Sempra (SRE) Q3 2026 Earnings Call Transcript

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

Louise Bick: Good morning, and welcome to Sempra's third 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 L. Sedgwick, Executive Vice President and Chief Financial Officer Justin Bird, executive vice president of Sempra, chief executive officer of Sempra Infrastructure; Caroline A. Winn, executive vice president of Sempra Alan Nye, chief executive officer of Oncor; Faisal Khan, chief commercial officer of Sempra; Dyan Z. Wold, vice president, controller, and chief accounting officer and other members of our senior management team. Before starting, I would like to remind everyone that we will be discussing forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. 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 Q filed with the SEC. Earnings per common share amounts in this presentation are shown on a diluted basis, and we will be discussing certain non GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We will also encourage you to review our 10 Q for the quarter ended 09/30/2026. I would also like to mention that forward looking statements contained in this presentation speak only as of today 11/05/2026, and it is important to note that the company does not assume any obligation to update or revise any of these forward looking statements in the future. We also encourage you to subscribe to the email alerts on our corporate updates web page so you can remain informed of the investor related developments. With that, please turn to slide 3, and let me hand the call over to Jeffrey.

Jeffrey Walker Martin: Thank you all for joining us today. Our business continues to execute well, as we remain focused on building America's leading utility growth business. And the strength of that execution is reflected in our year to date financial performance, including double digit growth and adjusted EPS at Sempra driven primarily by strong earnings growth at Sempra Texas. Growth in our Texas segment is in response to robust customer demand and the following 3 drivers. Higher levels of capital investment, completion of Oncor's recent rate case, which provided a timely update to the company's cost structure, and implementation of the unified tracker mechanism. Based on the strength of our financial performance, we are pleased to guide to the high end of our adjusted EPS guidance range for 2026 and affirm our EPS guidance range for 2027. Karen will cover our financial results in greater detail later in the call. Next, I would like to walk through several developments in our business. First, an expected 20% increase over Oncor's 2026 through 2030 base capital plan. Second, an update on business activities in California, and third, an update on our pending sale of a 45% equity stake in SI Partners. Let me start with a historical perspective. Going into 2018, Sempra had approximately 14 billion in utility rate base. All of which was located in California. Today, our business is larger. More diverse, and our earnings growth is more durable. With 2026 rate base now projected to exceed $65 billion later this year. what is also different is the significant growth in our Texas footprint. Today, Encore is the largest pure play T&D business in the country, and continues to experience remarkably strong demand growth. Having recently reached a new peak on its system of 33 gigawatts, a 6% increase over the prior record set last year. This increase underscores the robust economic growth that is occurring in Texas as electric demand continues to exceed expectations. In addition, Oncor continues to build out and advance 1 of our industries, most robust supply chain management programs while also improving visibility to higher levels of future capital deployment. Examples include new North And Central Texas transmission upgrades, the PUCT's recent approval of both segments of import Path 1 is part of the larger 765 kV Permian Basin reliability plan with 2 segments comprising import Path 2 remaining under PUCT consideration. In combination, these are critical infrastructure projects that are needed to address reliability concerns and grid constraints in West Texas and the greater DFW Metroplex. it is also important to note that Encore, remains committed to working constructively with the PUCT and all stakeholders to address landowner concerns. This will continue to be a priority for Alan and his team, as they look to help ensure Texas, has the infrastructure required to maintain reliability and support future economic growth. that is why when we release Q4 results in February, we plan to announce a 2027 through 2031 base capital plan that is expected to reflect, among other things, a significant increase of approximately 20% over Oncor's existing $47.5 billion capital plan. Along with the anticipated capital increase in Oncor's base plan, Alan's team is also tracking a significant opportunity set of incremental capital which we look forward to providing additional details on in February. Before wrapping up on Oncor, I would be remiss if I did not say how proud we are. Of Alan's leadership as well as Don Clevenger and the balance of that management team. Oncor is on a real growth footing, and it is doing a great job balancing a broad set of stakeholder interest. Now turning to Sempra, California. We continue to invest in modernizing critical infrastructure to enhance reliability, safety, and customer service. Recent milestones include advancing compressor station modernization projects at both utilities and launching a new customer information system at SoCalGas which is designed to strengthen customer service and digital capabilities. Caroline A. Winn and her team are also excited to advance the Golden State Power Link which is a FERC regulated 500 kV transmission line that will extend over 100-plus miles across SDG and E's eastern system and form a part of Sempra California's roll-forward-based capital plan that we will discuss next year. On the regulatory front, the CPUC issued a proposed decision last week denying our petition for modification that was requested as an adjustment to the 2024 GRC capital attrition rates. For our utilities, our petition for modification was viewed as a straightforward procedural filing to correct an error in the GRC decision and properly account for post test year capital investment. We expect to pursue all available regulatory avenues to get to the right decision here But absent getting this corrected, we would expect Sempra California segment earnings in 2027 to be toward the low end of its guidance range. it is important to note that the potential financial impact here is limited to 2027 only. that is because rates beyond 2027 will be addressed as part of our pending 2028 rate case with new rates expected to take effect in January 2028. Turning to the SI Partners transaction. We have made significant progress and expect to close within the next 2 weeks. I would like to thank Justin for leading the effort as well as our employees at Sempra and Sempra Infrastructure. Who have helped get this transaction to the finish line. it is really been a great team effort. Looking forward, our management team is excited. Sempra's business model is getting simpler, as we narrow our focus to regulated utilities. Importantly, with the completion of the SI Partners transaction, we expect to pay down debt strengthen the balance sheet, and lower our risk profile to support future growth and continue making investments to grow our rate base and ultimately drive the mix of earnings increasingly toward Texas, where we aim to give our owners increased exposure to significant value creation through the end of the decade and beyond. In conclusion, I am really pleased with the contributions from our leadership team and all of our employees Our financial performance is certainly benefiting from a back to basics utility strategy and broad based growth with improving earnings and cash flows. With that, I will turn it over to Karen who will cover our financial results.

