Skip to content
    SRE
    Earnings call· Jun 2025(Q2 FY25)

    SEMPRA Q2 FY25 earnings call SRE

    Aug 7, 2025 Source

    Executive summary

    Sempra Q2 FY25 — Strong Utility Performance, Oncor Capital Plan Upside, and Infrastructure Divestment Progress

    Sempra delivered solid Q2 FY25 adjusted earnings, affirming its full-year guidance, driven by strong performance in its U.S. utilities and significant progress on infrastructure projects. The company is actively pursuing capital recycling initiatives, including a non-binding LOI with KKR for a Sempra Infrastructure equity sale, aiming to enhance its utility-focused business model and credit profile. Regulatory advancements in Texas, particularly the UTM and Oncor's rate case, are expected to improve earned ROE and support substantial capital investment opportunities, while California utilities focus on affordability and wildfire mitigation.

    Highlights

    5

    • Affirmed full-year 2025 adjusted EPS guidance of $4.30-$4.70 and 2026 EPS guidance of $4.80-$5.30.

    • Oncor's 5-year capital plan of $36 billion is seeing upward pressure, with an anticipated $12 billion incremental opportunity for 2027-2029.

    • SDG&E awarded an estimated $600 million in transmission projects as part of the Cal ISO 2024-2025 transmission plan.

    • Port Arthur LNG Phase 2 secured a 20-year SPA with JERA for 1.5 MTPA of offtake capacity, advancing towards FID in 2025.

    • SDG&E reduced the cost per mile of undergrounding by 40% over the last 24 months.

    Concerns

    3

    • Q2 FY25 GAAP earnings of $461 million ($0.71/share) decreased significantly from Q2 FY24 GAAP earnings of $713 million ($1.12/share).

    • Sempra California experienced $37 million of lower income tax benefits and higher net interest expense in Q2 FY25 compared to Q2 FY24.

    • Oncor's Q2 FY25 earnings were partially offset by higher operating and interest expenses as well as lower consumption, primarily attributable to weather.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full-year adjusted EPS
    $4.30 to $4.70
    high materiality
    High
    Full-year adjusted EPS
    $4.80 to $5.30
    high materiality
    High
    Oncor incremental capital opportunities
    roughly $12 billion
    high materiality
    High
    Oncor earned ROE improvement from UTM
    50 to 100 basis points
    medium materiality
    High
    ECA LNG Phase 1 mechanical completion
    later this year
    medium materiality
    High
    ECA LNG Phase 1 substantial completion
    spring of 2026
    medium materiality
    High
    ECA LNG Phase 1 revenue generation from commissioning cargoes
    spring of 2026
    medium materiality
    High
    ECA LNG Phase 1 sales to long-term SBA customers
    summer of 2026
    medium materiality
    High
    Cimarron Wind commencement of power generation
    later this year
    medium materiality
    High
    Cimarron Wind commercial operations
    first half of 2026
    medium materiality
    High
    Port Arthur LNG Phase 1 Train 1 commercial operations
    2027
    medium materiality
    High
    Port Arthur LNG Phase 1 Train 2 commercial operations
    2028
    medium materiality
    High
    Port Arthur LNG Phase 2 Final Investment Decision (FID)
    2025
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Sempra California
    Earnings primarily driven by regulatory awards and transmission margin, partially offset by lower base operating margin and higher expenses. Focus on managing costs within authorized GRC revenues and prioritizing safety/reliability.
    Q2 FY25 Adjusted Earnings Variance: $5 million higherDrivers: higher regulatory awards, electric transmission margin, AFUDC equityOffsets: lower CPUC base operating margin, lower authorized cost of capitalImpact of lower income tax benefits and higher net interest expense: $37 million lower income
    		————
    Sempra Texas (Oncor)
    Higher equity earnings from invested capital and customer growth were partially offset by increased expenses and weather impacts.
    Q2 FY25 Adjusted Earnings Variance: $6 million higher equity earningsDrivers: higher invested capital, customer growthOffsets: higher operating and interest expenses, lower consumption (weather-related)
    		————
    Sempra Infrastructure
    Higher revenues primarily from a contract modification and increased power volumes.
    Q2 FY25 Adjusted Earnings Variance: $26 million higher revenuesDrivers: contract modification, higher power volumes
    		————

    Operational metrics

    28
    Adjusted EPS
    $0.89flat YoY
    Q2 FY25

    In line with prior period's results.

