Sempra(SRE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q1 2025 adjusted EPS of $1.44, an increase from $1.34 in the prior period, affirming full year 2025 adjusted EPS guidance of $4.3 to $4.7 and 2026 EPS guidance of $4.8 to $5.3 [5][27] - Q1 2025 GAAP earnings were $942 million or $1.44 per share, compared to $854 million or $1.34 per share in Q1 2024 [27][28] Business Line Data and Key Metrics Changes - Sempra California contributed $88 million from higher CPUC-based operating margin, while Sempra Texas saw a decrease of $37 million in equity earnings due to higher interest and operating expenses [28] - Sempra Infrastructure reported a slight decrease of $2 million, primarily due to lower asset optimization [28] Market Data and Key Metrics Changes - In Texas, ERCOT projected peak load growth to increase to 150 gigawatts by 2030, with significant investments proposed for the transmission grid totaling between $32 billion and $35 billion [12][13] - The legislative session in Texas is being monitored for potential beneficial impacts on the regulatory framework supporting transmission and distribution investments [14] Company Strategy and Development Direction - The company plans to invest approximately $13 billion in energy infrastructure in 2025, with over $10 billion targeted for U.S. Utilities [6] - The strategy includes selling non-core assets and recycling capital to finance future growth, with a focus on improving the regulatory compact in Texas and California [6][7] - The "Fit for 2025" campaign aims to reduce the company's cost structure and improve productivity through technology adoption, including artificial intelligence [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth opportunities and the importance of executing well in the near term to strengthen the company's value [10][11] - The management team is focused on delivering strategic initiatives that support consistent growth in earnings and cash flows [30] Other Important Information - The CPUC approved an expansion of West Side Canal battery storage, adding 100 megawatts of energy storage capacity [17] - The company is actively monitoring tariff impacts and has taken steps to mitigate risks by diversifying supplier sources and increasing domestic sourcing [60][61] Q&A Session Summary Question: Update on the SiP process and timeline - Management clarified the timeline for KKR's offer and subsequent responses, indicating an update will be provided in the Q2 call [34][36] Question: Insights on Texas growth and transmission projects - Management highlighted significant growth metrics in Texas, including a 3% increase in premise growth and a 66% increase in new transmission requests year-to-date [39][40] Question: Details on the Fit for 2025 program - Management discussed initiatives to improve cost structure and customer service, including voluntary retirement programs and technology investments [46][48] Question: LNG project development and macroeconomic uncertainties - Management reassured that Port Arthur Phase II is on track, emphasizing strong commercial interest and ongoing development progress [58][59] Question: Tariff exposure and capital plan impacts - Management indicated that tariff impacts are manageable, with most equipment sourced domestically, limiting direct impacts to around 2% or 3% of capital expenditures [60][62] Question: Unified Tracker Bill and its implications - Management discussed the potential benefits of the Unified Tracker Bill in Texas, which could streamline regulatory processes and improve credit quality [70][72] Question: Wildfire fund changes in California - Management expressed optimism about potential changes to wildfire fund legislation, emphasizing the importance of addressing wildfire risk for the company's operations [75][80]