Please standby, we're about to begin. Good day and welcome to the Sempra Energy Fourth Quarter Earnings Results Conference Call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Rick Vaccari. Please go ahead.

Welcome to Sempra Energy's fourth quarter 2016 financial presentation. A live webcast of this teleconference and slide presentation is available on our website. With me in San Diego are Debbie Reed, Chairman and Chief Executive Officer; Mark Snell, President; Jeff Martin, Chief Financial Officer; Steve Davis, Group President Utilities; Joe Householder, Group President of Infrastructure; Martha Wyrsch, General Counsel; and Trevor Mihalik, 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 most recent 10-K. It's important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis that we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call and to Table A in our fourth quarter 2016 earnings press release for a reconciliation to GAAP measures. I'd also like to mention that the forward-looking statements contained in this presentation speak only as of today, February 28, 2017, 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 4, and let me hand the call over to Debbie.

Thanks, Rick. On today's call, I will discuss several topics. Our 2016 achievements and update on the key items our management team is focused on in 2017 and our 2017 earnings guidance and dividend. This morning we reported full-year 2016 earnings of $5.46 per share or $5.05 per share on an adjusted basis. Our 2016 adjusted earnings include a net $0.11 per share benefit related to several additional items. The adoption of a new accounting standard for share-based compensation and a change in our planned repatriation, both partially offset by a revaluation of deferred income taxes related to Peruvian tax reform and the impairment of the north south pipeline. This net benefit largely offset the loss of earnings resulting from the sale of our interest in the Rockies Express Pipeline. In 2016, we delivered on our financial targets and positioned ourselves for future success by resolving some key issues that I will discuss in a few minutes. We are pleased to announce we are raising our 2017 earnings guidance to a range of $4.85 to $5.25 per share, up from our previous guidance of $4.80 to $5.20 per share. Jeff will review the key drivers of our increased guidance. At Sempra, we have a long-standing commitment of growing our dividend. Consistent with this, our board approved a 9% increase in the 2017 dividend to $3.29 per share last week. As you'll recall, we're targeting 8% to 9% annual dividend increases over the next several years. The strength of our projected future cash flow gives us confidence we can grow our dividend at a higher rate than our utility peers. It also reinforces our commitment to maximizing total shareholder value through a combination of dividend and earnings growth. The next few slides will highlight our key areas of focus in 2017,…

Thanks, Debbie. I have the good fortune of starting my new role on a positive note. We've updated our plan and are increasing our 2017 EPS guidance range. Our new 2017 guidance is $4.85 to $5.25 per share. Our new range is up from the previous guidance of $4.80 to $5.20, provided at last year's Analyst Conference. Next, I'll briefly discuss the key drivers of our updated guidance. First, both SDG&E and IEnova had strong performance in 2016, and we expect the improved performance to continue. Given the strong international growth opportunities, we're no longer planning to repatriate cash from current earnings from Mexico or Peru. Our plan is to indefinitely reinvest the cash locally in capital projects. Compared to previous guidance, our tax expense is lower because of this change. These benefits were partially offset by higher insurance costs at SDG&E and SoCalGas, that are not fully offset by cost savings included in our prior plan. Let's turn to slide 8 to discuss our financial results. Earlier this morning, we reported fourth quarter earnings of $379 million or $1.51 per share. On an adjusted basis, we reported fourth quarter earnings of $383 million or $1.52 per share. Full-year 2016 earnings were $1.370 billion or $5.46 per share. This compares favorably to 2015 earnings of $1.349 billion or $5.37 per share. On an adjusted basis, 2016 earnings were $5.05 per share. This year you'll also see the organizational changes we announced last fall. Our operations are now combined into two groups, Sempra Utilities and Sempra Infrastructure. Individual financial results for each of our businesses can be found in the appendix. Next I'll go through a comparison of 2016 to 2015. This slide highlights our recent results and that they were impacted by several items. Debbie addressed the first five items…

Thanks, Jeff. In summary, we were able to meet our 2016 adjusted earnings guidance, while positioning ourselves for long-term success. We executed our operational plan and continue to resolve key challenges, including finalizing the GRC at our California utilities and most recently reaching a proposed settlement on the cost of capital extension, closing the PEMEX JV acquisition, winning the marine pipeline bid jointly with TransCanada and executing the successful IEnova equity follow-on offerings in Mexico. Selling REX and our Southeast utilities to more closely align our assets with our long-term growth strategy and making significant progress related to Aliso Canyon. These are just some of the accomplishments that have established our foundation for future success and give us confidence in our 2017 dividend growth and earnings guidance discussed today. We look forward to seeing many of you at our upcoming Analyst Conference here in San Diego on April 4 and April 5 and talking more then about our future. Finally, I'd like to take a minute to acknowledge Mark Snell for his extraordinary contributions to the success of Sempra. It has been a pleasure to work with him over the last 15 years, and we wish him well as he moves into the next chapter of his life. With that, we'll conclude our prepared comments and stop to take any questions you have.

