Sempra Energy Aktie

Good day, and welcome to Sempra's First Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.

Good morning, and welcome to Sempra's First Quarter 2026 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure. Caroline Winn, Executive Vice President of Sempra; Allen Nye, Chief Executive Officer of Oncor; Dyan Wold, Vice President, Controller and Chief Accounting Officer; and other members of our senior management team.

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statements we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-Q filed with the SEC. Earnings per common share amounts in our presentation are shown on a diluted basis and we'll be discussing certain non-GAAP financial measures.

Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We also encourage you to review our 10-Q for the quarter ended March 31, 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, May 7, 2026, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to Slide 3, and let me hand the call over to Jeff.

Thank you all for joining us today. We're pleased with our first quarter financial results and the progress we've made against our 2026 value creation initiatives. Let me start by walking through the key developments from the quarter. Recall, our first initiative is to invest approximately $13 billion in T&D energy infrastructure while also emphasizing improved financial returns. 2026 has started on a positive note with Sempra deploying $3 billion of investment capital in the first quarter, which keeps us on track to meet our annual target.

As for improving returns, Oncor received approval from the PUCT for the settlement of its base rate review. This decision comes with higher authorized equity layer at 43.5%, higher return on equity at 9.75% and higher cost of debt set at 4.94%. Additionally, Oncor is permitted to surcharge the difference between the new billing rates and Oncor's current rates for the period January 1 to June 1, 2026. Based on the final order received last month, the surcharge we made through a separate filing with recovery expected over the remainder of the year. Ultimately, this outcome is expected to better align rates with Oncor's current cost structure and support improved financial strength and credit metrics during a period of elevated capital investment that helps support Texas' growing energy needs. For more information on the improved decision, please refer to Slide 11 in the appendix.

I also want to note that Oncor submitted its inaugural UTM filing last month to incorporate $4.4 billion of T&D assets that were placed into service since January 1, 2025, into rates. Importantly, the UTM helps meaningfully reduce regulatory lag by allowing recovery on these assets and going forward, can be filed every 365 days. We anticipate a final order and updated rates in the second half of 2026. In combination of the rate case approval and periodic UTM filings put Oncor in a better position to earn closer to its authorized ROE across the plan period.

In California, SDG&E filed an uncontested offer of settlement in its TO6 proceeding with FERC which establishes the authorized framework for SDG&E's cost to own, operate and maintain high voltage transmission infrastructure. Similar to improving financial returns in Oncor the offer of settlement is important because it would also increase SDG&E's authorized base return on equity to 10.28% with a hypothetical capital structure of 54% equity, among other items. The terms of the settlement remains subject to FERC approval, which is expected to occur in the second half of this year. Importantly, if approved, the settlement terms would be retroactive to June 1, 2025.

Now turning to Sempra Infrastructure. We declared COD at Cimarron wind during the quarter. At ECA LNG Phase 1, we introduced feed gas from the GRO pipeline into the facility and began the start-up process. We continue to expect to produce first LNG next month, and we're targeting substantial completion this summer. At that point, we'll begin recognizing LNG revenues with long-term contracted sales and full commercial operations commencing shortly thereafter. Port Arthur LNG Phase 1 and Phase 2 construction projects continue to progress on time and on budget.

Another one of our top priorities for the year is to close the SI Partners transaction and use the associated proceeds to reinvest in our utility businesses. We're making progress toward completing the transaction and have recently received key approvals from FERC and antitrust regulators. We expect to close the transaction in the second or third quarter of 2026. We also remain focused on simplifying Sempra's business model to concentrate our future investments on our utilities, which we previously projected would grow rate base at roughly 11% annually through 2030. That's why we're continuing to advance our capital recycling program. Consistent with this initiative, the previously announced EcoGas sale remains on track to also close in the second or third quarter of this year.

As you know, we also have a relentless focus on modernizing operations to support improving our cost structure and building out our execution capabilities. In that regard, Oncor continues to make strides diversifying its supply chain, while reducing execution risk. Currently, they're growing their supply base across multiple sourcing categories, securing labor and materials, expanding logistics and warehousing capacity and strengthening physical security.

Lastly, we continue to prioritize community safety, affordability and operational excellence across the enterprise. As an example, during January's Winter Storm Fern, SoCalGas' natural gas storage facilities helped both SoCalGas and SDG&E customers avoid approximately $120 million in higher potential energy cost by withdrawing natural gas purchase months earlier. The effective use of these assets highlights the clear value of natural gas storage and how it can be used successfully to support customer affordability.

Additionally, the California Earthquake Authority published its natural catastrophe resiliency study in April. It outlines several potential pathways to improve affordability in the state and improve community safety. We're encouraged by the report and we'll closely monitor developments informed by the study's findings as the year progresses.

Now please turn to the next slide where Karen will walk through our financial results.

Thank you, Jeff. Earlier today, Sempra reported first quarter 2026 GAAP earnings of $1.37 billion or $1.58 per share. This compares to first quarter 2025 GAAP earnings of $906 million or $1.39 per share. On an adjusted basis, first quarter earnings were $991 million or $1.51 per share. This is an increase to our first quarter 2025 earnings of $942 million or $1.44 per share. I'd also note that the positive financial impact for the first quarter of Oncor's base rate review will be primarily recognized in the second quarter given the PUCT order wasn't issued until April. We're pleased with our financial results for the quarter and look forward to building on them for the remainder of the year.

Please turn to the next slide. Variances in the first quarter of 2026 adjusted earnings compared to the same period last year can be summarized as follows: at Sempra Texas, we had $25 million of higher equity earnings from the UTM, higher invested capital and customer growth, partially offset by higher interest expense, depreciation and O&M. Turning to Sempra California. We had $44 million of increased earnings, primarily from higher CPUC base operating margin, net of operating expenses. Sempra California also had $48 million of lower income tax benefits and higher net interest expense. At Sempra Infrastructure, earnings increased by $34 million, primarily from lower depreciation due to the classification as held for sale, partially offset by other items. At Sempra Parent, we had $6 million of higher losses from higher net interest expense and net investment losses, partially offset by other items.

Please turn to the next slide. With solid first quarter results and progress against our key initiatives, we're affirming our full year 2026 adjusted EPS guidance range of $4.80 to $5.30 and 2027 EPS guidance range of $5.10 to $5.70. We're also affirming our projected long-term EPS growth rate of 7% to 9%. We remain focused on achieving the key milestones we've laid out for the remainder of the year, including closing the SI Partners transaction and recycling that capital back into our utilities, continuing to simplify the business with the completion of the Ecogas sale and strengthening the balance sheet post close through parent debt paydown and the deconsolidation of SI Partners as well as working with the rating agencies as we continue to improve our credit profile.

In addition, we're executing on a record $65 billion capital plan that supports strong projected rate base growth across the plan period. Also, a central feature of our capital plan is that we're investing more in Texas. We expect to derive a majority of our rate base by the end of the decade. What's more we have improving visibility into approximately $9 billion of incremental capital opportunities beyond the base plan, which is also primarily concentrated in Texas. In short, Sempra is well positioned to achieve our projected long-term EPS growth rate of 7% to 9%, which is one of the highest at the utility sector. We look forward to building on our early momentum and continuing to execute our corporate strategy which aims to provide investors with a compelling mix of current yield, durable earnings growth and long-term capital appreciation.

Now I'd like to open it up for your questions.

[Operator Instructions] And our first question will come from Shahriar Pourreza from Wells Fargo.

It's actually Constantine on for Shahriar. Maybe starting off on the progress at Oncor with the 127 gigawatts of qualifying load. Do you view the quality is comparable to the prior 39 kind of high confidence number? And do you envision any rule changes that could move that number lower? Just maybe talking about how you envision to have a time line for converting that into CapEx? Is that within the 5-year plan or mostly outside?

Yes. Well, let me try to address this from a couple of different perspectives. I think that number is quite solid. You'll recall, just over a quarter ago, it was closer to 38 gigawatts. I think Allen and his team have made substantial progress in confirming and meeting the requirements for that to move into the RTP. Why don't I do this? I'll provide a little bit of high-level commentary, and then I'll pass it to Allen to update us on where they're at in the Batch Zero process as well as the regional transmission plan and see if that will answer your question.

My starting point here Constantine is, I think the terminology I've heard a lot in our industry is the United States really is in the middle of an arms race. And it's a race to build the infrastructure that we're talking about, artificial intelligence and continue to improve America standing as a technology leader in the world. And when you think about it, and we study all the other states in the country. Texas truly is ground zero for this opportunity. And that's why I think there will be substantial opportunities to grow Oncor's plan beyond the base plan, beyond the incremental $10 billion of CapEx well into the middle part of the next decade. That's also why we and our Oncor friends are following the ERCOT Batch Zero process so closely as well as the regional transmission plan. So Allen, would you mind giving a little bit of a procedural update about where we're at with Batch Zero and your views on RTP?

Yes, sure, Jeff. So I think as we all know, ERCOT has been developing the process for Batch Zero through the stakeholder workshops that recently concluded. Protocol revisions are now proceeding through ERCOT committees to get to Board approval, hopefully, on June 1, followed by PUC approval. The time line, as we understand it right now, is we'll finalize the inclusion criteria in July of '26, batch study which occur between July '26 through January '27. Load commitment period beginning probably for 30 days beginning in February of 2027, followed by a refinement study from March to May of '27 and then RPG submission in June of '27. That's what we know about the schedule right now. It's obviously subject to changes as we've seen. We're obviously very involved and will continue to be throughout the process and I think it's good, Jeff, that you take it to me for both these issues because they do overlap to a certain degree.

In fact, there's some discussion as recently as about 30 minutes ago at the open meeting in Austin this morning about RTP in the batch process. But with regards to the 2026 regional transmission plan, I said on previous calls that we had, what I said was high confidence, you mentioned -- with regards to 38 gigawatts and I also said that it would likely increase by our April 1 filing for the regional transmission plan. As you've seen, our total [ Q ] right now for large load is 289 gigawatts, of which 271 gigawatts are data center related. For our Oncor's 2026 RTP filing, we did submit 122 gigawatts of load, and that's load 75 megawatts or higher. We also submitted 5.2 gigawatts of medium-sized load, which is load between greater than 25 megawatts but lower than 75 megawatts.

Together, that constitutes what's known as substantiated load pursuant to the ERCOT compliance plan. To your question about the quality of the variance, the quality between the 38 and the 127, they're effectively the same in this regard. The 127 that we submitted as part of the RTP meets all the requirements of SB 6 as they were at the time. So we feel very good about those numbers. How they can change? I mean there's literally a discussion this morning. about what the commission is going to do with regards to batch and RTP. So we'll have to see. But that's where we are right now on large load.

And Allen, I would just follow up with Constantine and summarize a couple of things that I think are most important for investors. Recall that Oncor is growing earnings at 30% annually through the midpoint of its 2027 guidance. Second, I would remind you that they've got a $47.5 billion capital plan that's solid. It doesn't turn on whether there's more or less large data center or large load customers coming on the grid. Number three, as I indicated earlier, they've identified this $10 billion of incremental CapEx. And Allen and Don and the team have been working quite aggressively to try to firm that up. And I'm confident that we'll be able to give you an update on that incremental CapEx bucket later this year.

And finally, we keep using this term of 127 gigawatts of large load customers. The bottom line is it's going to lead to higher levels of capital spending in Texas. And interestingly, internally, Constantine, we refer to this as the incremental to the incremental. In other words, it's beyond our incremental capital program or what we refer to as I squared. And we expect the I squared will show up in continued levels of record capital spending at Oncor well through the middle part of the next decade.

Really appreciate it. Really staggering numbers here. And maybe in a little bit more detail, kind of ERCOT has been moving forward with some of the local transmission upgrades supporting kind of near-term. I think they announced more than $2 billion of projects already awarded. And is that upside to the current plan? Is that a part of that $10 billion opportunity? And maybe more holistically, how are you tracking versus that $10 billion number? And maybe just the trigger for the next update?

Sure. So you're 100% correct. I think about 2 weeks ago, and I referenced this on a prior call, in addition to batch and RTP, we have also been pursuing some projects that we had at ERCOT that were just going through the regular RPG process. And so we had 4 gigawatts that we refer to as South Dallas, 4 gigawatts, and we had about 10 gigawatts elsewhere throughout the system. And approximately 2 weeks ago, I don't remember if it was Thursday or Friday, ERCOT did release those 4 gigawatts of South Dallas projects, and they had an estimated cost around those of around $2.9 billion. Given that those are -- they're not all in South Dallas, there are some other projects that they released as well. But given that the majority of them are in South Dallas, where we serve, the majority of those projects would be ours. Costs associated with those projects are presently in what is our incremental opportunities bucket.

And I think this is an important point, Constantine, because one of the things I indicated in my first response is they're working aggressively right now to firm up that $10 billion bucket. This is a great example of progress they made just 2 weeks ago. And certainly, I'd like to be in a position later this summer, perhaps on the Q2 call to provide more visibility to how this is firming up. Now remember, there's all -- you've got to get CCNs, you've got to get rights away. There's things out there.

But we have a process by which what we put into the base capital plan is firm and rock solid. And I think Allen is making a great point. We've made tremendous progress on the $10 billion of incremental capital just in the last 90 days. I think there's some more things we can do between now and our Q2 call in August, and we look forward to coming back to the Street and update you.

Our next question will come from Steve Fleishman from Wolfe.

Sorry, a less exciting question. Just the Sempra Infrastructure closing, what steps do you still have to achieve to close that?

Sure. We said a few things in our prepared remarks in terms of some of the progress we made. And maybe, Justin, why don't you recap the progress we've made since the announcement and what remaining items are that we'll resolve here in short order.

Yes. Thank you, Jeff, and hello, Steve. So as Jeff said in the prepared remarks, we do remain on track for closing in the second or third quarter of this year. Thus far, we've gotten FERC approval, competition approval from Korea. We've reached the end of the HSR period. We've received antitrust approvals in Mexico, and we have received the majority of our third-party consents. We are currently working with the Cameron partners and the Japanese export credit agencies who financed Cameron to get their consents. And Steve, at the same time, our teams are working on finalizing the pre-transition and transition services with those closing activities remaining on track. So I'd say our relationship with KKR remains strong. We're working closely with them to close the transaction in Q2 or Q3. And I think we're in great shape, Steve.

Okay. Good. And then just a follow-up on that. When you -- I think Karen mentioned just the rating agencies and completing their review after Sempra Infrastructure potentially, is that the key milestone? Or are there other things that the rating agencies are looking at related to the negative outlook maybe going away?

Sure. Karen, please go ahead.

Yes. So Steve, that's the main catalyst for some changes in our threshold from the rating agencies. So we've spoken with all of them, and they've all talked about improving our thresholds once the deal is done. But I don't expect that to be immediate. So it's not just that. For example, Moody's also wants to see some further progress on our construction projects. So they're tracking pipe installation and those things. So I anticipate our thresholds improving post close of the project, but probably closer to the end of the year once we reach some of those construction milestones end of the year or early '27.

So the way I think about it, Steve, is I probably think about closing plus 6 months, and that will give us time to pay down some parent debt. Obviously, a big part of it is deconsolidating Sempra Infrastructure from our financials and obviously improving the overall credit profile of the company. And that will go into what Karen is referring to as an adjustment in terms of downgrade thresholds.

Okay. And then I guess just one last question on the, I guess, your confidence on moving to California on getting changes to the wildfire liability law this session?

Yes. This is something, Steve, that I've been personally involved in with Caroline Winn. One of the things I've said on prior calls is the right people that are supposed to be addressing the issues are around the table. The right issues are being discussed. And I think one of the things from my perspective, and I'll pass it to Caroline for some additional commentary is I can see this legislative session kind of orienting around how we, as a state, improve the livability of the state for its citizens. I think, obviously, there's a continued prioritization from the governor's office in growing the economy. I think this session, you'll see a big focus on the affordability of housing, the availability of insurance, reduction in sales taxes in some areas. And I certainly think what you're asking about SB 254 falls in that category as well.

We were pleased, Steve, with the CEA laying out different paths to reduce wildfire risk and set up improved recovery mechanisms. But I have reasonable confidence that we'll get something done in this legislative session. I don't think it's going to cross a couple of years. I think there's a lot of momentum to get something done that will be helpful to our industry. And perhaps, Karen you can -- Caroline, you can provide some commentary on what your priorities are at this session.

Sure. Maybe I'll just highlight 3 areas of the report that I think were very helpful. One is that the wildfire risk is really framed appropriately as a whole of society problem, not just the utility problem. I think the second piece is that there's a clear acknowledgment that the current framework isn't durable nor adequate. And maybe three, that there is significant cost of inaction. So as Jeff mentioned, the report includes a menu of different options that provides, I think, a solid base of facts that will inform the legislature. And from our perspective, we're really focused on these 3 priorities. One, we need to put wildfire victims first. Two, we need to implement a more coordinated statewide approach to risk mitigation; and three, as Jeff mentioned, we need to make meaningful progress within this legislative session.

And ultimately, this is about improving California's wildfire framework. It's about keeping our communities that we serve safer. It's about making California more affordable to live in and ensuring that recovery is faster and fairer when wildfires do occur. And just as I end here, we are seeing that the governor and the legislative leadership are moving. And to that point, they'll start informational hearings next week. So I do think that there is a lot of activity and alignment on this issue.

The only other thing I would add, Steve, to Caroline's comment is I think what's different is you don't want to go to the legislature and be talking about bespoke issues. I think what's really important right now is the state conversation is around a dialogue of improving the livability of the state. And what you and I are talking about on this call with 254 is just one element of that. So I think the focus is on the right issues. And I think that we've got a lot more people aligned around action. And I think the CEA report is certainly helpful in that regard.

Our next question will come from David Arcaro from Morgan Stanley.

Circling back to the Texas landscape, we heard earlier today from an IPP in Texas anyway who was more cautious really on, I guess, the physical ability for all that data center capacity to come online. So I guess I'm curious your confidence level, what you're seeing on the ground, the physical progress and any maybe limiting factors that you see realistically for the low growth outlook?

Let me make a couple of comments, and I'll pass it to Allen. I think there's something, David, that's unique about Sempra and the Oncor story and you'll be reading and following different earnings calls where people are having challenges with the RTO or people are talking about leaving markets. I think what we're talking about is we've got a base capital plan that's largely indifferent to whether these things happen or don't happen. So we have an industry-leading story that is largely unrelated to the number of data centers that come online. And the great news is Sempra is an opportunity where you can have leading growth and the data center story as it matures, becomes significant upside beyond our capital plan. So I just want to keep putting that out there.

This is a plan based upon Texas' economic activity and the need to build this super highway of high-voltage transmission, and that informs roughly 70% of Oncor's existing base plan. So they have a solid plan in this area. And I do believe they have an improving view of how many data centers will come online. And you're making a great point, having the right matching of generation capacity that will be choreographed with that growth will be important. And maybe, Allen, you can talk about what you're seeing on the ground and whether you see continued progress on the generation side.

Yes, sure. Thanks, Jeff. Yes, it's a very reasonable question. The numbers, especially ours alone, but when you look at ERCOT as an aggregate are very, very large. And I think that's why it's important that ERCOT and the PUC are going through the exercises that they are right now with the batch process and how they're handling the '26 RTP. It's going to -- we're going to need as a state to coordinate and phase this very well. And there's going to have to be a lot, to Jeff's point, more transmission built to serve any significant amount of this load. There's going to be -- there is sufficient excess generation right now.

I think there's 164 gigawatts installed, and I know that's nameplate versus 85.5 gigawatt peak. But we have as a state about, I think, 450 gigawatts or so of generation somewhere in the ERCOT queue right now. So I think we have that Oncor, I think, over 164 gigawatts trying to connect to us in some manner right now. And I think as I've discussed things with people on the generation side, I think they're looking for price signals to put more steel in the ground, and this could certainly cause that.

What's interesting, Allen, is the choreography between the RTP process, the batch process, you're really trying to make sure that you match up load with capital investment in transmission and you start unlocking that 450 gigawatt queue of generation. So there's kind of a loading order here, David. And certainly, we continue to think that Oncor's capital plan is really positioned on what we think is the anchor investment that unlocks this, which is high-voltage transmission.

Great. Helpful color as we try to figure out what's going on the ground in Texas. And then maybe shifting over to California. We're close here heading into the GRC period, and I know you're filing coming soon. But I was wondering, any preview of just your maybe priorities and how you're positioning the GRC filings, what we should expect to see there?

