Sempra Energy (SRE) Risk Analysis

Energy Infrastructure Projects We are involved in a number of energy infrastructure projects in various stages of development and construction, which subject us to numerous risks. Success in developing each project depends on, among other things: ?our financial condition and cash flows and other factors that impact our ability to invest sufficient funds in the project, including for preliminary activities conducted before we determine whether the project is viable ?project assessment and design and our ability to foresee and incorporate emerging trends and technologies ?our ability to reach a positive FID or meet other milestones, which may be influenced by factors outside our control, including the global economy and energy and financial markets, actions by regulators, internal and external approval requirements, and many of the other factors described in this risk factor ?negotiation of satisfactory EPC agreements and renegotiation in the event of delays in reaching an FID or other specified deadlines ?identification of suitable partners, customers, contractors, suppliers and other necessary counterparties ?progressing relationships from MOUs, HOAs or other non-binding arrangements to execution of binding, definitive agreements ?negotiation and maintenance of satisfactory equity, purchase, sale, supply, transportation and other appropriate commercial agreements, and satisfaction of any conditions to effectiveness of such agreements, including reaching an FID within agreed timelines ?timely receipt and maintenance of required governmental permits, licenses and other authorizations on acceptable terms ?our project partners', contractors', equipment providers', lenders' and other vendors' and counterparties' willingness and financial or other ability to fulfill their contractual commitments ?timely, satisfactory and on-budget completion of construction, which could be negatively affected by engineering problems; stakeholder relations issues, such as the opposition by some members of the Yaqui tribe to the construction of the Guaymas-El Oro segment of the Sonora pipeline, which we discuss in in Note 1 of the Notes to Consolidated Financial Statements; work stoppages; unavailability or increased costs of materials, equipment, labor and commodities due to inflation, tariffs or supply chain or other issues; and a variety of other factors, many of which we discuss above under "Risks Related to All Sempra Businesses – Operational Risks" and elsewhere in this risk factor ?implementation of new or changes to existing laws or regulations, including increasing influence of the Mexican government on economic and energy matters and risks related to laws and regulation in Mexico generally, which we discuss further in the risk factors below ?obtaining satisfactory financing for the project ?the absence of hidden defects or inherited environmental liabilities on the project site ?timely and cost-effective resolution of any litigation or unsettled property rights affecting the project ?geopolitical events and other uncertainties Any failures with respect to the above factors or other factors relevant to any particular project could involve additional costs, otherwise negatively affect our ability to successfully complete the project and force us to impair or write off amounts we have invested in the project. If we are unable to complete a development project, if we experience delays, or if construction, financing or other project costs exceed our estimated budgets and we are required to make additional capital contributions, we may not receive an adequate or any return on our investment and other resources expended on the project and our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected. The operation of existing facilities and any future projects we complete involves many risks, including the potential for unforeseen design flaws, engineering challenges, or breakdowns of facilities, equipment or processes; labor disputes or shortages; fuel interruption; environmental contamination; increasing regulatory requirements, including from regulations aiming to reduce GHG emissions; and the other operational risks that we discuss above under "Risks Related to All Sempra Businesses – Operational Risks." Any of these events could lead to our facilities being idle or operating below expected levels, which may result in lost revenues or increased expenses, including higher maintenance costs and penalties. Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. LNG Projects In addition to the risks described above that are applicable to all our energy infrastructure projects, our LNG projects, which we discuss in "Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure," also face distinct disadvantages relative to some LNG projects being pursued by other project developers, including: ?The proposed Cameron LNG Phase 2 project is subject to certain restrictions and conditions under the JV project financing agreements for the Cameron LNG Phase 1 facility and requires unanimous consent of all the members, including with respect to the equity investment obligation of each member. We may not be able to satisfy these conditions, receive members' consent, obtain satisfactory conclusion on the EPC process, or obtain the extension of our non-FTA approval, in which case our ability to develop the Cameron LNG Phase 2 project would be jeopardized. ?The ECA LNG projects under construction and in development are subject to the Mexican regulatory process and an overlay of U.S. regulation for natural gas exports to LNG facilities in Mexico, which are not well developed and, among other factors, contributed to delays in obtaining a