Thank you. We will take our first question from Greg Gordon with Evercore ISI.

Thanks. Good morning.

Hi, Greg.

I just wanted to be – a couple of questions. First is, I just wanted to make sure it's clear that you're going to assume Train 1 mid-2018, Train 2 end of 2018, Train 3 in mid-2019, when you give us the guidance in April, but you have not formally agreed to a change in the contract in terms of the delivery dates, is that right?

Let me hit the high level and then I'll have Joe talk a little bit about where we are on that. As we look at the schedule on the trains, the schedule that you laid out is the schedule that has been confirmed by the contractors, the schedule that they believe that they can deliver the trains on. And we've been doing a lot of due diligence work both with the Cameron JV and then some follow-up meetings that the Sempra team has had with the contractor. And so, when we give our guidance – assuming nothing changes between now and the time we give our future guidance, we will be using that estimate that the contractor has affirmed to us as their current estimate. In terms of contractually, we're still working through all of those issues, but we've basically been using that as the schedule for the trains. Joe, do you want to add?

Thanks, Debbie. Hi, Greg. The concise answer to your question is no, we did not change the contract, but the contractor still has earlier dates in it. This is their working schedule that they're working with and the one they think is achievable.

Okay. So that's important for our understanding of the safeguards, right, that you're not giving – you're conceding that they won't owe you liquidated damages if they're late?

We have not – that's correct, we've not. And as you might remember, our IRR pretty much stays intact, whether there is a change in cost or a change in schedule. The most important thing is our earnings are protected it's just a question really of what happens to the tariff with respect to the issue that (19:24).

Okay. And then Jeff I had a question for you, you commented on a decision to not undertake tax repatriation from South America, because of the better growth prospects there. So not to jump the gun on the Analyst Day presentation, but is it safe to assume that we're going to see higher regulated capital expenditures in Chile and the Peru versus the prior plan as a result of that reassessment?

Greg, thanks a lot for your question. I mean I think one of the things I would say in response is we had our largest ever capital campaign last year of $5.3 billion, that was driven largely by our California utilities with $2.7 billion. But we are seeing a lot more deal flow outside of our regulated utilities, a lot of that showed up last year in Mexico. I think from a repatriation standpoint, we're really looking at whether we can put those earnings to work in a more efficient way there locally. And that currently is our assumption going into our planning period. So this is something we probably as you indicated, we'll give you a lot more visibility on in April.

Okay, great. And then can I ask you know I know – this is last question for me, the list of changes on page 9 from 2015 to 2016. As I think about what the old guidance was and how you did significantly better than old guidance on what you delivered in 2016, thank you for that. So what were the key changes that happened as you sort of got into the fourth quarter that moved you from the middle of the old guidance range to where you actually delivered?

I think...

I would assume, they were some of the tax changes in the repatriation and some of the order tax things.

Yes, so I mean those were the major things that occurred, there were, we tried to delineate pretty much everything that was happening for the quarter and for the year. So you could get a good picture of it. And I think that the major issues were some of the tax things and then there was a change in the accounting methodology for stock-based compensation and that also had an effect for last year's results.

Okay. Thank you.

Thank you.

And we'll go next to Steve Fleishman with Wolfe Research.

Good morning, Steve.

Hi. Good morning. One other clarification on Cameron, when you last talked about this, the contractors never had told you why there was a delay. So, have they clarified to you why the delay in the schedule?

Yes. I mean, what they've claimed is that much of the delay was due to weather conditions and as we've all known that there has been a lot of rain that's occurred. What I'd like to do though, was – Joe actually met with the principals of the CB&I yesterday with the lead director on our board for our – actually the chair of our LNG construction committee, and he is the prior CEO of Fluor. And so they both went and met with the principals of CB&I yesterday, and I thought – I think it might be helpful to add a little bit more color on what came from that meeting. Joe?