Yes. Caroline and her team have been doing work on this for probably well over a year. We're expecting to make our filing later in Q2. And Caroline, it might be helpful to talk about kind of what your priorities are to David's question as we put the GRC together.

Sure yes. Just as a reminder, our last rate case was filed in 2022, and we received our final decision in December of '24. So as Jeff mentioned, we will be filing next month, and we'll be taking into consideration really lessons learned from prior GRCs as well as others in the state. And you can expect our filing to focus on 3 key areas. One is continued necessary investments in safety and reliability, also technology innovation and lastly, modernization of our services and our infrastructure to support customer needs. But maybe I'd also like to note that we've done some really great work on the affordability of our services recently with modernizing our organization structure and rightsizing our business. And we're really focused on efforts that will support our ability to make critical investments while also improving the affordability of our services.

Our next question will come from Aidan Kelly from JPMorgan.

Just one question on my end. Now with the Texas base rate case wrapped could you just remind us of the expectations for ROE improvement by year as far as what you contemplate in the plan? And then just high level, how should we be thinking about the key components in your UTM filing?

Yes. I'm sorry Aidan, you came across just a little bit garbled. Would you mind repeating your question for us, please?

Yes. Sorry about that. Just wanted to ask on the ROE improvement by year in Texas as far as what you contemplated in the plan and then just the UTM filing, thoughts there on the key components.

Yes. So I would just start by saying that you'll recall that just over 18 months ago, we had been forecasting earned ROEs at Oncor just below 8%. There was a lot of work done by Allen and his team to create the right legislative environment and the right stakeholders to support the UTM process, which was designed to reduce that regulatory lag, which was even more important in a period of much higher growth and capital deployment. And behind that, the base rate review obviously increased both the ROE, the equity layer and the expected cost of debt. And those 2 things in combination, what we've said publicly is it is expected to move their earned ROE on average much closer to their new authorized ROE of 9.75%. But other than that, would you like to make any other comments, Allen, in terms of the schedule for the UTM?

Yes, sure. I'm glad to address UTM. It's going well. We made our filing on April 22. We got a revised procedural schedule actually yesterday, which would call for testimony to the parties, intervener staff Oncor to be filed in July with a potential hearing on August 20. We expect a final order and new rates to go into effect during the second half of 2026. And we have the opportunity to get interim rates on or about October 4, if we don't have an order before then. So we're constructive on the schedule, and we'll look forward to and we'll work with the parties moving forward. And just as a reminder, we can file once every 365 days.

Aidan, the only thing I would add is these developments were very, very important to Sempra, right? We knew there was going to be growth in the state. We knew that Oncor had an increased opportunity to deploy a lot more capital. But as we started to see these developments take place, that's why under Justin's leadership and Karen's leadership, we took the opportunity to load the balance sheet. So the timing, I think Steve Fleishman referenced this, the timing of getting the KKR transaction closed, the improvement in financial returns, which, by the way, was the #1 priority for our value creation initiatives last year, and it's the #1 priority this year. That progress and improved expectation of returns in Texas has really unlocked what I think is a significant leg of capital. And obviously, you're seeing that show up in the earnings growth.

Our next question comes from Julien Dumoulin-Smith from Jefferies.

This is actually Andrew on for Julien. Just 2 questions on my front. One, Texas, on the execution piece, I think the disclosure was very helpful that you guys have contracted slot for your base plan through 2028. Can you maybe kind of talk a bit more about the progress in securing that for the remainder of your base plan as well as kind of more specifically for your upside plan? Are you looking to kind of secure those slots throughout the rest of the year? Or are you kind of waiting for more visibility on those opportunities itself?

Well, Andrew, thank you for joining the call, and I would refer you and our listeners to Slide 13. And I think what we wanted to do here is lay out something that Allen has been leading at Oncor since the COVID days, which was they've got the opportunity in Texas to deploy economies of scale in terms of how they resource their business I think Slide 13 does a good job of showing their progress to date. But Allen, if you could, maybe talk about like the work you've done to support the base plan and why you think we're in good shape with the Board's support for you to keep contracting forward.

Yes, you bet. Thanks, Jeff. We're in excellent shape. As I've said on prior calls, we have what we need for the first 3 years of the base plan. The outer 2 years, we have line of sight to. We effectively have understandings or agreements that are not conceptualized in paper yet or not executed for those same suppliers to provide what we need in the outer years. And there's just some of our suppliers who will only execute 3-year contracts with us. But we have what we need for the first 3, and we believe we're in excellent shape for the outer 2 years for the base plan.

To Jeff's point, we're constantly working on supply chain, diversifying, securing slots and his point to what the Board support that we've had is several years ago -- 5 years ago, the Board gave us authority to start looking at securing things outside of what we were planning for. And so we've been doing that for a number of years now. That's how we got in the good position we are right now with regards to the 765 equipment that we have ordered or acquired. So we are always looking beyond the 5-year horizon, looking into our incremental buckets to see what we need. And the Board has given us the ability to go ahead and secure those slots or products that we need for those plants.

And Andrew, I would just add that over a long period of time, there's been discussions in the industry about the value of scale. And I think in this case, Oncor really is a case study in that. I think not only has it been proactive planning over the last 5 years, they're really in a position, I think, that has created a competitive advantage for them in the industry to be so far along in their supply chain management. But thank you for joining our call.

Yes. That was very helpful. Maybe one quick one on LNG as well, obviously, given the backdrop that we're in. Can you maybe talk a bit about how you're thinking about LNG as a long-term component of your business strategy versus historically more of a source of capital? Has that changed over time? And how has the conversation been with potential offtakers for your backlog projects?

Well, let me make a couple of comments, if you would, Justin, kind of on the macro environment, and I can pass it to you to talk about conversations you're having with current bilateral customers as well as potentially where you're at in some of your project status. But look, you may recall, Andrew, that it was back in 2018 that there were a lot of people that were challenging Sempra on its perspectives on LNG. And we came out front in the industry and said, look, we firmly believe there's going to be a second wave of LNG opportunity. And we really tried to build a business where we put the Mexican platform together with our LNG platform. And obviously, we've marked the value of that business multiple times now, including most recently in the KKR transaction. But I can tell you that the LNG trade today, which is about 60 million tons per annum or about 60 Bcf actually annually, really is attempting to balance supply and demand, both in Asia and Europe.

And when you see the stress that the global energy markets are in today, it really points to markets that have a competitive advantage and fundamentals. And the fundamentals we're talking about is the United States, which has deep capital markets, ample natural gas reserves, probably most importantly, low price volatility in the rule of law. So it's times like this that America's competitive advantage shows up. We're very bullish on the LNG trade long term because over time, and this came out recently from some comments from the IEA, buyers will continue to pay a premium for taking risk off from their supply market. And I think the United States, this is being demonstrated with the issues that Qatar is facing. The United States will continue to not only be the largest exporter of LNG, I think they're going to take market share. And Justin, you might want to talk about how that's informing some of the conversations with buyers and then maybe cap it off with just a quick recap of where you're at with your projects.

Sure. Thanks, Jeff. So as Jeff mentioned, the fundamentals of the market really matter when there's stress. And we think this is a key reason why the U.S. and frankly, our LNG portfolio with access to both the Pacific and Atlantic Coast continue to be well positioned from a supply perspective. In the short term, these items are translating into positive momentum around our additional volumes at Port Arthur LNG 2 and additional LNG development opportunities around our expansion projects. We are actively engaged in discussions for the remaining offtake at PA LNG Phase 2 and are constructive on securing our remaining volumes under long-term contracts with prices that will bolster SI's economic returns. So we and along with our SI partners and our Cameron partners are very bullish on the prospects of LNG -- U.S. LNG, our dual-coast LNG portfolio. And we really think there's an opportunity to supply the market with the demand that's going to be there.

Following on, on kind of the project status, let me just give you an update on some of the SI projects. At ECA, as Karen mentioned, we've achieved mechanical completion, but we're excited to have recently introduced first gas into the system, which began the start-up process and pre-commissioning activities. We continue to expect to produce LNG next month, which supports our target of achieving substantial completion this summer. Once we reach substantial completion, we'll begin recognizing revenues from LNG cargoes. And once the commissioning process is complete, long-term contracted sales and full commercial operations will begin. Overall, the project is moving along, and we look forward to an upcoming project milestones.

The only other thing I would add, Andrew, is we've revised our corporate strategy, right? We've made the decision this is going to be a pure-play utility business. So to the heart of your question, we would expect to be reducing our capital allocation to the LNG space. As one example, in addition to our $65 billion capital plan, we've circled about $9 billion of upside. Almost all of that's in Texas, about $1 billion of that could come from the LNG side. But I just want to be really clear, we think the opportunity for U.S. LNG is expanding. We think the opportunity for Sempra Infrastructure is also expanding. But Sempra's corporate strategy is going to a lower risk profile focused on our U.S. utilities with a big emphasis on Texas. And by the end of this decade, we expect to have almost 60% of our rate base in the state of Texas.

And we have time for one last question today. And our last question will come from Carly Davenport from Goldman Sachs.

Just one from me, and it's a follow-up to an earlier question on -- we're hearing more about emerging labor constraints, and I know you guys laid out the supply chain diversification in Texas. But could you talk a little bit more about the labor side specifically beyond 2028 and then how you think about kind of labor availability as you contemplate upside opportunities to the capital plan?

Yes. As you were framing that question, you think about we have this high-class problem where we have all this tremendous growth, which is fantastic. And you're really on point, supply chain becomes more and more important as you try to derisk your capital plan. And Allen, perhaps you could talk about some of the great work that Jim Greer did and now Ellen Buck, the work you're doing with contractors.

Yes. Carly, I think one of the really important features of our supply chain with regards to labor is this. We have so much to build, and we have so much in our pipeline. that it's very attractive to labor to come work for us and be able to know you're going to be working in one place for the next multiple years as opposed to having to move your family or jump from region to region to do the work. Is it tight? Certainly, it is. Have we had a tremendous response from our partners? We have. And we feel very good at where we are. We have increased the number of contract labor that we -- over the years significantly. We've almost tripled it. It's helped us in a number of ways. But one of the features I think is very important is our backlog or our future flow of work is very attractive to people in the field to come work for us for an extended period of time.

Thank you. That concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.

Well, as we close, I'd like to thank everyone for joining us today. We appreciate you making time to participate, and we're very excited to be getting on the road to meet with a lot of investors. We look forward to seeing many of you in Arizona at AGA. We also have investor trips planned to San Francisco, Los Angeles and Boston over the next 3 or 4 weeks. If there are any follow-up items, please don't hesitate to reach out to our IR team with your questions. And this concludes our call.

Thank you for your participation. You may now disconnect.

Good day, and welcome to Sempra's Fourth Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.

Good morning, and welcome to Sempra's Fourth Quarter 2025 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Caroline Winn, Executive Vice President of Sempra; Allen Nye, Chief Executive Officer of Oncor; and other members of our senior management team.

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statements we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K filed with the SEC.

Earnings per common share amounts in the presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We also encourage you to review our 10-K for the year ended December 31, 2025. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, February 26, 2026, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future.

With that, please turn to Slide 5, and let me hand the call over to Jeff.

Thank you all for joining us today. Our success in 2025 reflects how well we performed against our priorities. In that regard, we introduced 5 value creation initiatives last year designed to simplify Sempra's business model mitigate risk and improve financial strength. The first value creation initiative was to prioritize utility investments with improved returns.

During the year, we deployed $13 billion in CapEx and Sempra California increased CPUC base operating margin and Oncor, improved capital efficiency through the implementation of the unified tracker mechanism. Together, these factors contributed to separate achieving record adjusted EPS of $4.69 at the high end of our 2025 adjusted EPS guidance range while establishing a strong foundation for continued growth through 2030.

We continue to see compelling investment opportunities in Oncor service territory with historic levels of transmission expansion continuing to advance. In order to support this build-out, we're excited to introduce a new record capital plan of $65 billion for 2026 to 2030 representing a 17% increase to last year's plan. Karen will speak to this later in the call, including details about $9 billion of upside opportunities that we're tracking within the plan period.

The second initiative was to highlight value in our LNG franchise. In September, we announced the sale of a 45% stake in SI Partners for $10 billion implying over a $22 billion equity value. We're pleased to recognize the significant value created on behalf of our shareholders at an attractive multiple. And we continue to expect to close that transaction in the second or third quarter of 2026, subject to closing conditions.

Sempra Infrastructure also made progress during the year on several LNG projects by declaring FID on Port Arthur LNG Phase 2 and reaching mechanical completion at ECA LNG Phase 1. Also, Port Arthur LNG Phase 2 construction continues to proceed on schedule, and we're excited by the prospect of all of these projects driving the growth profile of that business well into the next decade.

Our third priority was to simplify the business and reduce portfolio risk, including the sale of noncore assets in Mexico. In December, SI Partners entered into an agreement to sell EcoGas for the equivalent of approximately USD 500 million. We believe the implied 12.7% EBITDA multiple provides further support for the overall value of Sempra Infrastructure's portfolio, and we look forward to completing that sale in the second or third quarter of 2026, subject to closing conditions.

Our fourth initiative was to execute Fit for 2025, which focused on reducing our cost structure to meet our future business needs and included modernizing our workforce to improve organizational efficiency. We have more work to do in this area, and it will continue to be a focus in 2026.

Lastly, we wanted to elevate community safety and operational excellence across the enterprise, which culminated in California legislature passing SB 254, which strengthened the long-term stability of the state's wildfire fund and called for further reductions to wildfire risk exposures through the natural catastrophe resiliency study to be published in April 2026 and SDG&E being recognized as best in the West in electric customer reliability for the 20th consecutive year.

Now please turn to the next slide where Karen will walk through our financial results.

Thank you, Jeff. Earlier today, Sempra reported fourth quarter 2025 GAAP earnings of $352 million or $0.54 per share. This compares to fourth quarter 2024 GAAP earnings of $665 million or $1.04 per share. The full year 2025 GAAP earnings were $1.796 billion or $2.75 per share. This compares to 2024 GAAP earnings of $2.87 billion or $4.42 per share. On an adjusted basis, fourth quarter 2025 earnings were $841 million or $1.28 per share. This compares to our fourth quarter 2024 earnings of $960 million or $1.50 per share.

Full year 2025 adjusted earnings were $3.66 billion or $4.69 per share. This compares favorably to our previous full year 2024 adjusted earnings of $2.969 billion or $4.65 per share. We're pleased with our execution as adjusted EPS for the year came in at the high end of our previously announced 2025 adjusted EPS guidance range.

Please turn to the next slide. Variances in the full year 2025 adjusted earnings compared to the same period last year can be summarized as follows: at Sempra, Texas, we had $80 million of higher equity earnings from the UTM, higher invested capital and customer growth, partially offset by higher interest expense, depreciation and O&M.

Turning to Sempra, California. We had $213 million, primarily from lower income tax benefits and higher net interest expense. As a reminder, fourth quarter 2024 and full year 2024 results were impacted by the recognition of 2 years' worth of income tax benefits from last year's GRC final decision. Sempra California also had $148 million of higher CPUC base operating margin, net of operating expenses, regulatory disallowances and a lower cost of capital.

At Sempra Infrastructure, we had $123 million primarily from higher asset and supply optimization. Higher transportation results and lower depreciation on assets held for sale, which were partially offset by lower income tax benefits. At Sempra parent, the $41 million of higher losses is from higher net interest expense, partially offset by higher income tax benefit, higher investment gains and other.

Please turn to Slide 9. To start, I'd like to extend our appreciation to our current shareholders for supporting our mission and as we look to build upon the momentum established in 2025, Jeff has laid out a series of priorities for 2026. And I'm pleased to note that we've already hit several important milestones. Oncor has successfully reached a comprehensive settlement in its base rate review. The settlement contemplates improvements to the authorized equity layer, ROE and cost of debt. If approved by the PUCT, this outcome will better align Encore's cost structure to the current environment and is also expected to improve Oncor's financial strength and credit metrics during this period of exceptionally high growth.

A final order is expected in the first half of this year. And importantly, Oncor expects to earn very close to its authorized ROE over the 2026 to 2030 time frame. At Sempra infrastructure, Port Arthur LNG Phase 1 remains on schedule for achieving COD at or near the end of 2027. And finally, in California, I'd like to note, we continue to be engaged in efforts to improve public policy to support SB 254 follow-on legislative efforts.

We look forward to updating you on these priorities on our next earnings call. With that, please turn to the next slide. We're excited to announce our 2026 to 2030 capital plan totaling $65 billion, an increase of $9 billion over last year's plan. In support of our mission, 95% of Sempra's overall capital program is targeted for utility investments. The capital plan is primarily driven by strong growth at Sempra Texas most notably from the acceleration of the Permian Basin reliability plan. And as the remaining 765 kV strategic transmission expansion plan continues to advance, we've taken a conservative approach in developing Oncor base plan by only adding major transmission projects with existing regulatory approvals and those that are part of the Permian plan.

As a reminder, Oncor is expected to build more than half of the total of ERCOT's estimated $32 billion to $35 billion in required transmission investment. Consequently, nearly 70% of Oncor's planned CapEx is dedicated towards transmission. Also within the plan period, we're tracking significant incremental capital opportunities at Oncor, currently estimated at $10 billion or $8 billion based on Sempra's proportionate ownership share. This upside opportunity primarily includes the non-Permian plan portion of the 765 kV step.

Additional transmission upgrades currently pending ERCOT approval and potential system resiliency plan updates. Further, Oncor accounted for certain LC&I interconnections in the incremental CapEx category. Even though these projects may not have currently met all development milestones to be included in our base capital plan, there's a high likelihood these projects come into the plan in the future. Keep in mind, too, that Oncor service territory has some of the highest concentration of AI-related and data center growth, which represents additional potential investment opportunities.

Please turn to the next slide. Driven by our expanded capital program, we project overall rate base to increase from $57 billion in 2025 to $97 billion in 2030, an impressive 11% 5-year CAGR. Our disciplined capital allocation strategy is designed to produce attractive returns with improving cash flows and distributions to help efficiently fund the exceptional growth we're seeing in Texas. Sempra Texas rate base is projected to grow at a remarkable 18% CAGR over the plan period. While California rate base is projected to grow more modestly as we continue to prudently invest in improvements to safety and reliability.

In combination, these investments will help grow our overall regulated footprint as we expect Sempra Texas to surpass Sempra, California as the majority of our rate base by 2030. Please turn to the next slide. With over $50 billion provided by operational cash flows and expected transaction proceeds, we've eliminated the need for new common equity issuances to fund the base capital plan. Due largely to our accomplishments in 2025, operating cash flows have increased by about $5 billion from last year's plan and are expected to be the predominant funding source for our capital campaign.

As always, we'll continue to seek the most efficient and lowest cost financing available to fund the capital plan and other future growth, and we're well positioned in that regard. For example, we anticipate an additional $2.2 billion of cash generated from the Sempra Infrastructure Partners transaction beyond the 2030 planning period.

We'll also retain a 25% residual stake in Sempra Infrastructure Partners, with an implied equity value of approximately $5.5 billion, which provides further flexibility. Across the plan period, we remain dedicated to providing investors with an attractive total return complemented by a growing dividend while retaining funding flexibility over the longer term to support our strong expected earnings growth.

Please turn to the next slide. We're committed to maintaining a strong balance sheet and investment-grade credit ratings and the pending SI Partners transaction remains a key driver in helping us meet our goals in this area. After closing, we expect regulated earnings to comprise approximately 95% of our business in 2027 and beyond as we transition to a more pure-play utility holding company.

We also have the opportunity to deconsolidate SI Partners debt and have held constructive discussions with the rating agencies about the potential to lower downgrade thresholds once we complete our capital recycling program. After we close the transaction, we're targeting at least 50 to 150 basis points of cushion on average above our FFO to debt thresholds over the plan period.

Please turn to the next slide. Simplifying our portfolio and concentrating our focus on utility investments continues to strengthen our visibility into future financial performance. The growth we see through 2030 and beyond really stems from the work and accomplishments from this past year. As Jeff highlighted earlier, those efforts are driving meaningful improvements across the businesses, including improving financial returns, growing earnings and cash flows, recycling capital to fund our record capital plan, while also strengthening the balance sheet.

In combination, these improvements have positioned us to launch a record capital plan without the need for common equity issuances and gives us the increasing confidence to be able to provide a robust 2030 earnings per share outlook.

