8-K: Sempra Q3 2025: Adjusted Earnings Up, Strategic Sales Advance

Sempra reported mixed third-quarter 2025 financial results with a decrease in GAAP earnings but an increase in adjusted earnings, while advancing key strategic initiatives including asset sales and infrastructure projects.

Summary

• GAAP earnings for the third quarter of 2025 were $77 million, or $0.12 per diluted share, a decrease from $638 million, or $1.00 per diluted share, in the third quarter of 2024.
• Adjusted earnings for the third quarter of 2025 were $728 million, or $1.11 per diluted share, an increase from $566 million, or $0.89 per diluted share, in the third quarter of 2024.
• GAAP earnings for the first nine months of 2025 were $1.444 billion, or $2.21 per diluted share, compared with $2.152 billion, or $3.38 per diluted share, in the first nine months of 2024.
• Adjusted earnings for the first nine months of 2025 were $2.253 billion, or $3.45 per diluted share, compared to $1.987 billion, or $3.12 per diluted share, in the first nine months of 2024.
• Sempra announced a strategic transaction to sell a 45% equity interest in Sempra Infrastructure Partners to affiliates of KKR, expected to close in Q2-Q3 2026.
• The sales process for Ecogas México, S. de R.L. de C.V., continues to advance with strong interest from strategic and financial buyers.
• Oncor Electric Delivery Company LLC (Oncor) anticipates more than a 30% increase in its roll-forward 2026-2030 base capital plan, building on its $36 billion 2025-2029 base capital plan.
• Oncor's active large commercial and industrial interconnection queue increased by approximately 60% year-over-year, including about 210 gigawatts from data centers.
• California enacted Senate Bill 254, establishing an up to $18 billion continuation account to strengthen the state wildfire fund.
• San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) are pursuing California Public Utilities Commission (CPUC) approval for cost-saving measures projected to save customers over $300 million between 2026 and 2031.
• Sempra Infrastructure reached a final investment decision to advance the development, construction, and operation of Port Arthur LNG Phase 2, which is subscribed with long-term offtake under 20-year sales and purchase agreements.
• Sempra affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70 and its full-year 2026 EPS guidance range of $4.80 to $5.30.
• The company also affirmed its guidance to the high-end or above its projected long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.

Sentiment

Score: 6

Explanation: While GAAP earnings saw a significant decline due to a one-time tax item related to asset classification, adjusted earnings showed solid growth. The company is making substantial progress on strategic initiatives, including major asset sales and significant infrastructure investments, and affirmed its future earnings guidance, indicating confidence in its underlying business performance and long-term growth trajectory.

Positives

• Adjusted earnings for Q3 2025 increased to $728 million ($1.11/diluted share) from $566 million ($0.89/diluted share) in Q3 2024.
• Year-to-date adjusted earnings for 2025 increased to $2.253 billion ($3.45/diluted share) from $1.987 billion ($3.12/diluted share) in 2024.
• Oncor anticipates more than a 30% increase in its roll-forward 2026-2030 base capital plan, indicating significant future investment and growth in Texas infrastructure.
• Oncor's active large commercial and industrial interconnection queue grew by approximately 60% year-over-year, reflecting strong demand and growth in its service territory, including 210 gigawatts from data centers.
• California Senate Bill 254 established an up to $18 billion wildfire fund continuation account, enhancing financial protections for the state's investor-owned electric utilities.
• SDG&E and SoCalGas are pursuing cost-saving measures projected to save customers over $300 million between 2026 and 2031.
• Sempra Infrastructure reached a final investment decision for Port Arthur LNG Phase 2, which is fully subscribed with long-term offtake agreements, advancing major LNG developments.
• Sempra affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70 and 2026 EPS guidance range of $4.80 to $5.30.
• Sempra affirmed its long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.

Negatives

• GAAP earnings for Q3 2025 significantly decreased to $77 million ($0.12/diluted share) from $638 million ($1.00/diluted share) in Q3 2024.
• Year-to-date GAAP earnings for 2025 decreased to $1.444 billion ($2.21/diluted share) from $2.152 billion ($3.38/diluted share) in 2024.
• The GAAP earnings decline is primarily due to significant items, including a $514 million net income tax expense in Q3 2025 (and $540 million YTD 2025) related to classifying Sempra Infrastructure Partners as held for sale.

