SRE 4Q2016 Earnings Quick Note

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Market Price (2/28/2017): $110.29/share; ST-Target: $150/share; NIV: $195/share

We continue to be positive on SRE based on its growth prospects

Note: Please note that due to 5 companies (NRG, CNP, PNM, LNG, SRE) reporting on one day, we will be writing Quick Notes for all of the companies reporting today followed by full notes later in the week

  • SRE increases 2017E AEPS guidance by $0.05 to $4.85-$5.25 from $4.80-$5.20
  • Also increases dividend by some 9.2% to $3.29 from $3.02
  • In line with other CA IOUs, SRE proposes 2-year cost of capital extension:
    • 2% ROE at SDG&E and 10.05% ROE at SCG starting 1/1/2018 through 12/31/2019
    • Looking to true-up some $36MM of debt costs in 2018, which is largely included in guidance
  • Aliso Canyon is finally fading in the review mirror; we continue to applaud SCG’s disaster management response
  • MHI Arbitration is expected in the near future
    • Current SONGS settlement calls for 50%/50% split of any favorable settlement awards between customers and shareholders
  • We continue to remain unconcerned about the delays in Cameron LNG 1-3, which we had built-in to our modeling, anyway, and view the delay as a lot to do about nothing:


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