Karen L. Sedgwick: Please turn to the next slide. Thank you, Jeffrey. Earlier today, Sempra reported third quarter 26 GAAP earnings of $877 million or $1.34 per share. This compares to third quarter 25 GAAP earnings of $77 million or $0.12 per share. On an adjusted basis, third quarter earnings were $917 million or $1.40 per share. This is an increase of 26% compared to our third quarter 25 earnings of $728 million or $1.11 per share. As Jeff noted, we are very pleased with our year to date performance which gives us the confidence to guide toward the high end of our 2026 adjusted EPS guidance range. Please turn to the next slide. Variances in the third quarter 26 adjusted earnings compared to the same period last year can be summarized as follows: At Sempra, Texas, we are seeing remarkable growth. With a $154 million of higher equity earnings from new base rates, the UTM SRP, and higher customer consumption, primarily attributable to weather, partially offset by higher interest expense depreciation in O&M. Turning to Sempra, California. We had $46 million of increased earnings primarily from higher CPUC based operating margin, net of operating expenses and higher electric transmission margin. Sempra, California also had $44 million of lower earnings from lower income tax benefits higher net interest expense, lower net regulatory interest income and other. At Sempra Infrastructure, earnings increased by $53 million primarily from lower depreciation due to assets held for sale. Lower interest expense, lower O&M, and other. Partially offset by lower asset optimization. And at Sempra Parent, $20 million of higher losses from lower income tax benefits, net investment losses, partially offset by lower preferred dividends. Please turn to the next slide. As this slide demonstrates, 2026 has been a year strong financial and operational execution. As a result, we are guiding to the high end of our full year 2026 adjusted EPS guidance range of $4.80-$5.30 and affirming our 2027 EPS guidance range of $5.10-$5.70. While recognizing that pending regulatory outcomes could cause results to be in the lower half of this range. We are also affirming our projected long term EPS growth rate of 7%-9%. Aiden the growing opportunities set in front of our company, we are working to finalize our financial plan later this year. Which will look to balance our updated operating cash flows with the expected increases in our capital expenditures through 2031. As part of that process, we will continue to compete capital internally across the portfolio and execute our overall financing strategy, with a focus on prioritizing the most efficient funding sources which could include, among other options, incremental capital recycling, proceeds received from the SI Partners transaction, the use of our established ATM program, and hybrid and debt financings. With these options, we have a lot of flexibility to fund the expected growth ahead in an efficient way. While maintaining a strong balance sheet. In closing, we continue to believe there is significant value in higher growth T and D companies, particularly those positioned to benefit from sustained investment in critical energy infrastructure. Sempra's utility businesses effectively operate as energy networks. With commodity costs passed through and significant credit risk from individual customers largely avoided. This creates an important distinction relative to the risks you are seeing play out in other parts of the utility industry while reinforcing the lower risk and sustainable nature of our business model. At Sempra, our growth is broad based, supported by long term infrastructure needs and extends across all customer classes. In 2 of America's largest economic markets. Also backed by a diverse portfolio and disciplined investment approach, we expect Sempra's lower risk growth and income story will translate into significant value for our owners as we offer a compelling mix of current yield, durable earnings growth, and long term capital appreciation. I am going to pause there, and we will open up the call for your questions.

Operator: Thank you. This concludes the prepared remarks. We will now open the line to take your questions. Please limit your questions to 1 question and 1 follow-up. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. And our first question will come from Shar Pourreza from Wells Fargo. Your line is open.

Shahriar Pourreza: Hey, Jeff.

Jeffrey Walker Martin: Hey, Shar.

Shahriar Pourreza: How are doing?

Jeffrey Walker Martin: Not too bad. Not too bad.

