Rick Vaccari – VP, IR Debbie Reed – Chairman & CEO Mark Snell – President Joe Householder – EVP & CFO Martha Wyrsch – EVP & General Counsel Trevor Mihalik – SVP, Controller & Chief Accounting Officer.

Greg Gordon – Evercore Steve Fleishman – Wolfe Research Chris Turnure – JPMorgan Julien Dumoulin-Smith – UBS Matt Tucker – KeyBanc Capital Markets Rajeev Lalwani – Morgan Stanley Faisal Khan – Citigroup Mark Barnett – Morningstar Financial.

Good day and welcome to the Sempra Energy Third Quarter Earnings Results Conference Call. (Operator Instructions). At this time I would like to turn the conference over to Rick Vaccari. Please go ahead, sir..

Good morning and thank you for joining us. Today we'll be discussing Sempra Energy's third quarter 2014 financial results and business update. A live webcast of this teleconference and slide presentation is available on our website under the investor section. With us today in San Diego are several members of our management team.

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 third quarter 2014 earnings press release for a reconciliation to GAAP measures.

I would also like to note that the forward-looking statements contained in this presentation speak only as of today, November 4th, 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 let me hand the call over to Debbie..

Thanks Rick and thanks to all of you who are joining us today. Our third quarter earnings were very strong and I am confident that our 2014 earnings will be near the upper end of our guidance range. We are also well-positioned to execute on our five year growth plan.

As we begin today, I'd like to start off a little differently by giving you an overview of the progress we are making on key business initiatives and strategies. This will give you a good sense of how we expect to achieve our growth rate of 9% to 11% through 2019. Over the past few months I've been on the road meeting with many of you.

Since I most often asked about our long-term growth prospects, I thought it would be helpful to start with a progress update. So today I will begin with a review of some of the projects in our five-year plan and the status of additional development opportunities that could add to our long-term growth.

After providing you with this broader context, I'll hand the call over to Joe to discuss the quarterly earnings and then we will take your questions. Please turn to slide 4, for several years we have chartered a path to exit merchant generation as it no longer fits with our long term contracted infrastructure strategy.

On October 29th we signed a definitive agreement to sell the last block of Mesquite power plant. The book value of the plant is approximately $300 million and the sale is at a premium to book value. We expect to close this transaction around year-end subject to regulatory approval and transfer of the existing contract.

Any gains in the sale is not included in our 2014 guidance. Shifting to our U.S. midstream business, we now have 20 year contracts for the full 1.8 Bcf per day at East to West capacity on the REX pipeline. Due to significant additional demand for capacity out of the Marcellus and Utica, we conducted a nonbinding open season for expansion.

The REX joint venture is finalizing precedent agreements with interested shippers and we should be able to report results within a few months. Other market developments that could enhance REX's long-term value include the build out of additional laterals such as the proposed Prairie State Pipeline.

Growth in our REX distributions from these recent developments is an important factor as we consider the structure and timing for a potential MLP or YieldCo which we will discuss later on the call. In addition to REX our U.S.

Gas and Power business is preparing bids for two natural gas pipeline lines in Texas that are being tendered by Mexico's Electricity Commission, the CFE. We expect to hear the results of those bids early next year. Now, let's turn to slide 5. A significant component of U.S.

Gas and Power's natural gas strategy is to leverage our core competencies and asset positions to build a broader LNG business. The progress we have made getting Cameron Liquefaction into construction positions us well to expand our LNG footprint. In October, the joint venture for Cameron became effective.

We contributed our asset to the JV and our partners made their initial capital contributions and reimbursed us for their share of development costs. We began drying up on our financing and issued the full notice to proceed to our EPC contractors for construction.

The combination of forming the joint venture and moving from the development phase to the construction phase where we have a fixed price turnkey EPC contract is another huge step that gives us confidence the project will be successful and profitable for Sempra. We remain on track to complete all three trains in 2018.

Moving to the next steps and growing our LNG business, our U.S. development efforts are progressing on two fronts. We are assessing opportunities to develop Cameron trains four and five and a liquefaction plant at Port Arthur and we continue to receive strong customer interest for both.

As we advance our analysis, we will gain more clarity on the prospects and timing for development of these two projects. With regard to Cameron trains four and five, the JV is progressing with a permitting work and we expect to initiate our FERC filing in the first half of 2015.

At this time, we would expect to complete the permitting process within about two years after filing. Since trains four and five will likely replicate the current design at Cameron, we may be able to accelerate the environmental review process and shorten approval time frames.

Sempra has the contractual rights to 50% of the equity and capacity in the expansion. Unit costs should be comparable to the current project and therefore quite competitive. Our goal is to have the contracts in place and approvals necessary to allow for continuous construction following completion of trains one through three.

For those of you who are less familiar with Port Arthur, we have a 2900 acre land position with three miles of waterfront connecting directly to the Gulf of Mexico. The location is on a deep water channel that could accommodate LNG carriers of all sizes. Port Arthur has been permitted in the past for both LNG and crude import facilities.

We are assessing the site for the possible combined use of LNG and/or liquids export and are discussing its development with several potential customers. Initial studies suggest the site could reasonably accommodate four trains similar in size to those at Cameron as well as other uses.

Our goal is to complete our site plan, negotiate contracts with customers and initiate our FERC filing next year. Now, please turn to slide 6 for developments in our international businesses. In Mexico, we are making progress on our gas studies to determine the size, structure and economics of an LNG export facility at ECA.

