Company: SREA
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001032208-25-000012
Chunk: 201

Company: SEMPRA
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1
Chunk 201
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, among other mechanisms, to hedge a portion of our known or anticipated purchase and sale commitments, inventories of natural gas and LNG, natural gas storage and pipeline capacity and electric generation capacity in an effort to reduce our, and for SDG&E and SoCalGas, customers’ financial exposure related to commodity price fluctuations. In addition, we have used and may continue to use similar financial instruments to hedge against changes in interest rates. The extent to which we hedge our positions varies over time. Certain derivative instruments are recorded at fair value through earnings to reflect movements in the price of the derivative, which has recently and could in the future create volatility in our earnings. The effect of such commodity derivative instruments for SDG&E and SoCalGas are passed through to customers in rates without markup. To the extent we have unhedged positions, or if any hedging counterparty fails to fulfill its contractual obligations or if our hedging strategies do not work as intended, fluctuating commodity prices and interest rates could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Risk management procedures may not prevent or mitigate losses.

Although we have risk management and control systems designed to quantify and manage risk, these systems may not prevent material losses. Risk management procedures may not always be followed as intended or function as expected. In addition, daily VaR and loss limits, which are primarily based on historic price movements and which we discuss in “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” may not protect us from losses if prices significantly or persistently deviate from historic prices. As a result of these and other factors, our risk management procedures and systems may not prevent or mitigate losses that could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

An impairment of our goodwill or long-lived assets could result in a material charge to earnings.

We test long-lived assets, including equity method investments, for recoverability when events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the assets. We test goodwill for impairment annually or when events or changes in circumstances necessitate a valuation. We could experience such an event or change in circumstances from, among other things, (i) an inability to operate our existing facilities, (ii) an inability to collect from customers, (iii) changes to laws or regulations or other circumstances affecting the energy sector or our assets in Mexico, (iv) adverse rulings in lawsuits, binding arbitrations,