Today, Sempra is affirming our full year 2026 adjusted earnings per share guidance range of $4.80 to $5.30. Introducing our full year 2027 EPS guidance range of $5.10 to $5.70 and issuing a 2030 EPS outlook of $6.70 to $7.50. With today's update, we believe we have one of the highest projected growth rates in the sector, and our 2030 outlook shows that our strong long-term growth expectations continue through the end of the decade.

For additional context on our guidance, please refer to Slide 17. And now I'm going to hand it back to Jeff to wrap up on our next slide.

Thank you, Karen. Allow me to conclude our prepared remarks today by outlining Sempra's value proposition and key investment highlights. First, we're launching a record $65 billion capital plan that projects 11% annualized growth in rate base across the plan period with visibility into another $9 billion of potential upside opportunities. Second, we're aiming to provide investors improved returns at lower risk in markets with constructive regulation, targeting long-term 95% regulated utilities earnings.

Third, our capital allocation is increasingly directed toward Texas, where we expect to drive nearly 60% of our rate base by the end of the decade. Fourth, we've been successful in creating a clear path to fortress in our balance sheet and improving our credit metrics.

With the efficient sourcing of capital, we now have no need for common equity issuances to fund the base capital plan. And finally, we're committed to returning capital to shareholders and are targeting annual dividend growth of 2% to 4% over the plan period.

To summarize, we believe Sempra offers investors an attractive combination of current yield durable earnings growth and long-term capital appreciation. We're pleased with our 2025 performance and view it as a foundational year that sets us up for long-term success. Now I'd like to open the line for your questions.

Thank you. This concludes the prepared remarks. We will now open the line to take your questions.

[Operator Instructions]

And our first question will come from Shahriar Pourreza from Wells Fargo.

Maybe just starting off on the 23 guide that you introduced today. The range obviously seems to indicate about that 7% to 9% you reiterated today from the 26 base. Can you just help us -- can you just help maybe elaborate what moves you into the top half of that 2030 range, does that variability include any of the $9 billion upside opportunities that you continue to highlight? Or could that be accretive to, let's just say, the $750 million you've got out there?

Sure. I appreciate the question, Shar. You'll recall that we set an expectation of our future growth last year of having a long-term growth rate of about 7% to 9%. And I think couple of the key takeaways from the call today is with all the accomplishments I noted in my prepared remarks back in 2025, now seeing the quality and the certainty of our future earnings and cash flows improve. In large measure, that's what's given us increased confidence to be more transparent about our expectations for 2030, and that's why we were confident today to go ahead and issue the outlook that you're referencing.

The larger items that can impact the long-term outlook are regulatory matters, I think we've talked about this before, but our 2028 GRC in California. This is something we've been working on in terms of regulatory strategy over the last 6 months. and Caroline and her team should be in a great position to make that filing in May of this year.

Second, we'll be working hard to do exactly what you just referenced, which is in the roll forward capital plan, make sure that we're really addressing that $9 billion of future upside I think there's been some calls or questions earlier today about whether that $9 billion is in the plan or outside the plan to be very clear is certainly outside the plan. And 1 thing that I think that would be a helpful guidance for you, Shar, is recall, at this time last year, we had about a $12 billion upside opportunity that we noted, and we were able to move roughly $9 billion or $10 billion of that into the current plan.

So I think we've got a track record of identifying stuff that's doable. We feel very good about that $9 billion, and that's the type of capital that can move us well into the upper end of that 2030 guidance. In terms of key takeaways from my perspective about the outlook, quality and certainty of future earnings and cash flows have improved and however we want to evaluate our expected growth. It's trending in line or above our long-term guidance of 7% to 9%.

Got it. That's perfect. And then just maybe diving a little bit deeper on California. I guess what's embedded in the earnings growth in '27 just given the smaller contribution versus prior years? Is there incremental ROE lag that you continue to anticipate? And does a potential reconsideration of attrition year revenues potentially drive that higher. It just seems like, Jeff, just California continues to be somewhat further deemphasized as you think about capital allocation within the company. So just give a little bit of a sense on that mix.

Yes. A couple of things here. It's really what you're seeing is that really reflects the impact of the approved attrition from the last GRC as you move from 2026 into 2027. It's also why Caroline and her team are really working aggressively about improving efficiencies and modernizing that business, and that's good for affordability too, right?

So I think we have opportunities there to continue to drive value in California. She also has a basket of regulatory items that she'll be pursuing both this year into 2027, which could have an impact. So we feel like there's continued opportunity, both share in 2026 and 2027 for improvements. But I think we're comfortable with the guidance we have out there for Sempra California at this point.

Got it. Super helpful. Congrats on the execution today. It's pretty noteworthy. Appreciate it.

Thanks a lot for joining our call.

Our next question comes from Steve Fleishman from Wolfe.

So just maybe I appreciate giving '26, '27, 2030. But because there was definitely shaping in 26 higher lower growth prior year. Could you give us some sense of just the shaping of the 28% to 30%. Is it a little more linear, just given that it's driven by the rate base growth and the UTM? Or just any color on that if possible.

Yes, Steve, I appreciate the question. I'll give you a couple of thoughts here. Over time, we try to get a lot of input from the investment community and from the sell side about how we can be more transparent about what we think we can accomplish in the future. And this includes surveying the other 31 companies in the S&P 500 Utility Index. So as you know, because you follow the sector, some folks have 1-year guidance. Some people have 2-year guidance. A few companies have 3-year guidance. Some companies pull their guidance when you're facing a rate case. And I think what we wanted to do is -- there was a lot of really helpful improvements in 2025, right?

We've improved our capital plan. We've improved our capital efficiency. We've improved and have a clear path to improving our balance sheet and I think what's taking place is we're moving from a set of cash flows that we're slightly higher beta, Steve, the cash flows now, which are more certain and it's really a tribute to the work that Allen and Don Clevenger are done in Texas over the last 12 months. So this has allowed us to give a lot more visibility into 2030.

And on top of that, obviously, you can look at all the interim growth rates that you might expect we're still kind of guiding to this longer term beyond the plan period, 7% to 9% growth. So look, it's never going to be a straight line, as we talked about before. but this is a very robust growth story. It's backed up by what I think is a solid dividend story. And I think you're going to continue to see us find new ways to deploy capital and to officially finance it.

Okay. And then my other question is the $9 billion of upside at Oncor, Texas, maybe I think you gave the pieces there. Could you maybe give a little sense of time line when we'll know the likelihood of that happening? And maybe any color just on growth.

This is an interesting question because that kind of goes to your prior question. If you look at the way we've laid out in our slide presentation, the bar chart for our base capital plan, Steve, if you look at where that $9 billion of upside capital can layer in it's really a '28, '29 and '30 story. So I think we feel very good about the shape of '26 and '27 in that capital plan but the upside opportunity that you're acquiring about really layers in nicely around growth in 2029 and '30.

And certainly, Steve, that could shape really the longer-term growth profile as you think about a CAGR through 2030. What I would do on your current question is refer you to Slide 22 and perhaps found it would be helpful, if you don't mind, for context, go ahead and highlight what you've pushed into your base capital plan. And to Steve's point, how you think about spending in the upside case.

Yes, you bet. Thanks for the question, Steve. So -- starting from the top, I think you all know our prior plan was $36 million in base capital and $12 billion in incremental opportunities. What we announced today was $47.5 million in base capital plan and $10 billion in additional incremental opportunities. So there's about $11.5 billion increase to the base plan as is shown on the slide, that both Jeff and Karen have referenced, divided into 4 main categories: Permian plan projects at about $6 billion new transmission projects, about $2 billion distribution upgrades, about $2 billion and the Delaware Basin transmission project is about $1 billion.

Now with regards to the incremental bucket, we think we have a really high-quality group of potential projects here that total up to about $10 billion. And I'll give you a little more color on these opportunities that are listed on Slide 22. But for the first one, the ERCOT non-Permian projects and the 765 step plan -- that's about a $3 billion opportunity. Additional transmission upgrades, the reference is the second bullet. Those are transmission upgrades that are presently in the stakeholder process or for which we are waiting ERCOT approval. That is about another $2.5 billion.

The system resiliency plan updates for '28 to '30 is approximately $2.7 billion. And then the additional LC&I interconnections is approximately $1.2 billion. So we feel very solid about our base plan. We think it's heavily derisked. It's primarily transmission that's either gone through the ERCOT or the PUC process. About 70% of that base is transmission. It's not contingent on things like data center development and we have a high degree of confidence in the base number.

With regards to incremental, we think and we believe that part of potentially all is very realistic or possible in the next 5 years. So some of the things that could drive the shift from the incremental bucket to the base plan. I think it's consistent with what Jeff said in kind of the outer years of the plan are things such as ERCOT releasing additional transmission projects that we've applied for or in a regional transmission plan if we were to achieve CCNs for some of these projects that are listed in the incremental bucket, especially for non-Permian Basin, 765 or projects. That could shift from incremental to base.

We're targeting an SRP filing in 2027. So when we make that filing, some of those dollars can obviously move into base and then things like the batch Zero process that's ongoing at ERCOT and the PUC right now or ERCOT's regional transmission plan, if there's additional projects for us that are presently incremental, those would move potentially some dollars into the base as well. That's kind of where we are. We feel very good about both the base and incremental.

I would add, Steve, to your question is I made reference to Slide 10 before that you can graphically see that with a lot of confidence across our management team and Allen outlined, I think we have the opportunity to go back and do exactly what we did last year is that this opportunity capital into the plan, primarily in '28, '29 and '30. And obviously, you can see that's going to have a fairly dramatic improvement to the projected long-term growth rate.

Our next question comes from Nicholas Campanella from Barclays.

And appreciate all the updates. I just wanted to follow up on 1 of the prior answers, just trying to understand the $9 billion of capital putting you into kind of the upper end of the guidance of -- I think that would be $750 million. Just what's kind of the offset that's keeping you at the high end of the range? Or is that just being conservative? Because I do recognize on the prior fourth quarter call, we kind of talked about trending and striving to be above the 7% to 9% then you had the $0.20 of Encore accretion, the UTM, a very large capital acceleration at Encore. So I guess just what does that kind of offset that's not really like accelerating you beyond that $750 high on.

Yes. Well, it's obviously a high-class problem when I'm answering questions like this, Nick, so I certainly appreciate you teeing that up. But I would say that really been dramatic year-over-year, and this is really a credit to the work that's taking place in our planning group and Karen is that we've been able to increase our projection of internally generated cash flows by just over $5 billion. That's a really big deal.

We're continuing to improve the credit quality in California, which is important. And even though we've moderated the growth a little bit in California, you've seen continued increase in the growth at Encore, and we're projecting, obviously, not only higher cash flows and earnings there but a lot higher rate base growth at the 18% level across the 5-year plan. So to your point, I feel very good about what Alan just outlined. We have a real opportunity to flex up into the higher end of that 2030 outlook -- we're pleased to be able to be 1 of the few companies in our sector that have that type of certainty of future performance, and we're pleased to announce it on today's call.

But is you've seen the improvement from last year, what a difference a year mix, right? We've been really working hard to be able to give this type of visibility to our shareholders. And I think to your point, we're going to try to do it again this year. And I think Karen laid out the '26 value creation initiatives. The only caveat I would share with you to the heart of your question is, -- we want to get to settlement finalized in Texas. We're confident we can do that.

And secondly, we have a very big transaction at Sempra Infrastructure and we want to get that done. So as we continue to take execution risk off the table, we'll look for opportunities to continue to update about how we think about the future.

I appreciate it. And then just you said in your prepared, and I think this is kind of the mantra of how you're operating as always, but you're always going to seek the lowest cost financing to fund CapEx. So just thoughts on the remaining 25% in terms of maybe using something to fund the $9 billion or other strategic actions to limit common equity or otherwise?

I appreciate that, Nick. And obviously, central theme here is we're continuing to build a great business. And to do that, we've got a robust growth story, and I think we've got a solid financing plan in place for the base capital plan. I think the heart of your question is, how do we think about continuing to officially finance these upside opportunities like some of the ones that Allen talked about today. I think we're in great shape. I'd start with this. Remember, it always starts with improving your operating cash flows, we talked about making this a priority over the last 12 months. And obviously, I've referenced this $5 billion of projected new internally generated cash flows, which is absolutely instrumental in our current capital plan.

Second, it's important to remember that we have 2.2 billion of additional proceeds that are owed to us as part of the Sempra Infrastructure transaction that currently fall outside of the plan period. So that's something that's important for investors to track.

And finally, we have a demonstrated track record. We've actually got a slide in the appendix to our materials about being committed to capital recycling. Recall, too, that we still have a 25% interest in Sempra Infrastructure. So as you referenced, that too remains a potential funding opportunity. And as I outlined these opportunities, remember, -- we've said this many times in the past, we're going to compete capital. And as these large capital programs come forward, utility company by utility company, people continue to be focused on the capital program but it's just as important that you're focused on sourcing capital efficiently.

And that's really been the big story for us over the last 12 months. I think the key takeaway for us is we'll work hard in this fall planning process with Karen's team to make sure as we roll the plan forward as we've done in the past, we'll continue to bring forward what we think is going to be a best-in-class efficient financing plan.

Our next question will come from Julien Dumoulin Smith from Jefferies.

Jeff, what a difference the year makes incredible outcome here. on, I got to say -- thank you. Absolutely, absolutely. Let me come back to what Nick was passing on a second ago. When you think about the moving pieces in the 710 midpoint here for 30 he was pressing on the sell-down of SIP. What else really would move the right? You talked about the $9 billion. We talked about the SIP. What else would really drive you within that range here? And if I can lead you in a certain direction here, how do you think about California in that vein, whether that's a strategic decision or frankly, whether that's just finding other avenues to accelerate in as much as it hasn't really changed here year-over-year for the the CapEx plan for instance?

Well, let me go back to about 12 months ago, we were facing an opportunity for a rate case in Texas that had 4 or 5 years of uncertainty for us. We were in the beginning of the rate case in California. And now 12 months later, think about this, with the settlement that we have in hand in Texas and with the efforts to kind of finalize that this spring, we're going to have certainty from the regulatory side with that new 2024 test year all the way through 2030 with no expectation of filing a new rate case there probably until the the April, May time frame of 2030. Likewise, in California, we've got this year and next year certainty from the last rate case.

So as you think about 2030, we've got to do a good job of executing on the 2028 GRC. So what you really think about is let's get the settlement approved in Texas. Let's get the SI transaction closed -- let's spend tomato rating agencies and make sure we're really thoughtful about fortressing our balance sheet -- and then we've got a great strategy in place to improve in California. So if some of those risk factors to execution come off the table. You should expect this management team to look for opportunities to provide more visibility. And let me come back to a point that you're making around California.

California has really high equity layers over the last 2 decades, Julien, it's been a top decile regulatory environment. I think there's a lot of positives going on in California today. This really is probably another re-rating opportunity for all the investor-owned utilities in the state. What we have going on, right, with the study bill right now, I think, is quite positive. And the other thing you got to remember is we have very high FFO to debt and by moderating the growth a little bit, we're still going to meet all of our safety and reliability needs and the cash flow generation from California is really important.

So at no time in our history, as California and Texas been more complementary, and it's happening at just the right time. Texas has the leading growth story in the country. It was the leading growth story last year, and it's even better now. And one of the things she should count on, Julian, is we're going to work really hard to continue to improve that growth story.

So I think Sempra as a whole, has a great plan in place. And I think the key takeaway from me as a CEO is we're really earnest about building a better business.

Excellent. Jeff, let me put that to a final point. do you think you'd come back subsequent to getting this settlement resolved, some degree of California visibility with the next step here, whether it's Track 3 or the next study phase and do something of an Analyst Day or a full look? Or do you think, look, you've given us an incredible FY '30 to begin with enough for now. I just want to understand on how you're thinking about cadence of updates, et cetera.

Well, look, there's no question that we have the opportunity today relative to the last 12 months to provide more visibility and more transparency. And we think that's always good for the investment community. And I think one of the themes that we've been pursuing in the last 12 months is this continued effort to simplify your business, Julien.

And I think you and I have had this conversation through the years that when you can simplify your business, take a risk and challenges away from your investors that always leads to a rerating story. So if there's an opportunity for us to come back and maybe have an Analyst Day, I think that's really a great idea. We'll take that on board and that's something we'll think about as we move through the year.

Our next question comes from David Arcaro from Morgan Stanley.

Maybe digging into the data center pipeline, the LCN pipeline in Texas. I was wondering have you seen slippages challenges in all of those data centers just physically getting built online. We've been hearing more about supply chain challenges with labor, certain equipment, transformers, et cetera. Curious what you're seeing on the ground and what can actually get built?

Yes. I think we've got a slide that Al as teams put together at Slide 23, which I'll ask Alan to comment on the second. But let me do a couple of things before I pass it to Allen. As we've laid out the $65 billion base capital plan 1 of the points we've made on the call, David, is it's really centered around highlighting how much growth we're seeing in Texas. And what's really remarkable to me, having been in this industry for close to 30 years, it's really built on the back of transmission.

So transmission is the key enabler for generation to come on the system as well as large load customers and to serve residential class. And I think what I've never seen before, -- and this is probably 1 of the most valuable pieces of infrastructure in the energy value chain is Oncor's capital plan is about 70% geared to transmission. So the large load growth is important. I know as we go from one earnings call to another earnings call, there's a big focus on data centers.

The great news is we're going to try to serve that growth, but that's really upside to our current plan. Let me stop there, Allen, and see if you could give a little bit more color on what you're seeing relative to Slide 23 and how you're thinking about making sure that we serve not just the data centers but many of the other large customers that are really in the siding to your system.

Yes. Thanks, Jeff. Thanks, David. So I'll tell you as a guy who talks to many, many data center developers in and around our system. I've said for many quarters now. The Oncor last quarter, it was at 226 gigawatts with 210 gigawatts of data. This quarter is at $273 million with 255 in data. So the first part of the answer is data centers are continuing to show up, looking for service on our system. -- the variance in the quality or the likelihood of those data centers varies by party. -- and I've explained this on calls many times.

You have ones that are very serious and are likely to make and you have ones that are significantly less serious than our chasing the gold rush. And there's many factors that go into the likelihood. I can't predict whether or not they'll make, but you can generally tell where the serious parties are. We are trying to work the data center and the large load customer angle a number of ways.

Obviously, we are working very heavily in the batch Zero process. ERCOT is working very hard to come up with cross criteria in the process. They're going through the stakeholder process now with the idea that they'll try to get something to the Board by June. There's actually a workshop this morning. I think it's too early to tell the outcome, obviously, of what's going to happen there. So more to come on batch 0 as that develops.

But we at Oncor are working multiple avenues and not just the batch Zero process, and I'll give you a few examples. We have a number of projects right now that have been pending at ERCOT for a while. -- and we continue to work those projects through the ERCOT process independent of the badge Zero process that's being developed right now.

So a couple of examples. We have a South Dallas project that's nearing completion at ERCOT, we believe, that would provide for 4 gigawatts of load serving capacity in the Dallas -- South Dallas area. And that would all be brownfield projects. It could be completed relatively quickly once approved. So that's potential opportunity there. We have -- in addition to the South Dallas project, we have about projects related to about 10 additional gigs, elsewhere on our system, that all those projects are presently moving through the RPG process.

In addition, another avenue that we're working on. We are presently developing a list of loads 2026, RTP projection, TDUs are due to file by April 1. Customers would need to meet a number of RTP 26 criteria that align generally with the SP 6 requirements for customers to, one, demonstrate financial commitment; two, provide proof of site control; three, fund or Cat study cost upfront, for disclosed intended generation sources; and five, identify any other active projects that could impact system reliability.

So as we sit here today, we have at least 38 gigawatts that meet these standards, but we are continuing to actively work with our customers between now and April and I strongly believe we'll have more than 38 gigawatts by the time we get to April 1, reminding you, obviously, that my entire -- our entire system right now is a current peak of about 3 gigawatts.

Finally, we are, as been mentioned on this call and many times before, constructing more than half of the Permian Basin reliability plan and the STEP 765 plan. And those transmission projects would obviously provide for additional load additions on our system as well.

Yes. So we spent a lot of focus on batch zero. It's very important. We'll continue to be heavily involved, but we're working multiple avenues to try and address the need of our large load customers and we'll continue to do so.

Thank you, Allen. The only thing I would add, David, is as you follow the opportunity for data centers and large load customers all across the country here about different jurisdictions where these things are going forward. We're very confident at Sempra that the largest opportunity in the United States for data centers, centers on Texas. And in the Texas region, the largest opportunity sits in the footprint at Oncor.