We should have a better sense of these factors and potential timing in the first half of next year.

We continue to see strong interest from potential off-takers, but since this facility is fully contracted as an import facility through 2028, we must consider the impact on contracts with existing customers and the resulting project economics before proceeding.

Another infrastructure, IEnova is continuing to meet key construction milestones on its major projects. The first phase of the Sonora pipeline was completed in October and Los Ramones 1 pipeline should be completed in December. Together, they represent about $1 billion in capital expenditure.

IEnova is also in the final stages of construction on the ethane pipeline and ESJ wind generation project. Near term development opportunities include the 17 natural gas pipelines outlined in the government's five-year infrastructure plan.

Although the process is running a few months behind initial scheduling, the CFE is moving forward and making progress on the tenders. IEnova has submitted a bid for the contracted pipeline and is preparing a bid for the second. As I mentioned, our U.S. Gas and Power business is preparing bids for the third and fourth pipeline.

You can refer to the appendix for additional details on all 17. Turning to energy reform, we see a long runway of opportunities resulting from the country's energy transformation.

In addition to the $13 billion of investment expected in natural gas pipelines, the government identified $14 billion of power generation projects, $2 billion of electric transmission projects and over $250 billion of energy investments in other sectors.

We are working to build upon our past success and become a first mover in several of these new areas of opportunity. While we expect to have increased competition for projects, we’ve worked over many years to develop our competitive advantage in Mexico.

For example, IEnova has the largest in country presence among competitors with over 560 local employees. Based on our large and ongoing construction program, we’ve a deep and experienced team who has demonstrated the ability to deliver projects on time and on budget.

We also have a long history of being able to work success successfully with local communities. This is essential for secure sing rights of way. Moving to Peru, our electric distribution company has received regulatory approval for a transmission plan that entails building several substations and transmission lines in Lima.

The plan will require about $150 million of incremental investment from 2015 to 2017. Capital expenditures will earn the regulated 12% rate of return. Let's go now to slide 7. At our California utilities, both our basic operations and projects are performing well and we continue to pursue additional growth opportunities.

At SoCalGas we received regulatory approval of our framework and are currently ramping up on 17 pipeline construction projects and a valve enhancement initiative, all part of our $1.5 billion PSEP program. The advanced metering program at SoCalGas is also ahead of schedule and we expect to have about 2.9 million meters installed by year end.

As you are aware, SoCalGas has made a filing at the CPUC for an $800 million to $850 million Southern gas system reliability project designed to reinforce the gas transmission system and provide stronger access to supply points and gas storage. This is very important for both gas and electric system reliability.

As expected, several alternate proposals have been filed, but we continue to believe our plan is superior. We expect the CPUC to rule late next year.

At SDG&E, we are on track with our $1.1 billion capital plan for 2014 and received notice from the ISO that we were awarded an additional $60 million electric transmission project in our service territory. On the regulatory front, we have two important matters at the Commission and both are moving forward.

We reached an amended settlement agreement with key parties on the Son's [ph] plant closure and expect CPUC approval this year. The revisions made to the settlement address all issues raised by the assigned commissioner and these revisions did not result in a material impact to Sempra's 2014 financial results.

We submitted our notice of intent to file our 2016 general rate case at both utilities. The Office of Ratepayer Advocates recommended acceptance and we expect to file our official applications by year end. Let's turn to slide 8 for an update on our ongoing assessment of MLPs.

We’re focused on finalizing our analysis of the pros and cons of different structures. We continue to look at the traditional MLP structure as well as a variety of YieldCo like structures that are designed for growth and distributions. To simplify terminology we refer to the latter as total return vehicles or TRVs.

The key issues for us include alignment with our strategies and growth initiatives, value creation for Sempra shareholders, flexibility and the potential asset mix, liquidity and size of the potential investor base and volatility and trading history of existing entities.

We are on path to conclude our analysis by the end of the first quarter 2015 and hope to provide you more detail around our strategy at that time. With that, let me hand the call over to Joe to provide additional context on this topic and to walk you through the quarterly earnings.

Joe?.

Thanks, Debbie. Turning to slide 9, we discuss certain factors we’re analyzing to inform our decision regarding a potential MLP or TRV. First and foremost, as Debbie just mentioned, the structure must be aligned with our strategy and enhance long-term value for Sempra shareholders.

The earnings per share, dividend per share and cash flow impact for Sempra are a focus of our analysis. If an MLP or a TRV is pursued, we will work with the rating agencies to maintain our solid investment grade credit ratings. In our decision process we will follow the same discipline we used in launching the highly successful IEnova IPO.

One important factor is the asset base. In our portfolio, we have assets with long-term cash flows that are currently available for formation of a vehicle. In the case of an MLP, we could include our share of REX distributions and potentially the U.S. based contracted revenues from the ECA re-gas terminal.

In the case of a TRV, we could include these assets as well as certain of our wind and solar assets. We also have a variety of assets we expect to be available for future growth. In either an MLP or a TRV, Cameron Liquefaction could be the asset providing the largest cash distribution growth after all three trains are online.

We could also have available LNG development projects, our Cameron pipeline, other qualifying midstream and storage assets, if market conditions improve. Additional renewables in operation or in development as well as other non-qualifying infrastructure could also be available for future growth in a TRV. Let's go to slide 10.