necessary permit from the Mexican government for the ECA LNG Phase 1 project and could cause similar delays or other hurdles in the future. In September 2025, we submitted a filing with the DOE to extend the construction deadline associated with our non-FTA permits for the ECA LNG Phase 1 project until the end of summer 2026, but we may not receive this extension on a timely basis or at all. In addition, the Baja California region does not have extensive sources of natural gas, and at times, natural gas supply to the region is severely constrained and may impact our costs and our ability to source all feed gas required under our ECA LNG Phase 1 supply contracts. Further, while we do not expect the construction or operation of the ECA LNG Phase 1 project to disrupt operations at the ECA Regas Facility, we expect construction of the proposed ECA LNG Phase 2 project would conflict with the current operations at the ECA Regas Facility, which currently has a firm storage and nitrogen injection service agreement with Shell that expires in May 2028. ?The PA LNG Phase 1 project under construction is located at a greenfield site and is therefore subject to certain disadvantages relative to projects being constructed or developed at brownfield sites, such as increased time and costs to develop and construct the project due to lack of existing infrastructure. The PA LNG Phase 2 project under construction is located at the site of the PA LNG Phase 1 project and is therefore subject to potential disadvantages, such as increased complexity of integrating new facilities with existing infrastructure. Development and operation of these or any other LNG projects will depend on the expansion of our existing pipeline interconnections or the ability to permit and construct new pipeline facilities, each of which may require us to enter into additional pipeline interconnection agreements with third-party pipelines, which may not be possible on reasonable terms or at all. The capital requirements for our LNG projects can be significant, even if we do not reach a positive FID. As has happened in the past, our proposed facilities may not be completed in accordance with estimated timelines or budgets or at all as a result of the above or other factors, and delays, cost overruns or our inability to complete one or more of these projects could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Our businesses depend on the performance of business partners, customers, suppliers, contractors, and other counterparties under contractual and other arrangements to provide, among other things, services, supplies, equipment or commodities. If they fail to perform their obligations in accordance with these arrangements or elect to exercise early termination rights, we may be unable to meet our obligations and may be required to secure alternative arrangements, if available, or honor our underlying commitments at then-current market prices, which may result in losses or delays or other operational disruptions. Any efforts to enforce the terms of these arrangements through legal or other means could involve significant time and costs and may not succeed. We may not be able to secure replacement agreements on favorable terms, in a timely manner or at all if any of these arrangements terminate. We often face counterparty credit risk with respect to customers, suppliers, and other counterparties and, although we perform credit analyses prior to extending credit or entering into transactions with such counterparties, we may not be able to collect the amounts owed to us. Volatility and disruptions in capital and credit markets could have a negative impact on our counterparties and their ability to meet their obligations. SI Partners also faces risks related to doing business with PEMEX and the CFE, which are Mexican state-owned enterprises, including their financial solvency and performance of their respective contractual obligations. Any delay or default in payment could result in our recording of a provision for expected credit losses on past due receivable balances and lower revenues, as was the case in 2024 and 2025 for a customer at SI Partners. The failure of any of our counterparties to perform their obligations could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. Financial Risks

SI Partners seeks long-term contracts for services and commodities to better utilize its facilities, reduce volatility in earnings and support the construction of new infrastructure. Certain of these contracts are at fixed prices, and their profitability may be negatively affected by inflation, tariffs, rising interest rates and changes in applicable exchange rates. We aim to mitigate these risks by, among other things, using variable pricing tied to market indices, contracting for direct pass-through of operating costs and/or entering into hedges. However, these measures may not fully or substantially offset any increases in operating expenses or financing costs and their use could introduce additional risks, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

