SRE
Sempra
NYSE
8-K: Sempra Closes $1.25 Billion Junior Subordinated Notes Offering
Sentiment:
Debt Offering Announcement
9 September 2024 4:02 PM
Sempra successfully completed a public offering of $1.25 billion in junior subordinated notes due in 2054, with net proceeds of approximately $1.238 billion after deducting underwriting discounts.
Capital raise
Sempra has raised $1.25 billion through the issuance of junior subordinated notes.
The net proceeds to the company are approximately $1.238 billion after deducting underwriting discounts.
Summary
- Sempra has closed a public offering and sale of $1.25 billion aggregate principal amount of 6.400% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2054.
- The net proceeds to Sempra from the sale of the notes were approximately $1.238 billion, after deducting underwriting discounts but before deducting offering expenses estimated at $2.6 million.
- The notes were sold to underwriters for resale at a public offering price of 100% of the aggregate principal amount.
- Interest on the notes accrues from September 9, 2024, and is payable semi-annually on April 1 and October 1, starting April 1, 2025.
- The notes bear a fixed interest rate of 6.400% per annum until October 1, 2034.
- After October 1, 2034, the interest rate will reset every five years to the Five-year U.S. Treasury Rate plus a spread of 2.632%.
- Sempra has the option to defer interest payments for up to 20 consecutive semi-annual periods, provided no event of default has occurred.
- The company can redeem the notes at 100% of the principal amount plus accrued interest starting 90 days before October 1, 2034, and on any interest payment date after that date.
- Sempra can also redeem all notes upon certain specified events at the redemption prices provided therein, plus accrued and unpaid interest.
Sentiment
Score: 7
Explanation: The document is a standard financial transaction announcement, indicating a successful capital raise. The terms are typical for this type of offering, and the company has secured a significant amount of funding. The sentiment is positive but not overly enthusiastic as it is a routine financial activity.
Positives
- Sempra successfully raised a significant amount of capital through the issuance of these notes.
- The offering provides Sempra with $1.238 billion in net proceeds for general corporate purposes.
- The fixed interest rate for the first ten years provides certainty in financing costs.
- The option to defer interest payments provides financial flexibility for Sempra.
- The ability to redeem the notes at par provides a potential exit strategy for the company.
Negatives
- The notes are junior subordinated, meaning they are lower in the capital structure and carry more risk for investors.
- The interest rate resets every five years after 2034, which introduces uncertainty in future financing costs.
- The company has the option to defer interest payments, which could negatively impact investors' income stream.
- The notes have a long maturity date of 2054, which may not be attractive to all investors.
Risks
- The junior subordinated nature of the notes means they are subject to higher risk in the event of a company default.
- The reset interest rate after 2034 is tied to the Five-year U.S. Treasury Rate, which can fluctuate and impact Sempra's financing costs.
- The option to defer interest payments introduces uncertainty for investors regarding the timing of their income.
- Changes in market conditions or Sempra's credit rating could affect the value of the notes.
- The long maturity date of 2054 exposes investors to long-term market and economic risks.
Future Outlook
The document outlines the terms of the notes, including the interest rate reset mechanism and the company's option to defer interest payments, providing a framework for future financial obligations. The company may redeem the notes at its option under certain conditions.
Management Comments
- The terms of the notes were established by the undersigned pursuant to authority delegated to them by resolutions duly adopted by the Board of Directors of the Corporation on May 11, 2023.
- The form and terms of the Notes have been established pursuant to Sections 201, 202, 203 and 301 of the Indenture and comply with the Indenture.
Industry Context
This offering is a common method for utility companies like Sempra to raise capital for general corporate purposes, including funding operations, capital expenditures, and debt refinancing. The use of junior subordinated notes is a way to balance the need for capital with the desire to maintain a certain level of financial flexibility.
Comparison to Industry Standards
- The use of junior subordinated notes is a common practice among large utility companies to raise capital.