On this slide, we break down the key attributes often used for comparison between an MLP and a TRV. As you know, the traditional MLP relies on qualifying assets while a TRV could include any asset with certainty in its long-term cash distribution profile. You are likely familiar with differences in the investor base between an MLP and a TRV.

Governance and tax impacts, however, are becoming more common between the two. While we were initially focused on an MLP structure, we understand that the tax shield for a TRV is essentially equivalent to the tax shield that MLP unit holders enjoy. For a TRV, a tax loss can be carried forward to offset potential future taxable income.

Analysis suggests that similar to an MLP, a TRV's tax yield can be maintained over time through growth. With regard to potential sponsor implications, asset quality and incentive distribution rights are important for valuation in either structure.

As Debbie mentioned earlier, we’re considering these issues and are on a path to conclude our analysis by the end of the first quarter 2015. Let's now turn to slide 11 and I will conclude with a discussion of our third quarter earnings. Sempra's third quarter consolidated earnings were $348 million or $1.39 per share.

This compares to consolidated earnings of $296 million or $1.19 per share in the same quarter last year. As we normally do, we’re providing individual financial results for each of our business units in the section of our presentation entitled business unit earnings.

For this call, however, I'm going to focus only on the key drivers of our consolidated third quarter earnings, beginning on slide 12. Increased quarterly earnings relative to 2013 are due largely to five items. The California utilities had a combined $13 million of increased earnings due to higher CPUC based margin and improved operating performance.

In 2014, the California utilities had a combined $10 million favorable impact for prior year's income tax issues, compared to a $2 million unfavorable impact in 2013. IEnova finalized the sale of a 50% equity interest in.

As a result of the transaction, we recorded a $14 million after-tax gain, of which of half or $7 million is attributable to the re-measurement of our retained interest to fair value. In Mexico, we recorded $14 million of AFUDC equity earnings associated with construction of the say another ray pipeline. U.S.

Gas and Power recorded a $25 million benefit related to the release of a Louisiana income tax valuation allowance. In past years we incurred losses for operations located in Louisiana. We recorded a valuation allowance against the deferred income tax benefit at that time, due to the lack of offsetting income.

With advancement of Cameron Liquefaction and prospects for future earnings in Louisiana, we were able to release the valuation allowance against our deferred tax assets. Partially offsetting these five drivers were two items. One item was the $24 million gain recorded in 2013 from the sale of a 50% interest in two solar projects.

The second item relates to $8 million in higher income tax expense for South America in 2014, primarily related to Chilean tax reform. As I mentioned on our first quarter call, Chile was considering a tax reform proposal that would increase the corporate tax rate.

The President of Chile signed the tax reform bill into law on September 29th, and the $6 million impact reflects the re-measurement of our deferred tax balances. Now let's go to slide 13. To conclude, our businesses are performing well and we are on track to execute on our five-year growth plan.

Cameron is in construction and new contracts on REX are also in place. IEnova's construction on major projects is progressing on time and year-to-date earnings for Sempra Mexico operations are higher than last year, despite $16 million of higher non-controlling interest in 2014. In South America, earnings reflect a couple of items worth mentioning.

Year-to-date earnings primarily for Chile continue to be impacted by a weaker peso to dollar exchange rate. As we have discussed previously, tariffs in our South American utilities are generally adjusted for foreign currency changes over time. Chilean tax reform also impacted earnings this quarter.

Despite these considerations, our South American utilities remain fundamentally sound and show continued growth in customers and sales. Finally, our California utilities have their major capital programs in place and earnings continue to reflect a higher CPUC base margin and improved operating results.

As Debbie noted earlier, based on third quarter earnings and our year-to-date financial performance, we expect to be near the upper end of our 2014 earnings guidance range of $4.25 per share to $4.55 per share. With that, we will conclude our prepared comments and stop to take any questions that you may have..

(Operator Instructions). We'll go first to Greg Gordon with Evercore..

I've got one question on the quarter and one question on some of the drivers. I guess I'll start with the quarter. As I look at the summary on page 13, it looks like the – I'm sorry, not the summary on page 13, the summary on page 12 with all the items impacting the quarter.

The income tax swing, the ESJ wind gain and the release of the allowance, I understand that you had – there are offsetting things that happened in the prior year like the gain you had on Copper Mountain, but as we look forward into 2015 and we look at your – the guidance range you gave for us for 2015, is that already – should we assume they contemplate such gains or losses in there?.

Greg, let me just say for 2015 we're going to update our guidance as we always do in February. What I would just say is that when we do our guidance we contemplate what we know at that point in time. So to the extent when we gave you the guidance back at the analyst meeting in March, we knew things were going to occur in 2015.

We would have put those in our guidance at that time. But we will update that guidance because there's been things that have happened since that time and we'll update that guidance in February as we always do..

Okay. So that switches to my next question. As I look at page 4 of your – the guidance section from the Analyst Day, you did a pretty good job outlining what was in your aspiration and what wasn't and based on the update you've given us today, looks like on the California utilities you've got a small transmission project that wasn't contemplated.

You've got a fairly large potential gas infrastructure project that wasn't contemplated. You've got the SFE pipelines in Latin America and Peru transmission that wasn't contemplated. And then refresh my memory. I just want to be clear, the 1.8 Bcf of day of REX backhaul was not – was also not contemplated in that guidance.

Is that correct?.

Yes. Let me just go through to summarize those so that everyone kind of hears the same thing.

When we look at what we showed you back in March and we look at some of the things that were in the additional opportunities that have already been secured that we have the 1.6 Bcf from REX for the east to west flows and that's incremental to what we had in our plan of the 0.2 B's.

