Sempra’s Earnings Call: SI Partners Timeline, Wildfire Liability Confidence, and Capital Plan Claims Don’t Match

Date of Call: Aug 6, 2026

Financials Results

• EPS: Q2 2026 GAAP EPS $1.21 per share vs $0.71 per share Q2 2025; Adjusted EPS $1.16 per share vs $0.89 per share Q2 2025

Guidance:

• Affirmed full year 2026 adjusted EPS guidance range of $4.80-$5.30.
• Affirmed 2027 EPS guidance range of $5.10-$5.70.
• Affirmed projected long-term EPS growth rate of 7%-9%.

Business Commentary:

Financial Performance and EPS Growth:

• Sempra Energy reported second quarter 2026 GAAP earnings of $796 million, or $1.21 per share, compared to $461 million, or $0.71 per share, in Q2 2025.
• The growth was driven by double-digit gains in adjusted EPS and positive contributions from all three growth segments, supported by strong execution and alignment with the company's mission.

Capital Investments and Strategic Initiatives:

• Oncor's five-year base capital plan is $47.5 billion, with $10 billion of incremental capital opportunities through 2030.
• The capital recycling program, including the sale of a stake in SI Partners and the sale of Ecogas, aims to simplify the business model, recycle capital, and deconsolidate debt.

Load Growth and Grid Modernization in Texas:

• Texas is experiencing unprecedented growth in electricity demand, with ERCOT's new all-time peak load reaching 91 gigawatts.
• Oncor is positioned to participate in a multi-decade investment opportunity focused on modernizing and extending the electric grid, supported by robust economic activity and increasing electricity demand.

Regulatory and Legislative Developments:

• The PUCT approved ERCOT's Batch Zero process, which could lead to a 140% increase in Oncor's system peak load, with 44 GW of large load requests eligible.
• The process aims to create a more durable framework for market participants, ensuring that data centers cover the full cost of interconnection and lower residential bills.

California Wildfire Liability Legislation:

• There is a focus on improving livability and addressing the status quo in California's wildfire liability framework.
• The legislative session is expected to see progress in creating a more durable framework, with an emphasis on financial strength and economic competitiveness.

Sentiment Analysis:

Overall Tone: Positive

• Executives stated 'Our operating businesses are executing well' and 'we’re very pleased with our performance for the first half of the year.' They noted 'improving confidence in Oncor’s $10 billion of incremental capital opportunities' and 'long-term view at Oncor has improved over the last quarter.'

Q&A:

• Question from Constantine (Wells Fargo): Starting off in Texas, the obvious question around the data center pause, rhetoric or not, do you see a threat of pushing for generation or even behind the meter solutions instead of transmission build? How does that impact timelines here, especially as you highlight the Batch Zero opportunities going into next year?
  Response: Management's long-term view at Oncor has improved; any Batch Zero-related capital is incremental to the base plan. They are supportive of the PUCT's framework to ensure data centers cover full interconnection costs and residential bill subsidies, aiming for a more durable framework.

• Question from Constantine (Wells Fargo): The quick return to normal kind of helped the Oncor CapEx update at year-end. Any way to think about that upside to the upside kind of converting closer to plan by that timeframe?
  Response: There is flexibility in Oncor's base capital plan; the roll-forward plan at Oncor is expected to increase, with a fair amount of flexibility in sequencing projects. They will provide a robust discussion on Oncor on the Q4 call.

• Question from Constantine (Wells Fargo): Maybe just a quick housekeeping item on the earlier announced ECA delays. How are you thinking about some of the near-term offsets going into year-end? Any potential re-proof of the SIP transaction or are those two separate tracks?
  Response: ECA project is expected to reach substantial completion in Q4 2026, with sales commencing shortly thereafter. The substantial completion is not a condition precedent for the SI Partners transaction, which is expected to close later in the quarter.

• Question from Steve Fleishman (Wolfe Research): Maybe you could just talk to some of the recent political commentary on the 765 kV approval process and thoughts on any risk of that changing or just where do you think that goes from here? Any color on that?
  Response: Remain constructive on Oncor's long-term picture. The process aims to balance protecting landowner interests and ensuring Texas has the infrastructure for growth. They are hopeful for a timely resolution by the PUC given the reliability needs in the Permian.

• Question from Steve Fleishman (Wolfe Research): Any sense on how things are developing on the California wildfire liability legislation and related, obviously, issues and just your confidence on something constructive getting done there?
  Response: Focus is on improving livability and affordability in California. They are encouraged by the dialogue and range of solutions being discussed but it's premature to assess any specific proposal until bill language is available. They remain constructive on getting solid legislation this session.

