The paragraph is an introduction to Sempra's Third Quarter 2024 Earnings Call. Glen Donovan welcomes participants and mentions that the call, including a webcast and slide presentation, is accessible on Sempra's website. Key management team members, including CEO Jeff Martin and other executives, are present. The call will discuss forward-looking statements, noting that actual results may vary from projections, as detailed in Sempra's recent SEC filings. Earnings will be presented on a diluted basis with non-GAAP measures, alongside reconciliation to GAAP. The forward-looking statements discussed are only relevant as of the call date, November 6, 2024.

The paragraph discusses the growing need for investment in energy infrastructure in the United States, driven by economic expansion and rising electricity demand. It highlights challenges like aging infrastructure, extreme weather, and increased energy demands, emphasizing the importance of enhancing energy network resiliency and integrating new energy sources. The text notes that over $600 billion is needed for transmission and distribution by 2030, but this may be conservative due to sector growth. Texas is highlighted as a key example, with its significant energy consumption and production. Additionally, the rising demand for electricity from digital infrastructure, including AI and data centers, is seen as a major growth driver, suggesting that investing in high voltage transmission offers low risk and high growth potential, especially in Texas where there is a large queue of energy projects waiting to connect to the grid.

The Texas Legislature recently passed a bill to expedite permitting for new transmission investments, benefiting companies like Oncor, which is set to build significant high voltage transmission infrastructure. With economic growth and rising demand, industry EPS growth is expected to exceed historical averages. To outperform peers, companies need a clear strategy, exposure to growing markets with favorable regulation, economies of scale, and disciplined capital allocation. Sempra is positioned to excel in this environment with strong utility platforms in Texas and California, and investments in cleaner energy. The company is seeing improved investment opportunities and reported positive financial results, including a third-quarter adjusted EPS of $0.89 and year-to-date EPS of $3.12.

The paragraph discusses the pending California GRC proposed decision and its potential impact on earnings, which will be retroactively applied in 2024. The company reaffirms its earnings guidance for 2024, 2025, and long-term growth. Allen Nye provides an update on Oncor's growth, noting significant load growth forecasts in Texas and operational achievements, such as building or upgrading over 800 miles of T&D lines and an increase in large C&I POI requests. Oncor's $24 billion five-year capital plan includes an additional nearly $3 billion for a system resiliency plan (SRP) and over $500 million in O&M expenses, pending approval, to enhance infrastructure and reduce risk, primarily from 2025 to 2027.

The article discusses Oncor's recent activities and future plans, highlighting ongoing discussions with the PUCT regarding the SRP and potential settlements. They have developed a prominent wildfire mitigation program in Texas and are collaborating with the Texas Forest Service and SDG&E. Oncor sees new investment opportunities due to increasing interconnection interest from large commercial and industrial customers across various industries in its service territory. The company is aligning its fall planning cycle with Sempra to evaluate future capital projects and plans to announce a new five-year capital plan, expecting a 40% to 50% increase due to economic expansion and customer growth in Texas. This growth is supported by Texas's regulatory framework. Additionally, Oncor anticipates substantial service territory growth, particularly in the Permian Basin, where ERCOT projects demand to quadruple by 2038, signaling strong growth prospects.

In early fall, the PUCT approved ERCOT's $4 billion Permian Basin reliability plan, allowing local projects to begin immediately, with voltage levels to be determined later. Oncor is expected to secure a significant share of the investment due to its existing operations in the area. The PUCT will assign projects, and Oncor is preparing to file necessary permits by early 2025, with proceedings taking about 180 days. The plan aims to have local projects in service by 2030 and all projects, including import pathways, completed by 2038, with a total investment of at least $13 billion. Decisions on voltage levels for import options are due by May 2025. ERCOT also has preliminary plans for a statewide extra high voltage grid, in which Oncor anticipates playing a major role.

The paragraph discusses proposed improvements and plans for major transmission lines in Texas, including the EHV initiative and the Phase 1 and 2 connections. It transitions to updates on Sempra's business in California, provided by Karen Sedgwick. She details the proposed decision in their rate cases, noting revenue requirement increases for 2024 for SDG&E and SoCalGas, as well as the recommended rate bases. The paragraph highlights ongoing needs for system integrity and safety investments, such as natural gas distribution and wildfire mitigation. Additionally, it mentions that some infrastructure and technology projects will be added to rates upon completion and that a process exists for considering changes before a final decision. Oral arguments were held by the CPUC, accessible to the public.

The paragraph discusses several developments involving SDG&E and SoCalGas. The two companies are involved in a regulatory process seeking outcomes that benefit all stakeholders. During the quarter, their California utilities faced a negative impact from a new cost of capital decision that lowered return on equity (ROE) rates. Despite the current decline in interest rates, which might limit future ROE reductions, they plan to file a new cost of capital application for 2026-2028. Additionally, SDG&E submitted a new filing to the Federal Energy Regulatory Commission to improve the authorized ROE to 12.25%. There's been record electric demand growth in SDG’s service area, driven by increased electric vehicle use and electrification in Southern California. Finally, Sempra's infrastructure is positioned to benefit from global geopolitical developments.