We also have the second piece of REX which is the Clarington West Flow [ph] that we haven't announced contracts on yet. And as I mentioned, that should be coming out in the next couple of months. Renewables, we have the 92-megawatt contract with Edison for CMS-4. And on electric transmission, this quarter we got $60 million of incremental investment.

We also have some other projects that were incremental to our plan at SDG&E and then we also had the $150 million of electric transmission in Peru that I mentioned on the call. So those are things that where we basically have either been assigned them by the ISO or by the regulators in Peru or we have contracts with REX or with renewables.

Then we have a lot of bids for additional development and we're bidding two CFE pipelines in Mexico, two CFE pipelines in the U.S., some additional renewables where we are offers out and we mentioned trains four and five in Cameron. Those are things we're actively working on as well..

You've also got this $800 million to $850 million gas infrastructure proposal where you'll find out late next year if that's approved, right?.

Yes. And part of that was in the later years of our plan, because that – we would expect to get the decision towards the end of next year but construction doesn't ramp up on that until some of the mid to later years of the plan..

And when would you roll out explicit 2016 earnings guidance range?.

We'll roll those out 2016; we usually do at the analyst conference. And so we do 2015 on the call in February, generally, and then we give you both of those and then our long-term outlook at the analyst conference.

And that would be – the one thing I want to be sure to mention is that when I went through all of these growth opportunities that – and using the Southern reliability system as an example, not all of these projects are going to affect 2015 earnings.

Some of the projects, like REX comes in part of it in 2015, some of the additional contracts would not come into place until 2016, when we look at the Peruvian transmission it's 2015 to 2017 and so a lot of these things are going to not affect just the 2015.

The other thing that I want to mention is that with the additional bids that we have under development, we are going to also be incurring development costs during 2015.

And we are planning on getting trains four and five with the permits filed and same thing for Port Arthur and for projects like that, plus all these CFE bids that we expect there to be development costs. So all of that kind of information will be updated when we give you our guidance in February..

I do have one more question. So there's been a lot of oil price volatility over the last couple months and the people's – it seems that investor's expectations for the probability of incremental LNG export kind of ebbs and flows with the oil price a as it balances between where it is today and the prices we saw earlier in the year.

Is there a – can you give us some sense of whether the appetite from your counter counterparties who are discussing with you the potential for these incremental trains, at what oil price they're no longer interested in ex ordering gas from the U.S.?.

Let me just mention one thing and that is that all of the joint venture parties agree for us to move forward with some of the initial work and preparation of our FERC filing for trains four and five. So I mean, that in itself is a good indication.

But Mark has done a lot of work in this area and we expected that there would be questions on oil prices, so I'm going to turn it to Mark to kind of say why we think our facilities are very well positioned in terms of the global markets..

Greg, I think you know that this LNG business is a long-term business and what we're seeing from our partners is an interest in securing long-term supply of LNG from the United States with all the stability and the continuity that that can provide.

And we really haven't seen that interest abate even as we've seen oil prices fall in the last few days here. If you look at the underlying numbers and I'm not going to get into all the details now, but generally speaking we still have – the U.S. gas and U.S.

LNG especially from the Gulf has a pretty good cost advantage over just about everything else that there is in the world today. And that continues down to gas or oil prices as they drop even down to the $70 range.

One thing I think it's worth noting is a lot of these foreign contracts, oil linked contracts for LNG have S-curves in them with sets a floor and a ceiling on prices as oil prices fluctuate.

And so it's not a point where even if oil were to drop to levels that we haven't seen in 15 or 20 years, LNG wouldn't necessarily on a worldwide basis fall to those levels, except other than on the spot market. There's some built in price levels there. And I think we're competitive with those, given where price is.

And I think the other thing that's really, really important and that these folks focus on is diversity of supply. And that includes geographic diversity. Obviously the United States being a real favorite these days of trying to get some supply out of the U.S., also diversity of facilities and geographic locations within the U.S.

So I think at the end of the day we feel very confident that our partners are interesting – interested in moving forward on trains four and five. We see other outside interest for Port Arthur. We are having discussions on, on maybe conversions there.

So we're kind of looking at all of these opportunities and we think we can be online with some of these as early as 2020. And we're going to kind of prioritize which ones that we think need to come online first and we'll just kind of move through the list.

But we're pretty excited about what's the level of interest and the opportunity for us to continue to grow our LNG business..

We'll go next to Steve Fleishman with Wolfe Research..

Couple questions, first on the Cameron four and five filing at FERC next year, would you anticipate you would have contracts in place by the time that you file at FERC?.

I'm going to have Mark go ahead and go through that and kind of go through the schedule a bit with you as to what we're envisioning..

It's a good question. I don't know that we would have firm contracts in place. Usually, the contracts aren't firm until we take FID, the firm investment decision, and we wouldn't expect to do that until sometime after we get the permit, 16 or 17.

We're working with our partners and we obviously have customers that we have put in the queue that are looking at this opportunity, but it's sort of a chicken and egg thing.

They want to make sure that we're going to do it and we have the facility and getting the permits will cement that in their minds that this facility is moving forward and I think they'd be much more comfortable than to commit to that supply. So as we look at this, I think we would expect sometime after that we would probably firm up contracts.

That doesn't mean we won't have MOUs and other kinds of indications of interest and I think that's very likely that we will. A firm contract really doesn't exist until you take FID..

