Sempra (SRE) Q1 2026 Earnings Transcript

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Thursday, May 7, 2026 at 12 p.m. ET

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​Image source: The Motley Fool.Thursday, May 7, 2026 at 12 p.m. ETNeed a quote from a Motley Fool analyst? Email pr@fool.comContinue reading 

Image source: The Motley Fool.

Thursday, May 7, 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, Controller and Chief Accounting Officer — Diane Wold

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TAKEAWAYS

• GAAP Earnings — $1.37 million and $1.58 per share, compared to $906 million and $1.39 per share in the prior-year quarter.
• Adjusted Earnings — $991 million and $1.51 per share, up from $942 million and $1.44 per share last year.
• Oncor Base Rate Review — Approved by PUCT; authorized equity layer at 43.5%, ROE set at 9.75%, and cost of debt at 4.94% with a surcharge to recover differences between new and old rates for January to June 2026.
• Oncor UTM Filing — $4.4 billion of T&D assets included in rates via inaugural UTM filing, with future UTM filings permitted every 365 days and a final order expected in 2026.
• SDG&E FERC TO6 Settlement — Uncontested offer filed; proposed authorized ROE is 10.28% on 54% equity, subject to FERC approval with retroactive terms to June 2025 if approved.
• Texas Large-Load Queue — Oncor’s 2026 RTP submission included 102.22 GW large-load (≥75 MW) and 5.2 GW medium-load (>25 MW-<75 MW); total substantiated load now stands at 127 GW meeting ERCOT SP6 requirements.
• Incremental Texas CapEx — $10 billion of incremental CapEx bucket identified, with $2.9 billion of South Dallas projects released by ERCOT in the last two weeks, included in incremental opportunities.
• Record Capital Plan — $65 billion capital plan affirms full-year 2026 EPS guidance of $4.8 to $5.3 and 2027 range of $5.1 to $5.7; projected long-term EPS growth remains at 7%-9%.
• Sempra Infrastructure Developments — Cimarron Wind declared COD, ECA LNG Phase 1 introduced feed gas and expects first LNG next month with substantial completion targeted for summer.
• SI Partners Transaction — Key regulatory approvals received; transaction targeted to close in 2026 with proceeds to be recycled into utilities.
• Supply Chain and Labor — Oncor has secured supply contracts for its first three years of base plan and has understandings for the following two years; contract labor usage has nearly tripled to address execution risk.
• Ecogas Sale — Transaction on track to close in the second or third quarter as part of ongoing capital recycling and business simplification strategy.

SUMMARY

Sempra (SRE 2.24%) detailed multiple regulatory wins in both Texas and California, highlighted by approval of Oncor’s base rate case and the pending FERC settlement for SDG&E, both designed to improve authorized utility returns and reduce regulatory lag. Management confirmed timing for major capital deployments, the closure of strategic transactions (SI Partners, Ecogas), and the execution of LNG and renewables milestones. Separate from its core plan, Sempra identified substantial incremental investment opportunities in Texas, signaling additional upside for long-term rate base growth. Executives emphasized that current and anticipated supply chain and labor resources have positioned the company to pursue these opportunities with minimal execution risk through the decade.

• Martin said, “Oncor is growing earnings at 30% annually through the midpoint of its 2027 guidance,” directly tying regulatory and investment actions to realized growth rates.
• Oncor’s ability to recover costs on $4.4 billion of T&D assets placed in service since January 2025 through the UTM process may further narrow the gap between earned and authorized ROEs on a recurring basis.
• SDG&E’s TO6 settlement, if approved by FERC, will increase authorized returns and apply retroactively, providing backward earnings lift if finalized in the year’s second half.
• Management highlighted $9 billion of incremental capital opportunities, predominantly in Texas, beyond the formal $65 billion capital plan, indicating a higher rate base concentration in that geography by the decade’s end.
• The company reaffirmed its shift away from energy infrastructure investments outside regulated utility growth, stating its future “corporate strategy is moving to a lower-risk profile focused on our U.S. utilities.”
• Oncor’s large pipeline of supply contracts and contractor relationships was repeatedly described as a competitive advantage in de-risking future execution on both base and incremental capital plans.