Sempra Infrastructure is well-positioned as the largest exporter of LNG to meet the growing demand in European and Asian markets. As Europe reduces its reliance on Russian gas, there is an increasing need for stable and cost-effective LNG from North America. The EU is taking steps to further cut Russian imports, including banning re-exports and demanding source tagging for LNG. Meanwhile, Asian demand for LNG is projected to grow dramatically over the next 15 years due to the displacement of coal and other carbon-intensive fuels in emerging economies. Sempra's Cameron LNG Phase 1 is performing well, with significant cargo achievements and higher-than-expected production levels. Construction on major projects is also progressing.

The ECA LNG Phase 1 construction is progressing well with a focus on above-ground piping, aiming for commercial operations by spring 2026. The GRO pipeline expansion, vital for LNG exports at ECA, is expected to be operational by year-end. Port Arthur Phase 1 is on schedule, focusing on infrastructure work including foundations and piping, supported by a new FERC authorization for the Louisiana Connector pipeline to supply gas from the Haynesville Basin. For Port Arthur Phase 2, efforts are on securing off-take agreements and financing, with Saudi Aramco as a key partner. Continuous construction across both Port Arthur phases is facilitated by an EPC agreement with Bechtel, although a DOE non-FDA export permit is awaited for Phase 2, signaling its progress ahead of the uncertainly-timed Cameron expansion.

In the third quarter of 2024, Sempra reported GAAP earnings of $638 million, or $1 per share, which decreased from $721 million, or $1.14 per share, in the same period of 2023. Adjusted earnings also fell from $685 million, or $1.08 per share, in 2023 to $566 million, or $0.89 per share, in 2024. This was partly due to pending outcomes affecting authorized base revenues. The decline in adjusted earnings was influenced by various factors: in Sempra California, decreases in tax benefits and higher expenses outweighed gains from operating margins; Sempra Texas faced lower equity earnings due to increased expenses and reduced consumption, despite higher revenues; Sempra Infrastructure saw reduced revenues and increased costs, though partially offset by tax benefits; and at Sempra parent, higher taxes were slightly balanced by net investment gains.

The speaker concludes their prepared remarks by summarizing key investment highlights, emphasizing their commitment to operational excellence in response to growing energy needs in North America. They highlight their unique position in North America's largest economic markets, allowing for significant investment in new energy infrastructure. To fund their capital campaign, they are establishing a $3 billion at-the-market equity program, supporting growth in capital expenditures while maintaining financial strength. They anticipate providing an update on their 5-year capital plan in February and will continue executing value-accretive investments. During the Q&A session, Nick Campanella from Barclays questions Jeff Martin about the company's ability to achieve EPS growth above the historical norms, in light of their outlined capital plans.

The paragraph discusses expected growth in the utility sector's earnings per share (EPS) from 2000 to 2020, which averaged around 3% but recently has been closer to 4%. This growth is anticipated to continue significantly, referred to as a "super cycle," with EPS growth expected to increase further, traditionally aiming for 6% to 8%. The focus is on achieving this target while balancing a strong dividend policy, with the sector confident in delivering or exceeding this growth range. There's also a mention of last year's capital strategy where the company de-risked the equity plan ahead of its formal capital expenditure outlook by conducting a $1.3 billion secondary offering. This strategy and planning provide high visibility to future growth opportunities.

The paragraph discusses Sempra's strategy to signal investment opportunities to its investors by introducing an ATM (at-the-market) offering as an additional financing tool, valued at $3 billion. This decision comes ahead of a more detailed update planned for February, where Sempra will provide insights on their capital program and 2026 forecasts. In response to a question about the ATM funding entirely covering anticipated CapEx increases, Jeff Martin explains that Sempra conducts a thorough evaluation of growth plans, prioritizing capital allocation to its U.S. utilities in California and Texas, which typically receive 90-95% of the capital plan's allocation.

In the paragraph, it's discussed that Oncor plans to announce a significant capital increase in February, and they've added a financial tool for flexibility, though its usage timing is undecided. Jeff Martin confirms comfort with the $3 billion figure. Regarding a proposed decision (PD) in California, concerns are raised about potential headwinds to expectations, especially given suggestions for lower revenue increases. Jeff describes an ongoing disciplined approach to capital allocation, emphasizing competition for capital based on returns relative to risk. He acknowledges some constructive aspects of the PD but sees potential for improvements in safety, reliability, and affordability for customers.

In the paragraph, the speaker discusses recent oral arguments highlighting necessary improvements, focusing on undergrounding for wildfire mitigation and integrity management for the natural gas distribution system. They emphasize the importance of increasing post-year funding to align with business activity levels and identify potential cost offsets for customers, mainly through tax benefits. The speaker expresses a commitment to working collaboratively with regulators to achieve constructive outcomes for all stakeholders. In response to a question from Julien Dumoulin-Smith regarding Oncor's growth, Jeff Martin praises Oncor's growth program in Texas, suggesting it is the best in the country, and sees an opportunity for future development and discussion.