I would say it would be very parallel to what we did on trains one through three where we had with partners, we had commitments that if the facility was built at a certain pricing point that they would move forward with it. But that's very different than getting to FID, where the partners now have to you put their money on the table and all.

So I think it would be constructed very much the same in terms of contracts..

Okay. Maybe my terminology might have been too specific there. I guess it seems that there's a little bit more of an interest in approving projects that have more likelihood of getting done, which having some kind of initial commitment helps along that way.

So do you expect by the time you file there would be some kind of initial commitment for the LNG?.

Yes, I think that we'll have initial interest.

And also too, I just want to remind you that now that FERC or that DOE has changed the way that they look at this and let FERC is taking the lead, you're not really going to move forward with a lot of this activity because it is, as Debbie mentioned, there's fairly expensive development costs in moving this through the permitting process.

And so we're not going to do that without some indication of interest and that we're going to be able to move this to completion. So I think the change in the process that was recently announced a few months ago is also leading to people being much more secure about what's going on as they move forward..

Okay.

Second question, this might be a little silly, but just do you guys have something against the term YieldCo or what's the thought or is there a message underneath kind of recalling it a TRV instead of YieldCo?.

I'm going to ask Joe to answer that, because he and his team came up with that term as we were looking at it.

I think it is pretty descriptive and kind of what the option we're looking at, but Joe?.

Look, I think, Steve, really it's us thinking pout thinking about what this is and I think the YieldCo term is a little bit funny, you think a YieldCo is something that's at a high yield.

What we really see is this is going to be very highly valued because of growth and yield and so we just didn't really like the term and didn't really fit us and it didn't fit our strategy and we think that it's really a total return vehicle and that's why we are talking about that.

One of the problems we had internally is we're looking at a couple different types. Everything we're looking at is MLP like in structure but it might be the tax is a little bit different depending on what we do so we needed a term to talk about these things that weren't traditional MLPs and this is what we came onto..

Okay. One last question with respect to just the decision on MLP YieldCo. The other companies that are moved forward with MLPs, YieldCos, the stocks generally have done well into it. Once they've actually executed there hasn't been a lot of follow-through.

Do you have any kind of thoughts they the way you're looking at it, where you might either do it differently or communicate differently to benefit to Sempra holders if you go forward?.

I think the key is that whatever we do has to bring greater value to Sempra shareholders in our minds and that we'll be able to articulate why we think that that would occur. I would say the one thing that we feel very good about is if we do something, if we don't do something, whatever we do, we have a really great set of assets.

I think how a company fundamentally has long-term value is the growth, the potential on assets that they have, the ability to grow their business, the ability to really have steady cash flows that are growing and I think we're in good position regardless of the structure that we have to do that. So that's kind of how we're looking at it.

And I would just turn it to Joe to talk about a little bit of what we're looking at on the shareholder value side and the work that's under way..

Steve, this is part of the reason we put a lot of content into this call because later once we make a decision, we'll be filing some stuff and then we won't with able to talk about it.

So we wanted to be able to explain how we're thinking about this, that we really are focused on the long-term value for Sempra and we wanted you to all understand what the things we're looking at. And so we've described on page 9 and page 10 how we're thinking about it, the kind of assets we're looking at, how we expect these things to work.

And I don't want to talk about really the other company's stock values and what's happened to them but we believe that the strength of our underlying business and the execution that we have on our growth plan is going to be reflected in how our shares perform and if we choose to create one of these vehicles then as it's been with other large high quality sponsors, they're kind of small at the outset but I think that's one of the things you see is these things are pretty small for some of these large players.

And so I don't think it's moving the stock much around. And it might do the same with us, it's hard to tell. Once those IDRs become significant and that value is very transparent, I think you'll see that in our stock very clearly..

I would just add to that and highlight IEnova and kind of what was done there and we were the first energy company to trade on the exchange and we took a lot of time to determine what was the best approach, what was the best timing, is this something that's going to bring value to the Sempra shareholders.

Is it going to give more transparency to the value of those underlying assets. And we would make the same kind of considerations as we decide whether we're going to do a vehicle and if so, what type of vehicle we would do. I think you'll l see that same kind of disciplined behavior for us as we analyze this..

We'll go next to Chris Turnure with JPMorgan..

Could you give us a little bit more color on. You certainly talked about contracting conditions in general for LNG. You mentioned that the kind of interest remains strong. So did IEnova when they talked about it.

Could you mention kind of if anything has changed for that project specifically over the past couple months?.

I would say that, Chris, there's nothing really that's changed. We've been doing the gas study and we're completing some of the work on the gas study to look at gas availability. The issue there that's been there and we've always talked about it is that we have contracts through 2028 as an import facility.

So the economics of taking a facility that, I don't know, it's about $150 million or so cash flow from that facility, and making it into an export facility, we need to look at what the benefits of that would be and that there has to be a compelling story for that.

And so looking at gas, looking at the sizing of the facility, looking at the customers, looking at the existing customers, are all the things that we've always talked about with that facility and they're still present for us. We're working it and we're definitely working trains four and five and definitely working Port Arthur.

We're working all three of them..

Okay. And then could you give us a little bit more color if you could on timing with ECA. I know it's hard to do at this point but you've definitely been more specific with four and five, I think, and even Port Arthur at this point than you've been down there..

Well I mentioned in my talking points that what we were looking at is having all the gas analysis done and then really looking at what kind of a facility could be there and having some conversations with our customers in the first half of next year. That's the kind of timing for that. There is a regulatory process.