Shahriar Pourreza: Hope all is well. Just maybe starting off on the political changes in Texas. I mean, the data center rhetoric is becoming a little bit more uncertain. I guess, what do you see as the risk to Encore's transmission CapEx, especially as we are thinking about the state's kind of blue wave heading into a legislative window in 2027. I think 765 will be the focus, or could we see legislative action on all wires front? The state's, I mean, such a big driver of growth for you, so just thinking about the risks there. Thanks.

Jeffrey Walker Martin: Yeah. Thank you for that question, Shar. And I think there is probably 2 key parts to it. 1 is the measure of our confidence in Encore's capital plan going forward, and I think I will take that question last. And I think the other question you had embedded was really how we are thinking about the election. So Alan and I tackle that first, and I will close out, if I could, on my confidence level about the capital plan going forward. I would just start by saying we look forward to work with the new administration in Texas. Across our long history at Sempra, Shar, you will recall that we have always really focused on running our business well for customers. If you spend your time focused on new and better ways to serve customers, we found that has always been a very important advice and part of our culture for a long period of time. And I would say Encore has traditionally taken the same approach, Shar. Alan, perhaps you can provide some color on how you are thinking about the political backdrop, and I will come back to the capital plan.

Alan Nye: Yeah. Sure. Thanks, Jeffrey and morning, Shar. Look. As Jeff said, we are looking forward to working with the new administration. While it is too soon to tell, you know, exactly what it all means, but generally the way I think about it, we provide essential service that is needed regardless of the party in power. And things like reliable, affordable, safe, electric service, those are not partisan issues. Things like economic development and job creation are not partisan issues. And the things that attract people to Texas and businesses to Texas have not changed. And go beyond, you know, any individual person or party. And so we believe, we continue to believe that both parties want a strong and growing Texas, and we expect that to continue. We are going to continue to provide the necessary infrastructure to support our customers in our state. Jeffrey said it, but been around this company a long time. Throughout the history of this company, we have always worked very well with both parties, and we are gonna continue to do so. And so again, we look forward to working with the new state leadership in keeping Texas strong and growing.

Jeffrey Walker Martin: Thanks, Alan. I will just follow up real quickly, Shar, on the other part of the question regarding the capital plan. And from my perspective, I say that we are very confident in the capital plan at Encore. Let me provide you a little bit of context as to why we feel that way. And I would start with the convention that Don Clevenger and Alan have adopted, going back to February 2025, Shar, you will recall that they had a $36 billion capital plan and it was their base capital plan which is informed only by 2 types of projects. Ones that have been endorsed by ERCOT or approved by the CPUC. If it has not been approved accordingly, it falls in what they have been tracking as an incremental bucket. And last year, they had a $12 billion in that incremental bucket. They rolled forward to February of this year, they added in 12 billion of new capital to their base capital plan, which is currently $47.5 billion And then, Shar, they took the next step to re up that incremental bucket they are you are tracking to $10 billion. We are using this call today to provide advanced perspective, advanced view into what we expect they will do next February, which is again raise their base capital plan by 20% And Shar, they will come back and again repopulate that incremental bucket. But here's 2 final points that really makes me feel great about their plan. Number 1, Shar, is what it excludes. So the $47.5 billion base capital plan today, we are forecasting will go up by 20% and it will not include the SRP which we had in the prior incremental capital plan, and it will not include the Eastern Step 765 projects. Those are excluded from our expected 20% step up. And the final reminder here, there is a lot of discussions around batch zero. That process continues to move forward. Hopefully, we will talk about that in today's call. But you will remember that the batch zero and all the capital and all the projects that will be associated with that will not be in Encore's February 2027 base plan or incremental plan. It will continue to be upside beyond the numbers we have been presenting to the street. I would just conclude that our confidence comes from the flexibility they have inside their plan today to move projects around, and the convention and discipline that they have adopted to make sure there is certainty in how they execute.

Shahriar Pourreza: Got it. that is perfect. And then, Jeffrey, in terms of, like, the California wildfire policy, did the CPC report with probably the strongest argument we have seen yet for the legislators to act outside of the earthquake authority report. We get a sense some. Can something get done in the remaining couple of weeks in the session, or do you expect kind of a longer and broader process in 2027 when there is kind of a cleaner slate? We just cannot get a strong sense from the hearings past couple of weeks if something can get done or not. Thanks.

Jeffrey Walker Martin: Yeah. Thank you for that question. Obviously, this is something that is important to the utilities in the state. To be honest, it is really important to our bondholders and our equity holders as well. I wish I had a definitive view to share with you, Shar, but what I would say is there continues to be ongoing dialogue in this area. I think the recent CPC report, which you are referencing, is really helpful. I mean, a couple key points in that I think you probably saw was there is a clear view that bills are unaffordable. there is a clear view that credit downgrades will constrain future utility service. And there is a clear view in that report, Shar, that capital access or the inability to access it affordably is definitely gonna hamper the California economy. So I think it clearly underscores that inaction does not work and that there is a real need for a timely solution. Now I cannot tell you whether it gets done and a bill gets filed before the 15th, which is the deadline. But I can tell you that whether it is action this fall or action next spring, I think there is a clear path that more and more people see it more clearly that the status quo does not serve the interest of Californians. Got it. that is perfect. Thanks a lot, Jeffrey. I will see you guys in a couple of days. Appreciate it. Thanks. Thank you, Shar. Thank you.