Thanks, Debbie. Hi, Steve. These are complex projects. There's thousands – there's over 20,000 line items of things that they're working on. So there's lots of things that go on in the project. Certainly weather is a factor among other things. One of the things that we spoke about yesterday when we talked about their confidence in meeting the working schedule is, they're making sure that logistically they're doing things in the best way possible. So, for example, they were talking about how they're going to move pieces of equipment directly to locations, reducing the use of cranes. There's so many different things, it's hard to characterize and pin anything on one particular item, because there are so many. But we had a good meeting with them yesterday and spoke about a number of issues. Again, remember that the Cameron joint venture is, the one in-charge of the contract with them and working with them on a daily basis and our director and I were there to basically do due diligence for Sempra to understand where they were and their confidence level in moving along and keeping to the working schedule and keeping that on track.

Okay. Want to – maybe just a little bit of a logistical question for the Analyst Day. Is your intention to still do the same kind of year-ahead outlook and then five-year outlook, as you've always done?

Our intention is to give the 2018 numbers and then to give a growth rate through 2021, consistent with...

Okay.

...ahead of our past practice.

Okay. And just at a high level and again I'm not sure this is fully possible right now, but just you mentioned like the repatriation changes, you have the updated schedule for Cameron, but is there any kind of things that we should just be kind of noting that have changed a lot versus the long-term outlook given then?

I think those are the things you named are the most significant things and we'll give you the details of that when we get to the Analyst Conference with laying out our 2018 numbers and then what has changed from when we last forecast 2018, which was several years ago. So, one thing as an example when we last forecast 2018, we still were forecasting REX in it. So, I mean I think most of those things you know about and I don't think that there is anything that I'm aware of that you probably don't already know about, but how it all comes together we'll share with you when we get to the Analyst Meeting.

Great. And I guess last question just on Mexico, you talked very briefly on it, but just maybe a little bit more color on how you're looking at the kind of political economic implications of the new administration and the like, and just maybe a little more color on, is it impacting future bids or kind of strategy around IEnova.

No. We really haven't seen anything impacting our business in Mexico. We see amazing growth opportunities in Mexico, and what we see there happening is that the markets that are opening are creating additional opportunities for us. We see some electric transmission bids coming, renewables is a big focus, they've set a renewable portfolio standard. Those bids we see going forward and then we're really interested in some opportunities we see with liquids pipelines and receiving terminals. And so, we see that business continuing to move forward and in discussions that we've had with the officials in Mexico and then with some of the administration that this – when we look at energy imports, exports, the U.S. export is twice as much in the energy space to Mexico as we receive from Mexico. So it really meets what the focus is, is to correct any trade imbalances. And so we see that opportunity for us to continue to grow in the energy space in Mexico remaining under the administration. And so going forward, we'd be talking about a lot of opportunities that Carlos and his team have on the drawing board right now, when we get to our Analyst Meeting, and are very excited about it.

Great. Thank you.

Thank you.

And we'll now go to Michael Lapides with Goldman Sachs. Michael Lapides - Goldman Sachs & Co.: Yeah. Hi. One housekeeping question and then one maybe more structural question. On the housekeeping side, can you just talk about the impact of bonus depreciation over the next couple of years, and also your position under current tax law in terms of cash tax payments levels over the next couple of years?

Yeah. I'm going to have Jeff and Trevor talk about that. As Jeff mentioned, when we looked at the provisions of tax reform going forward and the impact of bonus depreciation beyond the time that we had envisioned in our plan, because when we gave you our plans, we always looked at the bonus depreciation effect in the plans as far as that had been continued. Now if that continues beyond the timeframe, Jeff indicated to you that we thought it would be – it's about a 10% more capital or about a $100 million of each utility that would need to be spent to offset that, and we feel that that is very achievable with the kinds of long-term projects that we have like PSEP underway. So, but I'll have Jeff specifically talk on the cash tax impact.