I guess the rules just came out in Mexico with some of the details on what is required in order to get regulatory approval. But it's a different process than in the U.S.

So I mean, I think that within the first half of the year, just as with the other projects, we should have a good sense as to what we think about sizing, what we think about timing, and what we think about the economics of the project..

And then my follow-up question is just on year-to-date earnings and the third quarter specifically. There's kind of an unusually large number of one-time mostly tax related items.

Do you have a sense of what a normalized number would be if you moved all of that stuff?.

I'm going to have Joe or Trevor go through that. And I would remind you that if you kind of look year to year, last year we had a gain on CMS-2 that came in the quarter and it was almost the same size as this LA tax valuation.

So if you kind of take those things out, you still see a growth of double-digit growth rate year-over-year which I think is along a path that we're intending to head..

I think just what she said. You can pick and choose things that tend to be one-time items if you want to call them that. I would say in our renewable business we tend to have gains on sales fairly often. Last year we had $24 million in the third quarter, this year we had $13 million in the third quarter.

This year we had the Chilean tax reform hit us for 6 and we had $8 million of repatriation tax. Where last year this quarter we didn't have any because it all got booked in the first quarter.

So if you try to pull some of those out and you pull out the valuation allowance which was in our plan, but if you pulled that out and say that's the onetime item we have nearly 19% growth over last year and if you take out the tax items at the utilities, we have those all the time, they happen all the time, but if you take those out they're 14% earnings growth.

We have very solid growth in this quarter and year-to-date the numbers are very similar. You can pick and choose. But we have very, very solid growth..

We'll go next to Michael Weinstein with UBS..

It's actually Julien. I have a quick detail here on Mesquite.

Do you have a sales price that you could disclose?.

All we're saying that is our book value's about 300 and we sold it for above book. And we'll remind you all that the gain on that sale is not part of the guidance, so --.

Turning to Mexico, if you will, how much does the U.S./Mexican project drive a decision between MLP versus whatever else you you've contemplated? Call it YieldCo, total return vehicle, etcetera..

I don't think that that would drive anything in terms of our decision making. We're looking at kind of long-term and so it would be a nice factor for if you were looking at either of those. It would be a nice factor, but it's not a driver..

So you feel like you have sufficient critical mass to get the MLP off the ground, irrespective of near term project awards, right, just to be clear?.

We're not going to comment on that. As I mentioned, we're doing the assessment of that and we're looking at those assets. We're looking at where our growth is and we're doing that, all of that work, and I'm just not going to comment on specific assets..

And then going back to the notion of a total return vehicle, you talk about other infrastructure assets. Broadly speaking, what else would be contemplated within a TRV, if you will? It's midstream, clearly, it's renewables, clearly.

What else within the context of your current portfolio or within the context of your organic growth plans would be included potentially?.

I would refer you back to Joe's comments, but Joe, do you want to kind of articulate that again, some of the comments..

Sure. Really what we looked at is the strategy for Sempra and it's been consistent for many, many, many years now, long-term contracted infrastructure and we've built and contracted many different kind of assets. And while we're exiting merchant generation now, we certainly had assets like that that could have been put in there.

We might look at petrochemical kind of assets, other things that are natural gas related kind of assets. There could be things that just don't fit in the qualifying asset characterization. And so we could – I mentioned before, while we're not currently contemplating it, we could put some of these non-U.S. assets in there.

We certainly probably won't do that with Mexico but there's others assets that we could put in. It's just a broader group that fits nicely with our strategy..

And a last little detail here, congrats on Mesquite, first.

But secondly, TDM in Mexico, is there a thought process or time line around re-contracting that asset?.

We have a goal to do something with TDM on a long-term basis. And as I mentioned in my comments, with the energy reform going forward that generation will be kind of one of the next areas that they will be looking at. And we think with TDM interconnected to Mexico it could be one of the best and most economic assets to meet some of those needs.

So that's our plan is to work that with the sale into Mexico..

Under long term offtake presumably?.

A sale of the asset or sale or long-term offtake, PPA agreement, whatever structure seems to work best..

We'll go next to Matt Tucker with KeyBanc Capital Markets..

Just wanted to follow up and make sure I understand about the offtake agreements on Cameron trains four and five. So you've indicated that you expect to start the FERC filing process the first half of next year and I believe you said that you would expect to have some offtake agreements in hand before you go to FERC.

So is the implication that you expect to be able to announce some form of offtake agreements in the first half of next year?.

Yes, let me have Mark go through that again to be sure that it's very clear what we're talking about. And also kind of the schedule at FERC, because you make a pre-filing and then you make the complete FERC filing. And so let's kind of walk you through what we're thinking..

Yeah, I think where we're going to be is we will start the filing process at FERC with our application. And we would not expect at that moment in the first half of or the first quarter of 2015 to have agreements in hand. As I said before, actually firm agreements would not be done until we actually reached FID, which is a year or so down the road.

But we might have indications of interest and I think you can – by the very nature of this project, the fact that Mitsubishi and GDF are our partners and they have agreed to move these process forward, they obviously have an interest in that capacity.

So I think just by the nature of the players involved, you can see that there's interest in moving the project forward. But no one's has made a commitment yet to sign on and pay for the – to pay for these facilities to be built in a firm way. But we're going to move forward with the permitting process. We're going to get that started.