And you can see that on Slide 23, where they now have upwards of 273 gigawatts that are kind of in the queue. So we remain optimistic that this AI process moving forward, the commitment to data centers is very important all across the country, and we're going to be very aggressive supporting the governor and the economic agenda in Texas to make sure we can be accommodative of all customers through the lens of also making sure that we can manage costs for our residential and other customer classes.

Really helpful context. Separately, I was just curious if you could touch on how do your credit metrics maybe trend through the plan here through 2030, other peaks and troughs that you need to manage as you go?

Sure. I mean, obviously, this was an issue that was front and center last year. We've got a lot of work that we've done in the last 12 months to make sure that we've got a clear path to not only a stronger balance sheet. I think you can see in one of our slides, we've talked about guiding toward improving our holdco to total debt ratios, driving down our debt-to-equity ratio to 49% or below. And Karen, you've done a lot of work on the balance sheet. You want to provide a quick update generally about how we're thinking about it.

Sure. Absolutely. Thanks, Jeff. Yes. maintaining the balance sheet really is a priority for us together with those investment-grade credit ratings. -- the SI partner transaction is key to this. So the proceeds are going to support our balance sheet, eliminate the need for common equity in our base plan. After closing, we're aiming for our regulated earnings to comprise approximately 95% of our total earnings composition, as a reminder, that's really important with the rating agencies.

So in addition to that, we're going to be able to deconsolidate Sempra Infrastructure's debt. And we've had really constructive discussions with the rating agencies about what this means for our downgrade threshold. So will be meeting with them and getting updates from them. So over the last 12 months, we've also improved our cash flows for our fiber plan by $5 billion.

So again, adding to those credit metrics. So our target of 50 to 150 basis points, we feel really good about that. And I think we'll find to that later this fall when we closed the SI transaction have an opportunity to go meet with the rating agencies go through all of that. I think the key takeaway here is over the period, I feel really good about where they are. They're not going to fluctuate there to fluctuate a little bit, but there's not a lot. It's pretty solid once we get past of this transaction, and it's only going to get better when we start improving those cash flows.

And David, the only thing I'd say, and I've made this comment earlier in the call, our focus right now is making sure we get a great outcome for the base rate review in Texas, which we're expecting the spring -- we're also focused with just in help in making sure that we successfully closed that SI transaction.

And then over the next 3, 4, 5 months, there'll be a lot of work done closely with the rating agencies. We've made this a priority. And I think Karen's team -- we want to make sure that we gave a little bit of guidance about how much cushion we want to put on the balance sheet. But this will be an evolving conversation where we can provide more details to you as we get further along in our planned execution.

Our next question will come from Anthony Crowdell from Mizuho.

Just 2 quick ones, more housekeeping. On Slide 12, that $6 billion chart. You talk about the $2.2 billion of cash expected after the plan period. Do you have to do some bridge financing or something to meet the needs through 2030? How do you hand that? And I have a follow-up.

Yes. Currently, in the current base capital plan, we've got our financing lined up. So we're not going to need to basically go into that type of financing approach. There are opportunities, obviously, and I think as people think about Anthony, future capital increases, those are the type of things we look at as you get into that 2032, '23 time frame, you have the opportunity to monetize that $2.2 billion.

One other thing I would mention is when there are capital recycling opportunities in our company or even at SI, those proceeds could be helpful in returning more capital of SI earlier in the plan instead of waiting to that 2032, 2033 time frame.

Great. And you may have answered this with Steve's question earlier. Slide 10, you talked about $9 billion of CapEx opportunities. And then Slide 21, on Texas you -- or Slide 22, I'm sorry, you took about $10 billion of CapEx opportunities. It's just some of the Oncor opportunities outside the 5-year land?

No, it's just -- I'm sorry for that confusion. It's just our relative ownership, right? They're talking about their 100% opportunity. And when you see it on Slide 10, that's really our 80.25% interest of what they're projecting.

And our next question will come from Carly Davenport from Goldman Sachs.

Maybe just a follow-up on Allen's comments before on batch Zero and large load in ERCOT. I guess are there any outcomes that you could see from that process or even from large load forecast provisions that could pose downside risk to the ERCOT mandated transmission spend that you have in the current plan?

Yes. I'll pass it to Allen in a second, but I would -- here's the way I would frame it for you. And I tried to address this a little bit earlier, Carly, -- but I think what we've tried to build is kind of this bulletproof base capital plan, right? We've got a plan to spend $65 billion. We put a lot of thought into making sure that we efficiently finance it by competing capital sources inside of Sempra.

And I think we're pretty much shielded from those types of outcomes primarily because of 70% Allen's capital is allocated toward transmission, which is really a remarkable percentage. And even as you think about Carly affordability, remember, -- he's roughly 37% of the marketplace. So every dollar spent in transmission only goes to his customer base at the $0.30 level. So Allen, I think, tried to explain that as he thinks about his growth this batch 0 process is 1 of 4 or 5 legs on the stool that he's managing. But Allen, maybe you can provide just a little more color in your mind about how concerned you are about the batch process and whether you think there's downside.

Yes. Thanks, Jeff. Thanks, Carly. Very simply, I would just say this. The upside downside related to BatchZero is under category 4 of the incremental capital opportunities on Page 22 in the deck.

So what comes out of Badge Zero or other ERCOT transmission plans are not presently included in what we have in the base plan.

Okay. That's really clear. And then maybe just 1 -- maybe just one other clarification on Texas. Does the current plan contemplate not going back in for a rate case until 2030? I'm just curious if there are any items that could change that you believe could drive you to go in sooner?

Yes. Look, I think the goal here is we're focused on getting the current settlement approved -- and by moving to a 2024 test year, it really updates our overall cost. And by the way, importantly, Karl, because that really covers that gap where there's a big -- a lot of inflation between 21% and 24%.

So our expectation would be that the next base rate review filing would not be until spring of 2030. But obviously, they've always got the opportunity to go back in early if they need to. But we feel great about putting a lot more regulatory certainty around this capital program. So we feel great about it and getting that settlement approved here in the spring.

And we have time for one last question today. And our last question will come from Aidan Kelly from JPMorgan.

Aidan, we appreciate you joining the call and really appreciate your recent initiation of coverage.

Today. Just wanted to come back to the Texas load pipeline again. I'm curious if you could share any thoughts on what sort of commitments are being made there. I guess, any insight on the amount that are like LOAs versus not?

Yes. Well, look, a couple of things I'll highlight before I pass it to Allen. But on Slide 23, it kind of highlights the pipeline of folks that are trying to attach to the system. Number two, there is a process that Allen follows about making sure that they have either security deposits placed for high certainty load and he's got various mechanisms, which I'll ask him to describe in a second.

But one of the things that intrigued me, which came out on today's call is you're talking about Encore system peaking at 31 gigawatts and Allen's high confidence of go-forward attachments to a system of over 38 gigawatts. And I think that number will prove to be on the light side. So the overall demand growth that's expected to take place in the high certainty category is really encouraging you. But maybe, Alan, you can talk about the really, I think, unique steps you've taken to firm up who's in the high certainty category in the kind of the interim contracting process you've entered into.

Yes, sure, Jeff. So this has evolved over time. If you go back to last year, I was reporting on what we call high confidence load -- at that time, I think we had about 9 gigawatts of formerly signed facilities extension agreements, and I think we had another 27.5% or so of what we included at that time in an officer letter, which ERCOT is no longer doing, they've switched the process now.

We did initially also go down the path of entering interim FEA or interim facility extension agreements. Those required about a $6.5 million collateral from the customer. All these processes are overlapping now into what's going on in batch Zero and the development of the list of loads for the ERCOT 2026 regional transmission project or projection rather and the factors that are included for load going into that April 1 filing are the 5 factors that I list before that add up to the approximate 38 gigawatts that we have as of today. Again, it will be higher by April 1.

I don't know if that answers the question, but I think that's what we've got. We have one more factor, I'll tell you I think when I got this job, we had about $200 million worth of collateral that we were holding from customers in 2018. Today, the collateral that we have from not only these large load customers but also from other customers, but it's around $3.5 billion as we sit here today, which gives you a magnitude of the interest of the parties that we're dealing with.

Thank you that concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.

Well, look, I'd like to thank everyone for joining us today. We certainly appreciate you making the time to participate I would also want to highlight that this is a very exciting time for our company and meeting with investors remains a top priority for our management team, and that's exactly why we expect to be particularly active in March and April, and throughout this year with trips planned at various conferences, including in the next 45 days, trips to the Midwest, Northeastern Europe.

If there are any follow-up items, please reach out to our IR team with your questions. very much appreciate your participation, and this concludes our call.

Thank you for your participation. You may now disconnect.

Good day, and welcome to Sempra's Third Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.

Good morning, and welcome to Sempra's Third Quarter 2025 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section.

We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Caroline Winn, Executive Vice President of Sempra; Allen Nye, Chief Executive Officer of Oncor; and other members of our senior management team.

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statements we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC.

Earnings per common share amounts in our presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We'll also encourage you to review our 10-Q for the quarter ended September 30, 2025.

I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, November 5, 2025, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future.

With that, please turn to Slide 4, and let me hand the call over to Jeff.

Thank you all for joining us today. Before discussing today's financial results, I want to spend a moment reviewing how we've positioned our portfolio to deliver significant value to our owners through the end of the decade.

Today, our company is situated at the intersection of several important secular trends, including the ongoing electrification of America's energy systems, AI deployment and the growing need to deliver energy safely and reliably. In order to capitalize on these trends, we've worked closely with our Board of Directors to update our corporate strategy to focus on lower risk and higher value transmission and distribution investments, growing our position as a leader in large economic markets, shifting our capital allocation to fund the growing needs of our U.S. utilities and doing so with a sharp focus on Texas, which is a market that we believe offers the best long-term value proposition for our owners.

Next, let me turn to our financial results. Earlier this morning, we reported third quarter 2025 adjusted EPS of $1.11, which compares favorably with the prior period's results of $0.89. Also, with the strength of our year-to-date results, we're affirming full year 2025 adjusted EPS guidance range of $4.30 to $4.70 while also affirming our 2026 EPS guidance range of $4.80 to $5.30. And finally, we're affirming our projected long-term EPS growth rate as shown on this slide.

Please turn to the next slide, where I'll provide an update on our 2025 value creation initiatives. You'll recall that earlier this year, we announced a company-wide campaign focused on 5 initiatives to create value for owners. First, we set a goal of investing approximately $13 billion this year with the vast majority being allocated to our U.S. utilities.

Through the first 3 quarters, I'm pleased to report that we've successfully deployed nearly $9 billion of capital and remain on track to meet or exceed our year-end goal of $13 billion. Moreover, at Sempra Texas, we're benefiting from improving returns, primarily attributable to increased capital efficiency at Oncor, which is associated with the newly implemented unified tracker mechanism.

Moving to the second initiative. We're pleased with our recent announcement to sell a 45% stake in Sempra Infrastructure Partners for $10 billion. We view that transaction as a major catalyst in unlocking Sempra Infrastructure's franchise value while also benefiting Sempra in numerous ways, including: number one, improving our business growth profile as the mix of regulated earnings significantly increases; number two, unlocking reinvestment capital for our U.S. utilities; number three, adding an average of $0.20 to EPS accretion over the 5-year period starting in 2027; and number four, fortifying our balance sheet, deconsolidating Sempra Infrastructure Partners' debt and paving the way for improved credit metrics.

In parallel, the ongoing sales process for Ecogas continues to generate a lot of interest from a number of prospective buyers, and we're expecting to receive final bids before the end of the year. Both transactions are expected to close by the middle of 2026.

The last initiative shown here at the bottom of the slide is aimed at improving community safety and driving operational excellence across the organization. This includes efforts to improve the regulatory environment with a view toward reducing enterprise risk. A great example is California SB 254, which strengthened the long-term stability of the state's wildfire fund while also improving claims liquidity.

The key takeaway on this slide is that progress on these initiatives is translated into improved financial and operational results, and I cannot be more proud of our employees who have embraced our commitment to both modernize and scale our organization, improve our cost structure and better serve all of Sempra's stakeholders.

Please turn to the next slide where Karen will walk through business updates.

Thanks, Jeff. At Sempra, California, SB 254 was enacted, which is a significant derisking event for the California electric utilities. Jeff mentioned it earlier that the bill calls for an even split of funding between the California IOUs and their customers with no upfront contributions. Importantly, SDG&E share of the various contributions is a modest 4.3% for what amounts to just under $13 million per year through 2045, with additional future contingent contributions being required only if needed.

Continuation account also strengthens the cap on reimbursement in the event of a finding of imprudence. It's also important to note that any contributions made by IOU shareholders to the continuation account may be also counted as prepaid credits against potential reimbursement amounts in the future.

Taken together, we believe these measures, which are outlined on Slide 15 in the appendix, significantly strengthened the financial safeguards for electric utilities, an important achievement for all of California.

As we approach year-end, we're tracking several regulatory matters in California that we hope to wrap up, including Track 2 of the GRC, the T06 proceeding at FERC and the CPUC's cost of capital proceeding.

Moving to Sempra Infrastructure. We previously announced a definitive sales agreement that's expected to reduce our ownership percentage to 25% will be accretive to EPS forecast and credit. And following the close of the transaction, we expect to maintain a solid cushion above our FFO to debt thresholds.

Among other benefits, a lower equity stake will also improve our regulated earnings mix, while allowing Sempra to deconsolidate Sempra Infrastructure's debt from our GAAP financials.

In our LNG business, Port Arthur LNG Phase 1 continues to make notable headway with Train 1 expected to reach COD in 2027. We're on schedule and on budget with over 1/3 of piping installation complete on Train 1. Recently, we also completed the Tank A Roof Air Raise, which is another important milestone for the project.

Earlier in the quarter, you'll recall that we also reached FID at Port Arthur Phase 2 and issued a full notice to proceed under our fixed-price EPC contract with Bechtel. This is important because it gives us the opportunity to leverage continuous construction at the site and reduce project risk. To date, we placed all high-value orders for long lead plant equipment and also completed the project's first permanent piles for Tank C and Train 3.

I'll also add that the value proposition of Sempra Infrastructure's LNG franchise continues to grow. As the European Council recently backed the EU's proposal to end deliveries of pipeline gas and LNG from Russia by the end of 2027.

Moving to ECA LNG Phase 1. The project is over 95% complete and pre-commissioning activities are ongoing. Certain systems have moved into the commissioning phase, and we're currently working on repairing an auxiliary turbine designed to increase efficiency. Based on progress at the site, we continue to expect first LNG production in the spring 2026 with commissioning cargoes expected to commence thereafter.

At Cimarron Wind construction continues to advance with the overall project being approximately 95% complete. And just last week, Cimarron achieved initial synchronization of approximately 1/3 of the turbines that are now online and operational. And importantly, the project remains on target to achieve COD in the first half of 2026.

Finally, at Sempra Texas. Oncor's base rate review continues to make considerable progress. In September, a settlement on interim rates was approved that allows Oncor to apply the final approved rates back to January 1, 2026, if the case is not finalized by that date. And through October, Oncor has evaluated interpreter arguments, submitted rebuttal testimony and is actively engaged in settlement discussions with all parties.

Next, the procedural schedule calls for a hearing on the merits to begin the week of November 17. With completion of the base rate review and an updated 2024 test year, together with the opportunity to improve capital efficiency with the UTM, Oncor will be better positioned to support customer growth across its service territory.

And at the end of September, we continue to see strong growth in Oncor's core markets. Oncor's active LC and IQ has increased over 10% from the prior quarter. Further, premise count increased by 16,000 and Oncor also built, rebuilt or upgraded nearly 660 circuit miles of T&D lines during the quarter.

As customer growth continues to accelerate, in the transmission expansion plans advance, Oncor anticipates a substantial increase to its 2026 to 2030 capital plan.

Please turn to the next slide. Turning to the Texas 765 transmission expansion. We believe this remains a key growth driver that's underappreciated by the market. ERCOT estimates $32 billion to $35 billion to complete the full build-out. And as a reminder, we estimate Oncor's portion of these projects will surpass 50% of the total investment with Permian projects expected to come online by the end of 2030 and non-Permian projects being completed in the 2030 to 2034 time frame.

As a result, Oncor is now forecasting an increase of over 30% to its projected 2026 to 2030 capital plan. And though we're still early in our fall planning process, Oncor continues to see substantial upside opportunities to its updated base plan forecast. That's why at Sempra, we're prioritizing the Texas market within our portfolio and assuming a constructive rate case outcome you should expect us to allocate a significantly greater share of investment capital to Sempra Texas in our roll forward plan.

Please turn to the next slide, where I'll review the third quarter financial results. Earlier today, Sempra reported third quarter 2025 GAAP earnings of $77 million or $0.12 per share. This compares to third quarter 2024 GAAP earnings of $638 million or $1 per share. Note that third quarter 2025 GAAP earnings include a $514 million tax expense related to classifying Sempra Infrastructure Partners as held for sale, which is nonrecurring in nature.

On an adjusted basis, we're pleased with our strong year-to-date execution, as third quarter 2025 earnings were $728 million or $1.11 per share. This compares favorably to our third quarter 2024 adjusted earnings of $566 million or $0.89 per share. We believe this sets us up well for the remainder of the year as well as next year where we're anticipating strong year-over-year growth from the midpoint of our 2025 guidance.

We're continuing to expect several regulatory decisions in the next several months and don't want to get ahead of the CPUC. Ultimately, the resolution of these matters will be helpful in determining where our full year financial results come in.

Please turn to the next slide. Variances in the third quarter 2025 adjusted earnings as compared to the same period last year can be summarized as follows: At Sempra, California, we had $76 million primarily from higher income tax benefits, partially offset by higher net interest expense. This included $32 million associated with the election to accelerate deductions for self-developed software expenses authorized under OB3 as well as return to provision impacts and timing of flow-through tax benefits in the quarter.

We're also pleased that Sempra California had $47 million from higher CPUC based operating margin, net of operating expenses, partially offset by lower cost of capital.

Turning to Sempra Texas. We had $45 million of higher equity earnings from higher invested capital, Oncor system resiliency plan and unified tracker mechanism, partially offset by higher operating and interest expenses.

At Sempra Infrastructure, we had $26 million, primarily from higher asset optimization, partially offset by lower transportation results, lower tax benefits and others. At the parent, the $32 million decrease is primarily due to higher net interest expense, lower investment gains and others, partially offset by higher income tax benefits from OB3.

Please turn to the next slide. To conclude our prepared remarks, we continue to execute on our 2025 value creation initiatives and also have delivered solid third quarter and year-to-date financial results. Further, the Sempra Infrastructure Partners transaction is a significant positive catalyst for our company and reinforces our mission of building America's leading utility growth business.

To accomplish that, we're targeting strong rate base growth in Texas and California with a view towards posting improved and more durable earnings and cash flows in the future. And as we've indicated, we think there are significant incremental capital investment opportunities to do just that over both the near and long term, which is why we feel confident in announcing that Oncor's roll forward capital plan is expected to increase by at least 30% over its current $36 billion base capital plan.

Looking forward, we expect to officially announce Sempra's 2026 to 2030 capital plan on our fourth quarter call in February, subject to the completion of Oncor's pending base rate review.

Thank you for joining us, and I'd now like to open up the line for your questions.

[Operator Instructions] And our first question will come from Nick Campanella from Barclays.

So look, you've done a lot to derisk the balance sheet with the transaction that you announced 5 weeks ago. Obviously, you're talking about this higher CapEx outlook at Oncor. Just with the proceeds that are kind of coming in on a staggered basis, '26 and '27, just how are you kind of viewing balance sheet capacity for this increase? And is it fair to say there should be no equity through '27? Or just how are you kind of thinking about that?

Yes. Thank you, Nick. Let me take the equity question first, and then I'll pass it over to Karen to give more color on the balance sheet. But I would just start on the equity side and just say we're in great shape on this front, right? As you indicated, the proceeds from the SI transaction are expected to eliminate 100% of the common equity that was previously in the 2025 to 2029 financing plan.

It also sets us up well as we look to roll the plan forward to 2030, which we expect to discuss in February. But with the proceeds that you talked about being staggered and coming into us in 2026 and 2027, I think one of the key takeaways is we're in a great position to fortify our balance sheet, which Karen will talk about momentarily.

We have more work to be done this fall, but Karen and I are committed to maintaining a strong balance sheet to efficiently fund growth. And as we have in the past, Nick, we'll use all the tools we have available to grow the business in a thoughtful way.

Now let me turn to the balance sheet briefly. One of the things our management team does from time to time is we spend time discussing how we create a competitive advantage in every market cycle. And in today's market cycle, one of the things that we've identified with our Board of Directors is the importance of maintaining balance sheet strength, and that was a central part of the thesis that was behind the SI transaction and why we're taking a series of steps over the next 12 months to fortress our balance sheet to support the strong growth in our utilities.

That is one of the key takeaways today. We're seeing remarkable growth in our utilities, particularly in Texas, and we expect that not just to end Nick in 2030, but to extend well into the middle part of the next decade. And that's why privilege and the balance sheet is so important. And with that, Karen, perhaps she could talk about how you're thinking about next steps.

Sure. Thanks, Nick. Yes, I think you're looking about it as correct, Nick. We've been working closely with the rating agencies. They're giving us time to complete the SI transaction. And as we update our 5-year plan, we'll look to incorporate the benefits of that transaction. So as a reminder, we expect to get EPS accretion there, deconsolidate SI's debt and improvements to our overall credit.

And I'll remind you that we expect to receive improved credit profiles from each of the agencies. So this includes improving our view of our risk profile, our business risk and improved downgrade thresholds. So as I mentioned in our prepared remarks, that we plan to build a solid cushion on our balance sheet, and we'll provide more specifics when we roll out the financial plan next year. But in the interim, we feel really good about where we are and the strategy we've laid out.

Thank you, Karen.

And then maybe just switching gears to Texas. Just I see the schedule here going through April '26. Hearings are about 1.5 weeks out. Just since we're past testimonies now, is settlement less likely? Is this something that you're kind of still actively working towards? Can you talk to that quickly?

Sure. Allen and his team are doing a great job. I think, for the overall audience, I'd refer everyone to Slide 13 for the procedural references that Nick is referring to. And Allen, perhaps it might be best if you would just briefly talk about where you're at in the proceeding and what you think the next steps are.

Yes. Thanks, Jeff. Where we are, I think, is accurately portrayed on Slide 13, as you all both mentioned, interveners and staff both filed their testimony now. Staff testimony didn't get us all the way to where we need to be, but we thought it was very constructive.

We did file our rebuttal last Friday. We continue to engage in settlement discussions with the parties. And we will continue to engage in settlement discussions with the parties. At the same time, we've got a hearing set for the first -- for November 17, the week of, and we're preparing to go to hearing that week, if necessary. We're really confident in the strength of our case.

I'll remind you that we do have an order on interim rates, which becomes effective January 1, 2026. So we'll continue to talk. We'll continue to see what we can get done on the settlement front. And if we're successful, we'll obviously let everyone know. And if we have to go to hearing, we'll be ready to go. We expect an order, as you said, at the second quarter '26.

Thank you, Allen. Appreciate it, Nick.

Our next question will come from Jude Jordan from Wells Fargo.

This is actually Shar on for Jude.

Hey, Shar. Congratulations on the new assignment.

Appreciate it. Appreciate the support there. Just real quick on the SIP transaction. Can -- I guess, where do we stand on the leakage there? I mean, I know, obviously, you've got accretion numbers. You're looking at sort of a tax-efficient way to do this. I think you're still assuming around 20%. So what's the status there, I guess?

Yes. I think that that's a good number. We're still looking at that. Obviously, there's some complexity there given the assets we have in Mexico, the international implications, both state and federal, but 20% is still a good number for you to guide yourself to.

Okay. Perfect, Jeff. And then just, I guess, the 30% increase, just curious what's included in there? How much of that is awarded 765 kV versus base system needs increasing? And how does that increase kind of stack up against that $12 billion of prior upsides you called out in 4Q? So just any visibility there would be great.

Sure. Shar, I really appreciate this question because I think it's been one where there's been a lot of ambiguity and a lot of questions we've taken as part of the call. We tried to discuss this in our prepared remarks, but let me go through and provide a couple of reminders, I think, that will be helpful to the listening audience.

When Oncor rolled out through 2025 to 2029 capital plan last February, we indicated a base plan of $36 billion, and you're exactly right, there was a defined set of upsides there of about $12 billion. With the updates we've had over the last several months, both from ERCOT as well as the PUCT on the 765 kV transmission expansion and early indications within the fall planning process, Oncor is very comfortable increasing their expectations for the base capital plan to increase by about 30%.

And here's the key distinction. That's primarily being driven by the state's acceleration of the Permian plan that now needs to be completed early. It has to be done now, Shar, by 2030. The other key thing to note is that Oncor also has line of sight to additional upside. You remember the upside was previously about $12 billion we're now targeting something that's substantially similar.

So Shar, when you put that together, the base plan increase and expected upside, Oncor will have a $55 billion to $60 billion capital opportunity through 2030. And I might just add for context that in our 2025 to 2029 plan for Sempra, we currently sit at $56 billion. So if you just take the midpoint of that expectation, the roll forward base plan and upside is bigger than Sempra's current 5-year plan.

So the key takeaway from this call is, yes, we've had great financial results, I feel great about 2025 and the pull-through in the 2026. But we've made a commitment to back Texas, right? And to do that, with our Board of Directors, we launched a capital recycling program because we wanted to load our balance sheet, so we were in a position to officially fund the growth we're seeing in the future.

And I think Allen and his team have come forward with some very solid numbers, and we look forward to giving you more specifics on that in February.

Our next question will come from David Arcaro from Morgan Stanley.

Well, I guess I was curious now on the as you look at that Oncor load growth pipeline continues to chuck a lot and grow quarter-by-quarter. I guess I was just wondering if you could characterize. Like what is the maximum amount of new load that you could connect, if we're thinking about kind of the 2030 time frame? Are you full on data center activity? I mean how much could that actually increase as you look at the pipeline in order to feather it in or weave it in to even further enhance the load growth from here?

Yes. Let me do a couple of things here, and I'll provide some color, Allen, and I'll pass it to you to kind of walk through kind of summing up the numbers. But let me just start with what we've discussed in the past, David.

We've indicated that the state of Texas has a coincident peak of about 86 gigawatts, okay? That's a historical record. Today, Oncor system peaks at about 31 gigawatts. And on the last quarterly call, Oncor indicated that they had line of sight at least to approximately 39 gigawatts. So between now and the end of the decade, they are very comfortable that they're going to double their load. What's interesting about the CapEx increase that they're now forecasting, it's really less about that, it's more about the acceleration of the transmission plan.

So the key takeaway is you don't need to associate Oncor's growth as it's been announced today, with what might or might not happen relative to load growth. It is principally being driven by the state's desire to accelerate supporting the oil and gas industry and getting an expanded transmission grid in place in the western part of Texas.

Now that being said, the team has done a great job of tracking what those new opportunities are. And the way to think about your question as Allen goes through it is what we're going to talk about in terms of potential load growth and how much to your language can be feathered onto the system, it's really driving our growing confidence in this story continuing well into the middle part of the next decade.

So with that, Allen, maybe you could kind of talk about the different buckets of where you see growth are. And really, to David's point, where this quarter-over-quarter growth is coming from?

Yes. Thanks, Jeff. Thanks, David. Growth remains incredibly strong. I think you've heard that multiple times this morning from kind of this load growth on the transmission side, these large industrial commercial customers. I think as Karen said, we have over 600 active requests now, that's up 60% since the same time last year, third quarter over third quarter.

210 gigawatts of data now versus 186 last quarter, an increase of about 13% and 16 gigawatts of other non-data LC&I customers. What's different this time and what Jeff was alluding to is we typically go through a process with these customers where we come up with a high confidence load number. And I talked about this the last couple of quarters.

But we've had, as Jeff said, around 39 gigawatts of what we call high confidence load and that's made up of, in the past, 9 gigawatts of signed FEAs or interconnection agreements and 29 gigawatts that we submit an officer letter to ERCOT if those customers meet kind of 6 criteria that we lay out for them.

And -- but we don't sign those FEAs until studies are complete and ERCOT has approved the interconnection. In order to try and get more visibility into this massive queue that we're talking about, we've kind of done something different over the last few months. And that is in addition to doing just a typical FEA process, or interconnection agreement process, we've instituted what we call the interim FEA process.

And the interim FEA process is not a full FEA, the studies aren't done, ERCOT has not approved the interconnection, but what these interim FEAs do is the customers collateralize them. They give us about $6.5 million when we sign these things. The customer also provides us additional information that allows us to then begin or proceed with the studies we need to do that ultimately need to be approved by ERCOT.

Very, very strong uptake; very, very strong interest in this interim FEA process. To date, we've signed up about 19 gigawatts pursuant to this interim FEA process. And I can tell you that interest in signing these is very high. The number will change by the next time we talk about it.

Now a couple of caveats. It's not clear how ERCOT will view these interim FEAs versus the FEAs themselves. And obviously, with the SB6 rule-makings going on, it may alter the criteria that we ultimately need to use for this process. But I can tell you that in addition to the numbers I've already told you, I think I mentioned on past calls that when I got this job, we had about $200 million of collateral that we were holding and that had moved up to about $2 billion as of last quarter related to these activities.

As of now, that collateral that we hold is up around $2.7 billion. That gives you a general indication of the uptake on this new process that we're using.

Excellent. Yes, makes sense. And then pivoting maybe a little bit. With strong earnings this quarter and now year-to-date, curious if you could comment how that positions you in terms of achieving the 2025 guidance? And maybe as you look forward to 2026, are you seeing opportunities for expenses to be pulled forward or other initiatives to give you a head start on that 2026 earnings outlook?

Yes, David, thank you for that question. I mentioned this in my prepared remarks. I'm just so pleased with the work of our team, and we spent a lot of time trying to make sure that we've got a common set of business objectives across our 22,000 employees and that's certainly showing up in the strong financial performance we've seen thus far for the year.

So for 2025, I'd mentioned, we're tracking several regulatory matters, and we're pleased to be running well ahead of our financial plan for the year. That's why earlier today, David, we were comfortable affirming our 2025 guidance. And I would also mention that we believe we can finish in the upper half of that range.

Turning to 2026. We also affirmed that guidance. Obviously, it's going to be a stub year because we expect to close the SI transaction sometime between Q2 and Q3. But I would just mention, we're in the middle of our fall planning process right now and still tracking several key items.

Obviously, the SI closing with KKR as well as the base rate review that Allen just updated you folks on a few minutes ago. So our goal at this point is to review both 2026 and 2027 guidance with The Street at our February call, together with rounding out our full year results for 2025.

So I think the summary point here is I'm really excited about the progress we've made in 2025. We feel great about 2026, and we're excited to get back in front of folks in February and provide guidance for 2027.

Our next question will come from Carly Davenport from Goldman Sachs.

Maybe just on the transmission expansion in Texas that you've referenced. One of your peers came out this morning with plans to expand manufacturing for transformers and breakers. Just kind of curious what you're seeing from an equipment and supply chain standpoint and how you feel about execution on growing capital plan?

Yes. I mean I really want to give credit to Allen and his team here and Allen, I'll let you talk about it in a second. But going back to the pre-COVID days and being part of the boardroom, and seeing Allen layout kind of this 11-point plan for growing that business, the supply chain has been front and center. In fact, Carly, in September, we took the Sempra Board of Directors to Dallas. And the #1 issue we wanted to talk about was their ability to deliver on their growth plans and the strength of their supply chain. We also had the benefit, Carly, to have Governor Abbott kind of join the Sempra Board in a private 3-hour dinner, as we continue to due diligence the growth case in Texas.

And one of the things we did was we took the entire Board on a field visit to their Midlothian supply center. And this is an Amazon-like supply center. Hopefully, we can start hosting some investors there in the future, but they have a hub-and-spoke model across North Texas and that Midlothian center, which is about 45 minutes from Downtown Dallas, really is a state-of-the-art 21st century digitally driven warehouse center that not only supports their supply chain across the 5-year plan, it is the center of their storm recovery system.

So we came away from that incredibly impressed with the work that's gone into it. And now, Allen, maybe you can provide a little bit more detail around what you've done to feel good about delivering on your 5-year plan.

Yes, thanks for the question, Carly. I think Jeff did a pretty good job describing it. We started about 8 years ago fortuitously redoing our supply chain, redoing our logistics, adding the Midlothian facility, expanding the number of vendors for each type of product that we need and that has paid incredible dividends for us moving forward.

I've said on past earnings calls that we had with regards to the prior plan, our current plan, everything we need to accomplish that 5-year plan. Nothing about that has changed. Look, every day, you got to stay vigilant on it. Our people work very hard to stay very close to our vendors and our suppliers. You got to deal with challenges.

It doesn't mean I have every piece of equipment in a laydown yard somewhere, but it means I've gotten in some way line of sight either a contract or a commitment or an agreement for everything we need. We'll stay vigilant all that. We'll keep working on it, but we're extremely confident. We made a commitment to the state to complete the Permian plant by 2030, and we have every intention of doing so, together with all the other activities we have on our system.

Allen, you did -- one of the things you guys did, which I thought was really helpful was how you went out in the marketplace, both in Asia and Europe to taking care of the 765 equipment well before it became something that crystallized for the state. Can you briefly update the audience on that?

Yes, we did exactly what Jeff is talking about. I mean we've been very blessed in that our Board and our shareholders have given us authority in advance of actually approval of plans, of financial plans, 5-year plans and 1-year plans, to go out and make commitments in order to be in a position to actually execute and we did exactly what Jeff is talking about with regards to the 765 step plan.

Great. Super helpful. And then maybe just shifting gears a bit on -- just on California, curious as sort of the Phase 2 process kicks off, how you sort of envision Sempra's involvement there and perhaps any perspective that you'd share on the potential -- what potential solutions could look like?

Sure. I would just start by saying that Sempra has been very engaged in Sacramento on trying to find ways to improve public policy to support public safety. I got to give a lot of credit, Carly, to Governor Newsom, he has been out front and kind of leading this effort. He's made it a priority. It goes well beyond just serving electric customers.

It's about making sure that the state of California continues to take steps that are progressive and thoughtful to reduce risk from a public safety standpoint. We have Caroline Winn with us today. She heads up, you may recall, both San Diego Gas Electric and SoCalGas and she has been front and center on the next steps on the study bill. And perhaps Caroline, you could share your thoughts on the study bill.

Yes, be happy to. Earlier this week, the utility submitted a series of abstracts. The way to think about the abstracts is their problem identification statements that really frame the issues and it will inform the white papers due next month. Maybe I'll just note 4 areas of focus.

One, we believe a shared risk model through new cost-sharing approaches needs to be looked at. Number two, new insurance and funding structures. Number three, enhancing the process for paying claims quickly and fairly for wildfire victims and fourth, maintaining affordability and accountability.

Now these abstracts will form the foundation of, as I mentioned, the joint white papers next month, December 12, and will help inform the comprehensive report prepared by the California Earthquake Authority next April. I think the key takeaway here is that we believe that wildfire resiliency must be a shared responsibility between utilities, insurers, government and communities, and we're constructive on the effort to identify new models that will address wildfire risk across the state for decades to come.

Thank you, Caroline. The only thing I would add, Carly, to is and I tell folks this, but California is the fourth largest economy in the world, right? This is the home of technology and innovation. And this is just really a leadership opportunity here at the state level. And I think from Sempra's perspective, we're prepared to roll our sleeves up and do our part. But we're comfortable that we'll find a way between now and the next legislative session to take the next step to continue to derisk the state.

Our next question will come from Sophie Karp from KBCM.

On California, I guess, as you continue to emphasize Texas more in your capital plan and you see a lot of growth there. Could there be a more decisive step to deemphasize California or maybe through some strategic options for your California utilities?

Well, look, I think -- and you're asking a great question. One of the things we've done with our Board of Directors is take a step back and say, where can we allocate capital over the next 5 years to create the most equity value, the most long-term value for our shareholders by 2030?

And I think our analysis points to making sure that we load capital in areas where we have the best risk/reward. And right now, we think that's Texas. But look, these things change from time to time. One of the things we're working on in the Texas market. As you recall, they have a relatively thin equity layer compared to other jurisdictions. And California is actually a very good complement because it allows Oncor to have -- its principal shareholder have a strong balance sheet, which we think is important to support its growth.

We continue to have the largest natural gas utility in the Western Hemisphere, is here in California and that tends to have a 23% or 24% FFO to debt quality. It's a very important for overall credit stack within Sempra. We're a leader in our electric business here in California. So we're going to be thoughtful about allocating capital to make sure we minimize bill impacts.

We have found religion, and we're working very, very hard to take cost out of the system in California to make sure that as we grow the business, it minimizes impacts on customers. But look, we have a strong leadership position in the State of California and very few companies in the United States have the leadership position we have in Americas 2 biggest economies.

So California will always be an important part of Sempra, but it's really a very nice complement from the diversity of the investments here and the credit quality matched up with what we're trying to grow in Texas.

And we have time for one last question today. And our last question will come from Julien Dumoulin-Smith from Jefferies LLC.

Saved the best for last. There we go. I appreciate it. Let me try to wrap this up. So a couple of questions here. First on Oncor, well kudos. If I heard you right, $55 billion to $60 billion, well in excess of 30%. What's your confidence on being able to earn the ROEs at that level, just given that cadence of spend is pretty historic? I get the recent legislation.

And then related just coming back to where we started the call on equity needs. At what point do you start to think about equity as being part of this? Because I would suspect that we're going to talk about this in a renewed fashion, just given the magnitude that we're discussing here, if you don't mind.

Well, let's do a couple of things. I'm going to start with talking about the $55 billion to $60 billion. Just remember, that's the roll forward of the base capital plan of $36 billion, and we're going to increase that by about 30%, Julien, and you can do the back envelope that's between $10 billion and $11 billion.

And we're expecting a comparable number that will remain there in the upside. The upside we talked about before is still there. It's a very similar number. And that's how I got to this potential capital deployment, which we think is a real opportunity, by the way, between $55 billion and $60 billion. We're very excited about it. And the great news was, as I indicated earlier, we planned for this, right? We led a capital recycling program to fortress our balance sheet so we can fund this thing efficiently.

Turning to your second question, which was on the ROE topic. You recall that they currently have an authorized ROE of 9.7%. And Julien, they have been under-earning that for 2 principal reasons over the last several years. Number one, there was this regulatory lag. The majority of that is resolved as part of the unified tracker mechanism.

You've heard us reference several times today, we're starting to see material improvement in capital efficiency. So part of that under earning is being taken away by the UTM. And then secondly, part of that under-earning is associated with having a 2021 test year.

Obviously, when the base rate review is resolved, their new test year will be 2024. So the state because it has a backwards test year, you don't really expect them to earn at the 9.7% level. And certainly, they're not authorized to ever earn over that like we are in California. But I think you're going to see a material improvement when we resolve both of those matters. And that's one of the reasons Sempra has been more willing to aggressively fund this business as part of our long-term plan.

And then I think if I could tackle your third implied question, which was on capital and balance sheet. Look, there's nothing wrong with issuing equity, right? If you're thoughtful about using all the tools in your toolbox, if you look at Sempra, you recall from prior presentations, we've raised $15 billion from equity sales at Sempra Infrastructure since 2021.

We're not reticent to find the most cost-effective way to fund growth. And at the same time, Julien, the great secret at Sempra is since 2017, we've gone from about $14 billion of rate base to a number that's over $60 billion and we're going to drive that well over $90 billion or $100 billion by the end of the decade.

We are growing a remarkable utility within Sempra. So we will use equity as we need it. But the great news is we took equity off the table in the prior plan. We're going to load the balance sheet. We're going to maintain cushion. And what we're going to expect to do is as we go forward in that plan depending upon how our capital rolls out, we would certainly issue equity if we thought it was necessary. But remember, we're going to compete that against all the other options we have inside of Sempra. And if you followed us for a long period of time, I think that's been our track record.

That's excellent. And let me put a capper on this. I mean it's been a phenomenal year, Jeff, in terms of turnaround here. I mean, truly, the 7% to 9%, right? You put this all together. Clearly, this wasn't contemplated when you articulated that 7% to 9% earlier. How do you think about the various pieces that go into this, right? Clearly, there's a little bit of equity offset or some other permutation that will dilute the upside here. But what are the other puts and takes? Because otherwise, it seems pretty meaningful relative to what you said previously.

Yes. Well, you remember, I talked about that 7% to 9%. We didn't put it in writing at the time, but I said it orally on the February call or the Q4 call. I think one of the things we've discussed as a management team before this call, Julien, is we remain bullish on our growth prospects. And that's why we came out today and obviously reaffirmed the long-term growth rate. But I would also kind of highlight some of the points you're making in terms of puts and takes.