Operator: Next question will come from Steve Fleishman from Wolfe. Your line is open.

Jeffrey Walker Martin: Good morning, Steve.

Steve Fleishman: Hi. Good morning. Thanks. Maybe just switching back to Texas. The I think we start getting legislative proposals maybe next week. And then just into the legislative session. Any color on potent. Unlikely areas that impact you guys, I guess, particularly more on transmission and just regulatory overall?

Jeffrey Walker Martin: Yeah. Look. it is a great question, and Alan's very close to this. Alan, I would like you to provide some color?

Alan Nye: Yeah. Sure. Thanks, Jeffrey. Listen here. I am gonna say it is probably a lot this morning. it is too early for me to know definitively where this is all going. Having the election just a couple of days ago. But I guess a couple of things. We continue to believe that, you know, the belief or ideology that growth is good for the state remains unchanged. So that is 1. It appears that the debate is primarily focused around how to support growth while you know, maintaining a reliable grid with fair cost allocation and while protecting communities and water resources and landowners. And those are all things that we support and we will be working actively in the legislation should the legislature go that direction. The laws as they exist today provide a really constructive environment. For our investments. And we are optimistic that they will continue. And we look forward again to working with the new administration and all the stakeholders in efforts to protect affordability, reliability, and ensuring that large loads pay their fair share. You know, until we start seeing bills filed, I cannot go much further than that.

Jeffrey Walker Martin: The only thing I might add, Steve, is there is been a lot of discussion around the fact that today, roughly 5% of America's GDP is directly tied to electricity and energy production. The view that first 5% actually informs and powers the other 95%. And this is particularly true in Texas, Right? This is a state that has led the country in growth for about 2 decades. I think there is a consensus whether it is Republican or Democrat, we do not think of our business that way. But high voltage electric transmission, Steve, is 1 of the hardest things to build in this country, and there is a lot of scarcity of value around it. And I think from a very fundamental economic standpoint, a lot of people tend to focus on the generation side or on the call side. But that high voltage transmission is the anchor investment that allows us to get past some transmission congestion to add new generation to the mix and support future customer growth. So there may be some mixed views about we can do it in the most thoughtful way, but I think this is more about how we do it, not whether it happens.

Steve Fleishman: Okay. And I guess just maybe more specific to the. I guess, it is the import path to the 1 that the projects that got sent back to the judge. Is there a schedule on when we are gonna hear an update on that and get a commission order?

Jeffrey Walker Martin: I would just start for the broader audience to say that PATH 1, which also serves Permian has 2 lines in it, which have been approved by the PUC. To Steve's question, he is obviously referring to path 2 where we have 2 lines that also are intended to serve the Permian And perhaps, Alan, you could talk about what you think the procedural schedule is for that moving forward.

Alan Nye: Sure. So, path 2 was remanded by the PUC. On 2 issues, reliability standards and cost congestion generally. In September and November, we filed our directory of evidence with LCRA. We are waiting for a still a revised PFD. that is basically where we are. And we are hopeful and thinking that maybe that happens mid December, and then to be back at the commission, and we could see the commission hear oral argument again prior to issuing a ruling. But right now we are kind of in a standstill waiting for a revised PFD.

Jeffrey Walker Martin: The only thing I might add, Steve, and I think we have had this conversation before, but in the $47.5 billion base capital plan, the amount of exposure to 765 development, is limited to $5 billion. And path 1 using ERCOT estimates are close to 3.9 We are pleased that path 1 is moving forward. So what you are discussing with Alan has a relatively nominal part of the existing base plan. And we certainly think it is important that those projects go forward Alan and his team will continue to work hard in that endeavor. Thank you.

Steve Fleishman: Thanks, Steve.

Operator: Thank you. Our next question comes from David Arcaro from Morgan Stanley. Your line is open.

Analyst: Hi. This is Amanda, on for David. Thanks so much for taking our questions.

Jeffrey Walker Martin: Hey, Amanda. Hey. Maybe just in Texas on the affordability front, are there any additional measures to pursue at Oncor to help mitigate potential customer bill pressures and exposure to data center impacts? Yeah, it is such a great question. it is something I think we are experiencing as a national issue. It certainly has been a big theme in the political discussions during this political season. I think Texas in general is benefiting from 1 thing that is helping a lot, which is growth. So as you are seeing higher volumes, electricity sales, causes the overall rate not to move up that much. And I think that a lot of investments that Oncor is making is intended to take cost out of the system, I. E. By making transmission more efficient and having less congestion, But perhaps, Alan, you could share your views on next steps regarding affordability and why that is such an important topic for your company.