The NEM program is an electric billing tariff mechanism designed to promote the installation of on-site renewable energy generation (primarily solar) for residential and business customers. Depending on when the on-site generation is installed, NEM customers receive a full retail rate or a reduced retail rate for energy they generate but do not use that is fed to the utility's power grid, which results in these customers not paying their proportionate share of the cost of maintaining and operating the electric transmission and distribution system, subject to certain exceptions, but still receiving electricity from the system when their self-generation is inadequate to meet their electricity needs. As more and higher electric-use customers switch to NEM and self-generate energy, the burden on remaining non-NEM customers, who effectively subsidize the unpaid NEM costs, increases, which in turn encourages more self-generation and further increases rate pressure on remaining non-NEM customers. In December 2023, a new Net Billing Tariff was implemented for customers who interconnect their qualifying on-site renewable energy generation after April 2023. The new Net Billing Tariff revised the NEM structure for new customers with a retail export compensation rate that is better aligned with the value provided to the grid by behind-the-meter energy generation systems and retail import rates that encourage electrification and adoption of solar systems paired with storage. The new Net Billing Tariff is designed to compensate customers for the value of their exports to the grid based on avoided cost. In addition, prior to the fourth quarter of 2025, the electric residential rate structure in California was primarily based on consumption volume, which placed a higher rate burden on customers with higher electric use while subsidizing lower-use customers. In response to California legislation adopted in 2022, the CPUC broadly restructured the way certain residential fixed costs are collected, moving away from volumetric -only charges and incorporating an income-based fixed charge for default residential rates. The intent of such a fixed charge is to allow the utility to collect a greater portion of its fixed costs on a non-volumetric basis, advance the state's climate goals through end-use electrification and provide a more affordable rate design on average for lower-income customers. The residential fixed charge was implemented in the fourth quarter of 2025. Depending on the effectiveness of the new Net Billing Tariff and fixed charge, which are uncertain, the risks associated with the existing NEM tariff and rate design could continue or increase, including adverse impacts on electricity rates and the reliability of the transmission and distribution system and the potential for increases in customer dissatisfaction, likelihood of noncompliance with CPUC or other safety or operational standards, and power procurement, operating, capital and other costs that may not be recoverable, any of which could have a material adverse effect on Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects.

We are subject to complex tax and accounting requirements. These requirements may undergo changes at the federal, state, local and foreign levels, including in response to economic or political conditions. Compliance with these requirements and any changes to them or how they are implemented, interpreted or enforced could increase our operating costs and materially adversely affect how we conduct our business. New tax legislation, such as the OBBBA, and new regulations or interpretations or changes in tax policies in the U.S., Mexico or other countries in which we do business could negatively affect our tax expense and/or tax balances and our businesses generally. Any failure to comply with these requirements could subject us to fines and penalties, including criminal penalties in some cases. The occurrence of any of these risks could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Our businesses are capital-intensive, with significant and increasing capital spending expected in future periods. In general, we rely on long-term debt to fund a significant portion of our capital expenditures and to repay or refinance outstanding debt, and we rely on short-term debt to fund a significant portion of day-to-day operations. Certain of our businesses also rely on other funding sources, such as Sempra Infrastructure's use of capital contributions from its owners and various forms of project financing, which may involve guarantees, indemnities or other arrangements that expose us to additional risks, such as potential losses upon the occurrence of events related to the development, construction, operation or financing of the applicable projects. Sempra has also raised and may continue to seek capital by issuing equity, including in our ATM program, or selling equity interests in our subsidiaries or investments. External sources of capital may not be adequate or available on reasonable terms, in a timely manner or at all. Limitations on the availability of credit, increases in interest rates or credit spreads due to inflation or otherwise or other negative effects on the terms of any financing we pursue could cause us to fund operations and capital expenditures at a higher cost or fail to raise our targeted amount of funds, which could negatively impact our ability to meet contractual and other commitments, progress development projects, make non-safety related capital expenditures and effectively sustain operations. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. In addition to market and economic conditions, factors that can affect the availability and cost of capital include: ?adverse changes to laws and regulations ?for Sempra and SDG&E, risks related to California wildfires ?for Sempra, SDG&E and SoCalGas, any deterioration of or uncertainty in the political or regulatory environment for companies operating in California ?credit ratings downgrades

