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    SRE   US8168511090


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SEMPRA ENERGY : Entry into a Material Definitive Agreement, Financial Statements and Exhibits (form 8-K)

09/27/2021 | 04:04pm EDT

Item 1.01 Entry into a Material Definitive Agreement.

From October 23, 2015 through February 11, 2016, Southern California Gas Company
("SoCalGas"), a subsidiary of Sempra Energy ("Sempra"), experienced a natural
gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso
Canyon natural gas storage facility in Los Angeles County (the "Leak"). As
previously reported, 396 lawsuits, including approximately 36,000 individual and
business plaintiffs (the "Individual Plaintiff Litigation"), a putative class
action on behalf of certain property owners and lessors (the "Property Class
Action"), a putative class action on behalf of persons and entities conducting
business within five miles of the Leak (the "Business Class Action"), and
certain other proceedings, as outlined below, are pending against SoCalGas and
Sempra related to the Leak. All these cases are coordinated before a single
court in the Los Angeles County Superior Court (the "Court") for pretrial
On September 26, 2021, SoCalGas and Sempra entered into an agreement with
counsel representing over 80% of the plaintiffs in the Individual Plaintiff
Litigation to resolve the claims of all approximately 36,000 individual
plaintiffs for a payment of up to $1.8 billion. The agreement is subject to
acceptance by no fewer than roughly 97% of all plaintiffs in the Individual
Plaintiff Litigation by June 1, 2022, although SoCalGas and Sempra have the
right to waive such condition. The agreement, which requires each plaintiff who
accepts a settlement to release all such plaintiff's claims against SoCalGas,
Sempra and their respective affiliates related to the Individual Plaintiff
Litigation and the Leak, provides that the settlement amount will be reduced
based on the number of plaintiffs who do not accept. The agreement is further
subject to Court approval of the process to allocate payments among the
plaintiffs and a stay of the Individual Plaintiff Litigation. The plaintiffs who
do not agree to participate in the settlement will be able to continue to pursue
their claims.
Separately, also on September 26, 2021, SoCalGas and Sempra entered into a
settlement agreement to settle the Property Class Action for a total amount of
$40 million. If, following a fairness hearing at which any objections to the
settlement will be heard, the Court gives final approval of the settlement, the
agreement provides for a release of SoCalGas, Sempra and their respective
affiliates from all claims related to the Leak by all property class members who
do not opt out of the class. Members of the property class who opt out of the
settlement will have the right to pursue their claims on an individual basis.
Finally, on September 27, 2021, SoCalGas and Sempra entered into a settlement
agreement to settle the individual claims of the named plaintiffs in the
Business Class Action, which class was never certified, for a total amount of
$100,000 in exchange for a dismissal and release of SoCalGas, Sempra and their
respective affiliates from all claims related to the Leak.
In 2020, SoCalGas and Sempra recorded $307 million ($233 million after tax) in
Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra
Consolidated Statements of Operations for costs, inclusive of estimated legal
costs, related to settlement discussions in connection with civil litigation and
regulatory matters arising out of the Leak. As of June 30, 2021, $414 million
was recorded in Insurance Receivable for Aliso Canyon Costs on the SoCalGas and
Sempra Condensed Consolidated Balance Sheets. Other than insurance for certain
future defense costs that may be incurred and directors' and officers'
liability, SoCalGas and Sempra have exhausted all of their respective insurance
in connection with the Leak.
As a result of entering into the agreements described above, SoCalGas and Sempra
expect to record a charge of approximately $1.13 billion, after tax, in
September 2021 (approximately $1.57 billion pre-tax) on the SoCalGas and Sempra
Condensed Consolidated Statements of Operations. Subject to satisfaction of the
terms and conditions of the agreements, SoCalGas expects that its net, after-tax
cash outflows related to these agreements will ultimately be up to approximately
$895 million consisting of payments of up to $1.85 billion (inclusive of $10
million in administrative costs), offset by collections of insurance receivable
in future periods and other adjustments. Sempra has elected to make equity
contributions to SoCalGas beginning in September 2021 that are sufficient to
maintain SoCalGas' approved capital structure in connection with the accruals
related to these agreements, and Sempra does not expect to issue common equity
in relation to these settlement agreements.
The agreements do not cover (i) an Order Instituting Investigation (the "OII")
opened by the California Public Utilities Commission (the "CPUC") to consider
whether SoCalGas should be sanctioned for the Leak and what damages, fines or
other penalties or sanctions, if any, should be imposed for any violations,
unreasonable or imprudent practices, or failure to sufficiently cooperate with
the Safety Enforcement Division of the CPUC as determined by the CPUC, or (ii)
an OII opened by the CPUC to determine the feasibility of minimizing or
eliminating the use of the Aliso Canyon natural gas storage facility while still
maintaining energy and electric reliability for the region, but excluding issues
with respect to air quality, public health, causation, culpability or cost
responsibility regarding the Leak (collectively, the "Regulatory Actions").
While the agreements cover substantially all of the material civil litigation
against both SoCalGas and Sempra related to the Leak, they do not cover (i)
lawsuits by five property developers, and (ii) claims for violations of
Proposition 65 (collectively, the "Other Litigation"). In addition, the
agreements do not cover the four shareholder derivative actions alleging breach
of fiduciary duties against certain officers and certain directors of Sempra
and/or SoCalGas (collectively with the "Other Litigation" the "Unresolved
An adverse ruling in any of the (i) Regulatory Actions or Unresolved Litigation,
or (ii) lawsuits in the Individual Plaintiff Litigation filed by plaintiffs who
do not agree to settle or lawsuits filed by property class members who opt out
of the Property Class Action