Alan Nye: Yeah. You bet, Jeffrey. You know, we started this year as we did last year focused on 2 things, execution and affordability. We understand the importance of affordability and how big of an issue it is becoming nationwide. there is a number of things going on with regards to affordability. That I think are going to be beneficial to our position. The first thing is that what is going on in Project 58 thousand at PUC. The first of which is a potential switch from 4CP to 12 CP methodology. Which the PUC is scheduled to consider in December. So that is 1. 2 is the concept of a take or pay contract for new large load. A new large load tariff for loads over 75 megawatts. Where the customer would pay based on contracted load, not actual load. Which would ensure that large loads pay for the investment they require as well as lower rates for other customers. And again, the PUC is set to consider that in December. We have talked about the impacts of UTM and the SRP on prior calls, the fact that we can annually update who those costs are allocated to, that is certainly beneficial as well. And overall, just those potential changes or those changes, we have modeled the potential impact of the 58 thousand project 58 thousand proposals. And we believe those changes will cover the cost of not only of the investments, but would also reduce the residential customer bill between 15 and $35 per year. Depending on the amount of total CapEx required and the amount of load that actually connects. So over 10 years, that is about a $1.14 billion of savings. And again, affordability is something we focus on every day. We will continue working on it, but those things at least start to help us on the affordability front.

Jeffrey Walker Martin: Thank you, Alan. Thank you, Amanda. Thanks. And then maybe on the broader earnings growth trajectory, kind of given the expanded Texas investment opportunity and kind of the evolving regulatory outlook in California, we are within that, like, 7 to 9% long term growth range do you expect Sempra to trend? And kind of what factors would move you toward either end of that range? Yeah, I appreciate the question. I think what we have currently in terms of our 26 to 2 thousand and 30 plan, couple things we zero in on. Number 1 is we are expecting to have approximately 11% rate base growth Secondly, we are currently operating under $65 billion capital plan. And we have a overall financing plan, Amanda, that we pulled together this fall. That work is under way. We look forward to making a pretty comprehensive presentation to our investors next February, but you are on the right topics. There is remarkable growth taking place in Texas. We are seeing upticks in opportunities also in California as well as Sempra Infrastructure. So I think what we need to do is get through our planning process this fall. We normally match up our internal operating cash flows with the timing and expected quantum of increase in capital expenditures, to finance that efficiently, but we currently have a long term EPS growth rate of 7%-9%. I think that is very solid. When you think about that relative to 11% rate based growth, I think that should cause you to have a fair amount of confidence in that range. Thanks so much. Thank you.

Operator: Thank you. Our next question will come from Ross Fowler from Bank of America.

Ross Fowler from: Morning. Just probably delving a little deeper into a couple of questions that have already been asked. So just on Karen, maybe 1 for you. If we look at California, as you look at headwinds into 2027, can you kind of maybe flesh out what you are talking about there with the final year of the 2024 GRC and the PFM Track 2 TIMP? And sort of the range of outcomes that are possible there and how much the headwind that actually is to your 2027?

Analyst: Earnings?

Karen L. Sedgwick: Sure. Thanks for the question, Ross. The PFM is really straightforward. So the commission approved a specific capital investment as part of our 24 GRC, and unfortunately that attrition mechanism failed to include the associated revenue requirements. So the petition for modification that we are filing is just to correct that. We see that as an error. And I would note, for investors that a similar issue was found in Southern California Edison's last rate case and was corrected by the commission. So we think that is the same as the right outcome here. We have highlighted for you the revenue requirements in our materials that we have provided, is $188 million. So, of course, that is a revenue requirement. You can do the normal tax effect that and see what that earnings impact We think we are going to get this corrected now.

Jeffrey Walker Martin: We think that if we cannot for some reason, California is working very hard to mitigate that.

Karen L. Sedgwick: An important note is this all goes away. This is just a 2027 issue. Because we have a new GRC starting rate in January 2028, so that will not carry over, have a whole new rate case that will not have this impact. So it is a 1 year issue. We think it is a mistake. We think it gets fixed. For any reason, it could not. We are gonna try to mitigate that.

Jeffrey Walker Martin: I would also note, Ross, that on the corporate update part of our slide, we laid out all the numbers and impacts for both 2026, and 2027, which Karen just covered. Thanks, Jeffrey.

Ross Fowler from: And then, it is been a busy day, so I did not catch that. 15 in a day is a lot. Anyway, back to Texas, Alan, maybe to you. I know you talked about. And, Jeffrey, if I heard you right, there is $5 billion in the current plan at Oncor related to 765, and 3.9 of that is path 1. Really beyond path 1, we are just talking about a little over a billion dollars. But what. can you flush out? Like, what is in the 20% up upside you are talking about? And is that $7.65, or could that revert to $3.45? Like, what is in that piece that you are looking to have line of sight to?

Operator: Go ahead, Alan.

Alan Nye: Yeah, Ross. there is kind of 3 general categories. That I will tell you now and then we are going to have a lot more detail when we get to the rollout next year. But in that 20% increase, 1, first thing is the 1 year roll forward. So you drop 2025 and you are adding 2031. 2, just continued strong customer load growth from a variety of sectors really all over our system. And 3, projects that we have moved from our incremental capital opportunities into the base capital plan, You know, this is important, I think, to note that the overall increase is supported by projects that have received PUC approval or ERCOT endorsement. Is how we plan every year. And I think as Jeffrey said earlier on this call, we do not expect the 765 step program or the SRP 2 they will remain in the incremental opportunities bucket beyond the base plan.

Jeffrey Walker Martin: So that is additional upside.

Ross Fowler from: Got it, Alan. Thank you. Very clear. You bet.

Jeffrey Walker Martin: Thanks, Ross.

Operator: Thank you. Our next question will come from Nicholas Campanella from Barclays. Your line is open.

Nicholas Campanella: Hey, good afternoon or good morning.

Jeffrey Walker Martin: Hey, Nick.

Nicholas Campanella: Thanks. Hey. So yeah, just on the Oncor CapEx composition, very clear. No batch zero is included in this 20% increase. So still a lot outside the plan that could kind of make its way in. Just how are you guys viewing the timeline for batch? Under the current change in leadership? I know a lot of folks have been focused on this December 10 report, and then I think there was a seventeenth date for hearing. But do you expect that to all remain on track with the various shifts in leadership that just happened? Thanks.

Jeffrey Walker Martin: Yeah. I will make a couple comments. Thank you, Nick, and I will pass it to Alan. But just remember, we are currently operating under our capital program for Oncor between 2026 and 2030. And what we have indicated this morning is that when we roll forward that to 27 to 31, the base portion of that capital plan, we expect to go up 20%. We will repopulate incremental opportunity bucket as well that we will talk about next February. But I think the really important thing we wanted to emphasize today is that the eastern 765 step is not part of the expected roll forward base plan, nor is the SRP program, we expect to file next year. And to your point, Nick, which is an important 1, even when we roll those plans forward next February, both base and the incremental bucket, none of that will include anything from batch. that is signaling to you, at least through our current visibility into 2031, do not see any of that coming into our plan during that plan period. Obviously, that could change if things accelerate, but perhaps you could talk a little bit more about how you are thinking about the batch process and any potential delays.

Alan Nye: Yeah. Sure. Thanks, Jeffrey. Just procedurally where we are, and I think we addressed this in our appendix to the deck today, but the procedural deadlines, mid December, I think December 12, we are expecting ERCOT verification and audit report in April of next year. Nominal batch zero study results, summer of 27, developer commitments, and then the second half of next year, the final transmission plan. I will add 1 more thing. This is kind of breaking as of this morning. You all may have heard or seen that ERCOT said they are sending a second RFI to about 80% of the large load customers in batch zero because the responses were deemed not adequate to meet the ERCOT validation criteria. However, the important thing is that they are still aiming for a mid December validation completion. So I think that keeps it on track. With regards to, you know, administrative changes and potential delays, or additional delays, hate to say it again, but we are gonna have to see. We are gonna have to wait and see. But while we think the, you know, the outcome of the elections might influence the overall framework and timing here, we still believe that the fundamentals needed to serve this qualifying load remains unchanged. As does the commitment to overall growth in Texas. While we are not seeing any delay right now, we will have to see what happens. But overall, we still feel very positive.

Jeffrey Walker Martin: Thank you, Alan. I would just add 1 more kind of procedural issue for you, Nick, which is because we expect to announce our 2027 through 2031 plan in February, that the timeline that Alan just outlined will conclude in the fall of 27. So none of those updates will be in our 5 year plan when we roll it forward.

Nicholas Campanella: Alright. Very clear. I appreciate that. Maybe a wider question on cap. Capital allocation just in light of this PD that you got on the 2024 attrition for California. You know, in the last roll, last year, you did kind of lower the capital expenditures in that state. And I am just kind of wondering how this informs, the next roll forward. Also acknowledging that you have already kind of filed for test years in 2028 and beyond at the regulator, how can that all change into the fourth quarter? Thanks.