More and Increasingly Severe Wildfires In recent years, California has experienced some of the largest wildfires (measured by acres burned and/or structures destroyed) in its history. Frequent and severe drought conditions, inconsistent and extreme swings in precipitation, changes in vegetation, unseasonably warm temperatures, low humidity, strong winds and other factors have increased the duration of the wildfire season and the intensity, prevalence and difficulty of preventing and containing wildfires in California, including in SDG&E's and SoCalGas' service territories. Changing weather patterns, including as a result of climate change, could exacerbate these conditions. Certain California local land use policies and forestry management practices, as well as expanded construction and development of residential and commercial projects in high-risk fire areas, could lead to increased third-party claims and greater losses related to fires for which SDG&E or SoCalGas may be liable. The LA Fires burned in SoCalGas' service territory. The California Department of Forestry and Fire Protection estimates that the Palisades and Eaton fires destroyed approximately 16,200 structures and damaged approximately 2,000 structures. Although the majority of SoCalGas' infrastructure in the fire-affected areas is underground, these fires resulted in service disruptions, response costs and damage to some of SoCalGas' infrastructure and third-party property. SoCalGas and Sempra are subject to pending litigation with respect to the operation of SoCalGas' system and damage sustained as a result of the fires, which we discuss in Note 16 of the Notes to Consolidated Financial Statements. As with other litigation, the timing, impacts and ultimate outcome of these matters is inherently uncertain and may result in substantial costs, some or all of which may not be recoverable from insurance, third parties or in customer rates. We discuss these and other risks associated with litigation above under "Risks Related to All Sempra Businesses – Operational Risks." Future wildfires in SDG&E's or SoCalGas' service territories could compromise SDG&E's and SoCalGas' electric and natural gas infrastructure and result in further service disruptions, which could have a material adverse effect on Sempra's, SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects. We discuss these risks further in this risk factor below and above under "Risks Related to All Sempra Businesses – Operational Risks." The Wildfire Legislation In July 2019 and September 2025, respectively, the 2019 Wildfire Legislation and the 2025 Wildfire Legislation (collectively, the Wildfire Legislation) were signed into law, which we discuss in Note 1 of the Notes to Consolidated Financial Statements. The 2019 Wildfire Legislation established the Wildfire Fund and the 2025 Wildfire Legislation established the Continuation Account, which offer liquidity to reimburse wildfire-related claims incurred by participating California electric IOUs in excess of $1 billion, subject to the coverage of each fund. The Wildfire Legislation's legal standards for the recovery of wildfire costs may not be implemented effectively or applied consistently. Moreover, the Wildfire Fund and the Continuation Account, if it becomes operative, could be materially reduced, exhausted, or terminated due to claims by SDG&E or other participating IOUs related to fires caused by utility conduct or operations, or SDG&E could fail to maintain a valid annual safety certification from the OEIS or meet other requirements, any of which could result in SDG&E losing eligibility for the Wildfire Legislation's liability cap and the other protections afforded by these funds. As a result, a fire resulting from the conduct or operations of any participating California electric IOU could have a material adverse effect on Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects, with potentially material additional exposure if SDG&E's conduct or operations is determined to be a cause of a fire and SDG&E is found to have acted imprudently. In February 2026, a participating IOU publicly disclosed that it has received, or expects to receive, approximately $1.26 billion in aggregate reimbursements from the Wildfire Fund for eligible claims related to wildfires that occurred in 2019 and 2021. Also in February 2026, another participating IOU publicly disclosed it has received, or expects to receive, approximately $134 million in aggregate reimbursements from the Wildfire Fund for losses incurred and expected to be incurred in connection with one of the LA Fires, the cause of which remains under investigation and has not been conclusively determined. The administrator of the Wildfire Fund has confirmed that this wildfire qualifies as a "covered wildfire" for purposes of accessing the Wildfire Fund, and the scope of potential damages caused by this fire could materially reduce or exhaust the Wildfire Fund. The participating IOU stated that it is currently unable to reasonably estimate a range of potential losses associated with this event. Accordingly, SDG&E is unable to estimate a range of potential loss resulting from any reduction in available coverage from the Wildfire Fund. In addition to the risks described above, a material reduction, exhaustion or termination of the Wildfire Fund may require SDG&E to recognize a reduction to its Wildfire Fund asset up to its carrying value. The Wildfire Legislation did not change the doctrine of inverse condemnation, which imposes strict liability for certain types of claims (meaning that liability is irrespective of negligence or intent) on a utility whose equipment is determined to be a cause of a fire. In such an event, the utility would be responsible for the costs of damages, including business interruption losses, interest and attorneys' fees, even if the utility is not found negligent. In the past, the CPUC has denied recovery of incurred costs associated with wildfire claims despite the doctrine of inverse condemnation, which was historically