Let's start with Oncor. I talked about seeing improved capital efficiency there, and that's having a positive impact on their returns. And obviously, we're going to increase our capital program.

Go over to Sempra infrastructure. We've improved the runway, Julien, of their growth by basically taking FID on Port Arthur Phase 2. One of the things that Justin feels really great about is, he's got 5 or 6 very significant construction projects that give us great EBITDA growth through the end of the decade. And now with Port Arthur Phase 2, you've got great visibility into the early part of next decade.

And then we've talked about, and Karen did a good job in her prepared remarks, talking about the KKR transaction. Obviously, we think it's going to be accretive to credit and EPS, while allowing us to deconsolidate debt at SI. And again, it goes back to balance sheet. We see our balance sheet as a strategic resource to grow this business in the future.

So I think our takeaway would be: The team has done a great job, as you highlighted kindly, by the way, this year of stacking a series of positive catalysts in front of our company. And to your point, it really gives us more support for what we think is a great long-term outlook.

Excellent. Well, maybe with that, we'll leave it. Very curious to see what you guys have to say. Take care all the best, and we'll talk to you sooner now.

Thanks a lot, Julien.

Thank you. That concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.

Well, I'd like to just start by thanking everyone for joining us today. I know there were a number of competing calls this morning, so we appreciate everyone making the time to join us. I think it's a final point, many of you likely saw Oncor's recent 8-K announcing the retirement of Jim Greer.

We want to make sure we take a moment and recognize his many years of service and major contributions to the growth and success of Oncor. In his role of COO, Jim Greer made a lasting mark on the State of Texas. I also think congratulations is in order for Ellen Buck, who will be succeeding Jim.

Ellen is an absolutely outstanding leader, and we look forward to supporting her future success. And finally, I'd like to congratulate our friend, Don Clevenger, on a well-deserved promotion to Executive Vice President as he continues in his role of Oncor's CFO. If there are any follow-up items, please reach out to our IR team with your questions, and we look forward to seeing many of you at EEI in Florida next week. This concludes our call.

Thank you for your participation. You may now disconnect.

Good day, and welcome to Sempra's 2025 Value Creation Update Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.

Good morning, and welcome to an update of Sempra's value creation initiatives. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section.

We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Faisel Khan, Senior Vice President and Chief Financial Officer of Sempra Infrastructure; Diana Day, Chief Legal Counsel and Corporate Secretary; and other members of our senior management team.

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statement we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC.

I'd also like to mention that forward-looking statements contained in this presentation speak only as of the date of this call, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future. Before we begin, I'd like to note one clarifying point that for the purposes of the remarks today, we'll refer to Sempra Infrastructure to describe SI Partners.

With that, please let me turn the call over to Jeff.

Thank you all for joining us today. Earlier this year, we launched 5 strategic initiatives to guide our near-term business activities. Central to that effort was the opportunity to further simplify our business model, reduce risk and create notable value for our owners in the near term. That's why today, we're pleased to announce the sale of an equity stake in Sempra Infrastructure and positive final investment decision at Port Arthur LNG Phase 2.

And right upfront, I want to be very clear. The sale of equity at Sempra Infrastructure and the opportunity to officially recycle those proceeds into a capital campaign weighted toward Texas advances our goal of building America's leading utility growth business. Please turn to the next slide.

We're pleased to have signed a definitive agreement with KKR to sell a 45% interest in Sempra Infrastructure for a purchase price of approximately $10 billion, subject to closing adjustments. Exploring the deal specifics further, the transaction implies an enterprise value of nearly $32 billion at a compelling 13.8x EBITDA multiple and $22.2 billion in equity value. Pro forma for the transaction closing, Sempra will retain a 25% interest in Sempra Infrastructure, while KKR's ownership stake will increase to 65%, and ADIA will retain a 10% stake.

From the beginning, our primary objective was to sell a 15% to 30% stake in Sempra Infrastructure to officially finance our capital program while also strengthening Sempra's balance sheet. Secondarily, we wanted to help Sempra Infrastructure maintain sufficient financial strength to support its future growth. Also, we said that at the right valuation, we would consider selling more than 30% if we saw a path to create added value for our owners, and that's exactly what we've done.

Taken together, these considerations led us to upsize the transaction to sell a 45% stake while also adding further value to Sempra's balance sheet by reducing our ownership position at closing to 25%. We now expect to deconsolidate Sempra Infrastructure and account for our remaining investment under the equity method on Sempra's GAAP financials.

Importantly, the transaction is also accretive from an earnings per share perspective. Starting in 2027, on a full 5-year basis, we're expecting average annual EPS accretion of $0.20 with actual results varying by year. Under the terms of the agreement, we're receiving nearly half of the cash proceeds upfront. The remaining proceeds will follow with just over 40% accruing interest at a compelling 7.5% and payable in 2027 and the balance accruing interest at 8.5% through 2030 and 10% thereafter until maturity expected in 2033 unless repaid earlier.

Also, I'd like to make 3 key points here. This structured approach to the transaction improves the efficiency of our planned use of proceeds while also delivering nearly 90% of the total cash proceeds within the first 2 years with post-closing interest income that exceeds the earnings yield of the equity that we're selling. In addition, the transaction is expected to close between the second and third quarters of 2026. In short, this is a major milestone for our company, and we're pleased to extend our partnership with KKR and ADIA and expect great things from KKR's increased role as the new controlling owner.

Please turn to the next slide. What's special about this transaction is normally you face balance sheet and other trade-offs when you look to simplify and grow a business. And that's not what you see here. Our corporate development team and working with management at Sempra Infrastructure have done a great job in structuring a deal that is both EPS and credit accretive while also accelerating our strategic goal of building America's leading utility growth business. Let me briefly summarize several of the benefits shown on this slide.

In the near term, we have a goal of achieving 95% of our earnings, excluding parent and other, from our regulated utility businesses, up from 81% of 2024 adjusted earnings. Second, this transaction helps to fortress our balance sheet during a period of higher growth for the industry. And as a point of emphasis, we expect to improve and maintain our FFO to debt metrics while also fully deconsolidating Sempra Infrastructure, including nearly $10 billion of debt. Moreover, the timing of these developments is also important.

As you'll recall, Oncor is in the middle of a major investment cycle, and Alan and his team continue to evaluate incremental capital opportunities for the 2025 to 2029 period and beyond. And as we shift our business mix toward Texas, this transaction enables us to eliminate the need for common equity issuances under our previously announced 2025 to 2029 plan, while also reducing our reliance on future common equity issuances at a time of remarkable growth for our company and recycle proceeds directly back into the growing capital programs at our utilities at significantly higher financial returns as compared to simply buying back stock.

Please turn to the next slide. Next, this slide lays out the key milestones to complete the transaction. We continue to focus on closing the transaction in Q2 to Q3 of 2026, and that expectation is represented here as the middle of next summer. Please turn to the next slide.

Now let me shift the discussion to Port Arthur LNG Phase 2. Internally, we've long recognized the opportunity to build out one of North America's largest and most important LNG export facilities. We're pleased to announce that we've issued a full notice to proceed under our fixed price EPC contract with Bechtel, which is designed to leverage continuous construction on site, helping reduce project execution risk. Under our current planning, commercial operations for Trains 3 and 4 are targeted for 2030 and 2031, respectively.

Sempra Infrastructure will retain a 50.1% ownership stake at the project level, which in combination with the equity transaction announced today results in Sempra maintaining a 12.5% proportionate interest. The other 49.9% will be owned by an investment consortium led by Blackstone Credit and Insurance. Estimated incremental project capital expenditures stand around $12 billion, plus a $2 billion payment to acquire a 50% interest in shared common facilities at Phase 1.

Port Arthur Phase 2 is expected to generate unlevered after-tax returns to Sempra, surpassing 13%, exceeding our internal investment thresholds. As a result, when brought online, we expect this project will extend the strong growth profile of this franchise well into the next decade.

Compelling economics at the project are further reinforced by high-quality counterparties and a world-class anchor partner. We're pleased to extend our long-term strategic partnership with ConocoPhillips under a 20-year SPA, which helps reduce risk and create alignment for project success. As a final point, we're excited about today's announcement and like to extend our gratitude to the leaders at all levels of Sempra Infrastructure who have contributed to the company's success in reaching this major milestone.

Please turn to the next slide. Let me start by saying this is one of my favorite slides in that it highlights the steady commitment by our Board of Directors and management team to be good stewards of our owners' capital. With the transaction announced today, we will have raised over $15 billion by selling down various stakes in Sempra Infrastructure over the last 5 years, while at the same time, increasing the overall equity value of the franchise at a compounded annual growth rate of roughly 20%.

Moreover, the current transaction is set at an attractive enterprise value of nearly $32 billion and a 13.8x EBITDA multiple. This valuation surpasses all of our previous Sempra Infrastructure transactions and reflects the significant value created through expanding Sempra's LNG franchise and its advantaged market position, which has direct access to both the Atlantic and Pacific markets.

From a financial standpoint, by periodically monetizing equity with quality returns, this reduced reliance on issuing common equity to finance our growth. Importantly, we'll also retain a 25% interest in the franchise, which at our ownership level implies a residual equity value of approximately $5.5 billion. We believe this transaction is a clear demonstration of creating shareholder value while positioning the company for long-term sustainable growth.

Retaining the ownership stake provides Sempra with optionality on continued growth from the franchise's robust development pipeline, while serving as a value investment alongside our core utility strategy. As an example, since 2019, we've been able to grow our regulated utility rate base each year by an average of nearly 11% through 2024. With today's announcement, this is another example of recycling capital back into our utility businesses to generate lower risk and attractive returns on capital. Please turn to the next slide.

In conclusion, this is an exciting time for our company and our shareholders. We're pleased with our progress against plan for the year and the opportunity to continue realizing the benefits of our value creation initiatives. That's particularly true with today's announcement to sell a 45% stake in Sempra Infrastructure and take positive FID at Phase 2 of Port Arthur LNG. We're also in a position today to affirm our current 2025 adjusted EPS guidance, 2026 adjusted EPS guidance as well as our long-term EPS guidance, all as shown on this slide.

We intend to provide an update to our roll-forward capital plan on our fourth quarter call in February 2026, subject to the completion of Oncor's pending base rate review. By advancing our capital recycling program and improving our balance sheet strength, we're well positioned to advance our corporate strategy, which is now sharply focused on building America's leading utility growth business. And with that, we'll now take a moment to open the line and answer your questions.

This concludes the prepared remarks. We will now open the line to take your questions. [Operator Instructions] And our first question will come from Shar Pourreza from Wells Fargo.

Shar, congratulations on the new job.

I appreciate it. And congrats on the big announcement. I know you've been working on that for a while. So well executed. Congrats, Jeff.

So Jeff, can you just elaborate on the timing and scale of the reinvestment to achieve the $0.20 accretion? Does that number increase over time? Or could we see a step function? And could we see a step function change in the 7% to 9% CAGR? Or do you kind of need to see other pieces fit together with the overall plan?

Sure. I'll make a couple of comments here. Due to the expected timing of the closing, as you point out, Shar, we only expect nominal impacts to our previously stated EPS guidance range for 2026, which is why you saw us being comfortable reaffirming that today. And in our prepared remarks, we talked about that on a full year basis starting in 2027, we expect average annual accretion of $0.20, which will vary over time. We think that's a good number for planning purposes.

You'll also recall that our original financing plan contemplated the issuance of common equity. So in effect, the key takeaway here when you think about accretion is the level of projected accretion reflects our success in really Shar substituting a lower cost of capital, and we're now also better able to time the reinvestment of proceeds. So we're very comfortable with that accretion number. We're certainly comfortable with our guidance that we have on the Street.

And one thing I might note is that we talk about internally this concept of compounding progress, much like you think about compounding financial returns. So Shar, as you follow the company this year, think about some of the progress we've made on behalf of our owners. We've had 2 consecutive positive earnings calls. We've secured with the Oncor team a very positive unified tracker mechanism and capital in Texas, and that set up that company for, I think, successful execution of a growing capital campaign.

We've also had success under Caroline Winn's leadership in securing wildfire legislation in California, which was very important. And today, we're taking FID at Port Arthur Phase 2 and officially raising $10 billion in new capital while fully eliminating planned common equity in our 2025 to 2029 financial plan. So we really have momentum in our franchise. We're executing well. And when you put all these positive developments together, I think the key takeaway is this management team has an improved outlook for both near-term and long-term value creation.

Got it. Perfect. And then just lastly for me, Jeff, just on the capital recycling other than offsetting prior equity needs, just can you elaborate on the excess capacity to increase the regulated CapEx to maintain that cash efficiency and how we should potentially think about opportunistic buybacks because obviously, the share is still very undervalued.

Yes, sure. I mean I think what we've tried to do here is in lieu of taking all the proceeds upfront on day 1, which would have necessitated obviously having some repurchases of equity and potentially in the future issuances of equity, we think there was kind of an alignment of interest between ourselves and KKR to stage access to that capital in a way that improves our investment opportunities. So in lieu of just buying back equity, we can actually have improved financial returns by investing directly into the stages of growth in our capital program. So there's no question that you're going to see increased capital plan when we roll forward to next year. And I think this transaction puts us in a great situation.

I'd make this point. One of the issues that is commonly being discussed in this industry is how do they officially fund the remarkable growth that we're seeing all across the sector. And I think it's now a competitive advantage for this franchise that we've got access to ample proceeds to meet what we think is a growing capital campaign, and you can count on us to do that in an efficient way that would always look to minimize any reliance on the issuance of common equity.

Perfect. Congrats, Jeff, again. The execution is very noteworthy.

Our next question will come from Nick Campanella from Barclays.

Thanks for all the updates, and congrats. Appreciate it.

Thank you.

So -- yes, absolutely. So I would just -- I guess that you likely ran this by the credit agencies and just maybe you can kind of speak to what their reaction has been. What is your view of what the right FFO to debt minimum is to kind of now run this business at with 95% regulated earnings? And you gave an average accretion on an EPS basis. How are you kind of viewing it on the credit side? Is it 50 basis points accretive? Or how should we think about that?

Yes, sure. I will tell you that one of our goals in this transaction was to take our balance sheet off the table through the end of the decade. Now we've got some more work to do. You have to remember, we're going to roll forward our 5-year capital plan. We've got the pending base rate review in Texas, and we've got to get to closing hopefully in the Q2, but no later than Q3. And I think what we're trying to do here is make sure there's something in this transaction for everyone. There's no question this is a win for our fixed income holders, and we have worked closely with the credit rating agencies.

And I would tell you, it's not just at the Sempra level, Sempra Infrastructure has had ongoing conversations with all 3 agencies as had Sempra. So what we've tried to do here is create a path that creates value on the EPS side and also is accretive to credit. And I think what might be helpful, Karen, is to maybe express your views on how you think this transaction benefits the balance sheet and our credit metrics.

Sure. I would love to, thanks. Yes. So once we close, we expect to pay down debt, deconsolidate Sempra Infrastructure, that's including roughly $10 billion of debt, improve our risk profile with the mix of utility earnings expected to hit that 95% level in the near term. That's excluding parent. So in combination, these considerations will support lower thresholds while also allowing us to improve and maintain a solid cushion in our FFO to debt metrics.

And again, as Jeff said, our plan is to take the balance sheet off the table through the end of the decade. We expect to provide updates on our commitments in this regard once we have the roll forward 5-year plan, complete the base rate review with Oncor and finalize the closing. And you brought up the rating agencies, and I'll say we've spent a lot of time with them over the last couple of months and certainly in the last couple of weeks, and we really appreciate their support and believe they understand the benefits of this transaction to our balance sheet, in particular, to our business risk profile, and we'll continue to work with them going forward and more to come but I think the answer is we are taking this off the table.

And Nick, I would just add the point, too, as you think about -- and you asked the question, is there 50 basis points of accretion. I think that question needs to also take into consideration that one of the expected outcomes here is the opportunity to lower our downgrade thresholds, and we're not solving for our credit issues by doing that. We're also committing to improve our FFO to debt metrics. So the question will be where do we land in creating a sizable cushion that makes all of our investors feel comfortable with our ability to execute our campaign across the end of the decade.

Okay. That's helpful. And then just one follow-up. When you gave the outlook in the fourth quarter, you did kind of talk about there's going to be a point where the 7% to 9% outlook intersects the prior 6% to 8%. Obviously for basis here. But just kind of making the point that you'd be back in that projected range. Now that you kind of have the $0.20 of accretion and we haven't thought about incorporating ETM yet with the CapEx upside, just what year is that in your mind?

Well, I will tell you, it's a very insightful question. And you recall back in February, it was a very challenging phone call for this management team around our Q4 call. And I made the point at that time that we have a more muscular view of the value creation we can produce. And your question is very insightful. There's no question that these lines cross more in the near term than the long term. And what our job to do, Nick, is we want to keep stacking positive news around our equity story.

We have some big ticket items in front of us today. We need to, number one, execute well on the base rate review in Texas. We're going to roll up under Karen's leadership, our 5-year capital plan, and we're going to be laser-focused on closing this transaction. And we're going to come back to you in the spring with an update on our guidance for 2027 and give you a more definitive view.

But there has been a series of positive developments that improved our earnings outlook. And right now, we feel comfortable with guiding to the high end or above that 7% to 9% range. But I can tell you, our confidence in beating our guidance has gone up.

Our next question will come from Bill Appicelli from UBS.

Just a couple of questions around the deal itself. The net proceeds or after-tax proceeds, I saw in the footnotes there about the 20% tax payment. So is that -- so essentially, is it closer to like is it $9 billion or so after tax?

I think the schedule we provided in our slide materials are the best one to guide yourself by because it shows the puts and takes around closing as well as the expected proceeds from earned interest income. And from a tax standpoint, what I would do is perhaps pass it to Karen to provide some more color. But remember, all those taxes are not paid on day 1. some of those taxes are paid as and when you receive proceeds. But Karen, perhaps you could provide some color on the expected tax leakage.

Sure. So we anticipate taxes to be about 20% of the purchase price. We do have some opportunities to manage those cash impacts, so we can use existing NOLs, using available tax credits, including better utilizing credits that were otherwise set to expire. And we can apply the installment method where available and beneficial. So we'll anticipate providing additional details about the tax impacts when we close the transaction.

And Bill, I referenced this earlier, but you should read Karen's reference to that 20% together with the detailed information we gave in the waterfall on Slide 11.

Right. Okay. Perfect. And then the interest, will that be booked on the income statement as it comes in? Or is that sort of deferred and accrued and paid out with the installed payment schedule.

Yes, it will be booked as and when it comes in.

Okay. All right. And then I guess just around the FID decision, would the target be for additional SPAs moving forward? Or what's the threshold you're looking to get that to ultimately?

Sure. We're really excited about Port Arthur Phase 2. This has been a long-time project that we've been working on for over 5 to 7 years. Obviously, Bill, taking Phase 2 actually opens up further opportunities to develop that project. And I think we've taken a strong approach to how we've contracted that facility. And Justin, perhaps you could give a little bit more color about how you think about the approach to contracting.

Absolutely. And hello Bill, so at Port Arthur, look, we think this is a very attractive project to Sempra and our partners. As you saw in the materials, we have a strong mix of counterparties, ConocoPhillips as a strategic partner and customer across both phases, JIRA as one of the largest and most preeminent buyers of LNG in the world, EQT, one of the largest producers of natural gas in the U.S. And as you noted, Sempra Infrastructure contracted the remaining amount and expects to secure those under long-term agreements in the near term.

So first, this is a similar approach used in the industry to hold back volumes, noting that the increased certainty for counterparties after taking FID, which improves the certainty of COD provides the opportunity to improve the economics of the project. I'll tell you, Bill, we continue to be actively engaged with several counterparties and today's announcement is another tool in our toolbox as we discuss with those counterparties as to how we sell those remaining volumes.

And Bill, I would just comment anecdotally to Justin's point, which is we certainly believe that the pre-FID price for those contracts are below what we would expect on post-FID contracting.

Our next question will come from Julien Dumoulin-Smith from Jefferies.

Maybe just a couple of cleanup items there. I mean just in response to Nick's question there, as you think about the pro forma outlook preparing for 4Q here, you obviously emphasized here today no further equity. But it seems like if wordsmith, your commentary, effectively -- expect no incremental equity for most scenarios that you would be laying out with the 4Q time frame. You've effectively incorporated some of that incremental capital plan into the thinking with the rating agencies. Is that fair? How would you respond to that? Especially Karen gave some comments about the credit metrics as well there.

