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ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS | 3 Months Ended
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Mar. 31, 2019
Business Combinations [Abstract] |
ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS | ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date. ACQUISITIONS Sempra Texas Utility On March 9, 2018, Sempra Energy completed the acquisition of an indirect, 100-percent interest in Oncor Holdings, which owned 80.03 percent of Oncor, and other EFH assets and liabilities unrelated to Oncor, pursuant to the Merger Agreement with EFH. Under the Merger Agreement, we paid Merger Consideration of $9.45 billion in cash and an additional $31 million representing an adjustment for dividends and payments pursuant to a tax sharing agreement with Oncor and Oncor Holdings. Also on March 9, 2018, in a separate transaction, Sempra Energy, through its interest in Oncor Holdings, acquired an additional 0.22 percent of the outstanding membership interests in Oncor from OMI for approximately $26 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to 80.25 percent. TTI, an investment vehicle indirectly owned by third parties unaffiliated with Oncor Holdings or Sempra Energy, continues to own 19.75 percent of Oncor’s outstanding membership interests. We discuss this acquisition, including the purchase price allocation, in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report. Sempra South American Utilities Compañía Transmisora del Norte Grande S.A. On December 18, 2018, Chilquinta Energía acquired a 100-percent interest in Compañía Transmisora del Norte Grande S.A. through a sales and purchase agreement with AES Gener S.A. and its subsidiary Sociedad Eléctrica Angamos S.A. We completed the acquisition for a purchase price of $226 million and paid $208 million (net of $18 million cash acquired) with available cash on hand at Sempra South American Utilities. We accounted for this business combination using the acquisition method of accounting. We allocated the $208 million in cash paid ($226 million purchase price less $18 million of cash acquired) to the identifiable assets acquired and liabilities assumed based on their respective fair values, with the excess recognized as goodwill, which is included in assets held for sale in discontinued operations. There were no measurement period adjustments related to this acquisition during the three months ended March 31, 2019. At March 31, 2019, the purchase price allocation was preliminary and subject to completion. Adjustments to the fair value estimates may occur as the process conducted for various valuations and assessments is finalized, primarily related to deferred income taxes. We discuss this acquisition, including the purchase price allocation, in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report. PENDING ACQUISITIONS Sempra Texas Utility On October 18, 2018, Oncor entered into the InfraREIT Merger Agreement, whereby Oncor has agreed to acquire 100 percent of the issued and outstanding shares of InfraREIT and 100 percent of the limited partnership units of its subsidiary, InfraREIT Partners, for approximately $1,275 million, or $21 per share and unit, plus approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. In addition, the transaction includes InfraREIT’s outstanding debt, which as of March 31, 2019 was approximately $946 million. Consummation of the InfraREIT Merger Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Asset Exchange Agreement and Securities Purchase Agreement, discussed below. On October 18, 2018, Oncor entered into the Asset Exchange Agreement, whereby SDTS has agreed to accept and assume certain assets and liabilities of SU in exchange for certain SDTS assets. As currently contemplated, SDTS would receive certain real property and other assets used in the electric transmission and distribution business in Central, North and West Texas, as well as the equity interests in GS Project Entity, LLC (a wholly owned subsidiary of SU) and SU would receive certain real property and other assets that are near the Texas-Mexico border. Immediately prior to completing the exchange, SDTS would become a wholly owned, indirect subsidiary of InfraREIT Partners. Consummation of the Asset Exchange Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Securities Purchase Agreement, discussed below. On October 18, 2018, Sempra Energy entered into the Securities Purchase Agreement, whereby Sempra Texas Utilities Holdings I, LLC (a wholly owned subsidiary of Sempra Energy in our Sempra Texas Utility reportable segment) has agreed to acquire a 50-percent economic interest in Sharyland Holdings, LP for approximately $98 million, subject to customary closing adjustments. In connection with and prior to the consummation of the Securities Purchase Agreement, Sharyland Holdings, LP would own 100- percent of the membership interests in SU and SU would convert into a limited liability company, which is expected to be named Sharyland Utilities, LLC. Upon consummation of the Securities Purchase Agreement, Sempra Texas Utilities Holdings I, LLC would indirectly own and account for its 50-percent membership interest in Sharyland Utilities, LLC as an equity method investment. Consummation of the Securities Purchase Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the InfraREIT Merger Agreement and the Asset Exchange Agreement. For Oncor to fund its acquisition of interests in InfraREIT, Sempra Energy and certain indirect equity holders of TTI have committed to make capital contributions proportionate to their respective ownership interest in Oncor, with the amount estimated to be contributed by Sempra Energy equal to approximately $1,025 million, excluding Sempra Energy’s share of approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. We expect to fund our capital contribution to Oncor and to purchase the 50-percent limited-partner interest in Sharyland Holdings, LP by utilizing a portion of the proceeds received from the sales of Sempra Renewables’ assets. The capital contributions are contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement, but are not a condition to the transactions contemplated therein. The transactions are subject to the satisfaction of certain closing conditions, including approval by the PUCT. In December 2018, early termination of the 30-day waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted. In March 2019, we received approval from the FERC and clearance from the Committee on Foreign Investment in the United States. In addition, the acquisition of InfraREIT was approved by the InfraREIT stockholders on February 7, 2019. We expect that the transactions will close in mid-2019. DIVESTITURES Sempra LNG On February 7, 2019, Sempra LNG completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas), which we classified as held for sale at December 31, 2018, to an affiliate of ArcLight Capital Partners and received cash proceeds of $322 million (subject to working capital adjustments), net of transaction costs. In January 2019, Sempra LNG completed the sale of other non-utility assets for $5 million. ASSETS HELD FOR SALE We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next 12 months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs. Sempra Renewables On February 12, 2019, Sempra Renewables entered into an agreement with American Electric Power Company, Inc. (AEP) to sell its remaining wind assets and investments. On April 22, 2019, Sempra Renewables completed the sale to AEP for $584 million in cash, subject to working capital and other customary adjustments. Upon completion of the sale, remaining nominal business activities at Sempra Renewables were subsumed into Parent and other and the Sempra Renewables segment ceased to exist. The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale.
ASSETS HELD FOR SALE
(Dollars in millions)
| Sempra Renewables’ wind assets
| At March 31, 2019
Cash and cash equivalents | $ | 4 |
Accounts receivable – trade, net | 2 |
Other current assets | 2 |
Property, plant and equipment, net | 366 |
Total assets held for sale | $ | 374 |
Accounts payable – trade | $ | 1 |
Asset retirement obligations | 6 |
Total liabilities held for sale(1) | $ | 7 |
(1) | Included in Other Current Liabilities on Sempra Energy’s Condensed Consolidated Balance Sheet.
Sempra Renewables’ wind equity method investments totaling $290 million at March 31, 2019, which are included in the sale to AEP, were classified as Other Investments on Sempra Energy’s Condensed Consolidated Balance Sheet.DISCONTINUED OPERATIONS On January 25, 2019, our board of directors approved a plan to sell our South American businesses. We launched a formal process to sell our South American businesses and expect to complete the sale by the end of 2019. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses, met the held-for-sale criteria. These businesses are presented as discontinued operations, as the planned sale represents a strategic shift that will have a major effect on our operations and financial results. We do not plan to have significant continuing involvement in or be able to exercise significant influence on the operating or financial policies of these operations after they are sold. Accordingly, the results of operations, financial position and cash flows for these businesses have been reclassified to discontinued operations for all periods presented. Discontinued operations that were previously in the Sempra South American Utilities segment include our 100-percent interest in Chilquinta Energía in Chile, our 83.6-percent interest in Luz del Sur in Peru and our interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. Summarized results from discontinued operations were as follows:
DISCONTINUED OPERATIONS
(Dollars in millions) |  |  |
| Three months ended March 31,
| 2019 |  | 2018
Revenues | $ | 421 |  |  | $ | 426 |
Cost of sales | (265 | ) |  | (293 | )
Operating expenses | (45 | ) |  | (54 | )
Interest and other | (3 | ) |  | (5 | )
Income before income taxes and equity earnings of unconsolidated entities | 108 |  |  | 74 |
Income tax expense | (151 | ) |  | (47 | )
Equity earnings | 1 |  |  | 1 |
(Loss) income from discontinued operations, net of income tax | (42 | ) |  | 28 |
Earnings attributable to noncontrolling interests | (9 | ) |  | (7 | )
(Losses) earnings from discontinued operations attributable to common shares | $ | (51 | ) |  | $ | 21 |
The following table summarizes the carrying amounts of the major classes of assets and related liabilities classified as held for sale in discontinued operations.
ASSETS HELD FOR SALE IN DISCONTINUED OPERATIONS
(Dollars in millions) |  |  |
| March 31, 2019 |  | December 31, 2018
Cash and cash equivalents | $ | 67 |  |  | $ | 88 |
Accounts receivable, net | 331 |  |  | 315 |
Due from unconsolidated affiliates | 3 |  |  | 2 |
Inventories | 41 |  |  | 38 |
Other current assets | 15 |  |  | 16 |
Current assets | $ | 457 |  |  | $ | 459 |
Due from unconsolidated affiliates | $ | 46 |  |  | $ | 44 |
Goodwill and other intangible assets | 834 |  |  | 819 |
Property, plant and equipment, net | 2,459 |  |  | 2,357 |
Other noncurrent assets | 49 |  |  | 39 |
Noncurrent assets | $ | 3,388 |  |  | $ | 3,259 |
Short-term debt | $ | 46 |  |  | $ | 55 |
Accounts payable | 188 |  |  | 176 |
Current portion of long-term debt and finance leases | 22 |  |  | 29 |
Other current liabilities | 119 |  |  | 108 |
Current liabilities | $ | 375 |  |  | $ | 368 |
Long-term debt and finance leases | $ | 721 |  |  | $ | 708 |
Deferred income taxes | 263 |  |  | 250 |
Other noncurrent liabilities | 62 |  |  | 55 |
Noncurrent liabilities | $ | 1,046 |  |  | $ | 1,013 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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