    Adjusted EPS
    $0.89
    Q2 FY24

    Compared to Q2 FY25 adjusted EPS.

    Adjusted Earnings
    $583 millionvs $567 million in Q2 FY24
    Q2 FY25

    Compared to Q2 FY24 adjusted earnings of $567 million.

    Adjusted Earnings
    $567 million
    Q2 FY24

    Compared to Q2 FY25 adjusted earnings of $583 million.

    GAAP Earnings
    $461 milliondown from $713 million in Q2 FY24
    Q2 FY25

    Compared to Q2 FY24 GAAP earnings of $713 million.

    GAAP Earnings
    $713 million
    Q2 FY24

    Compared to Q2 FY25 GAAP earnings of $461 million.

    GAAP EPS
    $0.71down from $1.12 in Q2 FY24
    Q2 FY25

    Compared to Q2 FY24 GAAP EPS of $1.12.

    GAAP EPS
    $1.12
    Q2 FY24

    Compared to Q2 FY25 GAAP EPS of $0.71.

    Parent Adjusted Earnings Variance
    $16 million increase
    Q2 FY25 vs Q2 FY24

    Increase primarily due to timing of higher income tax benefits and higher net investment gains, partially offset by higher net interest expense.

    Cost per mile of undergrounding reduction
    40%
    last 24 months

    Achieved by engineering and project management teams working with vendors.

    New premises added
    20,000consistent with prior quarters
    Q2 FY25

    Consistent with numbers seen for many quarters.

    Peak load increase
    9.2%above prior peak
    May FY25

    New peak in May, 9.2% above the prior peak.

    Peak load increase
    23.5%above prior June
    June FY25

    Peaked 23.5% above prior June.

    Peak load increase
    6.9%above prior June
    June FY25

    Up about 6.9% over the same period.

    New transmission POIs
    47%
    YTD

    Year-to-date increase in new transmission points of interconnection.

    Total active POIs
    38%
    YTD

    Year-to-date increase in total active points of interconnection.

    Traditional LC&I new POIs
    19%
    Q2 FY25 vs Q2 FY24

    Increase in new traditional large commercial & industrial POIs, excluding data centers.

    Traditional LC&I total POIs
    2%
    Q2 FY25 vs Q2 FY24

    Increase in total traditional large commercial & industrial POIs, excluding data centers.

    Current peak load
    31 GW
    current

    Current peak load on Oncor's system, compared to over 200 GW of interconnection requests.

    Customer savings from phasing out regulatory programs
    $300 million
    future

    Targeted savings by phasing out certain regulatory programs no longer economically beneficial to customers.

    Customer savings from federal tax credits
    $200 million
    this year

    Federal tax credits being passed on to customers over the course of this year.

    Annual customer savings from public purpose programs
    $100
    future

    Expected savings if public purpose programs transition to state budget.

    Annual cost shift from net energy metering
    $1.3 billion
    annual

    Addressing the annual cost shift as part of net energy metering.

    LNG cargoes exported
    1,000
    since 2019

    Successful production and export of 1,000th LNG cargo, 6 years after first commissioning cargo.

    Project completion
    94%
    as of July FY25

    Project is more than 94% complete as of July.

    Project completion
    85%
    current

    Overall project completion beyond 85%, on time and on budget.

    Project completion
    50%
    current

    Overall project now surpassing 50% complete, advancing foundations, steel installation, LNG tank construction, ground piping, and dredging activities.

    Offtake capacity
    1.5 MTPA
    20 years

    Executed a 20-year SPA with JERA for 1.5 MTPA of offtake capacity.

    Industry KPIs

    6
    MetricValueDetails
    Adjusted operating EPS$0.89per share
    Multi year capital plan$36 billionUSD
    Regulatory rate base growth50 to 100 basis pointsbps
    Allowed ROE equity layer rate cases10.55% ROE, 45% equity layer%
    Combined electric gas framework mandates100%%
    Major regulated project construction progress$600 millionUSD

    Orderbook & backlog

    6
    Oncor Data Center Interconnection Queue186 GWcurrent

    Part of a total queue of ~1,100 customers; includes signed interconnection agreements with security provided and high confidence load submitted to ERCOT.

    Oncor Traditional C&I Interconnection Queue7 GWcurrent

    Part of a total queue of ~1,100 customers.

    Oncor Crypto Interconnection Queue5 GWcurrent

    Part of a total queue of ~1,100 customers.

    Oncor Oil and Gas Activity Interconnection Queue4 GWcurrent

    Part of a total queue of ~1,100 customers.

    Oncor Service to Other Utilities Interconnection Queue3 GWcurrent

    Part of a total queue of ~1,100 customers.

    Oncor High Confidence Load (2031)38 GWcurrent

    consistent vs last quarter

    Includes 9 GW of signed interconnection agreements with security and 29.9 GW of high confidence load submitted to ERCOT. Numbers updated annually with ERCOT.

    Deals & partnerships

    2
    KKRNon-binding letter of intent for equity sale in Sempra Infrastructurewithin or above 15% to 30% range

    Extension to the right of first offer process outlined in the limited partnership agreement. Valuation and other considerations will determine final stake.

    JERA20-year Sale and Purchase Agreement (SPA) for Port Arthur LNG Phase 2 offtake capacity1.5 MTPA20 years

    Milestone for Port Arthur LNG Phase 2, underscoring commitment to stable long-term LNG supply.

    Capital programs

    1
    Oncor 5-year Capital Planunderway$36 billion
    Period spend: $13 billion
    Spent to date: more than $5 billion
    Start: 2025

    Base plan at 100% level. Over $10 billion allocated to U.S. utilities. Evaluating incremental capital opportunities for 2027-2029 of roughly $12 billion, which is expected to be at the high end or more.

    Risks & headwinds

    5
    Regulatory investment lag and earned ROE impactover time

    Oncor's earned ROE is anticipated to increase by 50 to 100 basis points over time versus the existing recovery mechanisms due to UTM.

    Mitigation: Passage of HB5247 establishing the Unified Tracker Mechanism (UTM) in Texas, allowing interim rate adjustments and reducing lag. Oncor's comprehensive base rate review.

    Wildfire liability and operational risk in Californiaongoing

    SDG&E has not had a major wildfire in just over 18 years due to utility infrastructure.

    Mitigation: SDG&E's industry-leading wildfire mitigation program, including hardening 100% of transmission system in Tier 3 zones, expanding weather networks, dual Black Hawk helicopter strategy, enhanced drone inspections, and improved public safety power shutoff preparedness. Continued advocacy for AB 1054 framework stabilization.

    Customer affordability in Californiaimmediate and ongoing

    Addressing the $1.3 billion annual cost shift as part of net energy metering. Potential $100 annual savings per customer from public purpose programs moving to state budget.

    Mitigation: SDG&E filing for $300 million in savings by phasing out certain regulatory programs, passing on $200 million in federal tax credits, advocating for removing public purpose programs from customer bills, and increasing climate credits.

    Impact of rising expenses and inflation on Oncorcurrent operating environment

    null

    Mitigation: Oncor's comprehensive base rate review seeking to update O&M expenses to 2024 levels to align costs with current realities and improve cost recovery.

    Timing and complexity of Sempra Infrastructure equity saleexpected to close sometime in the middle of 2026

    Equity sale within or above the 15% to 30% range.

    Mitigation: Executed an extension to the right of first offer process and a non-binding letter of intent with KKR. Focus on optimizing implied equity value, minimizing tax leakage, and thoughtful use of proceeds.