Julien, it's a great question, and I would respond by saying I think that's generally fair. The one caveat I would give you is we're going to roll forward this capital plan, and we have lots of opportunity. And you know based upon following our company for a long period of time, we force capital inside the company to compete, and we're going to exercise a lot of capital discipline. So a lot of this will turn on, number one, where we want to land that cushion on our balance sheet, which Karen and I are committed to; and number two, where we size that capital plan.

And one point of nuance here, Julian, there may be an opportunity to size a base plan versus an upsided plan. But you're absolutely right. We're trying to structure this deal to make sure that we are minimizing reliance on issuing future equity across the decade. And if we have to issue some, we're certainly pleased to do that because of our growth. But we're trying to be very thoughtful about that. And I think your characterization is fair.

Excellent. If I can follow up more strategically, I think you checked the box when it comes to repositioning the company substantively in terms of regulated and regulated-like contracts, do you feel compelled at this point to continue to move in this trajectory? Obviously, you've achieved this here today. You sort of put the SI in a little bit of a smaller box here. How do you think pro forma here, whether that is continue to increase the formal utility box or any further moves over time in terms of emphasizing or deemphasizing the other components of businesses?

Yes. And Julien, I really appreciate that question. I would probably respond this way that in addition to be excited about today's transaction, I think it really reflects some of the thoughtfulness of our Board of Directors and management team. And let me offer this perspective. We just have over $100 billion of assets. They're spread across the Sunbelt with leadership positions in both Texas and California. And the perennial question that we address, you know how active we are on strategy, is how can we concentrate our resources and specifically our capital campaign to produce the best value for owners. And that was what was in the front seat of our decisions around these transactions.

And I will remind you that early in my CEO tenure, we worked closely with the Board to launch a new corporate strategy, and you and I have had this conversation on multiple occasions. That strategy was centered around four features: number one, trying to own and operate utilities at scale. number two, gaining exposure to large and growing economic markets; number three, focusing on states with constructive regulation; and number four, committing continuously to aggressive capital recycling program to minimize reliance on issuing common equity, which, by the way, was your first question today.

So it's with that background that we took on this transaction with KKR with a view toward it being transformative. It was aligned, Julien, with our 2030 strategy of building a leading growth platform as a utility, and it directly supports that as well as having obviously a stronger balance sheet. So the proposition I would leave you with, I think, for investors is at Sempra, the management team has improving confidence in our long-term growth. We're committed to our dividend and maintaining ample cushion in our FFO to debt metrics, and we certainly believe our current stock price is pretty significantly discounted relative to the value creation that we expect to see in the future.

So I think we're on the right path. Your terminology is very good. We put SI in a box from a credit standpoint. We certainly appreciate exposure to that business. And think about it, we put out prompt year projected EBITDA guidance of about $2.3 billion for that business. owning a 25% stake that's been greatly derisked, really provides important cash flows to support our dividend policy. So we think we're in a pretty good place right now, and it also gives us exposure to continued growth that we see in that platform.

Our next question will come from Carly Davenport from Goldman Sachs.

Maybe just a couple of quick follow-ups on some others that have been asked. Maybe just first, I appreciate all the color on the volumes and the potential for offtake agreements. I guess if there are other offtake agreements that could be struck, could that involve any incremental equity ownership in the project as we saw with Port Arthur Phase 1? Or are you sort of set today on the Sempra share of the project ownership structure that you disclosed?

Yes. I think we're comfortable letting you know that we're set on the capital structure for that project.

Okay. Great. And then just in terms of the other evaluation creation initiatives that you've highlighted, is there any impact from the shift in ownership or the deal terms related to the plans to sell the Mexico assets or any of the other initiatives that you've highlighted?

No. In reference to Slide 3, I think one of the things I wanted to mention to you was that earlier this year, we had a very positive view of what we thought we could do long term. And I think we soon realized, Carly, that the most important thing to build credibility about the long-term opportunity was to deliver value in the near term. And that's why I thought it was important to come out on March 31st with 5 key initiatives that would drive value in 2025, and you see that reflected on Slide 3.

So we've made great progress on the $13 billion goal on our own capital. We have already improved our expected returns, particularly with the UTM bill in Texas. Obviously, I'm providing an update today on #2 in terms of unlocking value in the LNG franchise. There really is no impact to your question around Mexico. That transaction is going quite well at Ecogas. We've received robust interest, and we continue to target closing for that deal in the Q2, Q3 time frame. And those cash proceeds would be distributed into the existing ownership structure at SI.

I would also note that we're making progress on improving the cost structure of this business. This is not unique to Sempra. It's not unique to the utility industry. All across the Fortune 500 universe, you're seeing companies rightsize their cost structure for their future needs. We've made great progress, particularly here in California in that regard.

And then finally, as you think about safety, risk reduction and operational excellence, which is #5, it is a significant progress for us to get wildfire legislation that we think is constructive in Texas and to also get a strengthened wildfire fund here in the state of Texas, and we continue to think we'll make progress on these same 5 initiatives throughout the balance of the year.

And we do have time for one last question. And our last question today will come from Anthony Crowdell from Mizuho.

Jeff, congrats. I guess just 2 high-level questions. I guess first question is, you look over the last 10 years, the company has done a great job of recycling capital, whether it was selling down South America, investing in Oncor, selling renewables, now the sell-down of SIP. What is the next, do you think capital recycling opportunity? Clearly, what you have, the California utilities and Texas is core, but what do you see next as the next capital recycling opportunity?

Well, I appreciate that question. And sometimes we talk about this internally. But if you go back to 2017, when I was the CFO, one of the things we had done with our Board of Directors, Anthony, was really identify three buckets of value inside of our company. We had a core platform of utilities that we knew we wanted to grow and diversify, and that led to our decision to enter the Texas market. We had a second basket of assets that we did not think were core. And I think with our management team, we decided to sell those as quickly as possible. I think we've thrown out a number in that 2018 to 2020 time frame on an enterprise value basis, we recycled about $35 billion of capital, and that was instrumental in funding our acquisition of an 80% ownership interest in Oncor.

And then, Anthony, the third bucket of assets were ones in which we thought that we could add value to, but may not own long term. We put together the Mexico platform, which was essentially a midstream platform with LNG. And obviously, on today's slides, you've seen the value creation that we've extracted from that. I think what's missing is that across that same time frame, we've been able to grow our rate base at about a 20% CAGR from 2017. So the real opportunity for us is to have really good execution in the next 6 months around the base rate review in Texas, around rolling up a very thoughtful and efficiently funded capital program and then making sure with Justin's help and Diana Day's help, we drive the closing on the transactions that we've announced today.

But long term, the value opportunity for this company is, we have made a commitment to take the balance sheet off the table at the same time that we've set a goal with our Board of Directors of creating the leading utility growth platform in the country. And I think what you'll see is we give investors more and more exposure to the quality of that Texas market, you should see the stock re-rate over time, and we have a very bullish view about the value we can create through the end of the decade.

That's great. And then just -- I don't know if you want to answer this or Justin, just curious, does this change maybe the management team at Sempra's, does Justin go with the assets? Is he -- like does that make any changes? And I'll leave it there.

Yes. I appreciate the question. At Sempra Infrastructure, I think one of the things we hear consistently is that it's a well-recognized management team with an established track record around 3 areas that we think -- where we have core competencies, Anthony. Number one, safety and operational excellence. We certainly have an energy infrastructure development expertise. And I think they've got a demonstrated track record for financial stewardship and value creation. So I think in terms of management, this transaction doesn't change that. It really just changes the capital structure.

You referenced Justin. He wears 2 hats at Sempra. He's an EVP at Sempra today and also the Chair and CEO of Sempra Infrastructure. And one of the things is we've worked through this with our partners so that Justin can continue in his CEO capacity through closing next year, at which point in time, we expect he'll move over full time to Sempra. But I think to the heart of your question, the key takeaway here is we have an experienced team in place that will continue to lead the business. And I think together with KKR and ADIA, we all as partners understand the importance of maintaining leadership continuity and business momentum through closing and through the end of the decade.

That concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.

I really want to take a moment to thank everyone for joining us on short notice this morning for an update on our 2025 value creation initiatives. If there are any follow-up questions per custom, please reach out to our IR team with your questions. I would note, we'll be -- I'll be joined by Karen, Justin and Allen Nye next week at the Wolfe Conference in New York, and we look forward to seeing many of you there. This concludes our call.

Thank you for your participation, and you may now disconnect.

Good day, and welcome to Sempra's Second Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn it over to Louise Bick. Please go ahead.

Good morning, and welcome to Sempra's Second Quarter 2025 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. Many of you may know me, I'm Louise Bick, Vice President of Investor Relations. Glen has recently taken on other financial responsibilities at Sempra, and I'm excited to be leading our IR program now. I look forward to seeing you more on the road in the coming weeks and months.

We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer; Karen Sedgwick, Executive Vice President and Chief Financial Officer; Justin Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Caroline Winn, who I'd like to know, is a new Executive Vice President of Sempra. With over 35 years at our California Utilities, Caroline brings extensive safety and operational expertise to her role overseeing Sempra California's dual utility platform, both SDG&E and SoCalGas. Allen Nye, Chief Executive Officer of Oncor; Don Clevenger, Chief Financial Officer of Oncor; Dyan Wold, Vice President, Controller and Chief Accounting Officer of Sempra and other members of our senior management team.

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statements we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC.

Earnings per common share amounts in our presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures.

We also encourage you to review our 10-Q for the quarter ended June 30, 2025. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, August 7, 2025, and it's important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future.

With that, please turn to Slide 4, and let me hand the call over to Jeff.

Thank you all for joining us today. Earlier this morning, we reported second quarter 2025 adjusted EPS of $0.89, which is in line with the prior period's results. With steady execution on our 2025 value creation initiatives, we're pleased with our first half results and remain on track to achieve our goals for the year. As a result, we're also affirming our full year 2025 adjusted EPS guidance range of $4.30 to $4.70, and we're also affirming our 2026 EPS guidance of $4.80 to $5.30.

Next, I'd like to provide an update on the progress we've made on the five value creation initiatives announced earlier this year. As a starting point, our current capital plan targets the investment of roughly $13 billion this year with over $10 billion allocated toward our growing U.S. utilities.

Through the first half of the year, we've already deployed more than $5 billion of new capital while continuing our efforts to strengthen the regulatory compacts in the jurisdictions where we operate. This includes advocating for constructive regulatory and legislative frameworks to better serve all of our stakeholders.

The recently passed House Bill 5247 in Texas is a great example, and Karen will touch on that development later in today's presentation. Next, I want to mention that we're making steady progress on our capital recycling initiatives. In the equity sale at Sempra Infrastructure, we've executed an extension to the right of first offer process that is outlined in the limited partnership agreement. With the benefit of that extension, Sempra has entered into a nonbinding letter of intent with KKR. The letter of intent contemplates an equity sale within or even above the 15% to 30% range depending upon valuation and other considerations.

Given that we're in ongoing negotiations, we're limited at this time in what we can disclose, but we'll look to provide additional updates once reaching a definitive agreement. During the quarter, we also advanced the Ecogas sales process and have received substantial interest from both strategic and financial parties. I'd refer you to Slide 10 for more color on both transactions. As previously mentioned, we expect these transactions to close sometime in the middle of 2026, and in combination, we expect these transactions will be accretive to the company's EPS forecast as well as credit.

As is our convention, we don't provide any details on M&A transactions until definitive agreements are in place. Subject to the transactions being completed next year, we expect a notably higher contribution of earnings from our regulated utilities, which we expect to improve Sempra's overall credit and business risk profile.

In that regard, I'd like to refer you to Slide 12 of the appendix, which highlights our changing business mix. As we continue our transition toward a more utility-focused business model, this slide demonstrates two key points. Number one, our utilities are anchored in the two largest economic markets in the United States, California and Texas. And number two, our regulated investments provide investors with broad exposure to both electric and gas utility investments in different markets with constructive regulatory compacts.

Taken together, regulatory and geographic diversity across both electric and natural gas investments improves the consistency of our earnings and cash flow while also reducing financial risk. Moreover, because our 5-year capital plan increasingly prioritizes growth at Oncor, we expect our business mix to become more weighted toward Texas through the end of the decade, a proposition that we feel strongly will enhance Sempra's value over time.

Moving to our Fit for 2025 campaign. We continue to make solid progress. The focus here, you'll recall, is on improving customer affordability by reducing internal costs, improving productivity and aligning Sempra's cost structure to its future business needs. To date, we've adopted new technology, found innovative ways to streamline processes and realigned our organizational structure to better serve our customers.

Finally, I'd like to discuss our continued progress in mitigating enterprise risk. SDG&E, as you know, has long been a leader in operational excellence and has made significant investments in data science, technology and wildfire mitigation measures. Moreover, we're pleased to report that SDG&E has hardened 100% of its transmission system with still structures in the highest fire threat areas or what we call Tier 3 zones.

SDG&E expects to achieve its medium-term goal of fully hardening Tier 2 zones by the end of 2028. I'd also like to highlight that over the last 24 months, our engineering and project management teams working alongside our vendors have been successful in reducing the cost per mile of undergrounding by 40%, demonstrating again our commitment to operational efficiency and safety while also improving the affordability of our future services. And with that, please turn to Slide 5, where Karen will walk through additional business and financial updates.

Thank you, Jeff. Across our businesses, we have a number of updates to share that demonstrate the progress we've made during the quarter. Starting with Sempra Texas, Oncor continues to present a truly compelling investment opportunity as the company continues to execute on its $36 billion 5-year capital plan.

Oncor is also evaluating incremental capital opportunities for the 2025 to 2029 period, as we've previously outlined. These opportunities are critical to supporting Texas' strong growth and are further reinforced by a series of constructive legislative bills that were recently passed and are designed to enable continued infrastructure expansion across the state.

In particular, HB5247, which established the Unified Tracker Mechanism, or UTM for short, was signed into law by Governor Abbott in June. This bill allows qualifying electric utilities such as Oncor, to record costs to a regulatory asset arising from eligible capital investments and apply for interim rate adjustments through an annual UTM filing. This filing occurs in place of the existing TCOS and DCRF processes. We expect this legislation to help reduce regulatory investment lag and improve the earned return on equity, particularly during sustained periods of higher capital investment necessary to support high-growth areas in Texas.

Oncor's earned ROE is anticipated to increase by 50 to 100 basis points over time versus the existing recovery mechanisms. Oncor has begun recognizing revenues related to assets placed into service from and after January 1, 2025, and expects to make its initial UTM filing in the first half of 2026.

Other legislative outcomes from Texas are summarized on Slide 14 in the appendix. Next, due to higher levels of growth and other drivers, Oncor's rate case is also important as the company looks to align its cost structure with the current operating environment.

In June, Oncor filed a request for a comprehensive base rate review, seeking to recover past storm-related costs, increase amounts recovered in rates for future storm-related costs to better reflect historical costs, mitigate the impact of rising expenses and inflation and improve its credit metrics and financial strength during a time of unprecedented growth.

In its filing, Oncor requested, among other items, a 45% equity layer compared to the currently authorized 42.5%, a 10.55% ROE compared to the currently authorized 9.7% and a 4.94% cost of debt compared to the currently authorized 4.39%. A key component of the base rate review is that it updates Oncor's O&M expenses, which are currently based on a historical 2021 test year to the level experienced throughout 2024. This is intended to more closely align the costs included in rates to the realities of today's operating environment and help improve Oncor's cost recovery and financial strength.

In terms of timing, Oncor is expecting to receive a final order in the first quarter of 2026. I'd also refer you to Slide 13 in the appendix where we present additional information relating to Oncor's base rate review.

Turning to Sempra California. We're pleased to announce SDG&E has been awarded an estimated $600 million in transmission projects as part of the Cal ISO 2024 to 2025 transmission plan that was finalized during the quarter. While most of the related investments are expected to occur beyond the period of our current capital plan, we're excited to continue to support California's transmission system while enhancing safety and reliability across our service territory.

Next, I'd like to acknowledge the significant initiatives currently underway to enhance customer affordability. SDG&E recently filed a request with the CPUC targeting savings of approximately $300 million by phasing out certain regulatory programs that are no longer economically beneficial to customers. Recall, too, this amount is incremental to the $200 million of federal tax credits that SDG&E is passing on to customers over the course of this year, further reinforcing our efforts to improve customer affordability.

Moving to Sempra Infrastructure. Let me start with operational updates. Cameron LNG Phase 1 recently celebrated the successful production and export of its 1,000th LNG cargo, marking a significant achievement just 6 years after its first commissioning cargo in 2019. Elsewhere, we're steadily making progress on major construction projects at ECA LNG Phase 1, Cimarron Wind and Port Arthur LNG Phase 1. Together, these projects should help drive a step change in cash flows at Sempra Infrastructure.

I'm pleased to note steady progress continues at ECA LNG Phase 1. Now that the company is closer to commercial operations, we're tracking several key near-term milestones that are expected to help us meet our financial commitments for next year. As of July, the project is more than 94% complete. We expect to reach mechanical completion later this year, followed by substantial completion in the spring of 2026. At that time, the facility is expected to begin generating revenues from LNG commissioning cargoes. We now expect sales to our long-term SBA customers to start shortly thereafter in the summer of 2026.

The Cimarron Wind project is on time and on budget with overall project completion beyond 85%. We continue to target commencement of power generation later this year with commercial operations planned for the first half of 2026.

We also continue to work towards delivering Port Arthur LNG Phase 1 on time and on budget, targeting commercial operations for Train 1 in 2027 and Train 2 in 2028. Current construction is advancing the foundations, steel installation, LNG tank construction, ground piping and dredging activities with the overall project now surpassing 50% complete. We're also excited about some of the recent developments at Port Arthur LNG Phase 2. In May, the project received the Department of Energy non-FDA export authorization.

At this point in time, Port Arthur LNG Phase 2 has received all major permits necessary for taking FID. Phase 2 also made significant commercial progress recently. In July, we executed a 20-year SPA with JERA for 1.5 MTPA of offtake capacity. This milestone helps advance the project towards reaching FID and underscores Sempra Infrastructure's commitment to supporting energy security for our customers through stable long-term LNG supply.

We're pleased with additional strong offtake interest and remain focused on advancing commercial progress and financing the project. We're still expecting to take FID in 2025. I conclude the business update by saying there's plenty to be excited about at Sempra Infrastructure as this segment continues to advance growth in LNG, energy networks and clean energy, while posting strong financial performance.

Please turn to the next slide where I'll review the second quarter financial results. Earlier today, Sempra reported second quarter 2025 GAAP earnings of $461 million or $0.71 per share. This compares to second quarter 2024 GAAP earnings of $713 million or $1.12 per share. On an adjusted basis, second quarter 2025 earnings were $583 million or $0.89 per share. This compares to our second quarter 2024 earnings of $567 million, which also equated to $0.89 per share.

For the first half of the year, we're pleased with our execution and Sempra is well positioned to deliver a year of solid financial performance on behalf of its shareholders. Please turn to the next slide. Variances in the second quarter 2025 adjusted earnings as compared to the same period last year can be summarized as follows: at Sempra California, we had $5 million primarily from higher regulatory awards, electric transmission margin and AFUDC equity, partially offset by lower CPUC base operating margin and lower authorized cost of capital.

Sempra California also had $37 million of lower income tax benefits and higher net interest expense. As you may recall, we received our final GRC decision for the California utilities at the end of last year. Since then, as part of our Fit for '25 initiative, we continue making progress in managing costs within the authorized base GRC revenues.

We're also prioritizing safety and reliability initiatives based on the outcome of our GRC decision, while advancing efforts aimed at further reducing the cost of service. Turning to Sempra Texas. We had $6 million of higher equity earnings, primarily from higher invested capital and customer growth, partially offset by higher operating and interest expenses as well as lower consumption, primarily attributable to weather.

At Sempra Infrastructure, we had $26 million of higher revenues, primarily from a contract modification and higher power volumes. At the parent, the $16 million increase is primarily due to timing of higher income tax benefits, higher net investment gains, partially offset by higher net interest expense.

Please turn to the next slide. To conclude our prepared remarks, we've made steady progress on our 2025 value creation initiatives and delivered solid financial results for the first half of the year. At Sempra Texas, we saw important milestones as Oncor filed a comprehensive base rate review and the regulatory compact significantly improved with the passage of HB5247.

