Sempra (SRE) Q4 2025 Earnings Call Transcript

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Date

Thursday, February 26, 2026 at 12 p.m. ET

Call participants

• Chairman and Chief Executive Officer — Jeffrey Walker Martin
• Executive Vice President and Chief Financial Officer — Karen L. Sedgwick
• Executive Vice President and Chief Executive Officer, Sempra Infrastructure — Justin Christopher Bird
• Executive Vice President — Caroline A. Winn
• Chief Executive Officer, Oncor — E. Allen Nye
• Vice President, Investor Relations — Louise Bick

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Takeaways

• Adjusted EPS — $4.69 for the full year, at the high end of Sempra’s previously announced range, supported by utility investment prioritization and capital efficiency improvements.
• GAAP Earnings — $352 million, or $0.54 per share for the quarter, compared to $665 million, or $1.04 per share, in the prior-year period; annual GAAP earnings of $1.796 billion, or $2.75 per share, compared to $2.08 billion, or $4.42 per share, in 2024.
• Adjusted Earnings — $841 million, or $1.28 per share for the quarter; $3.066 billion, or $4.69 per share for the year, versus $960 million, or $1.50 per share, and $2.969 billion, or $4.65 per share, respectively, in 2024.
• 2026–2030 Capital Plan — $65 billion, up 17% from last year’s plan, with 95% allocated to utility investments; Oncor’s base plan includes only projects with regulatory approvals and Permian plan alignment.
• Capital Upside Opportunities — $9 billion in potential additional capital investments tracked within the plan period, notably tied to incremental Oncor transmission and resiliency projects outside the current base plan.
• Oncor Transmission Focus — Nearly 70% of Oncor’s planned CapEx targets transmission projects; Oncor is projected to construct more than half of ERCOT’s estimated $32 billion to $35 billion in required transmission buildout.
• Rate Base Growth Projections — Company-wide regulated rate base forecasted to increase from $57 billion to $97 billion by 2030, representing an 11% five-year CAGR; Sempra Texas rate base expected to grow at an 18% CAGR, outpacing California and becoming a majority share by 2030.
• LNG Franchise and Asset Sales — Sale of a 45% stake in Sempra Infrastructure Partners for $10 billion, implying a $22 billion equity value, and sale of Ecogas in Mexico for approximately $500 million at a 12.7x EBITDA multiple, both expected to close in 2026 subject to conditions.
• Dividend Policy — Company targets annual dividend growth of 2%-4% over the plan period, underpinned by strong earnings and cash flow projections.
• 2030 EPS Outlook — Newly issued 2030 adjusted EPS guidance set in the $6.70-$7.50 range, with a 2026 range of $4.80-$5.30 and 2027 range of $5.10-$5.70.
• Equity Issuance — Management stated: “we have eliminated the need for new common equity issuances to fund the base capital plan,” attributing this to $50 billion in operating cash flows and expected transaction proceeds.
• Balance Sheet Strength — Targets include FFO-to-debt cushion of 50-150 basis points above downgrade trigger thresholds post-transaction, enabled by deconsolidating Sempra Infrastructure debt and ongoing constructive rating agency engagement.
• Oncor Large Load Pipeline — Oncor’s interconnection queue now includes 273 gigawatts, with 255 gigawatts attributable to data centers, supported by $3.5 billion in customer collateral deposits as of the call.

Summary

Sempra (SRE +1.61%) detailed the launch of a record $65 billion capital plan for 2026-2030, prioritizing transmission investments in Texas and advancing its strategy to become a predominantly regulated utility holding company. Management highlighted the ability to fund this capital program without new common equity issuances, driven by $50 billion in internally generated cash flows and upcoming asset sale proceeds. The company affirmed 2026 earnings guidance, introduced 2027 targets, and issued a first-time 2030 EPS outlook, signaling improved growth visibility and discipline in capital allocation. Following planned asset sales, regulated earnings are projected to comprise approximately 95% of Sempra’s total by 2027, with further credit metric improvements expected after transaction closings. The call emphasized the concentration of future growth in Texas, the de-risked nature of Oncor’s transmission-focused CapEx pipeline, and the rapidly expanding queue of high-certainty, large load interconnections, particularly for data centers.