We've authorized monies to be spent on development and we think the project looks very favorable compared to others that could be considered. So we're very optimistic that this project will move forward. It's certainly one of the lowest cost projects that you could possibly do in the region because it's an add-on to an existing project..

So I think I understand.

It's a point at which you get – when you get to the point where you'd be making the full FERC filing, at that point if you don't have some kind of nonbinding let's call it offtake agreements, you'd put the brakes on the project at that point?.

Yes, there's certainly a point if we thought that the interest in the facility was waning or that we couldn't reach a full FID decision, obviously we'd stop spending money on it. We're not in that position right now.

We feel like it's got a lot of interest and we're willing to spend some development dollars on furthering that and bringing that – bringing the project to fruition. This is very, very similar to what we did on Cameron's one through three. It's really the same process..

You announced the offtake agreements for trains one through three before the FID. So I guess I'm just trying to understand if we should expect a similar announcement of those agreements..

Yes, before FID you'll have agreements that require FID as a condition precedent for those agreements going forward. But that's a very typical way that this would be done..

If you look back at Cameron one through three, what we had is kind of an MOU with the parties on the joint venture agreement and then the tolling agreement in that case. And then we went forward with some of the more costly developments to allow the FERC filing after we had that to make the full filing at FERC that is necessary for your permitting.

It's the same type of process that we would be looking at here, whether it's offtake agreements for LNG or it's a tolling arrangement, we would look at having some type of MOU in place with interested parties before we started spending a lot of money..

The only thing here is that we're a little further ahead because things like the tolling arrangements and all those agreements have already really been drafted once. They just need to be amended for the additional capacity..

And then shifting gears to the MLP versus TRV debate. As you walk through the criteria, it really sounded to me like the TRV was the superior option on most of the criteria that you walked us through and largely because of the flexibility it provides.

Is it fair to say that's the way you're leaning?.

We're not leaning anywhere. I just made real clear because I could give you some reasons why the MLP would be interesting too.

So what we're trying to do is really look at this without getting hooked on anything and really do kind of the step away, look at this from a Sempra shareholder perspective as what is the best decision and to take our time to do that and to have that completed by the end of the first quarter. So there's no leaning one way or the other.

We're looking – all options are open for us right now and we're watching how things trade. We're watching how our growth goes and what kinds of assets that we think would be available for each vehicle if we decided to do a vehicle. All of that work is under way and we'll have that concluded by the first quarter..

At the Analyst Day in the Spring I believe you said that your plan was to do an MLP and it was just kind of a matter of timing and that was before you start talking about the TRV option.

Should we still be thinking of this decision in the first quarter as just which vehicle you're going to do or what's the likelihood that you decide to do nothing?.

I'm not going to comment because we haven't decided. Like I said, there's really options on the table, all of those options are open right now and I don't ever recall saying that we were committed to doing one thing. We had looked at it. There had been a lot of interest in us doing it.

We saw that we had assets that we thought would be very good assets for that type of structure and we still feel we have really good assets for either of these kinds of structures. So we'll make those decisions and inform you when we made the decisions after the first quarter..

And didn't mean to put words in your mouth, just one final follow-up to that. You kind of alluded to a pipeline of renewables projects that could contribute to growth if you go the TRV route.

Could you just talk to us a little about what's in your renewables pipeline right now and if the pipeline, what is included in your current long-term guidance?.

Yes. If you look at our renewables business, the areas where we still have a lot of opportunities for development are with our Copper Mountain facility and we can keep adding there. We also have rose month which we have actually are participating in some RFPs to develop that site right now.

There are opportunities to expand some of the wind sites that we're in and we're looking at some of the additional phases on those wind sites. And so – and then we're always out in the market, looking at other opportunities for exciting new renewables. So we have projects that we keep working on.

I think where we actually have some land positions we're in really great position to develop renewable projects in those sites..

The only one you didn't mention was Mesquite, create a large facility at Mesquite that we could expand..

We'll go next to Rajeev Lalwani with Morgan Stanley..

Just two quick ones, on REX, did you note the potential for some additional opportunities outside of the Clarington west part of it? I think you noted some laterals there..

What I talked about is the Prairie State Pipeline that Telegraph [ph] and AGL have proposed that links in to REX. And if they're doing a nonbinding open season on that pipeline, that ties into REX and takes gas into kind of the hub of Chicago. And obviously if they get a lot of interest on that pipeline they're going to need upstream supply.

And so we have – in the 2.4 Bcf of potential expansions for REX, there's two pieces. There's the piece of about 700 to 800 a day that's from additional compression and then the remainder of it would come from looping the line.

And so to the degree that there's more downstream market for the gas, then we think that that gives us additional upstream opportunities on REX..

And then just switching over to Cameron four and five, as it relates to the FERC process, what drives the time line for approval and what's the potential for accelerating it, given that you've got Cameron one through three already approved?.

So if your question is on the regulatory side, how does the process work, I think the answer to that is that it – the FERC process will drive it and the DOE export process kind of will play off of the FERC process. Under this new regime, the DOE will consider only projects that have gone through a certain amount of the FERC process.

One of the things that we talked about was that we may be able to accelerate the FERC process because we have trains one through three. We may be able to do what they call an environmental assessment as opposed to a full environmental impact report. And that could shorten the process by several months, really. And it would be a little bit cheaper, too.

We don't know that we're going to be able to do that. We're looking at it. We're talking with our consultants on it. But that is one way that we could shorten the process a little bit.