INDUSTRY GLOSSARY

• UTM (Universal Tariff Mechanism): Texas regulatory process enabling utilities to incorporate new transmission and distribution assets into rate structures annually, thus reducing regulatory lag.
• RTP (Regional Transmission Plan): A forward-looking ERCOT study and planning process determining future transmission builds by quantifying and prioritizing large electric system loads.
• SP6 (ERCOT Standard Practice 6): Document specifying requirements for substantiating large-load transmission needs within ERCOT’s transmission planning.
• CCN (Certificate of Convenience and Necessity): A state regulatory approval required before a utility can begin construction of new transmission projects in Texas.
• TO6 (Transmission Owner Rate Case 6): SDG&E’s Federal Energy Regulatory Commission proceeding setting terms for cost recovery and authorized return on high-voltage transmission investments.
• COD (Commercial Operation Date): Milestone indicating that an energy facility (e.g., wind, LNG) has completed construction and begun commercial operation.

Full Conference Call Transcript

Louise Bick: Good morning, and welcome to Sempra’s first quarter 2026 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 Diane Wold, Vice President, Controller and Chief Accounting Officer, along with 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-Q filed with the SEC. Earnings per common share amounts in our 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 reconciliation to GAAP measures. We also encourage you to review our 10-Q for the quarter ended 03/31/2026.

I would also like to mention that forward-looking statements contained in this presentation speak only as of today, 05/07/2026, 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 3. Let me hand the call over to Jeffrey Walker Martin.

Jeffrey Walker Martin: Thank you all for joining us today. We are pleased with our first quarter financial results and the progress we have made against our 2026 value creation initiatives. Let me start by walking through the key developments from the quarter. Recall, our first initiative is to invest approximately $13 billion in T&D energy infrastructure while also emphasizing improved financial returns. 2026 has started on a positive note with Sempra deploying $3 billion of investment capital in the first quarter, which keeps us on track to meet our annual target. As for improving returns, Oncor received approval from the PUCT for the settlement of its base rate review.

This decision comes with a higher authorized equity layer at 43.5%, higher return on equity at 9.75%, and a higher cost of debt set at 4.94%. Additionally, Oncor is permitted to surcharge the difference between the new billing rates and Oncor’s current rates for the period January 1 to 06/01/2026. Based on the final order received last month, the surcharge will be made through a separate filing with recovery expected over the remainder of the year. Ultimately, this outcome is expected to better align rates with Oncor’s current cost structure and support improved financial strength and credit metrics during a period of elevated capital investment that helps support Texas’ growing energy needs.

For more information on the improved decision, please refer to Slide 11 in the appendix. I also want to note that Oncor submitted its inaugural UTM filing last month to incorporate $4.4 billion of T&D assets that were placed into service since 01/01/2025 into rates. Importantly, the UTM helps meaningfully reduce regulatory lag by allowing recovery on these assets and, going forward, can be filed every 365 days. We anticipate a final order and updated rates in 2026. In combination, the rate case approval and periodic UTM filings put Oncor in a better position to earn closer to its authorized ROE across the plan period.

In California, SDG&E filed an uncontested offer of settlement in its TO6 proceeding with FERC, which establishes the authorized framework for SDG&E’s cost to own, operate, and maintain high-voltage transmission infrastructure. Similar to improving financial returns at Oncor, the offer of settlement is important because it would also increase SDG&E’s authorized base return on equity to 10.28% with a hypothetical capital structure of 54% equity, among other items. The terms of the settlement remain subject to FERC approval, which is expected to occur in the second half of this year. Importantly, if approved, the settlement terms would be retroactive to 06/01/2025. Now turning to Sempra Infrastructure. We declared COD at Cimarron Wind during the quarter.

At ECA LNG Phase 1, we introduced feed gas from the GRO pipeline into the facility and began the startup process. We continue to expect to produce first LNG next month, and we are targeting substantial completion this summer. At that point, we will begin recognizing LNG revenues, with long-term contracted sales and full commercial operations commencing shortly thereafter. Port Arthur LNG Phase 1 and Phase 2 construction projects continue to progress on time and on budget. Another one of our top priorities for the year is to close the SI Partners transaction and use the associated proceeds to reinvest in our utility businesses.

We are making progress toward completing the transaction and have recently received key approvals from FERC and antitrust regulators. We expect to close the transaction in 2026. We also remain focused on simplifying Sempra’s business model to concentrate our future investments on our utilities, which we previously projected would grow rate base at roughly 11% annually through 2030. That is why we are continuing to advance our capital recycling program. Consistent with this initiative, the previously announced Ecogas sale remains on track to also close in the second or third quarter of this year. As you know, we also have a relentless focus on modernizing operations to support improving our cost structure and building out our execution capabilities.

In that regard, Oncor continues to make strides diversifying its supply chain while reducing execution risk. Currently, they are growing their supply base across multiple sourcing categories, securing labor and materials, expanding logistics and warehousing capacity, and strengthening physical security. Lastly, we continue to prioritize community safety, affordability, and operational excellence across the enterprise. As an example, during January’s winter storm Fern, SoCalGas’ natural gas storage facilities helped both SoCalGas and SDG&E customers avoid approximately $120 million in higher potential energy cost by withdrawing natural gas purchased months earlier. The effective use of these assets highlights the clear value of natural gas storage and how it can be used successfully to support customer affordability.