Within Sempra California, we continue to focus on safety, reliability and customer affordability. And at Sempra Infrastructure, we're advancing two important sales transactions and steadily progressing five significant construction projects, all while moving forward on commercial development of Port Arthur LNG Phase 2.

Bottom line, the key takeaway from my perspective is this is certainly an exciting time for Sempra, 2026 should bring a conclusion to the Oncor base rate review, and I'd like to take a moment to list several other potential catalysts that could provide upside, including: number one, continued improvement in earned ROE at Oncor due to the UTM; two, incremental CapEx opportunities, which are expected to materialize in Texas; three, ECA LNG Phase 1 and Cimarron Wind earnings contributions coming online at Sempra Infrastructure; and four, conclusion of two sales transactions at Sempra Infrastructure, which are expected to unlock value, strengthen Sempra's balance sheet and provide investment capital for our growing utility platforms.

With that, we'll now take a moment to open the line and answer your questions.

[Operator Instructions]

Our first question will come from Ross Fowler from Bank of America.

Louise, congratulations on the full responsibilities of our IR, well deserved. Jeff, I wanted to dig in a bit on the KKR LOI around the Sempra Infrastructure Partners sale process. As you said in your comments, the LOI is within or potentially above the 15% to 30% range depending on valuation conditions.

So does that mean to the extent you will or are discussing stake sales with third parties beyond the current investors that the strategic approach here on business mix is that the full stake is beyond that 30% level? Or how are you seeing that and where we actually go at the end of the day?

Sure. Let me just start, and I trust you understand that in any M&A deal, Ross, we're fairly limited in what we can say. Obviously, we're trying to have a great transaction. What I'll try to do is recap what we've said publicly and then maybe provide a little bit more color to the latter part of your question.

We indicated that we've executed an extension to the right of first offer process under the existing limited partnership agreement. And similarly, we've executed a nonbinding letter of intent with KKR. Also, I would note that LOI contemplates -- the LOI with KKR, by the way, contemplates an equity sale in that 15% to 30% range, and we've also indicated that it could be within or above that.

And I would just note that's consistent with what I said on the Q1 call in May that the ultimate amount of equity being sold will be dependent upon a number of considerations, including valuation. I also talked about in May, Ross, I think this is probably important for the listening audience that we're focused on four value drivers.

So we're looking to obviously optimize the implied equity value of SI from the transaction. We want to make sure we minimize tax leakage. And it's also very important as we think about that roll forward 5-year capital plan that we're thoughtful on the timing and use of proceeds. And finally, I've been very clear with all of our stakeholders, there's an opportunity here to improve our balance sheet and put some cushion on the balance sheet.

So those are our priorities. We certainly are 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.

And then you mentioned the capital plan. So let me touch on that for a second. The incremental capital in Oncor in Texas and the transmission awards that you talked about in the deck, those are still outside the base plan with CCM coming in '27. How do you see the timing of a capital plan update related to those? And given that it's still outside the plan, can you just kind of give some color on your level of confidence that, that spending can be executed?

Yes. I would do a couple of things. One is, in Oncor's press release today, they go through kind of the process and recap of how they approve and roll forward their capital plan, and I'll try to touch on a little bit of that in my remarks this morning, but you'll recall that earlier this year, they announced a base plan at the 100% level of $36 billion, and you're correct, they articulated an opportunity in 2027, '28 and '29 for an improvement to that capital plan by roughly $12 billion.

What's important, I think, is Oncor has been very clear, they're seeing upward pressure on their capital plan. So we're feeling more confident, obviously, about that $12 billion, and here's the three drivers they've identified. They've had recent legislative developments that have been constructive. They've had some supportive regulatory decisions, and they're obviously making really good progress, Ross, on the thing we identified in February, which is, that $12 billion was associated with projects that needed additional permits on.

They're continuing to make steady progress on permits. So I think in combination, we're quite comfortable confirming that we expect them to be at the high end of that $12 billion or more, and the way the process will go is, at their Board meeting in October, we'll recap that roll forward five year plan with the Board, and remember, they're in the middle of a base rate review, obviously, in Austin as well.

So sometime in 2026, we'll look to update that plan. It could be on our February call, but it's going to be driven by resolution of their base rate review. Maybe I might get back -- yes, I was going to say, if I could, it might be helpful to your question, if you allow me, let's let Allen provide just a little bit more context on the key drivers of that capital plan because I think the growth story continues to get better, including tailwinds beyond the five-year plan. But Allen, it might be helpful to Ross if you just cover off on what you're thinking about from a growth standpoint and how that 765 overlay will help.

You bet, Jeff. And yes, thanks, Ross. As Jeff said, growth continues to be very, very strong, really all across our system. We already announced this morning, we added 20,000 new premise this quarter. That's fairly consistent with the number we've been seeing for many, many quarters now.

West Texas, we continue to see very, very strong growth out there. The Far West Texas weather zone had a new peak in May of this year, 9.2% above the prior peak, and the two transmission loops by which we serve the Permian, the Culberson and Stanton loops, both continue to see really increased peaks.

Culberson peaked 23.5% above where it did prior June in June of this year, and Stanton was up about 6.9% over the same period. So West Texas continues to be really strong. The story remains, transmission points of interconnection and data centers and LC&I load, and as we announced this morning, our total new transmission POIs are up about 47% year-to-date with total active POIs up about 38% year-to-date.

And breaking that down a little further, if you look at just traditional LC&I, taking data centers out of it, that's up for new about 19% and total are about up 2% quarter versus same quarter. Breaking that down a little further, that entire queue, there's around 1,100 or so, a little over 1,100 total customers that we're dealing with there. It's about 186 gigawatts of data centers, about 7 gigawatts of what I would call traditional C&I, about 5 gigawatts of crypto, 4 gigawatts of kind of oil and gas activity and then 3% or 3 rather gigawatts of service to other utilities. So that's what we're seeing there.

We continue to have our high confidence load number for 2031 of 38 gigawatts broken down by 9 gigawatts of signed interconnection agreements with security provided and another 29.9 gigawatts of high confidence load that we submitted in our officer letter to ERCOT.

And finally, Jeff may have mentioned this, I would just refer everyone back to Page 16 of the presentation, that lists out the really kind of amazing transmission opportunities that a lot of this growth is providing us, both through the Permian plan as well as through the STEP program or the 765 EHV plan, both of which we've said previously, we anticipate Oncor will build a significant amount of, that remains true.

To the permitting question that Jeff mentioned earlier or stated earlier, I'd simply say this, and I've said this before, I did these for 17 years before I became General Counsel, Oncor. I think I did 60 or so of them over about a 17-year period. We're filing 24 this year, and that will continue for the next couple of years to come.

Ross, I want to just have that background because it really feeds into that story about why that $12 billion incremental is probably going to be conservative.

Our next question will come from Steve Fleishman from Wolfe.

So I guess maybe just following on from there. Can you just remind us that your plan right now does not include that $12 billion? Or does it include some of it, the...

No, it does not include that. We're 80% of the $36 billion plan, and all of that represents upside to our base plan, Steve.

Okay. So even like that business mix, the rate base mix that does not include it yet.

That's correct.

Okay. And then just -- thanks for the update on the Sempra Infrastructure. Just -- I don't know if you can give this answer, but just any sense on timing of moving forward this LOI with KKR? Is this something by the next call? Or is it -- what's kind of going to drive the timing of that?

No, I would just say, Steve, it's a complex structured transaction. Obviously, we're dealing with a party, we know very, very well. They're in the boardroom at SI. We're engaged on our side. KKR is actively engaged. We're not going to forecast the timing of it right now, but we're pleased with the progress we've made so far, and we'll continue to look to make an update once we reach a definitive agreement.

Okay. And then I guess, just how do you feel about being able to kind of time the sale with this kind of obviously rising CapEx at Oncor, do you feel like you can match that up?

Well, it really is a very insightful question. Obviously, we've got a couple of things going on where we're starting our fall planning process, where we're going to do a real bottoms-up review of how we roll that capital plan forward and the timing of that capital, and then obviously, we're balancing that, Steve, with not only the timing of potential closing with our counterparty in the transaction, but also how we structure not only their proceeds but our use of proceeds.

So our goal is to make sure that as we roll this plan forward, we're obviously expecting our overall capital program to increase, it will continue to be increasingly weighted toward Texas, that's the priority inside of our company, and what we want to do, and we talked about this a little bit on the fourth quarter call, is make sure that this program is intended to accomplish several things, improve our overall EPS forecast, improve our credit, and also make sure that we're minimizing reliance on additional equity issuances.

And I think we're in a good spot to do this. But you're right, we got time this well into 2026, and our goal is to make sure we match up a really efficient use of proceeds and use those proceeds in a way where we're making investments that Wall Street will value the highest. As I indicated earlier, we certainly think that's around the quality and growth in Texas.

Okay. I guess one last thing just on the credit portion of that. How do you -- you mentioned, I think, in the capital recycling potentially getting to the point where you deconsolidate. Just could you talk to how that might impact kind of maybe the metrics and the risk view from a credit standpoint?

Sure. We've provided a little bit of visibility on this in the past. Karen and her team have done a great job of meeting with all the agencies. I've also taken the time to go to New York and meet with all the agencies around not only our capital plan, but also the pending SI transactions, and there's really an opportunity here based upon where we land in the equity sale, there's an opportunity to do a couple of things.

Number one, one of the thresholds we're evaluating is that when you get to a point where roughly 90% of your earnings composition comes from regulated utilities, that tends to be a signpost that could allow a reevaluation of what your downgrade threshold is. So there's an opportunity in this transaction to move our downgrade thresholds either 1 notch down or potentially 2 notch down. That's one point.

The second point is, depending upon where you land in the equity sale, you also have the opportunity to deconsolidate your accounting as well as the debt from SI from Sempra's balance sheet. Now this one is a little bit more complex because it really goes across three dimensions. It goes across the level of equity ownership. It goes across issues relating to governance, either positive or negative control, and then it goes to issues of materiality.

And as you would expect, Steve, each of the agencies has a little bit different test as they look at that. But that's why we talk about having a little bit of flexibility as we go forward in our transaction is we want to make sure that we're maximizing the overall value for our investors, and that will be one of the criteria we'll evaluate in the end.

Our next question will come from Fei She from Barclays.

It's Nick Campanella. I just wanted to ask one follow-up on the LOI. Just is there a point at which this ROFR extension expires?

No, we're not going to go into details on it. But the way to think about it is the most important thing is that extension is designed to give the parties adequate time to do a transaction, and that's something that I think would be evergreen or rolling forward until the parties reach a definitive agreement.

Understood. And then just maybe on California, any high-level thoughts on your kind of participation in a potential AB 1054 solution this year as well as maybe just on some of the status of the affordability bills that are out there. I know that a lot of folks have seen the governor's proposal. But just how would you kind of characterize stakeholder engagement beyond that? Do you see the state ultimately getting to kind of a constructive outcome here in September?

Yes. Let me try to tackle both these issues. I'll talk about our view on the wildfire legislation, and then I'll transition to affordability. I would note, we're pleased to have Caroline Winn with us today, who oversees all of our operations in California. And certainly, Caroline, please chip in as I go forward.

What I would start with the wildfire legislation, and we've taken obviously lots of questions on this when we've been on the road and on prior calls. But I'm not sure a lot -- I can't add a lot to it publicly, Nick, except to say we have always thought that we'll get to some progress in stabilizing the AB 1054 framework this year.

Obviously, in the draft bill that was leaked, you'll see that there's also a component to it that talks about a study bill. We also think that's important. We see that as part of any package that takes place this fall, and there will probably be opportunities to continue to improve the AB 1054 framework going into 2026.

There are several weeks left in the session. Obviously, our team is very much engaged. The one comment I would say is just as a matter of principle, we're not really supportive from a utility practice and procedure standpoint on the use of shareholder dollars. You may recall, this is important to Sempra because we haven't had a major wildfire in just over 18 years.

I might just say, though, we're going to look at the totality of the circumstances. We realize there's a broader set of issues for all stakeholders. So that's something that we would continue to evaluate. Caroline, do you want to add anything else on the wildfire side other than that?

I'd maybe just take an opportunity to step back and talk a little bit about how SDG&E is building a better business. As we head into our 18th year since a large wildfire due to utility infrastructure, SDG&E has continued to expand and enhance their industry-leading wildfire mitigation program, and this is a team of employees who really have a growth mindset and a strong culture that we need to be better than we were yesterday.

A couple of leadership areas in my mind is superior situational awareness. They have strong community engagement and service mindset. They're a leader in data science. But maybe a few enhancements that we've done this year is expansion of the weather network, and that includes camera and additional artificial intelligence, and that's going to improve our forecasting and our monitoring capabilities.

We've deployed a dual Black Hawk helicopter strategy for rapid response and quicker inspections and controls. We've done enhanced inspection regime that includes drone inspections of our wildland urban interface areas, and we've expanded our public safety power shutoff preparedness and our capabilities. So we're ready for the season and really pleased with the conversations that we're having in Sacramento in terms of fund replenishment.

And Nick, the reason I think this is important is, obviously, there's a big focus today on financial issues and insurance and the 1054 framework, which we think is very important, but the thing that's important inside this business every day is to keep building a better operational program, a better ability to basically mitigate wildfire, and I think you're going to continue to see this company extend the leadership position there.

I'll transition real quickly over to the affordability issue. With roughly four weeks left in the legislative session, my instinct here, Nick, is you're going to see some of these bills coalesce around a single bill, and what we're focused on is most of these bills are talking about potential long-term impacts, and I think what Caroline deserves a lot of credit for is inside the company, we're pushing for things that have an immediate impact to customers. That continues to be our message in Sacramento.

So we've talked about earlier today filing for an opportunity to pull back about $300 million from regulatory programs that we think are not fully serving customers today. You may recall from the rate case, we're passing on about $200 million of tax credit benefits to our customers.

Caroline has led a process, Nick, to update our organizational structure in terms of improving how we efficiently serve customers, and obviously, we want to keep pushing the edge on innovation and new technologies, and I think Caroline, in terms of public policy advocacy that your team has led, we're trying to remove the public purpose programs from customers' bills, which are important as well as make continued improvements to net metering framework. Would you like to make any closing comments on affordability, Caroline?

No. I mean, other than to say you're exactly right, Jeff, we are focused on immediate bill reductions that benefit customers. And I think the transitioning of the public purpose programs to state budget will save customers $100 annually, addressing the $1.3 billion just annual cost shift as part of net energy metering. There's a bill going on, on that.

And we also believe that increasing the climate credit, if we're able to double the climate credit from the state and using GHG funds to do so, especially during the summer months when bills are the highest, we think there's just great opportunity to provide that affordability for customers.

So Nick, I know that was probably a longer answer than you anticipated, but we're very engaged on both issues here in the state.

Our next question will come from David Arcaro from Morgan Stanley.

Wondering if you could give an update on the LNG market and contracting opportunities that you're seeing for Port Arthur. Good to see the JERA agreement move forward. But how is the macro backdrop and maybe the current administration's efforts have been impacting those discussions?

Yes. I would just kind of start, and I'll pass it to Justin. We certainly think this is one of the understated issues today in the market is the macroeconomic backdrop for LNG continues to strengthen in our view. And maybe, Justin, you can provide a little bit more color for David.

Yes. David, Yes, I think we still have a very bullish view on LNG, particularly from the U.S. We think there's probably growth for two primary reasons: energy security and affordability in Europe and then growing demand for gas in Asia.

In Europe, the EU ban on transshipments of Russian LNG from earlier this year and Ukraine's rejection of a deal to extend their gas volumes through the pipelines reflect growing confidence in the future without Russian gas and therefore, a greater reliance on U.S. LNG. This is part of the reason why we think the Gulf Coast assets, Cameron and Port Arthur are well positioned to meet that demand.

Asia over the long run, we as well as many others expect LNG will continue to penetrate the overall share of the energy supply by replacing coal and meeting the growing needs of end consumers. Demand is expected to grow through the expansion of natural gas pipeline and distribution systems in the developing markets, and then also gas-fired generation load is expected to grow to meet peak demands in the summer and winter as well as support grid reliability.

So this, we think, supports the Pacific Coast location as you think about ECA and future expansions at ECA. Again, our overall outlook for demand growth has not changed. We continue to believe Sempra Infrastructure's LNG assets are very well positioned to support these needs, and we're seeing that in the marketplace as...

Yes. The only thing I'd add, David, is just think about it, too, as a basis play, right? We have historically had remarkable production of natural gas here in the United States with very little price volatility. So it's a combination of low price and low volatility relative to the markers in both Asia and Europe, and we continue to think that thesis is intact, and we feel very good about the backdrop.

Great. Very helpful. And then I had a follow-up on the Texas side of things. I appreciate all the details, as always, Allen, on the data center pipeline. Obviously, that pipeline has increased a lot, but the high confidence numbers seem to be consistent versus last quarter.

So I'm wondering what the dynamic is there? Are you kind of at a limit that you see in terms of what you can connect in through 2031? Or what would you see as maybe the cadence of projects getting into that high confidence band that you characterized?

Yes, David, thanks for the question. I should have clarified that earlier. It's not that there are not more projects out there. It's not that we cannot meet those projects. It's just that those numbers are updated once a year with ERCOT, and we continue to see increased demand in that queue, and we continue to work with those parties to execute FPAs and get collateral and advance those projects. So we'll see when we update it next, but I would anticipate those numbers will continue to increase.

Just remarkable, too, David, when he went through those numbers earlier on today's call, he's got over 200 gigawatts of interconnection request, and he's got a peak load today on Oncor's system of 31 gigawatts. So the opportunity is really significant, and it's not just leveraged the data centers. I think it goes across what's unique for his story is how much it goes across a variety of different sectors in the C&I class of customers.

And we have time for one last question today, and our question will come from Carly Davenport from Goldman Sachs.

Maybe just a quick follow-up on Port Arthur Phase 2. Obviously, a number of progress points there since last quarter, and it seems like you're still quite constructive on the macro. So just wanted to get a pulse check on your views on the feasibility to reach FID on that project by the end of this year.

Sure. I'll provide some comments, and Justin, feel free to add on the back end of it, but we're continuing to see good progress, Carly. I think in the call today, we kind of summarized three points. We've had progress in getting all the major permits for Phase 2 to go forward.

We've obviously highlighted the marketing progress with JERA. That's a world-class buyer of LNG, by the way, and I think it adds a lot of credibility to the project. And we've also, with Faisel Khan helping Justin, we've been advancing the financing plan, which will also be ported for an FID decision.

I think the takeaway from my perspective is solid progress in Q2, which I think you took away from our earlier comments. I think the project has momentum, and we continue to think there's a few more remaining work streams we're tracking to make sure we're in a position to take FID this year. And Justin, do you want to add anything to that?

I think you covered it, Jeff.

Great. And then maybe just a quick follow-up on Texas as well. Just on the back of the UTM. I guess as you think about that 50 to 100 basis points of improved ROE, could you just talk a little bit about the timing of those filings and how you'd expect the cadence of that improvement coming to fruition to sort of play out?

Yes. Let me give you a little bit more color on the UTM, and I'll pass it to Don Clevenger. We've got the CFO from Oncor here, and he maybe talk about how the timing unfolds, but what I'll try to tell most people, Carly, is we put forward a fairly fulsome 8-K on the UTM, which I think does a pretty good job of explaining our expectation that over time, it should have a positive impact on the earned ROE of about 50 to 100 basis points.

I've said several times, though, that it will depend each year on the overall amount of invested capital as well as how much goes into service each year. Given that we don't anticipate Carly making our first filing until next year, we anticipate being on the low end of that 50 to 100 basis point range this year, but as you go forward in that capital plan and more capital gets deployed, obviously, you're going to move toward the higher end or above that 100 basis points, but Don, just spend a minute, maybe talk about how you're thinking about the timing and cadence of this going forward.

Sure. Thanks, Carly. And if you remember, one of the benefits of the House Bill 5247 was rolling six filings basically into one, and so we would expect, like Jeff said, to file -- make our first UTM filing in the first half of next year after our rate case is resolved and then annually probably about the same time thereafter.

And that concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.

Briefly, I just want to thank everyone for joining this morning. I know there's been a number of competing calls. We appreciate everyone making time to join us. If there are any follow-up items, please reach out to our IR team with your questions, and we look forward to seeing many of you over the next several weeks. We have a very busy IR schedule, including Citi, UBS and Barclays Investor Conference as well as West Coast NDR toward the end of August. This concludes our call.

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