Jeffrey Walker Martin: Yeah, Nick, I will make a couple of comments. We have not scaled back capital in the state of California. In fact, our year over year capital plan was very, very similar, and we expect to continue to grow California. What changed was the overall rate of growth going forward for California, but our capital plans have remained very similar and continue to grow in California. What it does inform is how we allocate capital between FERC electric investments versus state electric distribution investments versus the Southern California gas company. And it does cause us to prioritize capital that has been preapproved as part of the GRC. And this is probably the most important point, Nick, to take away from this question. Which is traditionally, capital gets preapproved here in California in advance as part of the GRC. Unless there is a separate application. And in some of those applications, like PSEP, the track 2, track 3 type of investments, that is where we invested prior to the being a commission approval, and there was look-back risk related to that. 1 of the things I think that Caroline A. Winn and her team have done which is very thoughtful, Nick, is they have swept the majority of all those separate capital approved items into the GRC. So in this case, once we get to 2028, the capital we expect to spend in the future will be pre approved as part of an overall comprehensive rate case. We have a improving view of California long term, We remain committed to investing capital steadily in the state. We will compete for capital based upon where we think it can best serve customers across our gas platform, our high voltage transmission platform, and electric distribution, but we remain strongly committed here. what is really different is we are really differentially growing the capital that is been allocated to Texas. We have got plenty of capital for either state. To the extent that there is growth opportunities. Thank you. Thank you very much.

Operator: Thank you. And our next question will come from Carly Davenport from Goldman Sachs. Your line is open.

Carly Davenport: Hey, team. Thanks so much for taking the questions. Maybe just a couple of kind of housekeeping items First, just in Texas, you highlighted higher O&M as a headwind for 27. Just any sense on the magnitude of the inflation that you are seeing there that you can point to and maybe put that into the context relative to the inflation that you saw ahead of the last rate case filing.

Jeffrey Walker Martin: Yeah. Sure. I will pass this to Don Clevenger. You will recall, Carly, he is the CFO of Oncor.

Analyst: Yeah.

Carly Davenport: Thanks, Carly. In Texas, we are seeing about 1% to 1.5% above the national inflation average. Mean, as you can imagine, with all the growth that is going on and people moving to the state and also the need for contractors and employees alike. that is that is about what we are seeing and about what we are what we are figuring.

Jeffrey Walker Martin: Great.

Carly Davenport: Okay. Thank you for that. Super helpful. And then just on the SIP sale, I guess, risk of further delay there or any color that you can share on the specific items kind of left outstanding to get that across the line in the next couple of weeks here?

Jeffrey Walker Martin: Sure, Carly. Thank you for that question. Justin, please proceed.

Justin Christopher Bird: Sure. Carly, since our last call, we had 2 remaining conditions to closing. Those were consent from the partners at Cameron and consent from the lending agencies in Japan We are in great shape on both of those, and we do expect to close in the next 2 weeks. Yep.

Carly Davenport: Thanks so much for the time. Thank you, Carly.

Operator: Thank you. And our next question will come from Aiden Kelly from JPM. Your line is Hey, guys.

Aiden Kelly: Thanks for the Thanks for the time today. Maybe just picking up on the funding side of the equation. Clearly, you guys outlined a lot of CapEx in the pipeline with the 20% you know, telegraphed increase, then you got the incremental opportunities from SRP and Eastern 765 kV. Just wondering how much additional investment can Sempra accommodate while preserving its targeted credit metrics? And no common equity funding. I mean, you kind of mentioned you are on track to get that SIP closed in the next 2 weeks, but know, what would warrant a consideration of, you know, further monetizing that remaining interest at this time as we kind of think into the next capital plan refresh.

Jeffrey Walker Martin: Right. it is a great question. And what we do is all those issues that you are raising get resolved as part of our, financial planning process this fall. that is being led by both Justin and Faisal Khan on our team. So they will look at the magnitude of capital that needs to increase across the roll forward 5 year plan. They will also look at the timing of that capital. Through the lens of competing it to make sure from a risk reward standpoint that we are funding the correct items. So the key thing there is capital actually competes inside of Sempra. And then you stitch together your financing plan that starts always with optimizing your internally generated cash flows. And then you go to all your sources of finance and then compete that for efficiency. And I think what is different this year is we just have a lot of leverage to pull. And I think Karen talked about this a little bit in our prepared remarks. We have got a staged access to the proceeds from the KKR deal, To your point, we have this option value or store value in the remaining 25% stake at Sempra infrastructure We have a standstill agreement on that until the first part of January 29. But that will also be part of the mix. So what we wanna do is put together an overall financing plan that is designed to meet our growth imperative and fund the right projects and do it in a way that is the most accretive use of capital possible. So that is what we look forward to bringing back to you in February of next year.

Aiden Kelly: Great. Thanks for the color, Jeffrey. And maybe just 1 question on the non data center demand. Appreciate you guys kind of highlighting disclosures there. Looks like it ticked up a little bit to 19 gigawatts from what I believe was maybe closer to 16 gigawatts in the past. Just curious, how has the quality and maturity of that pipeline evolved? And, you know, which industries, from your perspective, offer the greatest visibility into incremental transmission investment?

