SRE
#Thanks a lot, Debbie
First, regarding the cost of capital, we remain constructive on the settlement and believe it's in the best interest of all parties
We continue to expect that the settlement or something in a substantially similar form will be approved
Second, we're focused on executing the capital plan that we laid out at our conference by advancing major projects, in particular Cameron's Trains 1 through 3 in the marine pipeline
We've also made near-term progress on several other projects
At SDG&E, we signed five new contracts for battery storage facilities totaling 83.5 megawatt, 70 megawatt of which will be directly owned by SDG&E
SDG&E also placed one of the largest lithium-ion battery systems in the world into service in the first quarter
Many of you had the opportunity to visit SDG&E during the conference to hear about this and how it supports California's electrification efforts, as well as furthering the state's policy goal by reducing carbon emission
IEnova expects to complete three natural gas pipelines by the end of the second quarter
This also represents a combined investment of close to $900 million
Each project you recall is backed by 25-year U.S
dollar denominated contract with CFE
Third, we're also looking at new investment opportunities
Let me list a few examples
IEnova recently agreed to construct a solar facility with a 20-year PPA for 110 megawatts with an industrial steel company
This is the first bilateral agreement in Mexico under the new market for renewables where the off-taker is a private company
We anticipate there'll more opportunities like this
The Pima Solar facility is expected to cost roughly $115 million and be operational by the end of 2018. This project is also a great example of how we at Sempra leverage our experience across different growth platforms
The success we've demonstrated in the U.S
renewable business allows us to compete more effectively for projects just like this in Mexico
We also made CPUC filings for additional projects representing the potential for almost $500 million of new capital
To be clear, these projects were not included in the capital plan we outlined at the analyst conference
These projects include an expansion of SoCalGas' Master Meter program for Mobile Home Parks and SDG&E's proposal to replace its Customer Information System
Now, please turn to the next slide
Our first quarter financial results was the strongest first quarter performance Sempra has experienced since it was formed
Earlier this morning, we reported first quarter earnings of $441 million or $1.75 per share
This compares favorably to first quarter 2016 earnings of $353 million or $1.40 per share
On an adjusted basis, we reported earnings of $438 million or $1.74 per share
Again, this compares to first quarter 2016 adjusted earnings of $404 million or $1.60 per share
You'll also recall that we adopted the new accounting standard on stock-based compensation in the third quarter of last year
This was applied retroactively to the first quarter of 2016, and accordingly increased earnings by $34 million in that period
Now, let's turn to slide 7 to discuss the key factors impacting our result
Our higher quarter-over-quarter adjusted earnings were driven by strong operating results, including $18 million of higher operating earnings from SDG&E in South America; $21 million of higher earnings at our California Utilities, this is largely as a result of the delay of the 2016 GRC file decision, these earnings were recorded in the second quarter of 2016; plus $29 million of higher earnings at Sempra Mexico related to the GdC and Ventika acquisitions, and higher AFUDC earnings
Also improving earnings this year were $14 million of higher tax benefit and lower interest cost at Parent
These items were partially offset by $34 million of tax benefits in 2016 compared to $3 million of tax expense in 2017 associated with share-based compensation
And at Sempra Mexico, $25 million of lower earnings from foreign currency and inflation effects, primarily from current quarter losses
If you will, I'd like to spend a moment on foreign currency
You'll recall that our current hedging strategy limits our FX-related exposure on U.S
dollar debt in Mexico
While we expect some inter-quarter volatility from time to time, our hedging strategy over the full year is designed to reduce or eliminate expenses related to this exposure
You'll also recall that there are other FX exposures that impact earnings, but not cash flow
These occur in Mexico and South America and we do not hedge these additional costs
These exposures have historically largely offset over a full year when the currency's movement (08:50)
You'll find additional details on FX in the appendix
And with that, we'll conclude with our prepared comment and start to take any additional questions that you might have
Question-and-Answer Session
Good afternoon, <UNK>
On the $26 million improvement, roughly $15 million of that is from mark-to-market losses in the quarter last year
And as Debbie indicated, obviously, the natural gas prices have improved just over $1. I would also mention that at the end of this year you'll think about the ENI contract will be rolling off
And I think if I was to guide you in terms of how we think about the year, this segment we showed you at the analyst conference would report roughly $40 million to $50 million of negative results for the year, and we still think that's the best way to think about it
I think that you'll recall that the – ENI was one of the original contracting parties at Cameron, and that contract is rolling off within the year
And what we're really basically saying is, next year, you will not have the benefit of that contract
Not really
It's – I mean, it's probably about a $5 million benefit this year and zero next year
