Sempra — 2024 Q1

Yes, I appreciate the question. And I think we're in good shape on our balance sheet. I'll remind everyone, Shar, that we have a track record of efficiently financing our growth and that's been a big part of our success, as you know, since 2018. In fact, over the last 5 years, we've been successful at growing our adjusted EPS at roughly a 10% annual growth rate. Our current plan, as you know, contemplates we'll make about $48 million of investments through 2028. We certainly think there's opportunities to continue to grow that plan.

Yes, we are.

Yes. I think there's going to be an opportunity as we get through our rate case. You'll recall that we're expecting to have our proposed decision later this quarter and a final decision at the end of the year. And those are the type of issues that we would reconcile on the then next earnings call, which could be as early as Q3 to make sure we provide real clear visibility to the impact of the rate case on our forward earnings.

Well, it's certainly a great question. Obviously, ERCOT just released their latest information in the last couple of weeks. Allen noted this in his prepared remarks, but it's pretty amazing that you could take the peak demand load in America's largest economic environment, which is California, and the expectation is in Texas that look to grow back much between now and 2030. The key thing that Allen has mentioned before, too, is ERCOT is right in the middle of this growth story, right? So as you think about growth opportunities, we think that between 40% and 50% of that would fall to his service territory. And there's no question that this will be evaluated in the fall as Allen and his team put their plan together.

Yes, let me make a couple of kind of contextual comments, and I'll turn it over to Allen. Just yesterday, they made their inaugural filing. You know from our materials, it's $3 billion over 3 years. And one of the things that we're interested in at Sempra, very much like all the investments that we make across our different growth platforms, this plan is intended to harden our system to withstand extreme weather conditions, reduce restoration outage times and improve overall reliability.

Yes, sure, Jeff. And thanks for the question, Jeremy. Going back to Jeff's point to our original -- our current 5-year capital plan is presently at $24.2 billion. And that breaks down generally into about $5.1 billion for distribution expansion, about $13.5 billion for transmission expansion, $4.2 billion for maintenance, and about $1.4 billion for technology. And again, as I've said before, that demonstrates about 70% of our capital plan is growth. 97% of our capital plan or more is recoverable through our trackers, and that provides us right now with a very, we think, solid industry-leading rate base CAGR of around 11%.

Allen, if you would, maybe as a follow-up, going to kind of the heart of Jeremy's question, I don't want to get in front of your regulator, but could you just kind of define the value proposition that you think that the plan will deliver?

Well, sure, Jeff, and I think you said it very well. And I've said on prior calls, I view this and I think we view this as a historic opportunity to really directly take action on our system to the benefit of our customers in the ERCOT market. And I think each one of these categories would provide very specific benefits from resiliency to avoidance and prevention of wildfires to better reliability, all things that will benefit our customers very directly.

Thank you.

Yes. Thank you for asking me that question, Durgesh. I think I would start by saying that 2 things come to mind. First is, we believe the permitting pause is temporary and that permits will be issued in the future. I mean, many of you followed the comments that were made at the CERAWeek. I think Secretary Granholm has repeatedly now said that she anticipates this issue will be in the rearview mirror at some point early next year.

Sure. I would mention 2 things. One is we have guided our expected FID for Cameron expansion to the first half of 2025. We have not yet set an FID expectation for Port Arthur Phase 2. But I can assure you that Justin's team continues to make steady progress. I mean, as you go quarter-over-quarter, we are continuing to make progress and commercially developing both of those projects, and I think the momentum inside of our company continues to build on their overall success.

Thank you so much.

Yes. Let me start with the procedural point and then I'll pass it on to Allen to talk about how he expects that capital to go forward. Obviously, they've made the filing yesterday, which was contemplated in the legislative bill that passed last year. The commission has a statutory 180 days to review and approve the filing. So I think for now, we're expecting that to be in hand in the fourth quarter.

Yes, you bet, Jeff. Pretty simply, it's basically 2025 through 2027 for those outlays and it's slightly backloaded.