- The interest rate of 6.400% is within the typical range for similar debt issuances at the time of the offering.
- The reset mechanism tied to the Five-year U.S. Treasury Rate is a standard feature in many fixed-to-fixed reset rate notes.
- The option to defer interest payments is a feature that provides financial flexibility to the issuer, which is not uncommon in subordinated debt.
- The maturity date of 2054 is a long-term commitment, which is typical for infrastructure-related companies.
Stakeholder Impact
- Shareholders: The capital raise provides Sempra with additional financial resources, which could support future growth and operations.
- Bondholders: Investors in the notes will receive interest payments and have the potential for capital appreciation, but also face risks associated with subordinated debt.
- Employees: The capital raise could contribute to the financial stability of the company, which may positively impact job security.
- Customers: The capital raise could support Sempra's ability to provide reliable services.
- Creditors: The issuance of subordinated debt could impact the company's overall debt structure and credit profile.
Next Steps
- Sempra will use the net proceeds for general corporate purposes.
- Interest payments will begin on April 1, 2025.
- The interest rate will reset on October 1, 2034, and every five years thereafter.
- Sempra may choose to redeem the notes under certain conditions.
Key Dates
- 2019-06-26: Date of the indenture between Sempra and U.S. Bank Trust Company, National Association.
- 2023-05-11: Date of the Board of Directors resolutions authorizing the terms of the notes.
- 2023-05-26: Date of the base prospectus.
- 2024-09-04: Date of the underwriting agreement and preliminary prospectus supplement.
- 2024-09-09: Closing date of the public offering and sale of the notes, and date of the officers certificate.
- 2025-04-01: First interest payment date.
- 2034-10-01: First reset date for the interest rate.
- 2054-10-01: Maturity date of the notes.
Keywords
Sempra, Junior Subordinated Notes, Debt Offering, Fixed-to-Fixed Reset Rate, 2054 Maturity, Interest Rate, Underwriting, Capital Raise, Fixed Income, Bonds
SRE
Sempra
NYSE
Sector: Utilities
Filings with Classifications
Better than expected
23 June 2025 6:56 AM
Regulatory Update
- The new Unified Tracker Mechanism (UTM) is expected to improve Oncor's earnings, cash flows, and credit metrics.
- The UTM is projected to improve Oncor's earned annual returns on equity by approximately 50 to 100 basis points.
- The mechanism allows for more timely recovery of capital investments, reducing regulatory lag compared to previous methods.
Capital raise
13 May 2025 4:20 PM
Debt Offering Announcement
- Southern California Gas Company is raising $1.1 billion through the issuance of first mortgage bonds.
- The funds are intended for general corporate purposes.
Capital raise
8 May 2025 8:07 PM
Quarterly Report
- Sempra established an ATM program providing for the offer and sale of shares of Sempra common stock having an aggregate gross sales price of up to $3.0 billion.
- Sempra entered into forward sale agreements under the ATM program with Bank of America, N.A. and Wells Fargo Bank, N.A.
Better than expected
8 May 2025 8:07 PM
Quarterly Report
- Sempra's Q1 2025 earnings attributable to common shares increased to $906 million, or $1.39 per share, compared to $801 million, or $1.27 per share, in the prior year.
Better than expected
8 May 2025 10:53 AM
Earnings Release
- Sempra's first-quarter 2025 GAAP earnings increased to $906 million ($1.39 per diluted share) from $801 million ($1.26 per diluted share) in the first quarter of 2024.
- Adjusted first-quarter 2025 earnings rose to $942 million ($1.44 per diluted share) from $854 million ($1.34 per diluted share) in 2024.
Better than expected
28 March 2025 4:14 PM
Proxy Statement
- Sempra's three-year total shareholder return far outpaced the return of the S&P 500 Utilities Index and more than tripled the returns of the S&P 500 and S&P 500 Utilities Indices since the beginning of this century (from December 31, 1999 through December 31, 2024).