settlement, could have a material adverse effect on SoCalGas' and Sempra's cash
flows, financial condition and results of operations. In addition, there can be
no assurance that the conditions to resolve the Individual Plaintiff Litigation
will be satisfied or that the Court will approve the settlement for the Property
Class Action. For additional information about the Leak, including the
Regulatory Actions and the Unresolved Litigation, please refer to Note 11 of the
Notes to Condensed Consolidated Financial Statements in SoCalGas' and Sempra's
most recent quarterly report on   Form 10-Q   filed with the U.S. Securities and
Exchange Commission (the "SEC") on August 5, 2021, and "Part I - Item 1A. Risk
Factors" in SoCalGas' and Sempra's most recent annual report on   Form 10-K
filed with the SEC on February 25, 2021.
The description herein of the agreement to resolve the Individual Plaintiff
Litigation does not purport to be complete and is subject to, and qualified in
its entirety by, the full text of the agreement, which is filed as   Exhibit
10.1   hereto and is incorporated herein by reference. The settlement agreements
related to the Property Class Action and the Business Class Action are not
material definitive agreements, and the agreement to resolve the Individual
Plaintiff Litigation filed herewith is not conditioned on the consummation of
either of those settlements.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

    Exhibit Number           Exhibit Description
         10.1                  Master Agreement to Resolve JCCP No. 4861 Private Party Claims,
                             effective September 26, 2021, by and among Sempra Energy, Southern
                             California Gas Company, and the plaintiffs' law firms listed on the
                             signature pages thereto.
                             Cover Page Interactive Data File (formatted as Inline XBRL and contained
         104                 in Exhibit 101)

