Sempra Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Growth Narrative: Jeff Martin emphasized the strengthening growth narrative in energy infrastructure due to economic expansion, rising demand, and need for infrastructure investment. Sempra is well-positioned with leading utility platforms in Texas and California, and an infrastructure business with scale.
• Oncor Updates: Allen Nye highlighted Oncor's $24 billion five-year capital plan, system resiliency plan (SRP), growth in Permian Basin (ERCOT projects, local and transmission CapEx), and plans for an extra high voltage grid.
• California and Infrastructure: Karen Sedgwick provided updates on Sempra California's general rate cases, SDG&E's electric demand growth (record peak demand from EVs and electrification), and Sempra Infrastructure's LNG activities (Cameron LNG's performance, ECA LNG Phase 1 progress, GRO pipeline expansion, Port Arthur Phase 1/2 progress, and waiting for DOE non-FDA export permit for Port Arthur Phase 2).

Segment Performance

• Sempra California: In Q3 2024, had $9 million from higher CPUC base operating margin (net of operating expenses, including higher authorized cost of capital and regulatory interest income), but this was more than offset by $52 million from lower income tax benefits and higher net interest expense.
• Sempra Texas: Had $44 million of lower equity earnings due to higher interest/operating expenses and lower consumption, partially offset by higher revenues from invested capital and customer growth.
• Sempra Infrastructure: Had $36 million of lower revenues in transportation/renewables, higher O&M, and lower asset/supply optimization, partially offset by $7 million from higher income tax benefit and lower net interest (due to higher capitalized interest).

Guidance

• Affirmed full-year 2024 adjusted EPS guidance range, 2025 EPS guidance range, and projected long-term EPS growth rate.
• Established a $3 billion at-the-market equity program to finance capital expenditures.
• Expect to provide a full update on the roll-forward capital program, including sources and uses of funding, and 2026 guidance in February.

Risks

• Regulatory Uncertainties: In California, uncertainties related to general rate cases and need for additional investments in safety/reliability (e.g., undergrounding for wildfire mitigation, integrity management).
• Permitting Challenges: Waiting for DOE non-FDA export permit for Port Arthur Phase 2 and uncertainties in transmission project permitting.
• Geopolitical Impact: Geopolitical developments affecting LNG market dynamics (e.g., EU actions on Russian gas imports).

Question and Answer

• Q: Nick Campanella asked about EPS growth and equity program. A: Jeff Martin discussed sector EPS growth trending higher than historical norms and the $3 billion ATM as a financing tool for growth in capital expenditures.
• Q: Shar Pourreza asked about the $3 billion ATM funding CapEx. A: Jeff Martin explained the comprehensive capital planning process and that the ATM is an additional financing tool, with details on the roll-forward capital program to be provided in February.
• Q: Julien Dumoulin-Smith asked about Oncor's growth statistics. A: Allen Nye provided details on Oncor's growth drivers (e.g., 19,000 premise count increase, 38% jump in transmission points of interconnection, 103 GW of potential load additions from large customers).
• Q: Carly Davenport asked about LNG outlook and Port Arthur Phase 2 permit. A: Justin Bird discussed progress on Port Arthur Phase 2, ongoing commercial discussions, and the need to wait for DOE non-FDA export permit (expected in first half of next year).
• Q: Durgesh Chopra asked about equity and LNG permit. A: Jeff Martin discussed the capital planning process and that more details on the roll-forward program and LNG permit timeline will be provided in February.
• Q: Steve Fleishman asked about California rate case proposals. A: Jeff Martin discussed the regulatory process in California, efforts to balance customer affordability and safety investments, and that comments would be filed tomorrow to inform the process.