Capital raise
25 March 2025 4:17 PM
Debt Offering
- San Diego Gas & Electric Company is raising $850 million through the issuance of 5.400% First Mortgage Bonds, Series CCCC, due 2035.
- The net proceeds are estimated to be approximately $842.1 million after deducting the underwriting discount but before deducting the Companys estimated offering expenses.
Capital raise
25 February 2025 4:57 PM
Annual Report
- Sempra established an ATM program providing for the offer and sale of shares of Sempra common stock having an aggregate gross sales price of up to $3.0 billion.
- Sempra entered into a forward sale agreement under the ATM program for the sale of 2,909,274 shares of Sempra common stock.
Worse than expected
25 February 2025 4:57 PM
Annual Report
- Earnings attributable to common shares decreased from $3.030 billion in 2023 to $2.817 billion in 2024.
- Total revenue decreased from $16.720 billion in 2023 to $13.185 billion in 2024.
Delay expected
25 February 2025 4:57 PM
Annual Report
- The ECA LNG Phase 1 project is expected to commence commercial operations in the spring of 2026, which is later than previously anticipated.
- The first and second trains of the PA LNG Phase 1 project are expected to commence commercial operations in 2027 and 2028, respectively, which is later than previously anticipated.
Worse than expected
25 February 2025 10:54 AM
Earnings Release
- 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.
Capital raise
21 November 2024 4:05 PM
Debt Offering
- Sempra closed a public offering of $400 million of 6.625% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055 and $600 million of 6.550% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055.
- The total proceeds to Sempra from the sale of the notes were approximately $990 million, after deducting underwriting discounts but before deducting offering expenses estimated at $1.7 million.
Capital raise
6 November 2024 3:40 PM
Quarterly Report
- Sempra established an ATM program to offer and sell shares of common stock with an aggregate gross sales price of up to $3.0 billion.
- The company intends to use the net proceeds for working capital and other general corporate purposes, including to partly finance anticipated increases to its long-term capital plan and to repay outstanding commercial paper and potentially other indebtedness.
Worse than expected
6 November 2024 3:40 PM
Quarterly Report
- Sempra's third quarter earnings were worse than the same period last year due to lower revenues and higher interest expenses.
- Sempra California's earnings were worse than the same period last year due to lower income tax benefits and higher net interest expenses.
- Sempra Texas Utilities' earnings were worse than the same period last year due to lower equity earnings from Oncor Holdings.
Capital raise
6 November 2024 10:50 AM
Quarterly Report
- The company has put in place a $3 billion at-the-market (ATM) equity offering program to support general corporate purposes including its future financing needs.
Worse than expected
6 November 2024 10:50 AM
Quarterly Report
- Third-quarter 2024 GAAP and adjusted earnings were lower compared to the same period in 2023.
- The company has lowered its full-year 2024 GAAP EPS guidance range.
Capital raise
9 September 2024 4:02 PM
Debt Offering Announcement
- Sempra has raised $1.25 billion through the issuance of junior subordinated notes.
- The net proceeds to the company are approximately $1.238 billion after deducting underwriting discounts.
Capital raise
9 August 2024 4:45 PM
Debt Issuance Announcement
- Southern California Gas Company is raising $600 million through the issuance of First Mortgage Bonds.
- The net proceeds are estimated to be approximately $593.2 million after deducting the underwriting discount.
Worse than expected
6 August 2024 3:48 PM
Quarterly Report
- Sempra's year-to-date earnings were worse than the same period last year, primarily due to lower income tax benefits and unrealized losses on commodity derivatives.
Capital raise
6 August 2024 3:48 PM
Quarterly Report
- Sempra completed an offering of 19,242,010 shares of its common stock in November 2023.
- Sempra has forward sale agreements for 17,142,858 shares of its common stock, which may be settled no later than December 31, 2024.