Jeffrey Walker Martin: Yeah. You know, 1 thing I would note is that year over year, we have seen a 23% increase in large load request excluding data centers. So you are on the right topic, The growth has taken place in Texas is broad-based. The data centers are obviously the lion's share of it. But you are on a great point. There is a significant amount of non data center growth, and I would refer you, if you do not mind, to slide 12. In there, we do kind of a breakout of that 19 gigawatts. You will see that roughly 6 gigawatts come from the manufacturing sector. About 5 gigawatts comes from an expansion of oil and gas fields. what is really important there is this is really a strong tailwind for both PATH 1 and PATH 2 that are part of the Permian plan. there is a real need to get more of that growth in West Texas connected to the grid. We feel great about that. 4 gigawatts are associated with both utility and government expansion. Including military bases, and then there is 4 gigawatts of other C and I customers. But you are on a great point. there is a remarkable story for a business today that has brand new peak at 33 gigawatts. We have got 19 gigawatts wholly unrelated to data centers. Right. Right. Appreciate you clarifying that.

Aiden Kelly: I will leave it there. Thank you for joining. Thank you for joining.

Operator: Thank you. We have time for 1 last question today. Our last question will come from Ian Rapp from Scotiabank. Hi, Ian.

Ian Rapp from: Hey, Jeff. Good morning, Jeffrey and team. Thank you for taking my questions here.

Jeffrey Walker Martin: I just wanted to maybe clarify and put a finer point on some of the other questions that were asked. But in terms of the 2027 guidance indications, I appreciate the color provided in the presentation and the press release. In terms of the guiding to the lower half of the range in 2027, just wanted to clarify if the process fees in California the factual errors that you kind of identified in the in the pending processes, if those are addressed, would that ameliorate or completely resolve the lower end of the range and put you back towards maybe the midpoint, or are there other drivers there that we should be thinking about? Sure. I would say, number 1, we have got a slide in the appendix that kind of walks through the puts and takes that will impact the transition of our earnings and cash flows from 2026 to 2027. So I would start by referring you to that slide. Then the second point I would say is we are not lowering our outlook for 2027. We have affirmed our outlook for 2027. I thought it was appropriate, however, to talk about 1 of the issues that we are monitoring that could put pressures on us next year. So right now, it is a proposed decision related to the PFM, it is not final. there is a series of regulatory avenues that we will appeal to try to get the right answer. And most importantly, and I think Karen noted this, the Commission corrected the exact same error in the Southern California Edison rate case. So we think we are on the right side of this issue, and we look forward to trying to resolve it. Now, if we do not resolve it, we thought it was important to make sure that we, identify the magnitude of the headwind there and that is why we made a corporate filing on our website really in the form of something that is essentially an 8 k to guide the street. And the second point I would make is we have a series of business transformation programs going on in our utilities around people, process, innovation, and technology as we continue to modernize and rightsize that business. it is paid real dividends for Caroline A. Winn and her team. In 2025 and also in 2026. So if we do not get to the right outcome here, we will be basically working really, really hard to mitigate the impacts of it. And to answer your question directly, would feel even better about our 2027 numbers we are able to get to the right answer here with the commission in the next months or so.

Ian Rapp from: Great. that is really helpful. Appreciate that color. And maybe on the same point, just as a follow-up, given that the issue seem a little bit transitory, would you expect your guidance update to the long-term EPS CAGR to you know, maybe look through some of these issues for the for the longer term. I do not wanna front run too much, but just curious how you are thinking about the long-term growth in respect to some of these transitory issues.

Jeffrey Walker Martin: Yeah, it is a really interesting question, I appreciate you asking that. You know, currently, we talk about a long term growth rate that is really intended to persist beyond the end of our 5 year plan. In the 2026 to 2030 plan, have been guiding toward a 7% to 9% long term growth rate. I commented earlier on today's call that is backed by an 11% CAGR rate base growth across both of our utility platforms. So as you roll this forward, remember, it is really confined to 2027, as Karen articulated, and that absence of taxes, depreciation, and interest that is missing in the revenue requirement currently for 2027, that would be trued up as part of the overall 2028 GRC that is currently pending. So I would view it as having no impact whatsoever on how we guide to the update to the 7% to 9% growth rate next February. Great. Thanks again for the call.

Ian Rapp from: I hope you guys have good day. Hey. Thank you for joining us.

Operator: That concludes today's question and answer session. At this time, I would like to turn the conference back to Jeffrey Walker Martin for any additional closing remarks.

Jeffrey Walker Martin: Look, I really like to thank everyone for joining our call today with the expected closing of SI Partners transaction, I wanted to let everyone know that Justin will be transitioned into his new role as chief financial officer. Karen will also be transition to be the President and CEO of SoCalGas. I am really very excited for both of them and expect great things. I am also excited to mention and welcome back Faisal Khan to Sempra. In his new and expanded role as the Chief Commercial Officer, Faisal will report to Justin and oversee our overall treasury financial services asset management, and corporate development functions Per custom, if you guys have any questions or follow-up items, please reach out to our IR team and we are really looking forward to seeing many of you in Arizona. I will be joined by Alan and Don Clevenger, Justin Christopher Bird, and Caroline A. Winn So we should have a fulsome group there next week. And we look forward to seeing many of you then. This concludes our call.

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