Yes. I said something about this in my prepared remarks. We continue to see some supply chain constraints in some areas, but in general, we're seeing obviously load growth across all of our markets and there's been some relaxation of the supply chain issue. I think Oncor in particular, and both Justin and I serve on their Board of Directors, have done a really good job of going into the marketplace to secure the appropriate contractors and hard goods. But Allen, perhaps you could talk about the work that the team has done. And over what period of time do you feel like you've got what you need locked in?

Sure. Yes. Carly, it's a great question. Again, as Jeff said, we at Oncor and our operations and our supply chain people had been working to get in position to be able to execute on this plan for quite a while now. And we've done a number of things, including diversifying our supply chain, adding additional suppliers 5 and 6 years ago that have put us in a position now to while there certainly are issues out there with supply chain, we feel extremely confident in the first 2 years.

And then, Carly, the only other thing I would add to Allen's comments is think about his base capital plan, which is just over $24 billion, is really organized around growth. And specifically, it is weighted toward transmission. So roughly 60% of that spend is transmission. And I think that's why this SRP filing is so important. It really creates a second leg of growth specifically around building in redundancy and resiliency in the system, which is equally important to the state of Texas.

Yes, I'll make a couple of comments here. One is, Steve, Conoco is a very important strategic partner for us at Port Arthur. I would note that we've got a lot of respect for their management team and certainly have great relationships across both companies and I think a strong alignment of interest, and this is the key point around both Phase 1 and Phase 2.

Yes. What might be helpful here, Anthony, is Justin, if you just take us through maybe a little bit of a construction update as well as what you're doing to secure some long lead time items on some of the projects to your near-term focused, and that might be helpful for his question.

Yes, yes. Hi, Anthony, and thank you, Jeff. Yes. So let me start with construction and then I'll go to the heart of your question. So we're seeing solid progress at construction at both ECA Phase 1 and Port Arthur Phase 1. I've had opportunities to visit both sites recently. Jeff and I were at ECA just 2 weeks ago observing construction. And I was at Port Arthur recently for the 1-year commemorative groundbreaking. Both projects remain on track. We're not seeing the supply chain issues.

Anthony, I'd also mention to the heart of your question, the Bechtel relationship is a strategic relationship for us. They're very, very helpful, kind of the best in the business in the [ Gulf ]. And that's why Justin commented on the importance of not demobilizing Phase 1 and going right into a continuous build into Phase 2 at Port Arthur. I would also note that his team has master purchase agreements with all the key vendors in place. And there's a lot of focus on making sure we're sourcing the key equipment and particularly planning in advance to long lead time items. So that all goes into the box of how we manage risk to make sure that we're delivering projects that create the right risk reward for our owners.

Yes, let me provide a little bit of context for that because we're excited about that project. Let me start, Anthony, with the fact that we rolled out our new corporate strategy back in 2018. And really, at the heart of that strategy was a more narrow focus on 2 things, the first of which was building leadership and scale advantages in large economic markets; and number two, more narrowly invested in the energy value chain around T&D type of infrastructure investments like Cimarrón where we can produce highly recurring cash flows.

Yes, thanks for the question, Craig. I think you talked a little bit about supply chain, about labor, but let me go to the heart of your question at the end there. So I think the LNG pause, I would say, I think there was some time to react to that in the marketplace. You saw some people step back maybe with a little less desperation than they maybe had as part of the war in Ukraine. But I will say, and I think we've said it multiple times on this call, we are still seeing a robust commercial interest in our projects, our projects, our expansion opportunities. We've been a strong partner. So we're seeing robust interest. And I'd say currently, we have teams around the world actively engaged in commercial discussions for long-term contracted volumes.

I would also add, Craig, I appreciate your question. If it's all about seize the day, I'm betting on Justin's team. We're very excited about the progress we're making on the LNG front and look forward to providing updates in the future.

Let me just start by thanking everyone for joining us today. I know there were competing calls this morning so we appreciate everyone making the time to join us. As Karen mentioned, we certainly believe we have a compelling value proposition with a strong growth and income story. Our management team is committed to the long-term success of Sempra, and we believe there's an incredible opportunity for us to continue innovating and finding new and better ways to serve customers while also delivering strong financial returns to our owners.