Businessmodel of Sempra Energy

Customer Segments

Sempra Energy’s multiple operating segments serve a range of services and products to customers across the commercial and public sector, as well as to general consumers. These customers can be broadly categorised as follows:

• General Consumers, with the Company providing utilities to residential customers;
• Commercial Businesses, with the Company providing various utilities and energy services to businesses across multiple sectors;
• Industrial Companies, with the Company providing utility and energy services to industrial operators, including manufacturing and production businesses;
• Utility Electric Generation and Wholesale, which distribute and resell the Company’s utility and energy products; and
• Public Institutions, including government bodies, to which the Company provides a range of services, including energy infrastructure and public lighting solutions. Sempra Energy’s principal operating regions is its home market of the US, which accounts for the majority of the Company’s revenue. The Company also serves customers across Latin America, notably in Mexico but also in Chile and Peru.

Value Propositions

Sempra Energy provides value to its customers in the following ways:

• The reliability and quality of its products and services, with the Company having established itself as a reliable and efficient utilities provider, securing a substantial customer bases across multiple customer segments, including public bodies and large commercial businesses;
• Its industry expertise and experience, with the Company employing highly-trained specialist personnel across its multiple operating segments, led by a team of experienced industry executives; and
• Its commitment to research and development, with the Company committing a portion of its resources to the development of new and innovative energy solutions, particularly in the field of alternative energy. ### Channels

Sempra Energy operates a website at www.sempra.com, through which it provides information on its various services, activities, and projects. The nature of the Company’s services, however, is not conducive with the operation of an online sales channel.

Sempra Energy owns and operates its own network of storage, distribution and transmission infrastructure, through which it provides its natural gas and energy products. The Company deals with its clients directly through an in-house sales force, which is organised across the Company’s separate operating segments and geographic operating regions. Sempra Energy has offices across the US, Mexico, Chile and Peru.

To a lesser extent, Sempra Energy also utilises the distribution and sales services of third-party energy and utility wholesalers and power generation companies.

Customer Relationships

Sempra Energy does not provide any products or services to its customers on a self-service basis. The Company, instead, consults directly with its customers, working closely with clients to agree multi-year sales and distribution agreements. The Company also works closely with a number of organisations, including public bodies, collaborating in the development of energy infrastructure and utility projects across the Americas. Across all of its operating segments Sempra Energy seeks to establish longstanding customer relationships, with a view to securing recurring business.

Sempra Energy provides ongoing support to its clients. The Company provides contact details for its various operating segments and business divisions on its websites, providing personal responses to queries and enquiries from existing and potential customers. Sempra Energy operates several social networking accounts, including with Twitter and LinkedIn, through which it can interact directly with clients and post updates on its corporate developments.

Key Activities

Sempra Energy operates as a holding company. Through its various operating subsidiaries, the Company provides a range of utility and energy infrastructure services to commercial, industrial, public, and residential customers.

The Company’s principal operating units are San Diego Gas and Electric Company, Southern California Gas Company, Sempra International – which includes Sempra South American Utilities and Sempra Mexico segments, and Sempra US Gas and Power – which includes Sempra Renewables and Sempra Natural Gas segments. The Company owns energy and utility distribution infrastructure across the US and Latin America, including a natural gas-fired power plant in Baja California, natural gas distribution systems in Mexicali, underground gas storage facilities and pipelines across multiple US states, and a regasification facility in Hackberry, Louisiana.

Key Partners

Sempra Energy’s multiple operating segments collaborate with a range of companies in the provision of their various products and services. These partners include:

• Supplier Partners, including suppliers of services, resources, tools, and technology that support and supplement the Company’s own suite of services;
• Joint Venture Partners, comprising a rage of energy and utility companies, with which the Company collaborates on joint projects through mutually-owned entities;
• Strategic and Alliance Partners, comprising a range of partners across various sectors with which the Company shares resources and collaborates on joint projects; and
• Channel Partners, comprising a range of energy and utility distributors, wholesalers and power generation companies, that assist in delivering the Company’s products and services to clients. Sempra Energy participates in a solar energy partnership with Consolidated Edison Development, through which it holds a stake in several solar energy facilities. It is also a 50-50 partner alongside Mexico’s state oil company Petroleos Mexicanos in operating a natural gas distribution network that begins at the US border.

Sempra also has a range of community and corporate social responsibility partners. This includes a recent tie-up with Habitat for Humanity, under which the Company’s staff assisted in construction of homes in Mexico.

Key Resources

Sempra Energy’s key resources are its gas and electricity supplies, its production and distribution infrastructure – including pipelines and power generating facilities, its various operating permits and licences, its sales and distribution channels, its information and technology systems, its partnerships, and its personnel.

Sempra Energy owns and leases a number of offices and facilities across the US and Latin America, including office complexes, warehouses, maintenance centres, and service facilities, and own certain equipment that is key to its activities. The Company also owns or part-owns various gas pipeline networks, underground gas storage facilities, power generation plants, regasification facilities, and energy distribution networks that are key to the Company’s ability to provide core energy services.

While Sempra Energy is involved in research and development activities, the Company does not appear to have any patents or intellectual properties that are material to the success of its ongoing activities.

Cost Structure

Sempra Energy incurs costs in relation to the purchase of gas and electricity, the operation and maintenance of its production, storage and transmission infrastructure, the acquisition of relevant permits and licences, the operation of its sales and distribution channels, the maintenance of its information and technology infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 Sempra Energy accrued total operating and maintenance costs in the amount of $2.90 billion. The Company also accrued substantial utilities expenses, including costs related to the purchase of natural gas totalling $1.34 billion and costs related to the purchase of electric fuel and power totalling $2.14 billion. Sempra Energy also incurs occupancy costs relating to the operation of its network of international offices, and personnel costs comprising the payment of salaries and benefits to its global workforce of more than 17,000 employees.

Revenue Streams

Sempra Energy generates revenue through the provision of various energy and utility services. This includes tariff revenues and tolls based on a charge per unit of electricity, revenue derived under capacity services agreements, and revenue derived from terminal service agreements, as well as revenue derived from the provision of energy marketing, scheduling and related services in support of sales of generated power.

In 2015 Sempra Energy generated $10.23 billion in annual revenue, down slightly on the $11.04 billion recorded by the Company in 2014. The majority of this revenue was derived from the Company’s utilities businesses, which amounted to $9.25 billion, with San Diego Gas and Electric Company and Southern California Gas Company recording respective revenue of $4.22 billion and $3.49 billion, and Sempra South American Utilities generating $1.54 billion.