Good morning, Michael. I will just start by saying that when you get back to what the policymakers' priorities are in California, you think about safety and reliability and grid modernization. I mean, these are kind of ride in the wheelhouse. So we think it is important to our customers. So, if you go back to the original conversation on bonus depreciation several years ago, I think what you've really seen is the company is spending more capital to meet the policymakers' requirements, and no real change in terms of the impact to our rate base. And I think to Debbie's point, the bonus depreciation rules, which are in place today, were really reflected in the guidance we laid out last summer. And then on a going-forward basis, if you did move under tax reform to a 100% expensing, I think what we've laid out is, to Debbie's point again, it would require us about another $100 million of incremental capital at each of our utility to not have any erosion to our rate base. So, I think one of the things that we're kind of embolden by as we spend about – invest about $2.7 billion in 2016, which is one of our highest shares ever in terms of capital deployment at SoCalGas and SDG&E, we have lots of opportunity going forward. So I think there is a fair amount of enthusiasm of getting to the Analyst Day and kind of laying out that larger capital plan. And then with respect to cash taxes, currently, we had an effective tax rate last year of 21%, we think that probably goes up slightly going into 2017, but currently, we are not in a cash taxpaying situation.

Yes, we're not in a cash taxpaying situation throughout the period of the plan that we will be presenting. Michael Lapides - Goldman Sachs & Co.: Got it. And then, Debbie, thinking a little more structural, you made the organizational shift kind of creating a Utilities Group and an Infrastructure Group. Are you rethinking the broader structure, meaning are you and the board rethinking the broader structure of Sempra at all about what pieces fit well together and have natural synergies with each other across the multiple different businesses and multiple different geographies you serve, and whether there is a greater opportunity to create value, if maybe some of the pieces aren't part of the same corporate puzzles?

I mean, Michael, we always look at that, and that we always assess the structure of our company, we look at the assets that we have and which assets we want to keep and which we want to dispose of. I mean I think you've seen us do that clearly. We – in the last year we sold REX and we sold the Mobile Gas and Willmut Gas. And so, we always look at those things, and there is nothing in the near-term offing for that, but as those businesses continue to grow; we've tried to preserve optionality. I mean that was one reason we did the IPO in Mexico, we have an ownership in Peru that is outside of our ownership and we tried to structure these things in a way that will give us flexibility. The businesses no longer fit together in a portfolio that we would have the option of changing the way the businesses are structured, but there is nothing that we have – you should not read this as a sign that anything is planned now. Michael Lapides - Goldman Sachs & Co.: Got it. Thank you, Debbie. Much appreciated.

Thank you.

We'll go next to Paul Patterson with Glenrock Associates.

Good morning.

Hi, Paul.

So, on Cameron, in terms of – I mean if I heard your comments, you sound like you guys were a little bit more oriented maybe towards reducing risks, and I didn't hear as much about expansion or potential expansion, is there been a change or are there any thoughts that, just basically how you guys always have thought about it or is there any sort of reassessment or any change in how you look at the risk or opportunity at Cameron?

When we – what Joe was going through is, when we structured Cameron, we were very clear on the risk that Sempra was willing to keep and the risk that we wanted to lay off to other parties. And for Trains 1 through 3, it was very clear to us that we did not want to take the construction risk associated with either pricing or timing of construction, because we were not doing the construction and we were not – you have a joint venture overseeing the construction, it wasn't Sempra alone overseeing the construction. So, we fashioned this in a way that we protected our shareholder interest and keeping the economics of the project solid, regardless of what happened with the timing or the cost of construction. We laid those risks off intentionally. That's not to say that we're not looking at expansion and when we did that contract, we also looked at the expandability of the facility and we had terms in the agreement that went through, how we would expand to a 5-train facility. We've commented before that one of our partners has not been willing to provide the equity for the expansion and that we are working to resolve those issues with that partner, so that we can expand to a Train 4, that we've had meetings with that partner and the principals of that partner and are in discussions with them to see, if we can reach a resolution on that. And then, once we get that resolved, we are very interested in continuing forward with Cameron Train 4, because we think it's going to be one of the lowest cost options in the marketplace and it's a really good option. And so, nothing has changed in that, but as we told you before, we've got to resolve this partner issue in order for us to move forward with expansion and we're diligently working on that now.

Okay. Great. And then, I apologize for being – if I missed this. But the border tax adjustment, it just isn't intuitive to me why that would apply, what is it that – how does that work I guess, why would...

Yes, I'm going to have – go ahead with your question. I am sorry.

I'm just wondering, I guess, just simply, why would it apply to Cameron in the first place, I guess?