Does that answer your question?.

It does, Mark. Thank you..

We'll go next to Faisal Khan with Citigroup..

Just going back to this MLP versus YieldCo.

Is there any reason why you don't do both? The reason why I'm asking, is you don't know if you look down over the next four, five years if you're going to grow your midstream and natural gas and refined product exports, whatever you guys want to do, if you want to grow that asset base that's where the MLP works, if you're going to grow some of the stuff outside the U.S.

and the renewable stuff then certainly YieldCo works. I'm just trying to figure out, it seems like we're talking about one versus the other but I'm just trying to understand if you couldn't do both..

We think that either can work. I don't see us, and we said this for several years, I don't see us doing a separate YieldCo for our renewable business. Our renewable business is a nice business but it's not a big part of the business and I think that the YieldCo would be too small.

It just wouldn't be sufficient of a vehicle and so I don't see us going down that path. But I think that the TRV vehicle or the MLP can work for us and that's why we're looking at both of them very hard..

Just on REX and Clarington West, I just want to make sure that was I thought contemplated to be a 2.4 Bcf a day expansion, I noticed in your slides it says TBD.

Is that because it could be bigger or could be smaller?.

It's largely because there's two pieces of it and we did the nonbinding open season and as I mentioned that we're in the final negotiations with the shippers that participated in that nonbinding open season. We'll announce that later.

But if there's additional market pull in Chicago, that that may get all the way to the 2.4 and there's options, always options to expand beyond the 2.4 if you get to that. So how close we get to the 2.4, I think will be more visible to us over the next year..

And then just on the LNG strategy, you said that you guys are going to get reimbursed for the development cost for one and three.

Did I hear that right on the call? Is that – how does that cash come back to you?.

We did. When we went through the FID and through the lets call effective date which is when all the asset goes in and the financing is arranged and everything, then we did get reimbursed from our partners for our share of – or their share of the development cost.

And then we also got their first contributions to their equity going in to match our equity which was our basically billion dollar asset that we put into the JV. So now we're starting – that's our equity contribution. They'll continue to make equity contributions until they get up to the levels to match our equity value.

And then we’ve the sharing arrangement for all of the costs as we go forward..

And then for the marketing of volume for trains four and five, how competitive is the environment today, the contracting environment? There's still other facilities out there, some of them Brownfield, some of them greenfield, that are still being developed and just want to understand sort of what you guys commercial inertia is right now in terms of finding customers?.

I would say that the one thing that we found is that there is a lot of parties in the market. There have not been very many parties that have gotten through the process and into construction.

And so the fact that you have a facility that is already being built, that can be expanded or that you've demonstrated your ability to get through all of those processes and get a facility in place, I think provides us a strong competitive advantage in the marketplace.

There are a lot of players out trying to market that buyers really want certainty, because if they are contracting for long-term supplies on a certain date to be delivered, then they're counting on that gas to get there, that LNG to get there and they're not delighted with some of the projects that may never get done.

So I think we're in a good position. I think, yes there is a lot of people out there marketing but I think we're in a very good position..

And then just in terms of what happens if one of your JV partners wanted to opt out of the expansions at four and five?.

Sure. There is provisions within our agreement that would allow the other partners to take over their position if we so choose to..

Okay.

On a pro rata basis or just whoever wants is or – ?.

Yes, it's effectively pro rata..

Understood. And then last question from me, just with the stronger U.S.

dollar, just trying to figure out if there's any sort of longer term impacts to your earnings from overseas?.

Joe, do you want to discuss that? We have been seeing FX effects and that is something that we commented on and it's clearly impacted our South American businesses this year. What I would say is that if you look at those businesses, the growth and some of – we're able to offset some of the impact of FX by the growth in those businesses.

But it has been an impact..

We're really pleased with the continued growth we have in the customers and the energy sales in both countries, as Debbie just mentioned, and the utilities are performing as we expected them to and continue to grow.

But this quarter the currency movement wasn't very significant but for the year in Chile a lot of that currency movement is offset the growth but not in Peru. In Peru the currency is more stable and we have really solid growth there. So overall between Chile, Peru and Mexico it hasn't been very material this year..

We'll go next to Mark Barnett with Morningstar Financial..

Just wanted to make sure I didn't miss this. You mentioned the two Texas pipelines.

Had you talked about the size of those and what that would be volumetric, I would say?.

Yes actually, what I would refer you to, because it's a little bit confusing with all these pipelines that are being bid, if you go to slide 22 and 23 in your package it lists all of those pipelines.

And the two in Texas, three and four on page 22 and it shows that both the mileage and the CapEx that was estimated by CFE, that's not our CapEx number, that's the CFE estimate of CapEx so that will help you look at all of those pipelines.

And then the ones listed below, five through 17 are the ones that they've announced that they're going to be bidding in the near term. And you can see all of those are supposed to go in service by 2018, so they will need to bid them in the near term..

On those CapEx numbers actually, with the estimates that are coming out from the government, are those coming I guess in practice on the ground as these first round of pipes are being constructed, how accurate are those figures?.

Yes, I think it's not in our competitive interest to comment on their pricing estimates. So I would just say sometimes they're good, sometimes they're not so on track. And I'm not going to say anything more about it..

Well being that there are no further questions, thanks again for joining us today on Sempra's third quarter 2014 earnings call. If you have any follow-up questions, please feel free to contact our great IR team and have a wonderful day..

That does conclude today's conference. We thank you for your participation..