Additionally, the California Earthquake Authority published its natural catastrophe resiliency study in April. It outlined several potential pathways to improve affordability in the state and improve community safety. We are encouraged by the report and will closely monitor developments informed by the study’s findings as the year progresses. 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 first quarter 2026 GAAP earnings of $1.37 million or $1.58 per share. This compares to first quarter 2025 GAAP earnings of $906 million or $1.39 per share. On an adjusted basis, first quarter earnings were $991 million or $1.51 per share. This is an increase to our first quarter 2025 earnings of $942 million or $1.44 per share. I would also note that the positive financial impact for the first quarter of Oncor’s base rate review will be primarily recognized in the second quarter, given the PUCT order was not issued until April.

We are pleased with our financial results for the quarter and look forward to building on them for the remainder of the year. Please turn to the next slide. Experiences in the first quarter 2026 adjusted earnings compared to the same period last year can be summarized as follows. At Sempra Texas, we had $25 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 $44 million of increased earnings primarily from higher CPUC base operating margin net of operating expenses. Sempra California also had $48 million of lower income tax benefits and higher net interest expense.

At Sempra Infrastructure, earnings increased by $34 million primarily from lower depreciation due to the classification as held for sale, partially offset by other items. At Sempra Parent, we had $6 million of higher losses from higher net interest expense and net investment losses, partially offset by other items. Please turn to the next slide. With solid first quarter results and progress against our key initiatives, we are affirming our full-year 2026 adjusted EPS guidance range of $4.8 to $5.3 and 2027 EPS guidance range of $5.1 to $5.7. We are also affirming our projected long-term EPS growth rate of 7% to 9%.

We remain focused on achieving the key milestones we have laid out for the remainder of the year, including closing the SI Partners transaction and recycling that capital back into our utilities, continuing to simplify the business with the completion of the Ecogas sale, and strengthening the balance sheet post-close through parent debt paydown and the deconsolidation of SI Partners, as well as working with the rating agencies as we continue to improve our credit profile. In addition, we are executing on a record $65 billion capital plan that supports strong projected rate base growth across the plan period.

Also, a central feature of our capital plan is that we are investing more in Texas, where we expect to derive a majority of our rate base by the end of the decade. What is more, we have improving visibility into approximately $9 billion incremental capital opportunities beyond the base plan, which is also primarily concentrated in Texas. In short, Sempra is well positioned to achieve our projected long-term EPS growth rate of 7% to 9%, which is one of the highest in the utility sector.

We look forward to building on our early momentum and continuing to execute our corporate strategy, which aims to provide investors with a compelling mix of current yield, durable earnings growth, and long-term capital appreciation.

Operator: We will now open the call for questions. Please limit your questions to one question and one follow-up. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. Our first question will come from Shahriar Pourreza from Wells Fargo. Your line is open.

Shahriar Pourreza: Hi. Good morning, team. It is actually Constantine on for Shar. Thanks for taking our questions. Maybe starting off on the progress at Oncor with the 127 gigawatts qualifying load. Do you view the quality as comparable to the prior 39 kind of high-confidence number? And do you envision any rule changes that could move that number lower? Just maybe talking about how you envision the timeline for converting that into CapEx. Is that within the five-year plan or mostly outside?

Jeffrey Walker Martin: Let me try to address this from a couple of different perspectives. I think that number is quite solid. You recall just over a quarter ago, it was closer to 38 gigawatts. I think Allen and his team have made substantial progress in confirming and meeting the requirements for that to move into the RTP. I will provide a little bit of high-level commentary, and then I will pass it to Allen to update us on where they are at in the Batch 0 process as well as the regional transmission plan and see if that will answer your question.

My starting point here, Constantine, is I think the terminology I have heard a lot in our industry is the United States really is in the middle of an arms race. And it is a race to build the infrastructure that we are talking about, artificial intelligence, and continuing to improve America’s standing as a technology leader in the world. And when you think about it, and we study all the other states in the country, Texas truly is ground zero for this opportunity, and that is why I think there will be opportunities to grow Oncor’s plan beyond the base plan, beyond the incremental $10 billion of CapEx, well into the middle part of next decade.

It is also why we and our Oncor friends are following the ERCOT Batch 0 process so closely, as well as the regional transmission plan. So, Allen, mind giving a little bit of a procedural update about where we are at with Batch 0 and your views on RTP?

E. Allen Nye: Yeah, sure, Jeff. As we all know, ERCOT has been developing the process for Batch 0 through stakeholder workshops that recently concluded. Protocol revisions are now proceeding through ERCOT committees to get to Board approval, hopefully on June 1, followed by PUC approval. The timeline as we understand it right now is we will finalize the inclusion criteria in July 2026; a batch study would occur between July 2026 through January 2027; load commitment period beginning probably for 30 days in February 2027; followed by a refinement study from March to May 2027; and RPG submission in June 2027. That is what we know about the schedule right now. It is obviously subject to changes as we have seen.

We are very involved and will continue to be throughout the process. And I think it is good, Jeff, that you kicked it to me for both these issues because they do overlap to a certain degree. In fact, there was some discussion as recently as 30 minutes ago at the open meeting in Austin this morning about the RTP and the batch process. With regards to the 2026 regional transmission plan, I have said on previous calls that we had what I said was high confidence—you mentioned it with regards to 38 gigawatts—and I also said that it would likely increase by our April 1 filing for the regional transmission plan.

As you have seen, our total queue right now for large load is at 289 gigawatts, of which 271 gigawatts are data-center related. For Oncor’s 2026 RTP filing, we submitted 102.22 gigawatts of load—that is load 75 megawatts or higher. We also submitted 5.2 gigawatts of medium-sized load, which is load greater than 25 megawatts but lower than 75 megawatts. Together, that constitutes what is known as substantiated load pursuant to the ERCOT compliance plan. To your question about the quality variance between the 38 and the 127, they are effectively the same. The 127 that we submitted as part of the RTP meets all the requirements of SP6 as they were at the time.

So we feel very good about those numbers. How they can change—there was literally a discussion this morning about what the Commission is going to do with regards to Batch and RTP—so we will have to see. But that is where we are right now on large load.

Jeffrey Walker Martin: And, Allen, I would just follow up, Constantine, and summarize a couple of things I think are most important for investors. Recall that Oncor is growing earnings at 30% annually through the midpoint of its 2027 guidance. Second, I would remind you that they have a $47.5 billion capital plan that is solid—it does not turn on whether there is more or less large data-center or large-load customers coming on the grid.

Number three, as I indicated earlier, they have identified this $10 billion of incremental CapEx, and Allen and Don and the team have been working quite aggressively to try to firm that up, and I am confident that we will be able to give you an update on that incremental CapEx bucket later this year. And finally, we keep using this term of 127 gigawatts of large-load customers—the bottom line is it is going to lead to higher levels of capital spending in Texas. And interestingly, internally, Constantine, we refer to this as the incremental to the incremental—in other words, it is beyond our incremental capital program, or what we refer to as I squared.

And we expect the I squared will show up in continued levels of record capital spending at Oncor well through the middle part of the next decade.

Shahriar Pourreza: Thanks for that. Really appreciate it. Really staggering numbers here. And maybe in a little bit more detail, ERCOT has been moving forward with some of the local transmission upgrades supporting near term—I think they have announced more than $2 billion of projects already awarded. Is that upside to the current plan? Is that a part of that $10 billion? And more holistically, how are you tracking versus that $10 billion number, and maybe the trigger for the next update?

E. Allen Nye: Sure. You are 100% correct. About two weeks ago, and I referenced this on a prior call, in addition to Batch and RTP, we have also been pursuing some projects at ERCOT that were going through the regular RPG process. We had 4 gigawatts that we referred to as South Dallas 4 gigawatts, and about 10 gigawatts elsewhere throughout the system. Approximately two weeks ago—Thursday or Friday, I do not remember—ERCOT released those 4 gigawatts of South Dallas projects, and they had an estimated cost around $2.9 billion. They are not all in South Dallas; there are some other projects that they released as well.

But given that the majority of them are in South Dallas where we serve, the majority of those projects would be ours. Costs associated with those projects are presently in what is our incremental opportunities bucket.

Jeffrey Walker Martin: I think this is an important point, Constantine, because, as I indicated in my first response, they are working aggressively right now to firm up that $10 billion bucket. This is a great example of progress they made just two weeks ago. We would certainly like to be in a position later this summer, perhaps on the Q2 call, to provide more visibility into how this is firming up. Now remember, you have to get CCNs, you have to get rights of way—there are things out there—but we have a process by which what we put into the base capital plan is firm and rock solid. I think Allen is making a great point.

We have made tremendous progress on the $10 billion of incremental capital just in the last 90 days, and I think there are some more things we can do between now and our Q2 call in August. We look forward to coming back to the Street and updating you.

Shahriar Pourreza: Really appreciate that. Very impressive. Thank you. I will put you back in the queue.

Operator: Thank you. Our next question will come from Steven Isaac Fleishman from Wolfe. Your line is open.

Steven Isaac Fleishman: Good morning. A less exciting question. On the Sempra Infrastructure closing, what steps do you still have to achieve to close that?

Jeffrey Walker Martin: We said a few things in our prepared remarks in terms of progress we have made. Justin, why do you not recap the progress since the announcement and what the remaining items are that we will resolve here in short order?

Justin Christopher Bird: Thank you, Jeff, and hello, Steve. As Jeff said in the prepared remarks, we remain on track for closing in the second or third quarter of this year. Thus far, we have gotten FERC approval, competition approval from Korea, we have reached the end of the HSR period, we have received antitrust approvals in Mexico, and we have received the majority of our third-party consents. We are currently working with the Cameron partners and the Japanese export credit agencies who finance Cameron to get their consents. At the same time, our teams are working on finalizing the pre-transition and transition services, with those closing activities remaining on track.

Our relationship with KKR remains strong, and we are working closely with them to close the transaction in Q2 or Q3. I think we are in great shape, Steve.

Steven Isaac Fleishman: Good. And then just to follow up on that, I think Karen mentioned the rating agencies and completing their review after Sempra Infrastructure—potentially. Is that the key milestone, or are there other things that the rating agencies are looking at related to the negative outlook maybe going away?

Jeffrey Walker Martin: Karen, please go ahead.

Karen L. Sedgwick: Yes, Steve, that is the main catalyst for some changes in our thresholds from the rating agencies. We have spoken with all of them, and they have all talked about improving our thresholds once the deal is done. But I do not expect that to be immediate, so it is not just that. For example, Moody’s also wants to see some further progress on our construction projects, so they are tracking pipe installation and those things. I anticipate our thresholds improving post-close of the project, but probably closer to the end of the year once we reach some of those construction milestones—end of the year or early 2027.

Jeffrey Walker Martin: The way I think about it, Steve, is closing plus six months. That will give us time to pay down some parent debt; obviously a big part of it is deconsolidating Sempra Infrastructure from our financials and improving the overall credit profile of the company. That will go into what Karen is referring to as an adjustment in terms of downgrade thresholds.

Steven Isaac Fleishman: Okay. And then one last question: your confidence in moving to California on getting changes to the wildfire liability law this session?

Jeffrey Walker Martin: This is something, Steve, that I have been personally involved in with Caroline A. Winn. One of the things I have said on prior calls is the right people that are supposed to be addressing the issues are around the table. The right issues are being discussed. From my perspective, and I will pass it to Caroline for some additional commentary, I can see this legislative session oriented around how we as a state improve the livability of the state for its citizens. I think there is a continued prioritization from the Governor’s office in growing the economy.

I think this session, you will see a big focus on the affordability of housing, the availability of insurance, reduction in sales taxes in some areas, and I certainly think what you are asking about—SB 254—falls in that category as well. We were pleased with the CEA and laying out different paths to reduce wildfire risk and set up improved recovery mechanisms. I have reasonable confidence that we will get something done this legislative session. I do not think it is going to cross a couple of years. I think there is a lot of momentum to get something done that will be helpful to our industry. Caroline, could you provide some commentary on what your priorities are this session?

Caroline A. Winn: Sure. Maybe I will highlight three areas of the report that I think were very helpful. One is that the wildfire risk is really framed appropriately as a whole-of-society problem, not just a utility problem. The second piece is that there is a clear acknowledgment that the current framework is neither durable nor adequate. Third, there is significant cost of inaction. As Jeff mentioned, the report includes a menu of different options that provides a solid base of facts that will inform the legislature.

From our perspective, we are focused on three priorities: first, we need to put wildfire victims first; second, we need to implement a more coordinated statewide approach to risk mitigation; and third, we need to make meaningful progress within this legislative session. Ultimately, this is about improving California’s wildfire framework. It is about keeping the communities that we serve safer, making California more affordable to live in, and ensuring that recovery is faster and fairer when wildfires do occur. We are seeing that the Governor and the legislative leadership are moving, and to that point, they will start informational hearings next week. So I do think there is a lot of activity and alignment on this issue.

Jeffrey Walker Martin: The only other thing I would add to Caroline’s comment is I think what is different is you do not want to go to the legislature and be talking about bespoke issues. What is really important right now is the state conversation is around a dialogue of improving the livability of the state. What you and I are talking about on this call with SB 254 is just one element of that. I think the focus is on the right issues, and I think we have a lot more people aligned around action. The CEA report is certainly helpful in that regard.

Steven Isaac Fleishman: Great. Thank you very much.

Jeffrey Walker Martin: Thank you, Steve.

Operator: Thank you. Our next question will come from David Keith Arcaro from Morgan Stanley. Your line is open.

Jeffrey Walker Martin: Hi, David.

David Keith Arcaro: Hey, thanks so much for taking my questions. Circling back to the Texas landscape, we heard earlier today from an IPP in Texas who was more cautious on the physical ability for all that data-center capacity to come online. I am curious about your confidence level—what you are seeing on the ground, physical progress, and any limiting factors that you see realistically for the load growth outlook?

Jeffrey Walker Martin: Let me make a couple comments, and then I will pass it to Allen. I think there is something, David, that is unique about Sempra and the Oncor story. You will be reading and following different earnings calls where people are having challenges with the RTO or talking about leaving markets. What we are talking about is we have a base capital plan that is largely indifferent to whether these things happen or do not happen. We have an industry-leading story that is largely unrelated to the number of data centers that come online.

The great news is Sempra is an opportunity where you can have leading growth, and the data-center story, as it matures, becomes significant upside beyond our capital plan. I just want to keep putting that out there. This is a plan upon Texas’ economic activity and the need to build the superhighway of high-voltage transmission, and that informs roughly 70% of Oncor’s existing base plan. They have a solid plan in this area, and I believe they have an improving view of how many data centers will come online. You are making a great point: having the right matching of generation capacity that will be choreographed with that growth will be important.

Allen, can you talk about what you are seeing on the ground and whether you see continued progress on the generation side?

E. Allen Nye: Sure. Thanks, Jeff. It is a very reasonable question. The numbers—especially ours alone, but when you look at ERCOT as an aggregate—are very, very large. That is why it is important that ERCOT and the PUC are going through the exercises that they are right now with the Batch process and how they are handling the 2026 RTP. As a state, we are going to need to coordinate and phase this very well. There is going to have to be a lot more transmission built to serve any significant amount of this load. There is sufficient excess generation right now. There is 164 gigawatts installed—nameplate—versus an 85.5 gigawatt peak.

But we have, as a state, about 450 gigawatts or so of generation in the queue—somewhere within that 164 gigawatts trying to connect to us in some manner right now. In discussions with people on the generation side, I think they are looking for price signals to put more steel in the ground, and this could certainly cause that.

Jeffrey Walker Martin: What is interesting, Allen, is the choreography between the RTP process and the Batch process. You are really trying to match up load with capital investment in transmission, and you start unlocking that 450-gigawatt queue of generation. There is a loading order here, David. We continue to think that Oncor’s capital plan is really positioned for what we think is the anchor investment that unlocks this, which is high-voltage transmission.

David Keith Arcaro: Great. Thank you for that helpful color as we try to figure out what is going on the ground in Texas. Shifting over to California, we are close heading into the GRC period, and I know your filing is coming soon. Any preview of your priorities and how you are positioning the GRC filings—what we should expect to see there?

Jeffrey Walker Martin: Caroline and her team have been doing work on this for well over a year. We are expecting to make our filing later in Q2. Caroline, it might be helpful to talk about your priorities as we put the GRC together.

Caroline A. Winn: Sure. As a reminder, our last rate case was filed in 2022 and we received our final decision in December 2024. As Jeff mentioned, we will be filing next month. It will take into consideration lessons learned from prior GRCs as well as others in the state. You can expect our filing to focus on three key areas: continued necessary investments in safety and reliability; technology innovation; and modernization of services and our infrastructure to support customer needs. I would also note that we have done great work on the affordability of our services recently by modernizing our organizational structure and rightsizing our business.

We are focused on efforts that will support our ability to make critical investments while also improving the affordability of our services.

David Keith Arcaro: Very helpful. Thanks so much. I appreciate it.

Operator: Thank you. Our next question will come from Aiden Kelly from JPMorgan. Your line is open.

Jeffrey Walker Martin: Hi, Aiden.

Aiden Kelly: Hey, thanks for the time today. Just one question on my end. Now with the Texas base rate case, can you remind us of the expectations for ROE by year as far as what you contemplate in the plan? And then high level, how should we be thinking about the key components in your UTM filing?

Jeffrey Walker Martin: I would start by saying that just over 18 months ago, we had been forecasting earned ROEs at Oncor just below 8%. There was a lot of work done by Allen and his team to create the right legislative environment and the right stakeholders to support the UTM process, which was designed to reduce regulatory lag, which was even more important in a period of much higher growth in capital deployment. Behind that, the base rate review increased both the ROE, the equity layer, and the expected cost of debt. In combination, what we have said publicly is it is expected to move their earned ROE on average much closer to their new authorized ROE of 9.75%.