Okay. I'm going to have Jeff go through that for Cameron and as we indicated, we think it's not a highly likely scenario, but there are, depending on how this is drafted in terms of the final tax provisions, and we all know that's a moving target now, so that there are some ways where it could apply and be a benefit. Jeff?

Good afternoon, Paul.

Good afternoon.

I think just as you think about it, under a border adjustment, the taxes will apply to where the goods are consumed rather than produced. And the thing that hits us most directly as you recall, we have two facilities that actually we import power in the United States from. The first one is our Mexicali Power Plant referred to as TdM, that one is held for sale, so we expect that will resolve itself by middle of the summer. And then secondly, IEnova has the ESJ wind farm that dispatches into the California grid. We've done some assessment around that and the applicable taxes, if border adjustment did go forward and we think that's a non-material issue to our company. But what's a little bit interesting is, if you think about the Cameron facility, it's probably unlikely, Paul, that it would apply to us, but there have been scenarios in different bad countries, where the export exemption has applied upstream. So think about that as a towing facility, no different than a power plant, right? Our customers bring gas to the facility and they are ultimately the ultimate exporter from the facility, it's just something we want to track closely, because if you did see a decline in the corporate tax rate from 35% to 20%, if the border adjustment did apply, it would be reducing the tax on Cameron an incremental 20% to 0%. So again, to Debbie's point, it's probably speculative at this point. It will really depend on how the legislation is written, but it's something that we'll be actively following.

Okay. Great. And then I guess the sundry item on the balance sheet went up about $100 million I think from Q3 to Q4. Was there any earnings impact associated with that?

Yeah. Paul, it's Trevor. No, there is no earnings impact with that. Primarily what the increase there is it's the greenhouse gas allowances and then also the assets associated with the pension benefit. So, those are really the drivers on the increase, but no P&L impacts on those items. We used to combine the Rabbi Trust in there and then that, any movement in the Rabbi Trust would have a small P&L impact, but there we've broken it out a couple lines above.

Okay. Great. Thanks so much.

Thanks.

Thanks, Paul.

And we'll go next to Faisel Khan with Citigroup.

Yeah. Good afternoon. Faisel from Citi. Have you guys looked at this sort of the smaller scale LNG or modular scale LNG sort of concept that we've seen both Cheniere talk about and this new start-up, Tellurian, talk about, have you guys looked at that as sort of a competing technology to the expansions at Cameron?

We have looked at that technology. We specifically looked at it for ECA and whether or not something like that would be better than trying to convert the facility at Costa Azul. Joe, do you want to comment on that?

Yeah. Faisel, as Debbie said, we continue to look at many of these things, we look at a lot of projects. We're very mostly focused on the three projects, the Cameron expansion, the Port Arthur and ECA facility and building the larger scale trains, we think those will have the best economics and in terms of getting to the large scale customers. I think a lot of these smaller scale wins work well in the emerging markets things and some of the other ones, but that's not where our current focus is.

Okay. Yeah. Because some of these facilities are modular design, but they're still large facilities like 50 million ton, 20 million ton facilities, but I guess with what these new companies are advertising or our technologies are advertising is that they can get the cost structure sort of down below a certain number to make them competitive, so it sounds like you guys have looked at this technology and it's not necessary – you don't think it's cost competitive with the bigger scale trains.

Yes. And what I would say is that we've looked at this several times and that it depends on the market that you want to serve, and when we looked at it, as we were looking at potentially serving the Hawaiian market out of Costa Azul and something like that for a smaller market may make sense. I mean most of what we're looking at is the focus on the lowest cost for the volume of the facility and we don't see that technology as being the best technology when you have the kind of facilities that we have, that have great shipping up lanes and docking potential and all of that. If you had to serve islands in the Caribbean or Hawaii, it's by application and by the market you are going after and that we tend to go after the larger markets with long-term contracts and that's kind of our business plan.

These might eventually turnout okay, but when you are dealing with the big utilities, you're looking for something that has sustained reliability over long periods of time and they want to make sure that when they sign up for something that you are going to be able to deliver operating results over long periods of time.

Okay. Understood. Thank you.

Yes.

It appears there are no further questions at this time. I would now turn the conference back to Debbie Reed for any additional or closing remarks.

Well, thanks for joining us this morning. We really appreciated the questions and we hope to see all of you at our Analyst Conference on April 4 and April 5 in San Diego. And if you have any follow-up questions our IR team will be available to respond to them later today. Thank you very much.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation.