8-K: Sempra Announces 2024 Results, Raises Capital Plan to $56 Billion, and Updates EPS Guidance

Sempra reports its 2024 financial results, highlighted by a raised five-year capital plan to $56 billion and adjusted EPS guidance for 2025 and 2026.

Summary

• Sempra reported full-year 2024 GAAP earnings of $2.82 billion, or $4.42 per diluted share, compared to $3.03 billion, or $4.79 per diluted share, in 2023.
• Adjusted full-year 2024 earnings were $2.97 billion, or $4.65 per diluted share, compared to $2.92 billion, or $4.61 per diluted share in 2023.
• The company announced a record five-year capital plan of $56 billion, with over half earmarked for Texas.
• Sempra is targeting a final investment decision (FID) for Port Arthur LNG Phase 2 in 2025.
• 2025 EPS guidance is adjusted to $4.30 to $4.70, and 2026 EPS guidance is issued at $4.80 to $5.30.
• The long-term EPS growth rate is increased to 7% to 9%.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While GAAP earnings decreased, the increased capital plan and long-term growth outlook provide a positive outlook. The revised 2025 EPS guidance is a concern, but the 2026 guidance and growth rate target offer reassurance.

Positives

• The company's record five-year capital plan of $56 billion indicates strong investment in future growth.
• The increase in Oncor's capital plan by 50% demonstrates significant growth in the Texas energy market.
• The CPUC's decision on Sempra California's general rate cases improves investment visibility through 2027.
• Sempra Infrastructure's progress on LNG projects and strong commercial interest in Port Arthur LNG Phase 2 are positive indicators.
• The increase in the company's common stock dividend to $2.58 per share on an annualized basis is favorable for shareholders.

Negatives

• Full-year 2024 GAAP earnings decreased compared to 2023.
• The revision of the full-year 2025 EPS guidance range to $4.30 to $4.70 may be viewed negatively.

Risks

• The success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions, including risks related to being able to make a final investment decision, completing construction projects or other transactions on schedule and budget, realizing anticipated benefits from any of these efforts if completed, obtaining third-party consents and approvals and third parties honoring their contracts and commitments.
• Changes to our capital expenditure plans and their potential impact on rate base or other growth.
• Litigation, arbitration, property disputes and other proceedings, and changes (i) to laws and regulations, including those related to tax and the energy industry in Mexico, (ii) due to the results of elections, and (iii) in trade and other foreign policy, including the imposition of tariffs by the U.S. and foreign countries.
• Cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third parties with which we conduct business, including the energy grid or other energy infrastructure.
• The availability, uses, sufficiency, and cost of capital resources and our ability to borrow money or otherwise raise capital on favorable terms and meet our obligations, which can be affected by, among other things, (i) actions by credit rating agencies to downgrade our credit ratings or place those ratings on negative outlook, (ii) instability in the capital markets, and (iii) fluctuating interest rates and inflation.
• The impact on affordability of San Diego Gas & Electric Company's (SDG&E) and Southern California Gas Company's (SoCalGas) customer rates and their cost of capital and on SDG&E's, SoCalGas and Sempra Infrastructure's ability to pass through higher costs to customers due to (i) volatility in inflation, interest rates and commodity prices, (ii) with respect to SDG&E's and SoCalGas' businesses, the cost of meeting the demand for lower carbon and reliable energy in California, and (iii) with respect to Sempra Infrastructure's business, volatility in foreign currency exchange rates.
• The impact of climate policies, laws, rules, regulations, trends and required disclosures, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies, the risk of nonrecovery for stranded assets, and uncertainty related to emerging technologies.
• Weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events, such as work stoppages, that disrupt our operations, damage our facilities or systems, cause the release of harmful materials or fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms or insurance or may impact our ability to obtain satisfactory levels of affordable insurance.
• The availability of electric power, natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid or pipeline and storage systems or limitations on the injection and withdrawal of natural gas from storage facilities.
• Oncor Electric Delivery Company LLC's (Oncor) ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor's independent directors or a minority member director; and other uncertainties, some of which are difficult to predict and beyond our control.

Future Outlook

Sempra anticipates a decisive decade of growth, supported by a record five-year capital plan and an increased long-term EPS growth rate. The company is targeting a final investment decision for Port Arthur LNG Phase 2 in 2025 and expects significant opportunities to deploy incremental capital through the end of the decade and beyond.

Management Comments

• With the reset of our guidance in 2025, we are setting a new foundation for a decisive decade of growth, said Jeffrey W. Martin, chairman and CEO of Sempra.
• We are also announcing a record five-year capital plan of $56 billion and raising the company's long-term EPS growth rate to 7%-9%, said Jeffrey W. Martin, chairman and CEO of Sempra.
• Our team is excited about our new five-year capital plan, which is designed to help meet the energy needs of customers today and tomorrow, while significantly expanding our projected utility rate base by roughly 10% annually, said Karen Sedgwick, executive vice president and chief financial officer of Sempra.
• When considering the long-term trends in Sempra's core markets, we are confident there will be significant opportunities to deploy incremental capital through the end of the decade and beyond, said Karen Sedgwick, executive vice president and chief financial officer of Sempra.

Industry Context

Sempra's focus on expanding its energy grid in Texas aligns with the state's rapid growth and increasing energy demand. The company's investments in LNG infrastructure reflect the growing global demand for cleaner and more secure energy sources. The emphasis on wildfire and climate resilience in California addresses the increasing risks associated with climate change in the region.

Comparison to Industry Standards

• Sempra's capital expenditure plan of $56 billion is significant compared to other major utility companies like NextEra Energy and Duke Energy, reflecting its commitment to growth and infrastructure development.
• The targeted EPS growth rate of 7% to 9% is competitive within the utility sector, which typically sees more moderate growth rates.
• Sempra's focus on LNG projects positions it well to capitalize on the increasing global demand, similar to companies like Cheniere Energy and Tellurian.
• The company's investments in renewable energy and grid modernization align with industry trends towards cleaner energy and improved grid reliability, comparable to initiatives by companies like Iberdrola and Enel.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and potential for long-term growth.
• Customers in Texas and California can expect improved energy infrastructure and reliability.
• Employees may see increased opportunities due to the company's expansion plans.

Next Steps

• Sempra Infrastructure continues to hold substantial, active discussions with world-class companies for participation in the Phase 2 project.
• The company is targeting a final investment decision in 2025, pending the execution of definitive commercial agreements, obtaining permits and securing financing, among other factors.
• Oncor is contemplating filing a comprehensive base rate review later this year.

Key Dates