8-K: Sempra Announces Record Capital Plan Increase and Strong 2023 Results

Sempra reported strong 2023 financial results, highlighted by a 20% increase in its capital plan to $48 billion and a raised annualized common stock dividend for the 14th consecutive year.

Summary

• Sempra reported full-year 2023 GAAP earnings of $3.03 billion, or $4.79 per diluted share, compared to $2.09 billion, or $3.31 per diluted share in 2022.
• Adjusted full-year earnings were $2.92 billion, or $4.61 per diluted share, in both 2023 and 2022.
• The company's fourth-quarter 2023 GAAP earnings were $737 million, or $1.16 per diluted share, compared to $438 million, or $0.69 per diluted share in the fourth quarter of 2022.
• Sempra is forecasting a record five-year capital plan of approximately $48 billion, a 20% increase from the previous plan, with over 90% focused on Sempra California and Sempra Texas.
• The company narrowed its full-year 2024 EPS guidance range to $4.60 to $4.90 and issued a full-year 2025 EPS guidance range of $4.90 to $5.25.
• Sempra affirmed its projected long-term EPS growth rate of approximately 6% to 8%.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong earnings growth, a significant increase in the capital plan, and a raised dividend. The company's future guidance and long-term growth targets also contribute to the positive outlook. However, some negative impacts from foreign currency and one-off items temper the overall sentiment.

Positives

• Sempra's GAAP earnings for 2023 significantly increased compared to 2022.
• The company has increased its capital plan by 20%, indicating strong growth prospects.
• Sempra has a strong focus on investments in California and Texas.
• The company has increased its dividend for the 14th consecutive year, demonstrating a commitment to shareholder returns.
• Sempra has provided positive EPS guidance for 2024 and 2025, indicating confidence in future performance.
• Sempra Infrastructure delivered strong financial and operational performance in 2023.

Negatives

• Adjusted full-year earnings were flat year-over-year at $2.92 billion.
• Fourth-quarter 2023 adjusted earnings decreased slightly compared to the same period in 2022.
• The company experienced a $44 million equity loss from investment in Oncor due to a rate base write-off.
• Sempra experienced a $235 million negative impact from foreign currency and inflation on monetary positions in Mexico.

Risks

• The company faces risks related to California wildfires and potential liabilities.
• Regulatory decisions and actions by various bodies could impact the company's operations and financial results.
• The success of business development efforts and construction projects is subject to risks, including delays and cost overruns.
• Cybersecurity threats pose a risk to the company's systems and infrastructure.
• Changes in macroeconomic trends and capital market conditions could affect the company's ability to raise capital.
• The company is exposed to risks related to climate and sustainability policies, including the potential for stranded assets.
• Weather events, natural disasters, and other disruptions could impact operations and financial results.
• Oncor's ability to pay dividends could be impacted by regulatory and governance requirements.

Future Outlook

Sempra has narrowed its full-year 2024 EPS guidance range to $4.60 to $4.90 and announced a full-year 2025 EPS guidance range of $4.90 to $5.25, representing a 7% year-over-year increase from the midpoint of the 2024 guidance. The company also affirmed its projected long-term EPS growth rate of approximately 6% to 8%.

Management Comments

• Jeffrey W. Martin, chairman and CEO of Sempra, stated that the company's goal is to give investors exposure to attractive growth in the energy infrastructure sector with the support of a growing dividend.
• Karen Sedgwick, executive vice president and chief financial officer of Sempra, noted that the increased capital plan supports the company's confidence in delivering sustainable, long-term value for its owners.

Industry Context

This announcement reflects the broader trend of increased investment in energy infrastructure, particularly in the transmission and distribution sectors, driven by the growing need for safer, more reliable, and cleaner energy. Sempra's focus on California and Texas aligns with the significant economic growth and energy demands in these regions. The company's expansion into LNG and other lower-carbon fuels also reflects the global push for decarbonization and energy security.

Comparison to Industry Standards

• Sempra's 20% increase in its capital plan to $48 billion is a significant commitment to growth, which is higher than many of its peers in the utility sector.
• Companies like NextEra Energy (NEE) and Duke Energy (DUK) also have large capital expenditure plans, but Sempra's focus on California and Texas provides a unique regional advantage.
• Sempra's long-term EPS growth target of 6-8% is competitive with other large utilities, such as Southern Company (SO) and Dominion Energy (D), which typically target growth in the mid-single digits.
• The company's investment in LNG projects like Port Arthur LNG and ECA LNG positions it well to capitalize on the growing global demand for natural gas, similar to Cheniere Energy (LNG) and Tellurian (TELL).
• Sempra's focus on renewable energy and battery storage in California aligns with the state's aggressive decarbonization goals, which is a trend also seen in other utilities like PG&E (PCG) and Edison International (EIX).

Stakeholder Impact

• Shareholders will benefit from increased dividends and potential long-term growth.
• Customers will benefit from investments in safer, more reliable, and cleaner energy infrastructure.
• Employees will have opportunities for growth and development within the expanding company.
• Suppliers and contractors will benefit from increased capital spending on projects.
• Creditors will have confidence in the company's financial stability and growth prospects.

Next Steps

• Sempra will continue to execute its $48 billion capital plan.
• The company will continue to advance development efforts for its various LNG, hydrogen, and carbon capture projects.
• Sempra will continue to progress with general rate cases before the California Public Utilities Commission, with a proposed decision scheduled for the second quarter of 2024.

Key Dates

Keywords

Sempra, Capital Plan, Earnings, Dividend, EPS, Energy Infrastructure, Sempra California, Sempra Texas, Sempra Infrastructure, LNG, Oncor, Utilities