Sempra Energy Leans on Texas Growth in Q1 Call

Sempra Energy ((SRE)) has held its Q1 earnings call. Read on for the main highlights of the call.

Sempra Energy’s latest earnings call struck an upbeat tone, with management balancing solid near‑term results against a crowded slate of long‑term projects. Executives emphasized strong earnings growth, key regulatory wins and visible expansion opportunities, while acknowledging higher interest costs, tax headwinds and execution risks that could affect the pace, but not the direction, of the company’s strategy.

Strong Q1 Results and Steady Earnings Outlook

Sempra reported Q1 2026 GAAP earnings of $1.37 billion, or $1.58 per share, sharply higher than $906 million and $1.39 per share a year ago. Adjusted earnings rose more modestly to $991 million, or $1.51 per share, and management reaffirmed 2026 adjusted EPS guidance of $4.80 to $5.30, 2027 guidance of $5.10 to $5.70 and a long‑term earnings growth target of 7% to 9%.

Record Capital Plan and Aggressive Investment Pace

The company deployed $3.0 billion of capital in the first quarter alone and remains on track to invest about $13 billion in transmission and distribution in 2026. Overall, Sempra is executing a record $65 billion capital plan that it expects will drive roughly 11% annual rate‑base growth through 2030 and comes with around $9 billion of additional identified capital opportunities.

Regulatory Wins Boost Oncor’s Financial Profile

In Texas, the Public Utility Commission approved a settlement for Oncor that raises its authorized equity layer to 43.5% and sets a 9.75% allowed return on equity with a 4.94% cost of debt. The order also permits a surcharge to recover revenues from early 2026, which should help lift earned returns and support credit metrics just as capital spending peaks.

Texas Load Boom and Oncor Growth Upside

Management highlighted a massive large‑load opportunity in Texas, noting 127 GW of qualifying load and more than 100 GW of big projects in its recent filing. Oncor’s own capital plan totals $47.5 billion with another roughly $10 billion of incremental spending identified, and the utility’s earnings are expected to grow about 30% annually through the midpoint of 2027 guidance.

Infrastructure and LNG Projects Stay on Track

On the infrastructure side, the Cimarron Wind project reached commercial operation, while ECA LNG Phase 1 has introduced feed gas and begun startup activities. The company expects first LNG production next month and substantial completion this summer, which will trigger revenues, and it reported that both phases of Port Arthur LNG are moving forward on time and on budget.

Capital Recycling via SI Partners and Ecogas Sales

Sempra is advancing its capital recycling strategy, pointing to progress on the SI Partners transaction after securing key regulatory approvals and targeting closing in 2026. The company also reiterated that its Ecogas divestiture is on track to close between the second and third quarter of 2026, with proceeds earmarked for utility reinvestment and balance‑sheet strengthening.

Operational Enhancements and Supply‑Chain Readiness

Oncor filed its first utility transformation mechanism to fold $4.4 billion of transmission and distribution assets into rates, a move aimed at cutting regulatory lag. In parallel, management said the utility has diversified suppliers, expanded logistics and warehousing, secured more labor and nearly tripled its use of contract workers to better manage execution risk across the buildout.

Back‑Loaded Benefits from Rate Decisions

Investors were reminded that the full benefit of Oncor’s base‑rate review will not appear in first‑quarter numbers, because the regulatory order arrived in April. As a result, financial uplift from new rates is expected to show up mainly in the second quarter and beyond, effectively back‑loading some of the earnings momentum into the rest of the year.

Interest Expense and Tax Pressures Temper Results

Not all segments shared equally in the upside, as Sempra’s California operations faced $48 million in lower income tax benefits and higher net interest expense. At the parent level, increased borrowing costs and net investment losses added roughly $6 million of losses, partially offsetting gains elsewhere and underscoring the drag from the current rate environment.

Credit Improvement Expected, but Not Immediate

Management said rating agencies are waiting for the completion of key deals and subsequent performance before revisiting Sempra’s credit profile. Executives suggested that meaningful improvements are likely to materialize only several months after the SI Partners transaction closes, making any rating upgrades more of a late‑year or early 2027 event than a near‑term catalyst.

Regulatory and Process Risks in Texas Buildout

While the Texas growth story is compelling, Sempra cautioned that evolving ERCOT and PUC protocols could change both the size and timing of the 127 GW load opportunity. Additional approvals, including certificates of convenience and necessity and rights‑of‑way, could also affect schedules, adding an extra layer of uncertainty around the timing of incremental capital deployment.

Labor and Supply‑Chain Constraints as a Long‑Term Risk

Executives flagged emerging labor constraints and tighter supply chains as potential bottlenecks for the ambitious buildout, especially beyond 2028. Even with diversified suppliers and higher contract‑labor usage, competition for skilled workers could limit how quickly Sempra and Oncor can convert their full upside capital pipeline into rate‑base and earnings growth.

LNG and Transaction Execution Still a Key Variable

The company acknowledged that major LNG projects like ECA and ongoing transactions still carry execution risk, with commissioning schedules and remaining consents yet to be fully locked down. Although management is confident in hitting targeted milestones, it conceded that delays in project completion or transaction closing could shift the timing of expected cash flows and balance‑sheet benefits.

Guidance Reinforced by Large Capital Plan

Sempra reaffirmed its 2026 and 2027 adjusted EPS ranges and reiterated its 7% to 9% long‑term growth outlook, leaning heavily on its $65 billion capital plan and robust Texas pipeline. With roughly $13 billion of T&D spending slated for 2026, Oncor’s $47.5 billion program and identified incremental CapEx opportunities, management argued that regulatory wins and capital recycling moves provide strong support for its multi‑year earnings targets.

Sempra’s earnings call painted the picture of a utility‑infrastructure hybrid with a full project slate and a disciplined plan to fund it, even as higher rates and regulatory complexity create some noise around the edges. For investors, the message was that execution risks are real but manageable, and that the combination of affirmed guidance, regulatory tailwinds and outsized Texas growth keeps the long‑term thesis firmly intact.