Allen, would you like to make any other comments in terms of the schedule for the UTM?

E. Allen Nye: Sure. I am glad to address the UTM. It is going well. We made our filing on April 22. We got a revised procedural schedule yesterday which would call for testimony of the parties—intervenors, Staff, and Oncor—to be filed in July, with a potential hearing on August 20. We expect a final order and new rates to go into effect during 2026. We have the opportunity to get interim rates on or about October 4 if we do not have an order before then. We are constructive on the schedule and will work with the parties moving forward. And just as a reminder, we can file once every 365 days.

Jeffrey Walker Martin: Aiden, the only thing I would add is these developments were very important to Sempra. We knew there was going to be growth in the state. We knew that Oncor had an increased opportunity to deploy a lot more capital. As we started to see these developments take place—that is why, under Justin’s leadership and Karen’s leadership—we took the opportunity to load the balance sheet. So the timing—I think Steve Fleishman referenced this—the timing of getting the KKR transaction closed and the improvement in financial returns, which, by the way, was the number one priority for our value-creation initiatives last year and it is the number one priority this year.

That progress and improved expectation of returns in Texas has really unlocked what I think is a leg of capital. You are seeing that show up in their earnings growth.

Aiden Kelly: Great. Thanks for the insight.

Operator: Thank you. Our next question comes from Julien Dumoulin-Smith from Jefferies. Your line is open.

Julien Dumoulin-Smith: Hi, this is actually Andrew on for Julien. Thank you for the time. Two questions. One, on Texas execution: the disclosure was helpful that you have contract slots for your base plans through 2028. Can you talk a bit more about the progress of securing that for the remainder of your base plan as well as more specifically for your upside plan? Are you looking to secure those slots throughout the rest of the year, or are you waiting for more visibility on those opportunities?

Jeffrey Walker Martin: Thank you for joining the call. I would refer you and our listeners to Slide 13. We wanted to lay out something that Allen has been leading at Oncor since the COVID days, which is the opportunity in Texas to deploy economies of scale in how they resource their business. Slide 13 does a good job of showing their progress to date. Allen, if you could, maybe talk about the work you have done to support the base plan and why you think we are in good shape with the Board support for you to keep contracting forward.

E. Allen Nye: You bet. Thanks, Jeff. We are in excellent shape. As I have said on prior calls, we have what we need for the first three years of the base plan. For the outer two years, we have line of sight—we have understandings or agreements, not yet papered or executed, for those same suppliers to provide what we need. Some of our suppliers will only execute three-year contracts with us. But we have what we need for the first three, and we believe we are in excellent shape for the outer two years for the base plan.

We are constantly working on supply chain—diversifying and securing slots—and, to Jeff’s point about Board support, several years ago, probably five years ago, the Board gave us authority to start securing things outside of what we were then planning for. We have been doing that for a number of years now. That is how we got in the good position we are in with regards to the 765-kV equipment that we have ordered or acquired. We are always looking beyond the five-year horizon into our incremental buckets to see what we need, and the Board has given us the ability to go ahead and secure those slots or products.

Jeffrey Walker Martin: Andrew, I would just add that over a long period of time there have been discussions in the industry about the value of scale. In this case, Oncor really is a case study in that. It has been proactive planning over the last five years, and they are in a position that has created a competitive advantage in the industry to be so far along in their supply-chain management. Thank you for joining our call.

Julien Dumoulin-Smith: Thank you. That was very helpful. Maybe one quick one on LNG as well. Given the backdrop we are in, can you talk about how you are thinking about LNG as a long-term component of your business strategy versus, historically, more a source of capital? Has that changed over time, and how has the conversation been with potential offtakers for your backlog projects?

Jeffrey Walker Martin: I will make a couple comments on the macro environment and then pass it to Justin to talk about conversations with current bilateral customers as well as project status. You may recall back in 2018 there were a lot of people challenging Sempra on its perspectives on LNG. We came out in front of the industry and said we firmly believe there is going to be a second wave of LNG opportunity. We really tried to build a business where we put the Mexican platform together with our LNG platform, and obviously we have marked the value of that business multiple times now, including most recently in the transaction.

The LNG trade today, which is about 60 million tons per annum—about 60 Bcf annually—really is attempting to balance supply and demand both in Asia and Europe. When you see the stress that the global energy markets are in today, it really points to markets that have a competitive advantage and fundamentals. The United States has deep capital markets, ample natural gas reserves, and probably most importantly, low price volatility and the rule of law. It is times like this that America’s competitive advantage shows up. I am very bullish on the LNG trade long term because, as the IEA recently commented, buyers will continue to pay a premium for taking risk off from their supply market.