• Management confirmed that the $9 billion in incremental capital opportunities, primarily at Oncor, is currently outside the base plan and positions future growth into the upper half of the 2030 EPS guidance, contingent on regulatory and project approvals.
• Company credited the increase in projected internally generated cash flows—up over $5 billion versus the prior plan—for eliminating reliance on equity issuances and enhancing balance sheet flexibility through 2030.
• Oncor’s incremental CapEx opportunities—across non-Permian ERCOT projects, additional transmission upgrades, system resiliency, and LC&I interconnections—could be realized in 2028-2030 subject to ERCOT or regulatory milestones.
• Regulatory settlements in Texas, particularly Oncor’s comprehensive base rate review, are expected to strengthen earnings alignment to authorized ROE and stabilize cost structures through 2030, reducing the likelihood of another rate case before that year.
• Sempra California’s capital allocation is expected to remain modest relative to Texas, with ongoing regulatory initiatives focused on operational efficiency and policy engagement aimed at supporting SB 254 and wildfire fund stability.
• Management signaled continued focus on portfolio simplification, fortified credit metrics, and possible additional investor guidance updates following successful execution of major transactions and regulatory events in 2026.

Industry glossary

• CPUC-based operating margin: Operating margin derived from regulatory mechanisms and rates authorized by the California Public Utilities Commission for Sempra’s California utilities.
• FID: Final investment decision — a formal corporate commitment to proceed with a capital-intensive infrastructure project, typically in LNG or energy sectors.
• COD: Commercial operations date — the point at which a project is completed and begins generating revenue.
• GRC: General Rate Case — a regulatory process in which a utility requests approval to change rates, often based on updated costs and investments.
• ROE: Return on equity — the authorized or recognized rate of return a utility is allowed to earn on equity investment by regulators.
• UTM: Unified Tracker Mechanism — a regulatory construct employed at Oncor to align capital recovery with ongoing investments.
• Permian/STEP/LC&I: Respectively, Texas region in focus for reliability upgrades; Strategic Transmission Expansion Plan (765 kV); Large Commercial & Industrial customers interconnecting to transmission grid.
• Batch zero process: Initial ERCOT-led process to qualify or prioritize transmission projects for large new loads such as data centers in Texas.
• SRP: System Resiliency Plan — comprehensive infrastructure improvements for grid reliability and resilience, typically filed for regulatory review.

Full Conference Call Transcript

Operator: Good day, and welcome to Sempra’s fourth quarter 2025 earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Louise Bick. Please go ahead.

Louise Bick: Good morning, and welcome to Sempra’s fourth quarter 2025 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. We have several members of our management team with us today, including Jeffrey Walker Martin, Chairman and Chief Executive Officer; Karen L. Sedgwick, Executive Vice President and Chief Financial Officer; Justin Christopher Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Caroline A. Winn, Executive Vice President of Sempra; E. Allen Nye, Chief Executive Officer of Oncor; and other members of our senior management team.

Before starting, I would like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statement we make today. The factors that could cause our actual results to differ materially are discussed in the company’s most recent 10-Ks filed with the SEC. Earnings per common share amounts in the presentation are shown on a diluted basis, and we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. I also encourage you to review our 10-Ks for the year ended 12/31/2025.

I would also like to mention that forward-looking statements contained in this presentation speak only as of today, February 26, 2026, and it is important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to slide five, and let me hand the call over to Jeff.

Jeffrey Walker Martin: Thank you all for joining us today. Our success in 2025 reflects how well we performed against our priorities. In that regard, we introduced five value creation initiatives last year, designed to simplify Sempra’s business model, mitigate risk, and improve financial strength. The first value creation initiative was to prioritize utility investments with improved returns. During the year, we deployed $13 billion in CapEx, Sempra California increased CPUC-based operating margin, and Oncor improved capital efficiency through the implementation of the unified tracker mechanism. Together, these factors contributed to Sempra achieving record adjusted EPS of $4.69, at the high end of our 2025 adjusted EPS guidance range, while establishing a strong foundation for continued growth through 2030.

We continue to see compelling investment opportunities in Oncor’s service territory, with historic levels of transmission expansion continuing to advance. In order to support this build-out, we are excited to introduce a new record capital plan of $65 billion for 2026 to 2030, representing a 17% increase to last year’s plan. Karen will speak to this later in the call, including details about $9 billion of upside opportunities that we are tracking within the plan period. The second initiative was to highlight value in our LNG franchise. In September, we announced the sale of a 45% stake in Sempra Infrastructure Partners for $10 billion, implying over a $22 billion equity value.