Information Regarding Forward-Looking Statements
This current report on Form 8-K contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on
assumptions with respect to the future, involve risks and uncertainties, and are
not guarantees. Future results may differ materially from those expressed in any
forward-looking statements. These forward-looking statements represent our
estimates and assumptions only as of the date of this current report. We assume
no obligation to update or revise any forward-looking statement as a result of
new information, future events or other factors.
In this current report on Form 8-K, forward-looking statements can be identified
by words such as "believes," "expects," "anticipates," "plans," "estimates,"
"projects," "forecasts," "should," "could," "would," "will," "confident," "may,"
"can," "potential," "possible," "proposed," "in process," "under construction,"
"in development," "target," "outlook," "maintain," "continue," "goal," "aim,"
"commit," or similar expressions, or when we discuss our guidance, priorities,
strategy, goals, vision, mission, opportunities, projections, intentions or
Factors, among others, that could cause actual results and events to differ
materially from those described in any forward-looking statements include risks
and uncertainties relating to: satisfying all conditions precedent to the
settlement agreements, including the participation of a sufficient number of
plaintiffs in the Individual Plaintiff Litigation and approval of the Court of
the settlement of the Property Class Action; California wildfires, including the
risks that we may be found liable for damages regardless of fault and that we
may not be able to recover costs from insurance, the wildfire fund established
by California Assembly Bill 1054 or in rates from customers; decisions,
investigations, regulations, issuances or revocations of permits and other
authorizations, renewals of franchises, and other actions by (i) the Comisión
Federal de Electricidad, California Public Utilities Commission (CPUC), U.S.
Department of Energy, U.S. Federal Energy Regulatory Commission, Public Utility
Commission of Texas, and other regulatory and governmental bodies and (ii)
states, counties, cities and other jurisdictions in the U.S., Mexico and other
countries in which we do business; the success of business development efforts,
construction projects and acquisitions and divestitures, including risks in (i)
the ability to make a final investment decision, (ii) completing construction
projects or other transactions on schedule and budget, (iii) the ability to
realize anticipated benefits from any of these efforts if completed, and (iv)
obtaining the consent of partners or other third parties; the resolution of
civil and criminal litigation, regulatory inquiries, investigations and
proceedings, and arbitrations, including, among others, those related to the
natural gas leak at Southern California Gas Company's (SoCalGas) Aliso Canyon
natural gas storage facility; actions by credit rating agencies to downgrade our
credit ratings or to place those ratings on negative outlook and our ability to
borrow on favorable terms and meet our substantial debt service obligations;
actions to reduce or eliminate reliance on natural gas, including any
deterioration of or increased uncertainty in the political or regulatory
environment for local natural gas distribution companies operating in
California; weather, natural disasters, pandemics, accidents, equipment
failures, explosions, acts of terrorism, information system outages or other
events that disrupt our operations, damage our facilities and systems, cause the
release of harmful materials, cause fires or subject us to liability for
property damage or personal injuries, fines and penalties, some of which may not
be covered by insurance, may be disputed by insurers or may otherwise not be
recoverable through regulatory


mechanisms or may impact our ability to obtain satisfactory levels of affordable
insurance; the availability of electric power and natural gas and natural gas
storage capacity, including disruptions caused by failures in the transmission
grid or limitations on the withdrawal of natural gas from storage facilities;
the impact of the COVID-19 pandemic on capital projects, regulatory approvals,
and the execution of our operations; cybersecurity threats to the energy grid,
storage and pipeline infrastructure, information and systems used to operate our
businesses, and confidentiality of our proprietary information and personal
information of our customers and employees, including ransomware attacks on our
systems and the systems of third-party vendors and other parties with which we
conduct business; expropriation of assets, failure of foreign governments and
state-owned entities to honor their contracts, and property disputes; the impact
at San Diego Gas & Electric Company (SDG&E) on competitive customer rates and
reliability due to the growth in distributed and local power generation,
including from departing retail load resulting from customers transferring to
Direct Access and Community Choice Aggregation, and the risk of nonrecovery for
stranded assets and contractual obligations; Oncor Electric Delivery Company
LLC's (Oncor) ability to eliminate or reduce its quarterly dividends due to
regulatory and governance requirements and commitments, including by actions of
Oncor's independent directors or a minority member director; volatility in
foreign currency exchange, inflation and interest rates and commodity prices and
our ability to effectively hedge these risks; changes in tax and trade policies,
laws and regulations, including tariffs and revisions to international trade
agreements that may increase our costs, reduce our competitiveness, or impair
our ability to resolve trade disputes; and other uncertainties, some of which
may be difficult to predict and are beyond our control.
These risks and uncertainties are further discussed in the reports that Sempra
has filed with the U.S. Securities and Exchange Commission (SEC). These reports
are available through the EDGAR system free-of-charge on the SEC's website,
www.sec.gov, and on Sempra's website, www.sempra.com. Investors should not rely
unduly on any forward-looking statements.
Sempra Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor
and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same
companies as the California utilities, SDG&E or SoCalGas, and Sempra
Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor and
IEnova are not regulated by the CPUC.
None of the website references in this current report on Form 8-K are active
hyperlinks, and the information contained on, or that can be accessed through,
any such website is not, and shall not be deemed to be, part of this document.


© Edgar Online, source Glimpses

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