• Question from David Arcaro (Morgan Stanley): One thing I wanted to get a little bit of elaboration on was your large load pipeline in ERCOT. Is there still a very big advanced pipeline of realistic data centers? When could those come in, and how do you kind of frame that up in the context of Batch Zero?
  Response: Yes, there is more large load pipeline beyond the 44 GW in Batch Zero. Total active requests are up, showing strong growth interest. The Batch Zero process aims to sequence generation with large loads to balance load growth.

• Question from David Arcaro (Morgan Stanley): Relatedly, I just wanted to clarify the additional Batch Zero capital investment opportunities in terms of when you could frame that up and quantify it. Is that something that comes after April of 2027 next year? Is it something we could get mid-year in terms of the timing just as ERCOT goes through the batch process?
  Response: Visibility into additional capital required for Batch Zero will be provided after the Q4 2026 call. They will update the five-year plan on the Q4 call and bring additional numbers at the right time.

• Question from Nicholas Campanella (Barclays): I just wanted to ask if we could be a little bit more clear just on the batch process, just the actual next steps. To my understanding, there’s a good cause exception request of the PUCT, do you guys think that that gets acknowledged and then we just kind of keep moving along with the prior schedule, or are we kind of on pause until we get past November election? Any thoughts from Oncor, if we could see additional legislation in the next session around this too would be helpful.
  Response: Governor Abbott's letter calls for a comprehensive audit of data centers before interconnection, leading to a potential good cause exception request to the PUCT. This may result in a more durable framework but could cause some delay. The next key event is the August 20 PUC meeting.

• Question from Nicholas Campanella (Barclays): Then I guess just coming back to the questions on California legislation, I know that there’s been wide discussion that this is a more than utilities type problem for the state, right? Everyone has to bring something to the table. Just how do we kind of think about where you guys are drawing the line on maybe trading things like future contributions to phase 2 fund?
  Response: Focus is on public policy that improves livability, not a utility bailout. They will evaluate any legislation against principles of safety, wildfire mitigation, financial discipline, and investment. It's premature to assess specific proposals without bill language.

• Question from Paul Zimbardo (Jefferies): Of course. I know a lot has been asked already. Just on the good old transmission side of the business, kind of the earlier stage projects, any view on timing changes on some of these Certificate of Convenience and Necessity approvals just related to what’s going on? Or would you describe things as on track?
  Response: Things are on track for the CCN process. Oncor has flexibility in its capital plan to adjust timing if needed, but currently sees no significant changes to timelines.

• Question from Paul Zimbardo (Jefferies): One follow-up on the Batch Zero. You mentioned the 8 GW of kind of load that is already in process. If you could elaborate that a little bit, does that require capital to go? Is that kind of in that upside to the upside capital bucket as well? If you could help on that 8 GW scope.
  Response: The 8 GW is already interconnected load expected to increase over time, showing active load growth on Oncor's system. It is part of the 44 GW in the Batch Zero process but is not incremental to the existing capital plan.

• Question from Richard Sunderland (Truist Securities): Sticking with some of these Oncor upside CapEx themes, you’re very clear on the Batch Zero sequencing relative to your 4Q update. Can you speak to other opportunities that could fold into the upside bucket on that 4Q update? Presumably, there’s things like the SRP that would remain in there, but just trying to think about other things that might translate into upside that aren’t currently being discussed right now.
  Response: The $10 billion incremental capital opportunity includes $4 billion for DFW projects, $3 billion for non-Permian 765 projects, and $3 billion for a system resiliency plan. The Batch Zero process is an incremental opportunity beyond this. They expect some of the $10 billion to roll into the base plan, with a larger upside bucket likely on the February update.

• Question from Anthony Crowdell (Mizuho): Just I guess one high-level question on Texas and then one on the balance sheet. Steve had talked earlier about the 765 maybe delays and some of the news we’re hearing there. We’re talking about delays in the Batch Zero process. Is it the same issue there of nimbyism? Just, it seems the timing of both of them happening or the news we’ve seen in the last three weeks have just reached a peak. Is it the same issue that’s going on in ERCOT?
  Response: The focus in Texas is on ensuring a right process that addresses stakeholder concerns, which may lead to delays but could result in a durable framework. They have an increasingly bullish view for Oncor despite the timing challenges.

• Question from Anthony Crowdell (Mizuho): If I could pivot. Slide 11, you talk about Moody’s, your Baa2 with a negative outlook. If my memory serves me correct, they went to a negative outlook back in January of 2025. Just curious if there’s any timing on when they revisit it or any data points they’re looking for to change that negative outlook.
  Response: Priority is closing the KKR transaction to deconsolidate over $9 billion of debt. Moody's will also track project milestones like pipe installation. They expect improvements in credit outlooks after closing, with changes likely early next year.

