Sempra’s Solid Financial Performance in Q1 2025

Sempra, a leading energy infrastructure company, has reported its financial results for the first quarter of 2025. The company’s three main business segments - Sempra California, Sempra Texas Utilities, and Sempra Infrastructure - all contributed to the strong overall performance.

Sempra California Leads the Way

Sempra California, which includes the utility operations of SDG&E and SoCalGas, saw a 24% increase in earnings compared to the same period in 2024. This was primarily driven by higher CPUC-authorized base operating margins, lower authorized cost of capital, and increased income tax benefits.

SDG&E and SoCalGas were able to recover certain costs through regulatory mechanisms, helping to offset changes in natural gas and electricity prices. The companies also benefited from higher CPUC-authorized revenues, including for certain capital projects, as well as increased revenues associated with refundable programs.

Sempra Texas Utilities Sees Decline

In contrast, Sempra Texas Utilities experienced a 20% decrease in earnings. This was mainly due to lower equity earnings from Oncor Holdings, driven by higher interest expense, depreciation, and operating and maintenance costs. However, this was partially offset by overall higher revenues, which were attributable to rate updates, increased customer consumption, and customer growth.

Sempra Infrastructure Delivers Strong Results

Sempra Infrastructure saw an 11% increase in earnings. This was primarily due to favorable foreign currency and inflation effects, lower provisions for expected credit losses, and higher interest income. These positive factors were partially offset by lower optimization of transport and storage contracts, higher unrealized losses on commodity derivatives, and lower unrealized gains on commodity derivatives at the TdM facility.

The company’s energy-related businesses saw a 20% decrease in revenues, mainly due to lower optimization of transport and storage contracts and higher unrealized losses on commodity derivatives. However, this was partially offset by higher revenues from customer payments received in advance and the commencement of commercial operations at the Topolobampo marine terminal.

Operational and Financial Highlights

Some key operational and financial highlights for Sempra in Q1 2025 include:

• Sempra’s natural gas revenues increased by 12% to $2.362 billion, driven by higher CPUC-authorized revenues and revenues associated with refundable programs at Sempra California.
• Sempra’s cost of natural gas decreased by 11% to $493 million, primarily due to lower average natural gas prices and volumes at Sempra California.
• Sempra’s electric revenues increased by 0.3% to $1.059 billion, with higher CPUC-authorized revenues and revenues associated with refundable programs at Sempra California offsetting lower regulatory revenues.
• Sempra’s cost of electric fuel and purchased power decreased by 42% to $52 million, mainly due to lower purchased power costs at Sempra California.
• Sempra’s operation and maintenance expenses increased by 11% to $1.343 billion, primarily driven by higher expenses associated with refundable programs at Sempra California.
• Sempra’s interest expense increased by 42% to $433 million, mainly due to higher debt balances and unrealized losses on interest rate swaps at Sempra Infrastructure.
• Sempra’s income tax expense decreased by 67% to $57 million, primarily due to lower foreign currency and inflation effects on monetary positions in Mexico and higher income tax benefits.
• Sempra’s equity earnings decreased by 7% to $325 million, mainly due to higher interest expense and operating and maintenance costs at Oncor Holdings.
• Sempra’s earnings attributable to noncontrolling interests decreased by 97% to $2 million, primarily due to unrealized losses on interest rate swaps related to the PA LNG Phase 1 project.

Liquidity and Capital Resources

Sempra, SDG&E, and SoCalGas maintain strong liquidity, with $1.739 billion, $607 million, and $40 million in unrestricted cash and cash equivalents, respectively, as of March 31, 2025. The companies also have access to significant available unused credit, with $8.5 billion, $1.363 billion, and $1.053 billion, respectively.

Sempra has been active in the capital markets, establishing an at-the-market (ATM) program for the sale of up to $3 billion in common stock. As of March 31, 2025, the company had sold 4,996,591 shares under forward sale agreements, with the potential to raise an additional $415 million in net proceeds if the remaining 4,996,591 shares are physically settled.

The company has also made several long-term debt issuances, including $850 million in SDG&E first mortgage bonds, $54 million in Sempra Infrastructure variable rate notes for the ECA LNG Phase 1 project, $881 million in Sempra Infrastructure variable rate notes for the PA LNG Phase 1 project, and $750 million in Sempra Infrastructure senior secured notes for the PA LNG Phase 1 project.

Regulatory and Legal Matters

Sempra California’s operations are subject to regulatory oversight by the California Public Utilities Commission (CPUC). In December 2024, the CPUC approved a final decision in the 2024 general rate case (GRC) for SDG&E and SoCalGas, authorizing their revenue requirements for 2024 and attrition year adjustments for 2025 through 2027.

SDG&E and SoCalGas have also filed separate requests in the 2024 GRC, known as Track 2 and Track 3 requests, seeking recovery of additional wildfire mitigation and pipeline safety enhancement costs. These requests are currently under review by the CPUC.

Sempra Infrastructure’s operations in Mexico are subject to potential challenges related to land disputes, environmental and social impact permits, as well as regulatory and other actions by the Mexican government. Recent changes to the Mexican Constitution and energy-related laws have increased the government’s control and participation in the energy sector, which could adversely affect Sempra Infrastructure’s ability to operate its existing assets and develop new projects in Mexico.

Outlook and Risks

Sempra’s overall financial performance in Q1 2025 was strong, with the Sempra California segment leading the way. However, the company faces several risks and uncertainties going forward, including:

• Potential delays or cost overruns in the development and construction of Sempra Infrastructure’s major projects, such as the LNG facilities and pipelines.
• Regulatory and legal challenges in Mexico that could impact Sempra Infrastructure’s operations and projects.
• Continued inflationary pressures and the ability to recover higher costs in rates or through contractual adjustments.
• Potential changes in Oncor’s capital expenditure plan and the impact on Sempra’s own capital expenditures.
• The ability to maintain investment-grade credit ratings and access capital markets on favorable terms.

Despite these risks, Sempra remains well-positioned to continue delivering solid financial performance and executing on its strategic priorities across its diverse portfolio of energy infrastructure assets.