Diving briefs:
Sempra Energy executives have announced a five-year, five-year capital plan, with the aim of opening early rates in Texas during the company’s quarterly revenue call on Tuesday. According to Jeff Martin, chairman and CEO of SEMPRA, the record capital plan is 16% greater than the company’s previous five-year plan. The December spending increased, higher interest rates, lower revenues and a series of adverse regulatory results eroded the company’s fourth quarter revenue and forecast revenue for 2025, causing a 19% drop in the company’s share price as analysts questioned the company’s financial plans. Martin admitted that the current course will reduce the company’s short-term financial performance, but said the plan is intended to position the company for longer periods of growth, particularly in Texas.
Dive Insights:
After a rough fourth quarter, Sempra is lending a bank to “Texas Miracle” to recover the company’s financial performance.
The company reported fourth-quarter profit of $665 million from $737 million in 2023, and also reduced its 2025 revenue estimates expected during Tuesday’s call. An unfavorable decision issued in December in the California Public Utilities Commission on San Diego Gas & Electric’s latest fee case and a December 31 Federal Energy Regulation Commission order rejecting profit margins for equity members of California Independent System Operator Utility, unexpectedly reduced the company’s potential for revenue.
According to Karen Sedgwick, Vice President and Chief Financial Officer of SEMPRA, Sempra Infrastructure’s liquefied natural gas projects, higher interest rates and operating costs, and some delays in electricity consumption for a mild winter.
Funding for the $56 billion five-year capital plan for the planned company, which will launch an on-call early rate case for its Texas subsidiary, puts downward pressure on the company’s potential revenues next year, Martin said. He apologised to investors for the unexpected recession, but he said he believes the fee case and growth plans are the right decision for the company.
“We could have maintained a 6% to 8% growth rate, but it fundamentally raises our business’s earning potential expectations over the long term,” Martin said.
Still, some analysts questioned the funding and expansion plans laid out by Sempra’s executive team, asking Barclays analysts “it would be wise to invest this capital and shareholders take such pain before that capital.”
According to Allen NYE, CEO and Director of Sempra’s Texas-based subsidiary, Oncor saw a 27% increase in new interconnect requests in 2024, driven primarily by large C&I customers from multiple industries. According to Sempra, a quarter of these new requests came from data centers, while an additional 11% came from oil and gas developers.
The company expects peak loads to increase from 31 GW to 36 GW by 2031, urging that a $36 billion capital investment in Texas would be needed to meet demand.
According to NYE, 60% of the $36 billion plan is directed towards transmission projects, including the Permian Basin Reliability Plan, the Delaware Basin Load Integration Plan and the West Texas Infrastructure Plan. Other spending would cover distribution and reliability upgrades, he said.
Additional projects not included in the company’s five-year capital plan could potentially have a total investment of between $55 billion and $74 billion by 2034, NYE said.
“We certainly believe we are in the early innings of the sector’s new supercycle,” Martin said. “That’s why we continue to believe that Sempra is well positioned in the right market with the right corporate strategy to create a lot of value over the next few years.”