based on the ability of a utility to pass such costs through to rate payers. The doctrine of inverse condemnation also is not exclusive of other theories of liability, such as negligence, under which additional liabilities, such as fire suppression, clean-up and evacuation costs, medical expenses, and personal injury, punitive and other damages, could be imposed. We are unable to predict the impact of the Wildfire Legislation on SDG&E's ability to recover costs and expenses if SDG&E's equipment is determined to be a cause of a fire. The 2025 Wildfire Legislation also established a multi-stakeholder task force, coordinated by the Wildfire Fund's administrator, to prepare and submit to the California legislature and Governor of California on or before April 1, 2026, a report that evaluates and sets forth recommendations on new models to complement or replace the Wildfire Fund and, if it becomes operative, the Continuation Account. We are unable to predict the impact on Sempra or SDG&E of further legislative or regulatory action with respect to the Wildfire Fund or the Continuation Account or wildfire claims liability generally. Cost Recovery Through Insurance or Rates As a result of California's doctrine of inverse condemnation, substantial losses recorded by insurance companies, and increased wildfire risk, obtaining insurance coverage for wildfires potentially associated with SDG&E's equipment (or, to a lesser extent, SoCalGas' equipment) has become increasingly difficult and costly. If these conditions continue or worsen, including as a result of the LA Fires, insurance for wildfire liabilities may become unavailable or may become prohibitively expensive and we may be denied recovery of insurance cost increases through the regulatory process. In addition, insurance for wildfire liabilities may not be sufficient to cover all losses we may incur, or it may not be available to meet the $1.0 billion of primary insurance required by the Wildfire Legislation. Wildfire insurance may also become prohibitively expensive or unavailable for homeowners and businesses in SDG&E's service territory, potentially increasing SDG&E's financial exposure if a wildfire is found to be caused by SDG&E's equipment. We may be unable to recover in rates or from the Wildfire Fund or the Continuation Account the amount of any uninsured losses (including amounts paid for self-insurance and other costs). A loss that is not fully insured, is not sufficiently covered by the Wildfire Fund or the Continuation Account and/or cannot be recovered in customer rates could materially adversely affect Sempra's and one or both of SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects. Regulatory Actions Related to Wildfire Mitigation Efforts Although we expend significant resources on measures designed to mitigate wildfire risks, these measures may not be effective in preventing wildfires or reducing our wildfire-related losses, and their costs may not be fully recoverable in rates. SDG&E is required by California law to submit WMPs for approval by the OEIS and could be subject to increased risks if these plans are not approved in a timely manner or SDG&E is determined to not have substantially complied with its approved plans, including the risk of fines or penalties for non-implementation or denial of its safety certification. Moreover, wildfire mitigation investments incremental to those authorized in a GRC may be subject to reasonableness reviews after they are made and could be subject to disallowances as a result of such reviews, as was the case with the FD issued in connection with SDG&E's Track 2 request in its 2024 GRC. One of SDG&E's wildfire mitigation strategies is to de-energize certain circuits for safety when there is elevated weather-related wildfire ignition risk. These "public safety power shutoffs" have been subject to scrutiny by various stakeholders, including customers, regulators and lawmakers, which could increase the risk of regulatory fines and penalties, claims for damages and reputational harm if SDG&E is found not to have acted within applicable guidelines and regulations. Such costs may not be recoverable in rates. Unrecoverable costs, adverse legislation or rulemaking, stakeholder scrutiny, ineffective wildfire mitigation measures or other negative effects associated with these efforts could materially adversely affect Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects.

Our operations in Mexico pose foreign currency exchange rate and inflation risks. Exchange and inflation rates with respect to Mexico and fluctuations in those rates may have an impact on the revenue, cash flows and costs from our international operations, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We sometimes attempt to hedge cross-currency transactions and earnings exposure through various means, including financial instruments and short-term investments, but these hedges may not fully achieve our objectives of mitigating earnings volatility that would otherwise occur due to exchange rate fluctuations. Because we do not hedge our net investments in foreign countries, we are susceptible to volatility in OCI caused by exchange rate fluctuations for entities whose functional currencies are not the U.S. dollar. Moreover, Mexico has experienced periods of high inflation and exchange rate instability in the past, and severe devaluation of the Mexican peso could result in governmental intervention to institute restrictive exchange control policies, as has occurred in Mexico and other Latin American countries. We discuss our foreign currency exposure at our Mexican subsidiaries in "Part II – Item 7. MD&A" and "Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk."