Richard Vaccari – VP, IR Debra Reed – Chairman and CEO Joseph Householder – EVP and CFO Mark Snell – President.

Matthew Tucker – KeyBanc Capital Markets Steve Fleishman – Wolfe Research Julien Dumoulin-Smith – UBS Gabe Moreen – Bank of America Merrill Lynch Michael Lapides – Goldman Sachs Faisel Khan – Citi Kit Konolige – BGC Financials Mark Barnett – Morningstar Inc. Vedula Murti – CDP Capital.

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

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, Senior Vice President, 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 most recent 10-K and 10-Q filed with the SEC. 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 first quarter 2014 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, May 2, 2014, 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 I let me hand the call over to Debbie..

Thanks, Rick, and thanks to all of you for joining us today. Before I get started off I’d like to thank those of you who attended our March Analyst Conference in San Diego and those of you who also participated in the webcast.

It was a great opportunity for us to discuss our strategy for achieving a 9% to 11% growth rate and the numerous additional projects in development that could provide upside to our plan. On today’s call we will discuss our first quarter financial results and provide you with several operational and regulatory updates.

Earlier this morning we reported first quarter adjusted earnings of $256 million, or $1.03 per share. Our first quarter earnings were in line with our growth expectations and consistent with our full year of 2014 guidance.

On our Cameron liquefaction project we are happy to announce that FERC completed its environmental review process and published the final environmental impact statement on April 30th. We are now awaiting the final FERC permit which we should receive this summer. This is an important milestone and we expect to be the second U.S.

LNG Export Project to begin construction. Consistent with our 50-50 partnership model for renewables we successfully completed the sale of a 50% interest in our Copper Mountain Solar 3 facility during the quarter. Additionally on April 21st, we announced a partnership agreement for our ESJ wind-generation project in Mexico.

On the California regulatory front SDG&E and Southern California Edison reached an important settlement agreement with key parties that was approved by the CPUC to resolve all outstanding cost issues on the SONGS plant closure. We have also received the proposed decision on our pipeline safety enhancement program.

We will provide further details on all of these developments later in the call. Now let me hand things to Joe to discuss the first quarter results in more detail starting with slide four.

Joe?.

Thank you Debbie. As you mentioned the first quarter financial performance was strong and in line with our growth expectations. We reported first quarter consolidated earnings of $247 million or $0.99 per share. Excluding a $9 million revision to the loss on the SONGS plant closure we reported adjusted earnings of $256 million or $1.03 per share.

This compares to earnings of $178 million or $0.72 per share in the same quarter last year. In comparing first quarter performance year-over-year remember that first quarter earnings in 2013 did not include $29 million of earnings from our California utilities as a result of the general rate case delay.

In Feb these earnings were recorded in the second quarter of 2013 after SDG&E and SoCalGas received their rates case decisions. 2013 first quarter earnings were also impacted by several other items including a $44 million gain on the sale of a portion of the Mesquite Power plant.

In addition we recorded a $63 million deferred tax expense in the first quarter last year related to the IEnova IPO restructuring. In the first quarter of 2014 we recorded $12 million of estimated deferred tax expense to reflect only a portion of the planned repatriation for the year.

However our estimated annual tax rate includes an expectation that we will record additional deferred tax throughout the year to reflect our plant repatriation for 2014. Now let me turn to our earnings guidance. First I would note that the impact of the SONGS settlement was not in our original guidance.

Still we are reaffirming our 2014 guidance per share at $4.25 to $4.55 including the $9 million or $0.04 per share of SONGS impact.

Also last month the President of Chile presented a tax reform proposal to the Congress that would increase the corporate tax rate from 20% to 25% and apply a 10% additional shareholder tax when profits are earned rather than distributed.

The higher proposed taxes are likely to be enacted this year although the final rules have not yet been determined. We expect the proposal would phase in the higher corporate tax rate over a four year period beginning in 2014 and change the shareholder level tax starting in 2017.

In the quarter the [innate] tax changes enacted we will record changes to deferred tax liabilities impacted by the change. None of these potential impacts to the proposed Chilean tax reform is in our guidance, as additional details were pending and the timing of enactment is uncertain. Now please turn to slide five for details on SDG&E.

First quarter adjusted earnings for SDG&E were equal to $108 million and excludes a $9 million revision to the loss on the SONGS plant closure that resulted from the settlement agreement. In a year-over-year comparison first quarter 2013 earnings were $17 million lower due to the general rate case delay.

In the first quarter of 2014 $4 million in higher CPUC based margin and improved operational performance largely offset $6 million of lower earnings from both the reduced FERC authorized return on equity and the loss to SONGS rate base earnings. Now please move to SoCalGas on slide six. The SoCalGas first quarter earnings were equal to $78 million.

As with SDG&E first quarter 2013 earnings for SoCalGas were $12 million lower due to the rate case delay. First quarter earnings last year were also reduced by $3 million of gas pipeline integrity expenses that were not recovered in rates in the first quarter.

Instead those expenses were recovered in the second quarter of 2013 under the rate case decision and all ongoing costs are now fully balanced. In the first quarter of 2014 SoCalGas had $11 million in higher CPUC base margin and improved operational results. Now let’s move to Sempra International on slide seven.

At our South American utilities first quarter earnings were $35 million. In 2013 first quarter earnings were $37 million and included a $7 million impairment charge on our Argentine investments.

South America’s first quarter earnings are lower this year primarily due to $5 million of foreign exchange impacts resulting from the movement of currencies quarter-over-quarter. In addition Chile incurred $2 million of higher interest expense this quarter due to an inflationary impact on the local bond interest rate.

As we discussed at our analyst conference, tariffs for South American utilities do adjust for foreign currency and inflation effects overtime. However there is some lag effect. Moving to Sempra Mexico, first quarter earnings were $42 million versus $31 million in the first quarter of last year.

Sempra Mexico’s first quarter earnings increased by $11 million due to a $10 million reduction in income tax expense including effects from foreign currency in 2013.

First quarter earnings this year also include $9 million of AFUDC equity earnings from construction of the Sonora gas pipeline offset by $9 million of higher dilution resulting from the reduced ownership following the IEnova IPO that occurred in late March of last year.

Looking forward to the second half of 2014 Sempra International expects to have several large projects coming online that will bolster earnings. These projects include the Sonora and Los Ramones pipelines in Mexico and the Santa Teresa Hydro project in Peru. Now please turn to slide eight. Moving onto Sempra U.S.

gas and power the natural gas segment earned $9 million in the first quarter of 2014 compared with $53 million in the same period last year. The difference in earnings is primarily due to $44 million gain after tax on the sale of a portion of our Mesquite Power Plant in the first quarter of 2013.

First quarter earnings for the renewable segment were $28 million and included $16 million gain associated with the sale of 50% of our Copper Mountain Solar 3 facility to our joint venture partner ConEd.

First quarter earnings also include higher deferred income tax benefits primarily due to a $5 million reduction in tax grant benefits in the same period last year as a result of the federal budget sequestration. With that, let me hand the call back to Debbie to discuss slide nine..

Thanks Joe. Now we will provide you with an update on some of our major projects. As I mentioned at the outset of this call on April 30th of this year we received the final FERC environmental impact statement on our Cameron LNG project. This is an important milestone and the FERC final order is expected this summer.

In March of this year we also signed a lump-sum turnkey construction contract. Along with the progress we are making on financing we are on track to begin construction later this year. Turning to Sempra Mexico, this week the Mexican Government released its five years national infrastructure plan.

The plan calls for investments totaling an estimated $13 billion in natural gas pipeline, $7 billion in power transmission projects and $14 billion in power generation projects including renewable. In the near term PEMEX plans to develop three pipelines to transfer liquids from the Gulf of Mexico to the Pacific Ocean.

PEMEX estimates that the total for these pipelines and needed storage and port infrastructure at over $2 billion. They deem guidelines to be published in the second quarter of this year. At a recent analyst conference we also discussed a number of natural gas pipelines to be awarded in the near term by Mexico’s Electricity Commission.

On April 21st the Commission announced five pipelines for which bid offers will be reviewed this summer. The total estimated investment is over $2 billion and three of these pipelines are in or have segments within U.S. territory. Each of the pipelines is expected to be contracted by the Mexican Government under a take-or-pay long term structure.

We will watch for further details on the bid process but the segments in Mexico will likely be attractive opportunities for IEnova. We also view the US segments to be attractive opportunities for our U.S. gas and power business, particularly as they will be long term contracted assets that could blend well with Cameron in an MLP.

IEnova also announced on April 21 an agreement to InerGen 50% of our 155 megawatt ESJ wind generation project. InerGen is a global power generation firm with 11 power plants in operation in Europe, Mexico and Australia.

The transaction is subject to regulatory approval and is consistent with our renewable strategy to deconsolidate and reinvest proceeds in near term growth opportunities. For U.S. gas and power we recently completed the sale of 50% of our Copper Mountain Solar 3 facility to ConEd recording a $16 million after tax gain.

The 250 megawatts facility is currently under construction and half of the facility expected to be completed by the end of this year and the remainder expected to be completed by 2015. Additionally U.S. Gas & Power agreed to invest in a 50% ownership of ConEd’s California solar portfolio.

This 110 megawatt portfolio is comprised of four operating projects that provide power our under long term contracts. Finally we have some really good news with regards to our REX pipeline. This week REX launched a binding open season for 1.2 BCS per day of East to West capacity.

REX has already secured binding financial commitments for this capacity at rates of $0.50 per dekatherm for 20 years. If REX receives higher bids in the open season the shippers who have already provided commitments will have the opportunity to match the higher bid.

Also during the first quarter REX concluded a successful binding open season on its Seneca lateral and we have filed with FERC to expand the associated capacity from 200,000 dekatherms per day to 600,000 dekatherms per day. The first portion of this capacity is expected to be in service in the second quarter of this year.

Let’s now turn to the slide 10 for an update on the regulatory proceeding at our California utilities. On the regulatory front our California utilities have seen important progress on two major issues.

First, we announced at our analyst conference in March that SDG&E and Southern California Edison had reached a settlement agreement with key parties on the SONGS plant closure. The settlement agreement is subject to CPSC approval and was filed with the commission on April 3rd.

If approved the agreement resolves all outstanding cost issues on the plant closure and allows for recovery of replacement power cost, operating and maintenance expenses and our non-steam generator investments among other things.

The resulting financial impact for SDG&E is not materially different from the impairment we recorded in 2013, and we recorded an incremental $9 million after tax loss in the first quarter of this year. Additionally the agreement outlines a sharing mechanism between rate payers and shareholders for any third party recovery.

On April 15th we also received a proposed decision for our natural gas pipeline safety enhancement program or PSEP. The proposed decision finds that SoCalGas and SDG&E presented a reasonable conceptual plan to enhance safety and adopt the basic structure of the plan.

In its current form the proposed decision approved a process for cost recovery and balancing account treatment subject to a reasonableness review. The proposed decision also includes criteria for determining recovery of costs associated with records review and testing of pipeline installed after 1955.

Our California utilities are seeking additional clarification on a number of key areas within the proposed decision and plan to file comment to the CPC by the deadline of May 5th. Now let’s finish by turning to slide 11. In summary I am very pleased with our first quarter results.

We are on pace to meet our 2014 earnings guidance and we have several large projects in Mexico and Peru coming online in the second half of the year, in addition to the numerous growth opportunities.

At our California utilities we are making headway on significant regulatory matters like farms and PSEP, our Cameron liquefaction project remains on track to begin construction this year and our U.S. Gas & Power business has made important progress on both the REX pipeline and renewable project.

So with that let me stop and take any questions you may have..

(Operator Instructions). And at this time our first question will come from Matt Tucker from KeyBanc Capital Market..

Hi good morning and congrats on a nice quarter..

Thanks Matt..

First question on Cameron and now you’ve got the FERC final EIS out there? Any sense as to whether they will take on the full, I think it’s a 90 day window to issue decision? Or are you thinking that it could come sooner than that and I guess is there any role for you all to play at this point in the FERC process or is it just in their hands now?.

Well I’ll give you kind of a high level view but then I’m going to have Mark kind of walk you through the schedule as we see it. The next step as you mentioned is not a precise period of time and generally to get to the next step where FERC issues the order is a 30 to 90 day period.

Obviously with all of the issues with the Ukraine and all of the attention on that we would it certainly hope that FERC would look at keeping that period as short as possible and we thought it was a really good sign that there were no delays whatsoever in their issuing the final environmental impact statement. And so that was a positive sign.

I would also say that Secretary Moniz have commented that once FERC acts on it than DOE intends to act very quickly and giving their final approval for the export as well. So I think with all the attention on this we’re hopeful that we’ll be starting to see but there is not a required standard that will see some shorter time period.

I’ll have Mark kind of walk you through what we see is the way that it would unfold?.

Yeah I think Debbie pretty much highlight exactly how it’s going to work but we do, as we’ve said we have the final EIS and they could take up to 90 days usually a little shorter than that but it could be that long. We’ll get a FERC and then that has the mandatory 30 day comment period before it really becomes final.

But during that period they could issue our initial authorization to construct which would allow us to do some work and get moving on the project. But I think as it stands right now and as we’ve looked at the other projects, the other project that have received the FERC [inaudible] project.

We still expect that we begin construction sort of later this year and that will time well with our financing and also meet the expectations that we laid out to you at the analyst conference..

Thanks a lot that’s helpful. And then on the PSEP program you mentioned that the commission kind of endorsed your, I guess your model or structure for the program.

Has your estimate for kind of the amounts of spending changed at all or was that part of the commission’s proposed decision?.

That’s not really part of the commission’s proposed decision. We are going through it and we are looking now what happened in their proposed decision is that they actually laid out the approval for all phases of PSEP, not just the first phase of PSEP.

And so what that means in terms of how we do the work and how much work occurs over the 5, 10, 15 year period time we are going through and assessing that right now. What I would say as we look at the plan that we showed you in March for SoCalGas. We feel that we can certainly be consistent with the plan that we showed you in March of this year..

Great and then just one last one for Joe.

I am sorry I missed when you were discussing what had – was in the original versus what’s in guidance now if you could just go back over those items that you called out please?.

Sure. What I said was that the SONGS settlement there revision of $9 million, because of the SONGS settlement that was not in our original guidance. We are reaffirming guidance as the numbers we have that now includes that, so that’s the difference.

And then we also said that in guidance was nothing for the Chilean tax reform which has been recently proposed..

Thanks a lot..

Yes..

Thank you. And our next question comes will come from Steve Fleishman from Wolfe Research..

Yeah, hi..

Good morning, Steve..

Good morning, morning Debbie. So just to first on the REX news, could you maybe I think if I recall this project was not in your plan.

Could you give us some sense on maybe how meaningful that would be to plan even if we stayed at the $0.50 and but also did the Seneca expansion as well?.

Yeah, let me just clarify what is in the plan and what would be upside potentially to the plan. So there is really three pieces of REX that we are talking about.

We are talking about the first phase of the Seneca lateral which is about 200 a day and then we are talking about the second phase of the Seneca lateral which is an additional 400 a day and they were talking about the east to west flows. And those east-to-west flows have been contracted at 1.2 Bcf a day at a $0.50 per dekatherm rate for 20 days.

And that part of the open season, the binding open season if other parties wanted to pay more than that or look at different volumes and that’s the purpose of the open season. But we really have firm contracts for the 1.2 Bcf a day at the $0.50 a dekatherm.

We can’t go through kind of what the investment levels are in each of these phases but I would say that they are not substantial. And so, what I would – you could and we cannot disclose what the rates are on the Seneca lateral pieces of that. The first phase of the Seneca lateral was in our plan of 200 a day.

The second incremented for an additional 400 was not in our plan, nor was the REX east to west flow. So you can kind of do your best to calculate the numbers with what I have given you there and assume not huge levels of capital..

And when would you think you will get a rough timeline for an answer on the binding open season?.

I think it’s May, that we are supposed to get that completed. Initial day was May 7th, I think and then they said something about if they may have to make some extension but sometime in May we would expect..

Okay, great.

And then on the Chilean tax impact issue Joe could you just explain kind of what the process is and whether this is actually going to happen and is it more even would it be meaningful more from impacting your deferred tax balance or more from kind of an ongoing tax or I guess both?.

Yeah, Steve. That will be helpful. I can elaborate on that. So as I mentioned in the prepared remarks the President presented the tax reform proposal to Congress.

She mentioned that she would be looking at doing something like this when she was running and so we expect that probably this or some form of this will get enacted but she wants to raise the current rate from 20% to 25% and we believe that will occur over a four year period. So 1% or 2% a year for a few years.

This would increase our tax in Chile a few million a year in the early years, not so much because it’s not a big change.

But the other change that she wants to make has to do with the way that taxes under current law would be paid in addition so that they distribution tax, or withholding tax if you will, a second level tax that brings the rate up to 35% under current law.

She wants to maintain the 35% rate but she wants those taxes paid currently even though the funds aren’t distributed out of the country and she wants back beginning around 2017.

We haven’t tried to estimate what the impact on the deferred taxes are yet because it’s a little bit unclear on the second part exactly it’s going to work and when it be enacted but we will tell you on our future call when we know more information about that.

But just to be clear she keeping the total rate of 35%, she is changing the structure so it will have some impact on current taxes in the next couple of years and then it could have a little higher impact if this 10% of additional tax gets imposed currently..

Okay, get it.

And then last question is just on the Mexico bids when are those expected to be I guess decided?.

Sure, I am glad you asked that because there is a lot really exciting things happening at Mexico and the Mexican government actually put out their five year plan that outlines the hundreds of billions of dollars of projects that they plan on several hundreds of billions of dollar just in the energy sector alone.

And this year they have identified a number of projects, I think there is about ten or so pipelines that would be bid out this year. What we seen already the announcement from CFP of the five projects that I mentioned. And we expect those to be, the bid packages to be out within the next couple of months on those.

Three of these projects are in U.S., two them are in Mexico and then we have also seen an announcement of bid packages coming out for our three projects from PEMEX over the rest few next couple of months. And one of those projects is a gas pipeline one is a naphtha pipeline and one is a liquids pipeline or propane pipeline.

And so we are seeing a lot of momentum right now in terms of the bids coming out and they have identified more bids, another five or so projects later this year that’s on their schedule that they have identified as being bid out this year.

So we think it’s a great opportunities, we are analyzing those right down looking at what is available on the project. So they said they don’t have the bid packages out, so it’s very difficult for us to assess which ones we would bid on. We are certainly into both of those in Mexico and the U.S. project..

Great, thank you very much..

Thank you..

And our next question will come from Julien Dumoulin-Smith from UBS..

Hi, good morning..

Good morning, Julien..

So first kind of the big picture strategic question as you think about the various monetizations that you have talked in the past, can you talk about where you are in the gas side of the world. You have obviously had a couple of [emerging] plans out there.

And then also on the renewable side how do you think about the future of that business kind of given the [yield co] phenomenon out there et cetera and how that’s procured?.

Yeah, in terms of the power business I think your real – your question seems to be about the power part of our business which has the renewable and the generation. And on the generation side, in the U.S. we don’t see that as a business that we want to be in and that we are exiting business.

We have Mesquite held for sale, we have already sold our other power plants in the U.S. and that’s largely because that doesn’t fit our business model because that business when it was long-term contracted as it was when we had DWR contract then that made a lot of sense but for those assets today you are not get 10-20 year contracts on them.

And that we – although we do have on a block at Mesquite a long-term contract but it’s very, very competitive. It’s not a focus area for us. So you are going to see us trying to exit that business this year in the U.S.

I would say in Mexico we still own the TDM plant and as I mentioned is billions of dollars that are planned in Mexico for electric generation. So, we see an opportunity for that plant to meet some of those needs in Mexico and we’ll hold that plant to enable that either at a long-term contracted arrangement or selling the plant down the line.

In terms of the renewable business that we think it’s a great business. The issue that we certainly always look at is the deferral of our ability to use the tax benefits from that business and it may be a great business. Our question is, is it a great business for us to continue to deploy capital in.

We certainly are very focused on building out our solar facilities and if we see good projects on the wind side we are doing those but we are really focused largely on continuing to develop our solar side of the business until the issue on the taxes and what’s going to happen with tax incentive gets a little firmer.

I don’t know Mark you want to...?.

The only thing I would add to that is that again those renewable projects do fit our contraction, our contracting mode though which is the long term 20 years contract. They are all contracted for a long period of time. On the wind side, we are kind of, I guess the whole industry is a little bit up in the air.

We don’t know where we are going to be with CPUC extensions or not. I think from our perspective since we are not using all the tax credits some phase out of CPUCs or something would be probably be helpful for us.

But I think what we will be doing is deploying capital primarily in our solar projects that are adjacent to some of our existing facilities. We have a fairly competitive pricing point there because we have a lot of infrastructure in place and I think we can win bids and be successful and get the kind of returns that we expect.

So I think we are going to stay in that business but again it’s going to be the long term contracted kind of profile that you come to expect from us..

I would just also add the analyst meeting we talked about our capital allocation and the things that’s been great for Sempra is we have a lot of growth areas. We have a lot of places we can deploy our capital.

And so we always look at these businesses in terms of the risk adjusted returns and how it fits for us in comparison to other alternatives that we have and we will continue to do that..

I would also just add Debbie, we talked about on a few other calls but we’re always interested in way to increase the value and we try to look at whether the stock’s being priced fairly and one of the things we talked about is our contracted energy infrastructure business is effectively a yield co.

I was talking to myself this morning and I was thinking maybe we should just change the name to simply yield growth, [inaudible]..

That’s true. Well perhaps just a second strategic question and maybe this is a change in tack for your prior statements. But how are you thinking about the complementary asset here to backup Cameron, you kind of alluded to it little bit earlier.

What exactly could those include just guiding from your comments and the remarks earlier as well as how are you thinking about timeline to get something off on the ground today?.

Well I mean there is a lot of assets that are adjacent to Cameron that we own, like the LA storage, it’s – that is something that we are looking at now, the potential of development of that.

We have the Cameron pipeline, we are going to be – we have our other storage facilities that we think with all of the change that we’re starting to see and we are seeing now the picking up the pace, hold the gas conversions occurring and then we are starting to see the LNG facilities coming on line over the next coming years.

So we think all of those assets integrate well, we think other pipeline assets integrate well and that we think other LNG facilities, we have the Port Arthur property that we think is a very viable facility to develop and then we have train four and five at Cameron that we think are also viable to develop.

So our focus is kind of around that cluster of assets that really kind of support each other and support the change and what’s happening in the gas market..

So just to follow up to be specific is REX now eligible to be included now that you have some of the contract comfort and then secondarily if it is to be included, do you still think you need other assets to look outside the complement starting, or kick starting in?.

Yeah, we’ve been spending a lot of time on this question, so I will let Mark and Joe answer this and I might summarize at the end..

Yes. Well, let me – I’ll just kick in. Clearly we are pleased with the upside potential at REX that we just six months to year ago we didn’t know whether – where we were going to be with that asset.

So obviously given the interest on the east to west shipping and some of the lateral opportunities there clearly is a strong asset there now, that looks like it’s going to have good cash flows for a long time to come.

I think and Joe can comment on this but unfortunately we only own 25% of it and therefore there is some regulatory reasons why it is a standalone asset, can’t be an MLP, but it can be in MLP with other types of assets that we own and we certainly have plenty to do that. I do think we are continuing to look in our MLP-able assets that make sense.

And one of the most exciting thing is this pipeline announcements that came out of Mexico, there is several of those pipelines, three of them that are going to be in the U.S. and they are sizeable investment and if we win one or two or so of those they would also be very good assets for the MLP.

So we see some real opportunities where we actually have some I think advantages because of our history with the Mexican government and our ability and the fact that we’ve been doing business in the Mexico for a long time.

I think we would be looked at as somebody that would have not only the wherewithal to do that but also the experience and I think somebody that will be a trusted partner for PEMEX and for the PFE on those pipelines..

I would just add that, in terms of the timing of when the government is expecting in this case PFE expecting this pipeline to go into service, one of them is expected to go into service in 2016 the other is in 2017. So they have nice timing relative to our Cameron assets..

Excellent. Thank you for all the details..

Thank you. (Operator Instructions). Our next question will come from Gabe Moreen from Bank of America Merrill Lynch..

Hi. Good morning everyone. Not to stick with everyone’s favorite acronym but related to the answer around the IEnova projects in the U.S portion of those projects. I guess two fold one is it possible to [recap] how much of that $2 billion is actually piped within the U.S.

And then the second part of that is in terms of structuring it is that something that CapEx will be undertaken at IEnova even for the U.S. portions and then MLP would acquire it later, or does U.S.

Gas and Power just build that section and it eventually goes to an MLP?.

Yeah. Let me tell you about the three U.S. pieces of the project and I’ll have Mark or Joe talk about some of the options for structuring with IEnova. The three pieces the government has estimated as part of the $2 billion that those three pieces end up being, it looks like about $1.2 million of the total. So they are quite large.

There is one that $250 million and then the largest of the three is $550 million in the government’s estimate.

Now the government’s estimate kind of seemed low to us from what was published but those are the Mexican government’s estimate for those pipelines, So you can see that there is sizable pipeline and then Joe do you want to….?.

Yeah. And so then we wouldn’t have IEnova build the U.S. side of lines we would actually do that in U.S Gas and Power.

As Mark mentioned a little bit earlier talking to Julien because we only own 25% of REX to form an MLP we would need some other assets that are slightly larger than the value of REX because there of the [inaudible] investment company rule and so we need some other assets. I am very excited about REX.

I said that at the conference and this new announcement is great because it really enables us to look hard at that and I mentioned that we have some other assets related to our LNG plant in Mexico that creates some U.S. income.

Looking at that and then looking to ability to put these pipelines from the CFE bids that are in the U.S and whether we funded from U.S gas and power or whether we use – of the IPO to fund it we can look into that further but first we have to win those bids but this is a very exciting momentum for us with REX..

Great. Thanks. And then thinking I guess on the topic of REX, it’s a two part question.

One, clarifying which is to stay the matching ability on bids, does that mean $0.50 goes higher for all shippers, if indeed incremental shippers come in at higher than $0.50 or does that just mean existing shippers have the chance to match on capacity? And then second on the Analyst Day I think there was implied there was a decent amount of hydraulic flexibility around the size of a REX reversal.

So I am just curious around the 1.2, I guess given other producer and midstream commentary on the need to get gas out of the Utica and the Marcellus I think imply that the REX reversal may not even be enough, the flexibility to go to an even higher capacity if you get more interest?.

Yeah we had talked about and I’ll have Mark go through the detail of how the open season works. But what we had talked about at the Analyst Conference is that there have been like 5.5Bs of interest in the REX reversal and so there is a high level of interest.

What we have in place is 1.2B’s of signed contracts at the $0.50 that they come to base point for the open season.

Mark?.

Yeah to answer your question specifically we went out and obviously canvassed potential parties and got commitments for 1.2Bs at $0.50 if somebody comes in and wants additional capacity than the existing holders have the right to match that price so the $0.50 effectively becomes kind of a floor but at the end of the day we kind of expect that to be the price.

So there could be a little bit of an uptick but I think for our modeling and stuff we are using $0.50. And then to the other question yes, we can expand the East-West capacity of REX beyond the 1.2.

The question is as you start to expand it further you get into certain additional compression but also you get this pretty quickly to where you have to start doing some looping which gets very expensive and so the question is are we still the most cost effective solution and we’re looking at it and so everyone will certainly study it but I would expect we’re not putting anything in our plans right now for that and we’re just really focused on getting this 1.2 signed up and moving forward on that.

And then we’ll look to see if we’re cost effective for the shippers on doing any further expansion, could be that we are but we’re just starting to study that now..

Great thanks very much..

Thank you. And our next question comes from Michael Lapides from Goldman Sachs..

Hi guys, congrats on a good quarter.

Debbie I wanted to ask I went through the filing, the proposed decision in California and there was some language in there honestly I almost felt like I was reading another utilities language in some of the other PSEP related proceedings going on because but there was language about potential cost that will be borne by the shareholder not the rate payer and pipe record that haven’t been tapped and pipelines that you can’t really prove they’ve been inspected or not is and to be honest I’m not sure I understood a whole lot of it when it came to the Sempra side effect of it.

So could you kind of walk us through your interpretation of what some of those components of the PD means and what the cost implications in kind of the rate payer versus the shareholder implications are?.

Sure I’ll try to do the best I can on that, if you read the decision then you’ll also see that is very hard to interpret and there’s some contradictory elements and we’re going to filing comments on May 5th and trying to get some of that cleaned up.

What the decision basically does is it goes back to 1956 and it says that any pipeline that they set they feel that should have been tested from 1956 and beyond where you haven’t tested or you don’t have complete records of testing, that a shareholder should be responsible for the test and the test component of that.

And we think we have some really good evidence that, that was even inconsistent with the policy at that time. In fact we have CPUC policy statements on the record dating back to 1950 where they said that utilities were not required to meet voluntary standards and that they were not going to be funded.

So these are things that I think are in contention right now in the decision. If we look at the decision in entirety and you look at the fact that we can expedite some of the other phases that even if we look at the decision as it stands today we think we can be consistent with the plan that we showed you in March.

But we do feel like we have a really strong case for getting some of these things modified.

And you will see that, I hope you read our comments on May 6th when we file them and you see that’s the case that we have that shows that really this first time there were standards put in place was in 1961 and SoCalGas and SDG&E had a very, very few miles of pipe that were installed post 1961, that we don’t have complete records on.

So I think that’s hopefully that’s where we end up on this. But you’ll see some very strong comments from us..

Great, thank you on that, one real quick Joe on Chile and the tax implications, just curious if all of it got implemented tomorrow morning, I know it’s not, I know it’s going to be a long-term multi-year process but how would you think about what the net income or EPS impact would be if all components of the tax change happens in the 2014 timeframe, I’m just trying to quantify what the net income or EPS at risk is here?.

Yeah we haven’t tried to quantify because there are so many unknowns about how that tax is going to work and what we might be able to do structurally around it. And so we’re kind of just focused on the next year or two is going to have a 1% or 2% increase in the next few years and that’s only a few million.

If this additional tax does get enacted we just need to know more about the rule really to try to figure that out. You can make some assumptions with math but we haven’t tried to do that for you..

Okay and then finally the REX reversal contract when would that actually go into place?.

It would go, well it would become effective, the contract’s effective but the actual line would go into place in June 2015, is the timeframe..

Meaning the reversal and therefore the revenue flow back to REX equity?.

Yeah..

Got it, thank you Debbie, much appreciated..

Thanks Michael..

Thank you and our next question will come from Faisel Khan from Citi..

Good afternoon..

Hi Faisel..

Hey guys, on REX just wondering would the binding opportunity you guys had was there – did you have the solicit any sort of term back capacity so did reverse shippers – would the existing shippers sort of allowed to turned back to capacity in order to make room to the reversal or do these sort of contracts still stick until they run out at the end of decade?.

Yeah I’m going to turn it to Mark..

We had a FERC hearing on those issues and we were successful and FERC agreed that in that zone the shippers don’t have any right to those revenues or the ability to do that..

Okay, got it.

And then just on guidance, was the Copper Mountain sort of gain on sales, is that included in your guidance before and is the sale of the wind assets in Mexico, the 50% interest, is that also, is that gain also been baked into your guidance?.

Yeah on any of the gains or costs like that we would incur entering into these partnerships on renewables are in our guidance to the extent that we can expect them and as you remember last December we talked to you about ESJ that we thought we would be towards the low end of our ranges of that time because ESJ was delayed because it was in our plan for last year.

And so ESJ and Copper Mountain 3 were both in our plans for this year. It’s part of our business model where we sell 50% down, a lot of that is recouping the development cost that we already expensed during the course of the time for these projects. So it’s always in our guidance if we know that we’re intending to sell an asset like that..

Okay, got it..

In the renewable – and I would say, in the renewable space. Like Mesquite is not in our guidance because that is not something that’s a typical business model for us but the turn of these renewable projects is selling off 50%, we always put that in our guidance..

Okay understood on SoCalGas the transportation volumes seems to be down pretty in a very large amount of way over last year is there anything associated with that except for just weather or…?.

I would say it’s probably the weather. We’ve had an endless summer in California it’s like 90 degrees here today. So there’s nothing fundamentally different in the business as we see it I think it’s mainly weather..

Yeah. Residential volumes were down and so Edison’s electric volumes were probably down and the power points were not used as much..

Yeah. I don’t think anyone had their heater on in California, at least in southern California there has been high C’s and it’s been so warm, yeah..

Yeah. Fair enough. On Mexico – on the Los Ramones and the Sonora pipelines, as those sort of ramp up at the end of this year, what’s going to be the – I mean how are they going to ramp up, like what’s the – how much gas are they going to pull from the U.S.

as those facilities ramp up? Is it – is it sort of they are going to hit capacity right away or is it going to be the slow sort of movement in volumes as they get connected to some of these pipelines..

Well. I think the actual volume of gas flowing probably will ramp up because not all of the infrastructure is in place. But we will get paid. We’ve got a firm capacity arrangement essentially, so we will get paid as if it was running full..

Oh, sure I understand.

I was just trying to figure out kind of the magnitude of the flow across the border?.

It will be slower at first I don’t – I can probably get you those numbers if you are interested and get back to you on it. But I just – I don’t know off the top of my head exactly what the ramp up will be..

Okay. Yeah that would be great if we get a chance to do that.

And then just on in Mexico too on the ethane pipeline, the LPG terminal in Guadalajara, what’s the sort of plan for that, I mean is there a, is there opportunity to expand that pipeline, is that part of the whole infrastructure de-bottlenecking and expansion plans for Mexico?.

Yeah. It’s not listed as some expansion project in the list that we’ve gotten but there is obviously if we get more petrochemical plants down there and things – there is an opportunity there. But I think right now it’s – we’re not counting on it..

Okay, got it. I appreciate. Thanks for the time guys..

Thank you, Faisel..

Thank you. Our next question will come from Kit Konolige from BGC Financials..

Good morning..

Hi, Kit..

Just a very brief question.

On SONGS what are you guys anticipating as far as timing on – hearing from NEIL and on the arbitration with MHI and what would the economics and accounting look like if there is some recovery from one or both of those?.

Okay, well the timing on – we are supposed to hear something back, at least what NEIL has indicated this summer about their response to the claims that have been made. And then the MHI arbitration is likely to take a couple of years. We won’t even probably be appearing before the arbitrator for a year or something.

So that will take some period of time. Under the settlement provision there is a sharing mechanism for third-party recoveries where based upon the amount recovered that the – get a certain amount and the shareholders get a certain amount. And none of that has been recorded at all. Anything that we would get in that would be upside.

We don’t have anything in our plan about any recoveries about, that would be all upside..

Yeah. The first thing that happens is we recover the legal fees that we had paid out so that would go like earnings because we are already recording those expenses. And then as Debbie said it would be upside it would go to reduce the losses that we took earlier. So we would just have income for the amount that came to us..

Okay. That’s great. And just to kind of clarify in a few sentences maybe, just to go back through how we should view the potential for an MLP, if I can characterize it obviously Cameron would be, I guess the key asset. It sounds as though – well let me ask you it this way if you were to win one or more of the U.S.

pipes in the Mexican bidding would you be able to put the potential asset if you will into an MLP and start an MLP say in 2015, if that – along with REX say if that were to be when the bids were held?.

There is a lot of what ifs there. But REX is a great asset. As we’ve said that it is not an asset that could stand alone in an MLP. The pipelines we’re going to service in 2016 or 2017 according to the schedule that’s been published by the government.

And so when those start if we were to get one or more of those and they were cash flowing in that period of time then that would be something we would definitely look at as a potential bridge strategy consistent with what we told you at the Analyst Meeting, because those assets have the same type of characteristics as Cameron.

They will be long-term contracted. And one of the things we don’t want to do is to form an MLP with assets that don’t have the same kinds of value enhancing characteristics like Cameron that would trade at low yield.

So if all of those things happen we would certainly look at it and we would time it based upon how to create the greatest long-term value for our shareholders..

And so is it fair to say that the Mexican bidding would be key to forming an MLP or could there be a bridge strategy with only the Mexico, LNG and REX?.

I mean we will look at – I would not say Mexico, the Mexican pipelines in the U.S are one way to form a bridge strategy.

There are other ways to form bridge strategies and we have a team looking at all MLP-able assets and what it does to the long-term value if we were to acquire, build or buy any of these assets or companies, what it would do in terms of creating long-term value and comparison to standalone MLP with Cameron and that’s the way we’ll look at it.

And we will figure out the combination and the timing that gives us the greatest long-term value..

Yeah. We usually do see the economics are better when we build green field things and buy something. But I think what Debbie just said all the above, we’re looking at all the above..

Okay. Good luck with it. Thank you..

Thank you. And our next question will come from Mark Barnett from Morningstar Equity Research..

Hey, good morning everyone.

Can you hear me over there?.

Yes, yeah. We can hear you..

Okay..

Can you hear us?.

Yes I can thanks. You talked a lot about what’s going this year in Mexico and lot of it is very exciting. Just one more quick question I guess following-up on that discussion.

Outside of the bidding rules for the next slate of projects this year, you had mentioned in some past calls that there are some outstanding uncertainties around maybe rule making and some additional reforms that you are still looking forward to.

Could you maybe highlight what some of those might be?.

Sure. One of the – I mentioned earlier that we don’t have anything in our plans in Mexico to do additional electric generation or transmission right now.

Those are areas that are opening up and the government has published a list of potential projects to bid on – those are right in our sweet spot absolutely, those are areas of interest to us that we have not put into any of our plans today.

And those are projects that we’re interested in – they are on the list that the government has published as well to be bid out. The other area I would say and we’re doing some work now is in the gathering and processing. We have done different types of pipelines in Mexico. We’ve built an ethane pipeline as an example.

And so we think that this is a great opportunity area for us is to get into the gathering and processing area in Mexico. And so we’re exploring those opportunities. All of the markets are opening up in those areas.

So it’s not just gas pipelines for us, it’s electric transmission electric generation gathering and processing, all of those are great opportunity areas. And I think in the energy sector that there was something like $600 billion of projects identified over the next five years in Mexico.

I would see us going after a very large share of that and aggressively going after a very larger share of that..

All right thanks for that..

Thank you. At this time we have one question remaining in the queue. (Operator Instructions). We’ll take our next question from Vedula Murti from CDP Capital..

Good morning out there, good afternoon here, how are you?.

Hi. I will say hi, that’s easy..

Yeah, that’s fine. To follow up a little bit on your conversation with [Ticon] or whatever.

What’s your how you evaluate it when you look at everything, all different permutations that would impact? What’s your opinion about how [inaudible] OGE kind of put their structure together what Davin did with cross tax in term of trying to accelerate things and that type of thing.

Is that something that based on what you’ve seen and how the value realization has kind of read through so far something that you grew positively or do you feel like it’s something that can slow is paramount or how should we think about how are you thinking about those specifics?.

Well I will tell you how we are thinking generally I am not going to comment on any other companies or their transactions. But the way that we think about it is we have an exceptional asset with Cameron when that goes online that has natural drop down, we think would trade at a very low yield and would be an amazing MLP.

That if we do a bridge strategy we would not wanted to diminish the value of that long term asset or an MLP. But there is a possibility that how something might be structured could increase the value in a bridge strategy.

And if we found assets that we thought would trade as comparable kinds of yield and that they would allow us to have higher splits by doing it earlier we are absolutely not adverse to doing that.

But we are not going to just go out and buy something that is going to trade very differently than Cameron would likely trade and diminish the value of a high value asset in the long term and that’s the way we would generally look at it..

Okay and just to follow up then on that which I completely agree with, given your probably quickly well along into this evaluation, can you characterize how you think the probability is that a bridge strategy that meets your criterion can materialize at least or do you feel like there is something that you see that has a chance to actually meet these criterion which I completely agree with and wouldn’t want to dilute anything.

So I am just are you optimistic about that? Or how are you thinking about those?.

I am always optimistic. And I think that there is a lot of infrastructure that’s needed in the U.S. and so there are opportunities for us to look at but I wouldn’t want to handicap it. And the good thing is we have an incredible fall-back position with Cameron and the assets around Cameron.

And so I wouldn’t want to handicap that, but I think there is a lot of opportunities happening in the United States right now in terms of infrastructure..

Okay. Thank you very much..

Thank you..

Thank you. And it appears there are no further questions at this time. Ms. Reed I would like turn the conference back to you for any additional or closing remarks..

Well thank you all for joining us today on the call. As always our incredible investor relations staff will be there to answer any of the follow-up calls that you have after. So call Rich or Kendall or Amanda with any follow-up questions and have a wonderful day. Thank you..

That concludes today’s conference. Thank you for your participation..