    What to watch in Q3 FY25

    5

    Oncor Base Rate Review Outcome

    Q1 FY26
    CurrentFiled in June FY25, seeking 10.55% ROE, 45% equity layer
    TargetFinal order received

    Why it matters

    The outcome will significantly impact Oncor's earned ROE, cost recovery, and financial strength, driving future capital investment and Sempra's overall earnings.

    In terms of timing, Oncor is expecting to receive a final order in the first quarter of 2026.

    Q&A highlights

    6

    Clarification on whether the KKR LOI implies a stake sale beyond the 15-30% range and the timing of updating the capital plan to include incremental Oncor capex.

    Management stated the LOI allows flexibility for a sale within or above the 15-30% range, depending on valuation, aiming to optimize value, minimize tax leakage, and improve the balance sheet. The $12 billion incremental Oncor capital is not yet in the base plan but is expected to be at the high end or more. An update to the capital plan is anticipated in 2026, driven by the resolution of Oncor's base rate review.

    “We're certainly not trying to 'guide the Street' to a higher level of equity sale. It's just there's a fair amount of flexibility that we want to make sure that we're maximizing, driving the most value to our owners.”

    asked by Ross Fowler from Bank of America · answered by Jeffery Martin

    2 min read5 chapters

    Detailed Narrative

    01

    Sempra Infrastructure Equity Sale Progress

    Sempra has extended the right of first offer process and entered a non-binding letter of intent with KKR for an equity sale in Sempra Infrastructure. The sale could be within or above the 15% to 30% range, depending on valuation and other considerations. This capital recycling initiative, along with the Ecogas sale, is expected to close in mid-2026, be accretive to EPS, and improve Sempra's credit and business risk profile by increasing the contribution of earnings from regulated utilities.

    02

    Oncor's Regulatory Advancements and Capital Plan

    Texas' recently passed HB5247 establishes the Unified Tracker Mechanism (UTM), allowing Oncor to record costs from eligible capital investments and apply for interim rate adjustments annually. This is expected to reduce regulatory investment lag and improve earned ROE by 50-100 basis points over time⏳. Oncor also filed a comprehensive base rate review seeking a 45% equity layer (vs. 42.5% authorized), a 10.55% ROE (vs. 9.7% authorized), and a 4.94% cost of debt (vs. 4.39% authorized), with a final order expected in Q1 2026.

    03

    California Utility Focus on Affordability and Wildfire Mitigation

    SDG&E was awarded an estimated $600 million in transmission projects by Cal ISO. The utility is actively pursuing customer affordability initiatives, including a request to the CPUC for $300 million in savings by phasing📎 out certain regulatory programs and passing on $200 million in federal tax credits. SDG&E has also hardened 100% of its transmission system in highest fire threat areas (Tier 3 zones) and expects to complete Tier 2 zones by end of 2028, while reducing undergrounding costs by 40%.

    04

    LNG Market Outlook and Project Development

    Sempra maintains a bullish view on LNG demand, driven by energy security and affordability in Europe, and growing demand in Asia. Cameron LNG Phase 1 successfully exported its 1,000th cargo. ECA LNG Phase 1 is over 94% complete, targeting mechanical completion later this year and revenue generation by spring 2026. Port Arthur LNG Phase 1 is over 50% complete, targeting commercial operations for Train 1 in 2027 and Train 2 in 2028. Port Arthur LNG Phase 2 has received all major permits and secured a 20-year SPA with JERA for 1.5 MTPA, aiming for FID in 2025.

    05

    Enterprise Risk Mitigation and Operational Efficiency

    Sempra continues to make progress on its "Fit for 2025" campaign, focusing on improving customer affordability through cost reduction, productivity improvements, and organizational realignment. SDG&E's wildfire mitigation program includes expanded weather networks, dual Black Hawk helicopter strategy, enhanced drone inspections, and improved public safety power shutoff preparedness.

    AI-generated summary of the company’s earnings call. Not investment advice.