the queue. I would like to turn the conference back to Ms. Debbie Reed for any additional or closing remarks.

Well, thank you, all, very much for joining us. And as always, if you have any follow-up questions, you can please contact our IR team, and they'd be happy to answer them for you. And have a great day.

Ladies and gentlemen, this does conclude today's conference. We appreciate your participation.