DBA Sempra 5.750% Junior Subord

What they do

Sempra operates through regulated utilities, primarily San Diego Gas & Electric and Southern California Gas in California, and holds a 100% economic interest in Oncor Electric Delivery Company in Texas, which it accounts for as an equity method investment due to ring-fencing. The company also has unregulated operations, including Cameron LNG, and energy infrastructure projects in Mexico.

Revenue drivers

• San Diego Gas & Electric — Regulated electric and natural gas utility serving the San Diego area; revenue from rate-based electric and gas delivery.
• Southern California Gas — Regulated natural gas distribution utility serving central and southern California; revenue from gas delivery rates.
• Oncor Electric Delivery — Largest regulated electricity transmission and distribution utility in Texas; revenue from PUCT-approved tariffs; accounted for as equity method investment.
• Cameron LNG (joint venture) — Liquefaction facility in Louisiana; revenue from tolling agreements with customers; Sempra holds a partial interest.

Recent performance

For Q2 2026, Sempra reported GAAP earnings of $796 million ($1.21 per diluted share), up from $461 million ($0.71) in Q2 2025; adjusted earnings were $762 million ($1.16) versus $583 million ($0.89). First-half 2026 GAAP earnings were $1,833 million ($2.80) versus $1,367 million ($2.09) in the prior year. Full-year 2025 revenue was $12.42 billion with net income of $1.84 billion, down from $2.86 billion in 2024. Quarterly revenue has been rising sequentially, reaching $3.43 billion in Q1 2026. Capital expenditures exceeded $6 billion in H1 2026.

Strategy

Sempra is focused on simplifying its portfolio to become 'America's leading utility growth business,' with a record five-year 2026-2030 capital plan of approximately $65 billion, 95% allocated to Texas and California utilities. The company is executing value creation initiatives to strengthen its financial position and support long-term utility growth. In Texas, Oncor is investing in grid infrastructure to meet growing electric demand, including high-voltage transmission projects endorsed by ERCOT. Management emphasizes operational execution and innovation across its businesses.

Risks

• Regulatory disallowances — California regulators may disallow recovery of certain costs, as seen in Q2 2025 when a $25 million after-tax impact was recognized.
• Oncor ring-fencing limitations — Sempra does not control Oncor and cannot direct its operations, dividends, or strategic actions, limiting its ability to influence cash flows.
• Mexico regulatory changes — Mexico's 2025 energy laws and regulatory actions could affect Sempra's infrastructure assets and investments in that country.
• Interest rate and derivative exposure — Unrealized losses on derivatives and interest rate swaps, particularly related to Port Arthur LNG, can cause volatility in reported earnings.

Outlook

Management expects continued growth driven by the $65 billion capital plan and Oncor's new base rates, which took effect June 1, 2026. ERCOT endorsed transmission projects requiring over $7 billion of incremental investment, with Oncor expected to construct the majority, subject to regulatory approval. The company sees strong Texas demand, as evidenced by ERCOT's July peak load of 91 GW. Sempra remains focused on execution to deliver long-term utility growth.