Risks

• California wildfires, including potential liability for damages regardless of fault and any inability to recover all or a substantial portion of costs from insurance, wildfire funds, or rates from customers.
• Decisions, denials of cost recovery, audits, investigations, inquiries, ordered studies, regulations, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions by regulatory bodies (e.g., CPUC, FERC, PUCT) and governments.
• The success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions (such as the planned sale of a portion of the equity interest in Sempra Infrastructure Partners), including risks related to reaching final investment decisions, negotiating definitive contracts, completing projects on schedule and budget, realizing anticipated benefits, obtaining regulatory and other approvals, and third parties honoring their contracts and commitments.
• Changes to capital expenditure plans and their potential impact on rate base or other growth.
• Changes, due to evolving economic, political, and other factors, to trade and other foreign policy (including tariffs) and laws and regulations (including those related to tax and the energy industry in the U.S. and Mexico).
• Litigation, arbitration, property disputes, and other proceedings.
• Cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on systems or the systems of third parties, including the energy grid or other energy infrastructure.
• The availability, uses, sufficiency, and cost of capital resources and the ability to borrow money or otherwise raise capital on favorable terms and meet obligations, which can be affected by actions by credit rating agencies, instability in capital markets, and fluctuating interest rates and inflation.
• The impact on affordability of SDG&E's and SoCalGas's customer rates and their cost of capital, and on SDG&E's, SoCalGas's, and Sempra Infrastructure's ability to pass through higher costs to customers due to volatility in inflation, interest rates, commodity prices, and tariffs.
• 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 that disrupt operations, damage facilities or systems, cause the release of harmful materials or fires, or subject to liability for damages, fines, and penalties, some of which may not be recoverable through regulatory mechanisms or insurance.
• The availability of electric power, natural gas, and natural gas storage and transportation capacity, including disruptions caused by failures in the transmission grid or pipeline and storage systems.
• Oncor Electric Delivery Company LLC's ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments.

Future Outlook

Sempra updated its full-year 2025 GAAP EPS guidance range to $3.05 to $3.45, affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70, and affirmed its full-year 2026 EPS guidance range of $4.80 to $5.30. The company also affirmed its guidance to the high-end or above its projected long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.

Management Comments

• "We are pleased with another solid quarter of financial performance."
• "We continue to make significant progress on our near-term value creation initiatives and we are pleased with our year-to-date financial results."

Industry Context

Sempra's strategic focus on expanding transmission and distribution infrastructure in Texas through Oncor aligns with the broader industry trend of grid modernization and capacity expansion, driven by significant population growth and increasing industrial demand, particularly from data centers. The final investment decision for Port Arthur LNG Phase 2 positions Sempra Infrastructure to capitalize on growing global demand for natural gas, especially from North America's Pacific and Gulf Coasts. In California, the establishment of the wildfire fund continuation account reflects ongoing efforts to address climate-related risks and ensure financial stability for utilities, a critical issue for the industry in fire-prone regions. The cost-saving measures pursued by SDG&E and SoCalGas also reflect a broader utility trend towards enhancing efficiency and affordability in regulated markets.

Stakeholder Impact

• Shareholders: Experienced mixed financial results with lower GAAP earnings but higher adjusted earnings; potential for value creation from strategic asset sales; affirmed long-term growth guidance provides stability.
• Customers (California): Potential for over $300 million in savings between 2026 and 2031 from SDG&E and SoCalGas cost-saving measures; enhanced financial protections for electric utilities through the up to $18 billion wildfire fund continuation account.
• Customers (Texas): Improved electric reliability and support for future growth through Oncor's increased capital investments in transmission and distribution infrastructure.
• Employees (SoCalGas): The transition to a digital-first service model and closure of branch offices may impact employees.

Next Steps

• Closing of the 45% equity sale in Sempra Infrastructure Partners to KKR affiliates, expected Q2-Q3 2026.
• Advancement of the sales process for Ecogas Mexico.
• Oncor's pending base rate review, with a scheduled hearing on the merits in mid-November and ongoing settlement discussions.
• California Public Utilities Commission (CPUC) approval for SDG&E's proposal to discontinue select energy efficiency programs.
• California Public Utilities Commission (CPUC) approval for SoCalGas's plan to close remaining branch offices and transition to a digital-first service model.
• Continued development, construction, and operation of Port Arthur LNG Phase 2.
• Advancing six major projects by Sempra Infrastructure, including key LNG developments on North America's Pacific and Gulf Coasts.

Key Dates

Recommendation

While the significant drop in GAAP earnings is a concern, it is largely attributable to a non-recurring tax item related to asset classification. The underlying adjusted earnings show healthy growth, and the company is actively pursuing strategic initiatives like asset sales and major infrastructure investments (e.g., Oncor's capital plan increase, Port Arthur LNG Phase 2) that are expected to drive future value. The affirmation of long-term EPS growth guidance provides stability. Given the mixed short-term financial picture but strong strategic execution and future growth prospects, a 'hold' recommendation is appropriate for investors to monitor the execution of these initiatives and the impact of the asset sales.

Keywords

Sempra, SRE, Earnings, Q3 2025, Financial Results, Utility, Energy Infrastructure, California, Texas, Mexico, LNG, Port Arthur LNG, Oncor, SDG&E, SoCalGas, Wildfire Fund, Capital Plan, Asset Sale, KKR, Ecogas, SEC Filing, 8-K