SREA — Sempra

Sempra (SREA) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• GAAP Earnings: $1.37 billion, or $1.58 per share, compared to $906 million, or $1.39 per share in Q1 2025.
• Adjusted Earnings: $991 million, or $1.51 per share, up from $942 million, or $1.44 per share in the same quarter last year.
• Oncor's Rate Review: Positive financial impacts from Oncor's base rate review will primarily be recognized in Q2 2026.

2. Strategic Updates and Business Highlights

• Investment Initiatives: Sempra is on track to invest approximately $13 billion in transmission and distribution (T&D) energy infrastructure, having deployed $3 billion in Q1 2026.
• Oncor Developments: Received approval for a base rate review with a higher authorized equity layer (43.5%) and return on equity (9.75%). Oncor is also pursuing a UTM filing to incorporate $4.4 billion of T&D assets into rates.
• SDG&E Settlement: Filed an uncontested settlement with FERC to increase SDG&E’s authorized return on equity to 10.28%.
• Sempra Infrastructure: Declared commercial operation date (COD) at Cimarron Wind and initiated feed gas at ECA LNG Phase 1, expecting first LNG production next month.
• Capital Recycling: Progressing with the SI Partners transaction and the Ecogas sale, aimed at reinvesting proceeds into utility businesses.

3. Forward Guidance and Outlook

• 2026 Adjusted EPS Guidance: Affirmed range of $4.80 to $5.30, with 2027 EPS guidance of $5.10 to $5.70.
• Long-term EPS Growth Rate: Projected at 7% to 9%, one of the highest in the utility sector.
• Capital Plan: Executing a $65 billion capital plan with a focus on Texas, expecting significant rate base growth.

4. Challenges and Points of Concern

• Interest Expenses: Higher interest expenses and depreciation are impacting earnings across segments.
• Regulatory Risks: The approval of settlements and filings remains subject to regulatory scrutiny, particularly with FERC and state commissions.
• Labor Constraints: Emerging labor constraints could impact execution on capital projects, although management is optimistic due to the attractiveness of long-term work opportunities.

5. Notable Q&A Insights

• Oncor's Load Growth: Management expressed confidence in Oncor's ability to manage increased load growth, with a solid capital plan independent of data center developments.
• LNG Strategy: Sempra is shifting towards a lower-risk utility-focused strategy, reducing capital allocation to LNG while maintaining a bullish outlook on U.S. LNG market opportunities.
• Wildfire Liability Legislation: Management is optimistic about potential legislative changes in California to address wildfire risks, highlighting a collaborative approach among stakeholders.
• Supply Chain Management: Oncor is diversifying its supply chain and securing labor contracts to mitigate risks associated with labor availability and project execution.

This summary encapsulates the key financial results, strategic initiatives, forward guidance, challenges, and insights from the Q&A, providing a balanced view of Sempra's current position and outlook.