This is being demonstrated with the issues that Qatar is facing. The United States will continue to not only be the largest exporter of LNG; I think it is going to take market share. Justin, you might want to talk about how that is informing some of the conversations with buyers and cap it off with a quick recap of where you are with your projects.

Justin Christopher Bird: Thanks, Jeff, and hello, Andrew. The fundamentals of the market really matter when there is stress, and we think this is a key reason why the U.S.—and, frankly, our LNG portfolio with access to both the Pacific and Atlantic coasts—continues to be well positioned from a supply perspective. In the short term, these items are translating into positive momentum around our additional volumes at Port Arthur LNG Phase 2 and additional LNG development opportunities around our expansion projects. We are actively engaged in discussions for the remaining offtake at Port Arthur LNG Phase 2 and are constructive on securing our remaining volumes under long-term contracts with prices that will bolster SI’s economic return.

Along with our SI partners and our Cameron partners, we are very bullish on the prospects of LNG—U.S. LNG—and our dual-coast LNG portfolio. We think there is an opportunity to supply the market with the demand that is going to be there. Following on project status: at ECA, as Karen mentioned, we have achieved mechanical completion. We recently introduced first gas into the system, which began the startup process and pre-commissioning activities. We continue to expect to produce LNG next month, which supports our target of achieving substantial completion this summer. Once we reach substantial completion, we begin recognizing revenues from LNG cargoes, and once the commissioning process is complete, long-term contracted sales and full commercial operations will begin.

Overall, the project is moving along, and we look forward to upcoming project milestones.

Jeffrey Walker Martin: The only other thing I would add, Andrew, is we have revised our corporate strategy. We are going to be a pure-play utility business. So to the heart of your question, we would expect to be reducing our capital allocation to the LNG space. As one example, in addition to our $65 billion capital plan, we have circled about $9 billion of upside—almost all of that is in Texas. About $1 billion of that could come from the LNG side. To be clear, we think the opportunity for U.S. LNG is expanding, and the opportunity for Sempra Infrastructure is also expanding.

But Sempra’s corporate strategy is moving to a lower-risk profile focused on our U.S. utilities, with a big emphasis on Texas. By the end of this decade, we expect to have almost 60% of our rate base in the state of Texas.

Julien Dumoulin-Smith: Very clear. Thank you very much.

Operator: Thank you. We have time for one last question today. Our last question will come from Carly S. Davenport from Goldman Sachs. Your line is open.

Carly S. Davenport: Thanks so much for taking my question. Just one from me, and it is a follow-up to an earlier question. We are hearing more about emerging labor constraints, and I know you laid out the supply-chain diversification in Texas. Could you talk a little more about the labor side, specifically beyond 2028, and how you think about labor availability as you contemplate upside opportunities to the capital plan?

Jeffrey Walker Martin: As you frame that question, you think about the high-class problem where we have tremendous growth—which is fantastic—and you are really on point: supply chain becomes more and more important as you try to de-risk your capital plan. Allen, perhaps you could talk about some of the great work that Jim Greer did and now Alan Buck, and the work you are doing with contractors.

E. Allen Nye: Excuse me, Carly. I think one of the really important features of our supply chain with regards to labor is this: we have so much to build, and we have so much in our pipeline, that it is very attractive to labor to come work for us and be able to know you are going to be working in one place for the next multiple years—as opposed to having to move your family or jump from region to region to do the work. Is it tight? Certainly, it is. Have we had a tremendous response from our partners? We have. We feel very good about where we are.

We have increased the number of contract labor we use over the years significantly—we have almost tripled it. It has helped us in a number of ways, but one of the features I think is very important is our backlog or our future flow of work is very attractive to people in the field to come work for us for an extended period of time.

Carly S. Davenport: Okay. That is really helpful color. Thank you so much.

Justin Christopher Bird: Thank you, Carly.

Operator: Thank you. That concludes today’s question-and-answer session. At this time, I would like to turn the conference back to Jeffrey Walker Martin for any additional closing remarks.

Jeffrey Walker Martin: As we close, I would like to thank everyone for joining us today. We appreciate you making time to participate, and we are very excited to be getting on the road to meet with investors. We look forward to seeing many of you in Arizona at AGA. We also have investor trips planned to San Francisco, Los Angeles, and Boston over the next three or four weeks. If there are any follow-up items, please do not hesitate to reach out to our IR team with your questions. This concludes our call.

Operator: Thank you for your participation. You may now disconnect.