In the paragraph, Allen Nye discusses the strong growth in their service territory, noting increases across residential, meter, and transmission systems. He highlights substantial growth in West Texas and the Permian region, with a focus on enhancing the ERCOT transmission backbone. Nye points out significant growth in new transmission points of interconnection and an increase in projects seeking to interconnect with the system. The most notable increase is from large commercial and industrial customers looking to connect at high power levels, with potential load additions rising from 80 gigawatts last quarter to 103 gigawatts.

The paragraph discusses significant potential growth in energy demand on the Oncor system, highlighting that potential load could increase more than three times the current peak. In the latest quarter, potential load rose by 29% compared to the previous quarter, driven by data centers and other customers. West Texas shows robust growth, with key transmission loops seeing substantial increases from the previous year's peak. Various projects, including those from the Delaware Basin study and Permian Basin plans, are progressing, aimed at enhancing transmission infrastructure. The Permian Basin reliability plan is currently under review, and upcoming plans, such as the SRP, are anticipated.

The paragraph discusses Oncor's growth strategy, emphasizing its diverse geographical and customer expansion. The speaker highlights a significant pending interconnection request for AI, totaling 82 gigawatts, which surpasses California's peak capacity. This growth focuses heavily on high-voltage transmission, comprising 60% of Oncor's capital plan. Oncor benefits from a favorable regulatory environment with mechanisms to adjust for transmission and distribution (T&D) investments. The conversation includes a query about the specifics of Oncor's high-voltage transmission capacity, particularly regarding the upper end specifications.

In the paragraph, Jeff Martin mentions a $13 billion plan for the Permian, with a decision pending from the PUCT on whether to upgrade to a 345 kV or 765 kV infrastructure, expected by next year. Carly Davenport from Goldman Sachs inquires about changes in the LNG business due to administration changes and the status of Port Arthur Phase 2. Justin Bird, CEO of Sempra Infrastructure, explains that Port Arthur Phase 2 is progressing well, with increased interest and ongoing commercial discussions. The project has a 20-year agreement with Aramco for off-take and equity, an EPC agreement with Bechtel, and awaits a DOE non-FTA export permit expected in the first half of next year. They are also identifying financing sources and advancing key milestones to reach a final investment decision.

The paragraph discusses a conversation about future legislative considerations in Texas and financial plans. Participants express optimism about the 2025 capital deployment for a project and mention preparations for the upcoming legislative session. Jeff Martin and Allen Nye highlight their lack of major concerns regarding utility issues in Austin, though they're monitoring potential legislation following Hurricane Beryl. Durgesh Chopra from Evercore ISI seeks clarification on the timing and necessity of a $3 billion equity need for a five-year plan from 2025 to 2029.

The paragraph outlines plans for a February update where the company will present its five-year capital plan, reconcile the balance sheet, and provide 2026 guidance. They aim to offer early visibility to investors about their expectations, focusing on a robust capital program in Texas. The company also sees the ATM as a strategic financing option, utilizing hybrids as part of their funding strategy. Durgesh Chopra asks about any updates on an LNG permit pause related to election results. Jeff Martin responds, emphasizing the nonpartisan nature of their business, which shifted focus from energy to energy infrastructure about six years ago, an area with strong bipartisan support.

The paragraph discusses the bipartisan support for an infrastructure bill and the role of the U.S. in global energy leadership, particularly in LNG (liquefied natural gas) production. The speaker highlights the importance of LNG for American foreign policy and its benefits for the domestic economy. Additionally, they express confidence in receiving necessary permits for a project called Port Arthur Phase 2. The discussion then shifts to a question about a California case, focusing on affordability and tax-related benefits that could reduce customer rates. Jeff Martin emphasizes the need to operate systems safely while collaborating with various involved parties.

The paragraph discusses a proposal for additional funding aimed at enhancing customer safety through investments in integrity programs and wildfire undergrounding in California. It also mentions the introduction of tax benefits to minimize customer impact. Jeff Martin emphasizes the importance of collaborating with stakeholders and does not provide specific details about financial adjustments or decisions, as the process is ongoing. Steve Fleishman inquires about capital plans concerning Oncor, noting the increase in Sempra's capital plan from $40 billion to $48 billion. Martin refrains from giving specifics, indicating future comments will be more instructive.

Jeff Martin discusses Sempra's disciplined approach to capital allocation, emphasizing that growth at Oncor will add to the $48 billion capital base. He expresses optimism about resolving rate cases in California and highlights significant investment opportunities in Texas, including the SRP program and data center demands. Martin also mentions new infrastructure investments in the Permian Basin and ERCOT transmission expansions. He concludes by asserting confidence in Sempra's three growth platforms to drive future growth and shareholder value.

The paragraph announces Trevor Mihalik's retirement at the end of the year after over a decade of service at Sempra, where he held several leadership roles. The speaker expresses gratitude for Trevor's contributions and invites attendees to contact the IR team with any questions. The paragraph concludes the call and notes an upcoming meeting at EEI in Florida.

This summary was generated with AI and may contain some inaccuracies.