• Question from Carly Davenport (Goldman Sachs): I just had one follow-up on some of the commentary earlier on the call on California. Just as you think about the potential outcomes here, if you don’t see any legislation move forward this session, is there anything that you could see changing about your GRC filing or any other parts of your investment strategy in California that we should be keeping in mind?
  Response: California rate base growth is about 5%, with a capital plan dialed in appropriately. They will continue to execute the current plan regardless of legislation, which is still constructive. No hypothetical changes without bill text.

Contradiction Point 1

Timeline and Outlook for the SI Partners Transaction

This involves inconsistent statements on the transaction's closing timeline and its financial impact, which could affect rating agency reviews and credit profiles.

Constantine (Wells Fargo) - Constantine (Wells Fargo)

2026Q2: The SI Partners transaction closing later in Q3 is not contingent on ECA’s substantial completion. - Jeff Martin(CEO), Justin Bird(CEO)

What are the potential near-term offsets to ECA LNG delays, and is the SI Partners transaction at risk? - Steve Fleishman (Wolfe)

2026Q1: Full credit profile improvement is anticipated closer to year-end or early 2027. - Justin Bird(CEO), Karen Sedgwick(CFO)

Contradiction Point 2

Confidence and Progress on California Wildfire Liability Legislation

Contradiction in the level of confidence and preparedness regarding legislative progress, impacting strategic outlook and regulatory engagement.

Steve Fleishman (Wolfe Research) - Steve Fleishman (Wolfe Research)

2026Q2: It is premature to assess specific proposals without bill language. Sempra will evaluate any legislation... The company is constructive and expects solid progress this session. - Jeff Martin(CEO), Caroline Winn(EVP)

What is the current status of California wildfire liability legislation and how confident are you in its outcome? - Steve Fleishman (Wolfe)

2026Q1: Confidence is reasonable. The legislative focus aligns with improving state livability... Securing meaningful legislative progress within this session. - Jeff Martin(CEO), Caroline Winn(EVP), Karen Sedgwick(CFO)

Contradiction Point 3

Nature and Integration of Batch Zero Capital Opportunities

Contradiction on whether Batch Zero is part of or separate from the existing incremental capital plan, affecting capital planning and growth projections.

Constantine (Wells Fargo) - Constantine (Wells Fargo)

2026Q2: The Batch Zero process is seen as an incremental upside opportunity beyond Oncor’s base capital plan and $10 billion of incremental opportunities. - Jeff Martin(CEO)

Do you see a threat of shifting to behind-the-meter solutions due to the Texas data center "pause" rhetoric, and how might this impact timelines for Batch Zero opportunities? - Constantine (on behalf of Shar Pourreza, Wells Fargo)

2026Q1: Oncor's capital plan is largely independent of data center load and is expected to support earnings growth regardless of the final load numbers. - Jeff Martin(CEO), Allen Nye(CEO)

Contradiction Point 4

Nature and Composition of Oncor's Capital Upside Opportunity

Contradiction on whether the upside is incremental or part of the base plan and its relation to other projects, impacting growth forecasting and capital allocation.

Constantine (Wells Fargo) - Constantine (Wells Fargo)

2026Q2: The Batch Zero process is seen as an incremental upside opportunity beyond Oncor’s base capital plan and $10 billion of incremental opportunities. - Jeff Martin(CEO)

Does the Texas data center "pause" pose a threat of shifting to behind-the-meter solutions instead of transmission, and how might this impact timelines, particularly regarding Batch Zero opportunities? - Steven Fleishman (Wolfe Research, LLC)

2025Q4: The $9 billion upside opportunity layers in primarily in 2028-2030. It is shown as incremental on Slide 22 and includes items like non-Permian 765kV projects, additional transmission upgrades pending ERCOT approval, system resiliency plan updates, and LC&I interconnections. - Jeffery Martin(CEO) & Allen Nye(CEO, Oncor)

Contradiction Point 5

Timeline and Progress on California Wildfire Liability Legislation

Contradiction on the expected timeline for legislative progress and assessment, affecting regulatory strategy and financial planning.

Steve Fleishman (Wolfe Research) - Steve Fleishman (Wolfe Research)

2026Q2: It is premature to assess specific proposals without bill language. Sempra will evaluate any legislation... The company is constructive and expects solid progress this session. - Jeff Martin(CEO) & Caroline Winn(EVP)

What is your view on the 765 kV approval process, any risk of change, and the outlook moving forward? - Shahriar Pourreza (Wells Fargo Securities, LLC)

2025Q4: Efforts are underway to improve efficiencies and modernize the California business. There is a basket of regulatory items being pursued that could have an impact. - Jeffery Martin(CEO)