We are pleased to recognize the significant value created on behalf of our shareholders at an attractive multiple, and we continue to expect to close that transaction in 2026, subject to closing conditions. Sempra Infrastructure also made progress during the year on several LNG projects by declaring FID on Port Arthur LNG Phase 2 and reaching mechanical completion at ECA LNG Phase 1. Also, Port Arthur LNG Phase 2 construction continues to proceed on schedule, and we are excited by the prospect of all these projects driving the growth profile of that business well into the next decade. Our third priority was to simplify the business and reduce portfolio risk, including the sale of non-core assets in Mexico.

In December, Sempra Infrastructure Partners entered into an agreement to sell Ecogas for the equivalent of approximately $500 million in U.S. dollars. We believe the implied 12.7x EBITDA multiple provides further support for the overall value of Sempra Infrastructure’s portfolio, and we look forward to completing that sale in 2026, subject to closing conditions. Our fourth initiative was to execute Fit for 2025, which focused on reducing our cost structure to meet our future business needs and included modernizing our workforce to improve organizational efficiency. We have more work to do in this area, and it will continue to be a focus in 2026.

Lastly, we wanted to elevate community safety and operational excellence across the enterprise, which culminated in California legislature passing SB 254, which strengthened the long-term stability of the state’s wildfire fund and called for further reductions to wildfire risk exposures through the natural catastrophe resiliency study to be published in April 2026. SDG&E being recognized as best in the West in electric customer reliability for the twentieth consecutive year. Now please turn to the next slide, where Karen will walk through our financial results.

Karen L. Sedgwick: Thank you, Jeff. Earlier today, Sempra reported fourth quarter 2025 GAAP earnings of $352 million, or $0.54 per share. This compares to fourth quarter 2024 GAAP earnings of $665 million, or $1.04 per share. Full year 2025 GAAP earnings were $1.796 billion, or $2.75 per share. This compares to 2024 GAAP earnings of $2.08117 billion, or $4.42 per share. On an adjusted basis, fourth quarter 2025 earnings were $841 million, or $1.28 per share. This compares to our fourth quarter 2024 earnings of $960 million, or $1.50 per share. Full year 2025 adjusted earnings were $3.066 billion, or $4.69 per share. This compares favorably to our previous full year 2024 adjusted earnings of $2.969 billion, or $4.65 per share.

We are pleased with our execution as adjusted EPS for the year came in at the high end of our previously announced 2025 adjusted EPS guidance range. Please turn to the next slide. Variances in the full year 2025 adjusted earnings compared to the same period last year can be summarized as follows. At Sempra Texas, we had $80 million of higher equity earnings from the UTM, higher invested capital, and customer growth, partially offset by higher interest expense, depreciation, and O&M. Turning to Sempra California, we had $213 million primarily from lower income tax benefits and higher net interest expense.

As a reminder, fourth quarter 2024 and full year 2024 results were impacted by the recognition of two years’ worth of income tax benefits from last year’s GRC final decision. Sempra California also had $148 million of higher CPUC-based operating margin net of operating expenses, regulatory disallowances, and a lower cost of capital. At Sempra Infrastructure, we had $123 million primarily from higher asset and supply optimization, higher transportation results, and lower depreciation on assets held for sale, which were partially offset by lower income tax benefits. At Sempra parent, $41 million of higher losses is from higher net interest expense partially offset by higher income tax benefit, higher investment gains, and other. Please turn to slide nine.

To start, I would like to extend our appreciation to our current shareholders for supporting our mission, and as we look to build upon the momentum established in 2025, Jeff has laid out a series of priorities for 2026, and I am pleased to note that we have already hit several important milestones. Oncor has successfully reached a comprehensive settlement in its base rate review. The settlement contemplates improvements to the authorized equity layer, ROE, and cost of debt. If approved by the PUCT, this outcome will better align Oncor’s cost structure to the current environment and is also expected to improve Oncor’s financial strength and credit metrics during this period of exceptionally high growth.

A final order is expected in the first half of this year, and importantly, Oncor expects to earn very close to its authorized ROE over the 2026 to 2030 time frame. At Sempra Infrastructure, Port Arthur LNG Phase 1 remains on schedule for achieving COD at or near 2027. And finally, in California, I would like to note we continue to be engaged in efforts to improve public policy to support SB 254 follow-on legislative efforts. We look forward to updating you on these priorities on our next earnings call. With that, please turn to the next slide.

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