Delay expected
6 August 2024 10:54 AM
Quarterly Report
- The Energa Costa Azul LNG Phase 1 project has experienced labor and productivity challenges, which has delayed the expected mechanical completion and first LNG to 2025, with commercial operations targeted for spring 2026.
Worse than expected
6 August 2024 10:54 AM
Quarterly Report
- Sempra's adjusted earnings for the second quarter of 2024 were lower than the same period in 2023.
- Sempra's adjusted earnings for the first six months of 2024 were also lower than the same period in 2023.
Capital raise
31 May 2024 4:02 PM
Debt Offering Announcement
- Sempra raised $500 million through the issuance of junior subordinated notes.
- The proceeds will be used for general corporate purposes.
Capital raise
7 May 2024 4:29 PM
Quarterly Report
- Sempra completed an offering of 17,142,858 shares of common stock in November 2023.
- The company expects to settle forward sale agreements related to the offering by December 31, 2024, which may result in additional cash proceeds.
- Sempra may elect cash settlement or net share settlement for all or a portion of its obligations under the forward sale agreements.
Worse than expected
7 May 2024 4:29 PM
Quarterly Report
- Sempra's earnings were worse than expected due to lower natural gas prices and unrealized losses on commodity derivatives.
- Sempra California's earnings were worse than expected due to lower CPUC base operating margin and higher interest expenses.
- Sempra Infrastructure's earnings were worse than expected due to unrealized losses on commodity derivatives and lower transportation revenues.
Worse than expected
7 May 2024 11:02 AM
Quarterly Report
- Sempra's GAAP earnings decreased from $969 million in Q1 2023 to $801 million in Q1 2024.
- Adjusted earnings also decreased from $922 million in Q1 2023 to $854 million in Q1 2024.
Better than expected
17 April 2024 4:18 PM
Proxy Statement Supplement
- Sempra achieved record revenue of $16.7B in 2023.
- GAAP EPS has grown at a 22.9% CAGR and adjusted EPS has grown at a 10.3% CAGR from 2018-2023.
- Sempra increased its five-year capital plan by 20% to $48 billion.
Better than expected
25 March 2024 8:01 AM
Proxy Statement
- Sempra's business strategy helped the company deliver a series of record financial results in 2023.
- The company's total shareholder return has outpaced the return of the S&P 500 Utilities Index during the past one, three and five years.
- Sempra California reduced methane emissions by approximately 70% from 2015 levels through 2022.
- 2023 annual bonuses were achieved at 176% of target based on performance on ABP Earnings, Safety Measures, and Sustainability Measures.
- The overall payout for the 2021-2023 LTIP awards based on relative TSR and EPS growth was 163% of target.
Capital raise
19 March 2024 4:21 PM
Debt Issuance Announcement
- San Diego Gas & Electric is raising $600 million through the issuance of first mortgage bonds.
- The net proceeds are estimated to be approximately $588.7 million after deducting the underwriting discount but before deducting the company's estimated offering expenses.
Capital raise
18 March 2024 4:40 PM
Debt Issuance Announcement
- Southern California Gas Company raised $500 million through the issuance of First Mortgage Bonds.
- The proceeds will be used for general corporate purposes.
Capital raise
14 March 2024 4:01 PM
Debt Offering Announcement
- Sempra has raised $600 million through the issuance of 6.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2054.
- The net proceeds to the company were approximately $594 million after deducting underwriting discounts but before other expenses.
Capital raise
13 March 2024 4:08 PM
Debt Offering Announcement
- Southern California Gas Company is raising $500 million through the issuance of First Mortgage Bonds.
- The net proceeds are estimated to be approximately $492.4 million after deducting underwriting discounts.
Better than expected
27 February 2024 10:55 AM
Annual Results
- Sempra's full-year 2023 GAAP earnings of $3.03 billion were significantly better than the $2.09 billion reported in 2022.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.