Sempra pivots to utility focus with record Texas capital plan and affirmed 2026 earnings

Sempra management has outlined a clear strategic pivot to simplify its business model, concentrating future investments on utility operations. The company projects an 11% annual rate base growth through 2030, a trajectory underpinned by a record $65 billion capital plan focused heavily on Texas. This region has been identified as ground zero for an infrastructure arms race driven by surging demand from artificial intelligence and data centres, with a majority of the projected rate base expected to be located there by 2030.

The financial outlook remains robust, with full-year 2026 adjusted earnings per share guidance affirmed at between $4.80 and $5.30. This guidance is supported by a long-term projected earnings growth rate of 7% to 9%. A key performance driver is the Oncor base rate review settlement, which provides a higher authorised equity layer of 43.5% and a return on equity of 9.75%. This adjustment is designed to better align rates with current cost structures, while regulatory lag is being addressed through an inaugural UTM filing to incorporate $4.4 billion of assets into rates.

Sempra Infrastructure is in the process of transitioning from a capital source to a contributor of near-term revenue. First liquefied natural gas production at ECA Phase 1 is expected to commence next month, with substantial completion targeted for summer 2026. While the company remains bullish on US LNG market share gains due to global energy stress, management intends to reduce capital allocation to this segment to focus on utility growth. The company is actively negotiating the remaining offtake for Port Arthur Phase 2, seeking pricing that bolsters infrastructure returns while shifting toward a lower-risk utility profile.

To further strengthen its balance sheet and credit profiles, the company plans to close the SI Partners transaction in 2026. This move is intended to facilitate parent debt paydown and the deconsolidation of Sempra Infrastructure, with credit rating thresholds expected to improve approximately six months post-closing. Additionally, the sale of Ecogas is anticipated to close in the second or third quarter of 2026 as part of ongoing capital recycling efforts. Management notes that the transaction has already received approvals from FERC, HSR, and antitrust regulators in Mexico and Korea.

Operational modernisation at Oncor includes diversifying the supply chain and securing labour and materials through 2028 to mitigate execution risks during a period of elevated capital deployment. The company submitted 102.22 gigawatts of large load in its 2026 Regional Transmission Plan filing, meeting all current substantiated load requirements. Management views this load growth as incremental to the incremental, likely driving capital spending well into the middle of the next decade beyond the current $10 billion upside bucket.

California wildfire liability remains a focus for the utility, with management expressing reasonable confidence in legislative action this session following the CEA's natural catastrophe resiliency study. The effective use of natural gas storage during winter storm Fern saved customers approximately $120 million, a figure management cites as evidence of the strategic value of gas infrastructure in supporting affordability. Beyond the base plan, management identifies approximately $9 billion in incremental capital opportunities, primarily concentrated in Texas and driven by large-load customer growth.